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Government procurement: A tender issue

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DQW Bureau
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Already fighting with their backs against the walls, Indian PC manufacturers are being increasingly faced with the threat of losing out on one of their most lucrative segments-the government. For sometime now, government contracts have been a tender issue with Indian PC manufacturers as they find themselves in a situation where they are not even eligible to participate.

After all what could be more discriminating than a tender asking 'only MNC brands to apply'!





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Understandably, there is a perceptible bias against Indian brands with preference being tilted towards MNC brands. But Indian PC manufacturers are as competent and service levels comparable to MNC vendors. As a matter of fact, Raj Saraf, Chairman, Zenith Computers Ltd, challenges, "Open any MNC brand and Indian brand. You will not see any difference. We all buy from the same place-be it Taiwan or anywhere else."

In fact, Saraf headed a Committee under the aegis of MAIT to look into the issues of PSU purchasing way back in 1998. But nothing came of that panel and today he is a disillusioned man and says he is not looking at the government sector at all. (Market feedback however indicates that Zenith has considerable presence in the Maharashtra State government).

Domestic vendors are angry at the way MAIT has handled the issue alleging it has not done enough for the cause. Responding to the allegation, Vinnie Mehta, Executive Director, MAIT, said, "It is not an easy problem. There is no government stipulation, which says that brands cannot be mentioned in tenders. The problem gets compounded since there is no central government agency for procurement. Each one makes the purchase on its own; so it's a huge task to educate them. Whenever we see tenders that are framed wrongly, we address it on a case-to-case basis. In many cases we have been successful in getting the tenders rectified and getting everyone to participate in the tendering process."

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Meanwhile MAIT has roped in the Chief Vigilance Commissioner to add muscle to the cause. Speaking on the issue, N Vittal, CVC, agrees that it is a bad practice but says there is no government guideline regarding specifying brands. He says it is "not fair" and the office of the CVC takes up the issue whenever it comes to their notice.

The response from various departments of the Government on the issue of procurement is that mentioning brands is sometimes inadvertent in order to keep the flock of small assemblers from the bidding process. And since price is the determining factor in tenders, small assemblers could very well walk off with orders. Officials clarify that credibility of Indian PC manufacturers is not suspect and some Indian brands are quite respectable.

Vendors have a solution to that problem. They have suggested the government to empanel vendors in order to prevent small assemblers from bidding. In fact, two of the biggest Indian vendors in the government segment-HCL and Wipro-are said to be on the empanel list of most government departments. With domestic brands being able to counter the MNC vendors on the price front, it is no wonder that both these vendors have the biggest market share in the government segment (more than 50 percent over the last three-quarters).

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Says George Paul of HCL Infosystems Ltd, "Whenever we see tenders specifying brands we approach the concerned authorities and educate them and we have seen good results. But at the same time, we have also stepped up our efforts in educating officials in the segment. This has started showing tremendous changes."

Vendors are actually left with little choice than to educate officials. They admit that they would rather not use any other means of protesting since tenders are a very delicate issue and would rather not upset government officials for fear of being blacklisted for later orders. Most vendors agree that it is not a question of losing an order or two but a bigger issue of having a level-playing field and transparency.

With the PC market facing the heat due to tough economic conditions, it is the government, which is the biggest spender in rolling out its computerizing program. A lot of vendors like IBM and Compaq have aligned with various state governments to implement e-governance solutions. Gartner Group had predicted that government spending would help the sector recover to a large extent. It is no wonder then that domestic vendors are gunning for the government.

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Players traditionally focused in other market segments like the home and the small businesses have now turned their eyes to this segment. Said Manish Aggrawal, Director (Operations), Vintron Informatics Ltd, "We have no presence in the government but are now looking at that market and specifying brands is a matter of concern to us."

Specifying brands is actually ludicrous since it negates the meaning of bidding for a tender. "It is better to place an order to the vendor and who in turn can pass it on to its preferred partner to execute," pointed out Aggrawal.

(CNS)

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