Saturday, April 11, 2009

Project delays and bureaucracy

Why do government agencies (with exceptions like the Delhi Metro), unlike the private sector, find it difficult to complete projects in time? I will argue that, apart from other usual suspects, a major contributor to the delays has been the environment in which the bureaucracy surrounding such projects operate.

The major part of the delay usually occurs in tendering and entrusting the work to a contractor. Bigger infrastructure works and projects involve elaborate, complicated and procedurally dense bid process management. The multiple levels of bid scrutiny, detailed qualification norms, and numerous stages of approval makes the process heavily bureaucratic. The legalesse involved in concession agreements and contracts and the heavily skewed information asymmetry against the government and in favor of the private contractor, only adds to the bureaucracy.

The bureaucrateuse apart, the environment in which these transactions take place plays an important, and often overlooked, role in determining the speed of clearances. The increased intensity of external oversight by the vigilance and anti-corruption departments, media and now the Right to Information (RTI) Act may have, perversely enough, contributed to slowing down the bureaucratic process. These external factors are ideal fuel for firing up the internal rivalries among officials and between departments. The stakes too are invariably high in view of the heavy competition to win these projects. Further, political patronage claimed by specific bidders makes the process even more murky and complicated. All these elicit contrasting responses in different officials.

There are broadly two types of officials - honest and dis-honest (everyone else falls within the spectrum, and their behviours vary in shades between the two extremes). The former, being concerned about their reputation, seeks to protect themselves from any inadvertant lapses or omissions and takes caution to its extreme, often to the extent of paralyzing the process. Wary of future vigilance or departmental enquiries or even witch-hunts in the aftermath of government changes, and history shows that all major projects invariably have a few skeletons in its cupboard, he seeks to hedge himself with all available protection, refusing to take decisions unless it literally screams out from the file. The attendant delays and transaction costs are always substantial.

The dis-honest also paralayze in another way. The complex and labyrinthine procedures in the bidding proces provides a fertile ground for numerous rent seeking opportunities. First, they create obstacles in the tendering and sanctioning process, so as to facilitate negotiations with the bidders and maximize their personal returns. Then, they game the process to favour the preferred bidders, most likely to be not the most suitable and eligible, who end up walking away with the bid. These "successful bidders" have no intention of completing the project in time and with good quality, and only eye the collateral benefits that come with winning the bid. The stage is set for project delays.

Now, all this analysis should not be mis-construed as an arguement that transparency, vigilance enquiries, elaborate procedures and RTI are detrimental to the swift sanction of projects. It is undeniable that these procedural and institutional mechanisms have provided valuable checks and balances to ensure transparency and accountability in the tendering pricess. But it cannot also be denied that the strong possibility of their being misused (and experience shows it is very real) introduces negative externalities that come in the way of quick sanction of projects.

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