Low quality, ‘black-box operation’, waste of public coffers . . . These are often some complaints made against the public works and government-contracted services. Many have blamed these on the non-transparency of government procurement procedures, which have not undergone any major revision for over three decades.
In the face of public pressure and delays, the government has finally come up with a draft bill regulating its procurement of goods and services with goals to enhance the efficiency and transparency of the procedures. While pundits believe the new regime is a good step forward there is still much room for the authorities to be transparent beyond the rules.
Currently, three main regulations govern the Administration’s procurement of goods and services, as well as contracting public works: Decree-Law 122/84/M, Decree-Law 63/85/M and Decree-Law 74/99/M. The former two concern the detailed procurement rules and procedures of services and goods, while the last entails detailed rules for granting public construction projects.
In the draft bill unveiled in November, now undergoing a 60-day public consultation exercise, the authorities propose a so-called new Public Procurement Law to replace the two decree-laws coming into force in the 1980’s as the 1999 decree-law will remain effective. The new bill features clauses and terms that will bring major changes in the procurement regime to 19 areas, including setting up basic principles for public procurement, detailing and standardising different types of procurement practices, standardising the criteria for granting, and others, the consultation document reads.
One of the major changes is raising the minimum threshold amount for launching public tender: the amount for a public construction project will be increased from more than MOP2.5 million (US$312,500) to MOP15 million, while the threshold for the procurement of goods and services will be increased from over MOP750,000 to more than MOP4.5 million.
The rationale behind the six-fold hike in both thresholds is due to a series of factors, including public expenditure in the past three decades, staff costs and inflation, as well as listening to the opinions of government departments and society, the government explains. According to official figures, the expenditure for procurement and investment rose nearly six times from MOP4.7 billion in 2003 to MOP27.7 billion in 2017.
Circumventing rules
While legislator Leong Sun Iok understands the importance of raising the thresholds – as a low amount will dampen administrative efficiency – he is worried there will be more room for public bodies to circumvent the rules to avoid bidding.
“The amount [of the threshold] is actually not that important,” he said. “What I am more concerned about is how the government enhances the transparency and supervision of the procurement procedures.”
His worries are not unfounded. According to the annual report of the Commission Against Corruption for 2016, the watchdog lambasted a number of government departments for breaking down the procurement of services and goods or projects into smaller parts in order to avoid public tendering. In an annual report a year earlier the watchdog cautioned that ‘collusion between civil servants and businessmen was severe.’
The Commission of Audit has also released strongly worded reports on the procurement practices of government departments over the years. In the annual report for 2016, the Commission underscored the situation of public bodies failing to comply with procurement rules. In 280 projects the watchdog analysed nearly 30 per cent- or 81 projects – did not follow procurement regulations for various reasons.
“What is of paramount importance is that the government has to ensure the greater transparency of the procedures, allowing both the public and stakeholders to keep track [of each step] to minimise the occurrence of irregular practices,” said Mr. Leong.
The consultation document mandates the Financial Services Bureau to set up and manage a website publicising all the necessary information about procurement, including public tenders, invited tenders with preliminary assessment, lists of bidders, and others.
Although not stated in the consultation document, officials from the financial bureau pledged in one of the consultation sessions that the government would make the information regarding projects or goods and services each worth MOP1 million or more available on the portal. There have been calls, however, for the government to upload all their procurement activities online for better public supervision.
Mr. Leong also hopes the draft bill can clearly detail the penalties for parties failing to comply with procurement rules. The consultation document now only states that civil servants and officials have to face criminal, civil and internal administrative procedural obligations for failing to comply with the rules but it does not specify what types of penalty they are subject to.
Lack of solutions
With regard to procurement practices the draft bill lists five types for all government departments, public bodies, and government-controlled companies to adopt; namely, public tender, invited tender with preliminary assessment, competitive negotiations, enquiry and direct grant.
While the first two types of procedure are about bidding, enquiries happen when the value of a public construction project is between MOP250,000 and MOP15 million, and between MOP100,000 and MOP4.5 million for procurement of goods and services; public bodies have to consult at least three to five entities for quotations before procurement.
Direct grant takes place when the value of the project is less than MOP250,000 for public works, and below MOP100,000 for procurement of goods and services, in which government departments negotiate directly with one entity for works or services. Direct grant can also be applied, regardless of the amount of the project, due to the complex nature of the services and works and other reasons like national security.
Competitive negotiation is a new type of procurement procedure the government plans to introduce, in which separate negotiations will be held with a certain number of entities to strive for the best procurement scenario. This could be adopted due to the complexity of the project, or when no submitted bid in the tendering process is accepted, according to the consultation document.
Pan-democrat legislator Au Kam San believes that where there is a will there is always a way for public bodies to circumvent the procurement rules.
“Many instances show government departments would break down a project into different phases so that the amount of each phase will be lower than the minimum threshold of public tender,” he illustrated.
As the draft bill lacks terms to address the matter, he believes that “This practice might continue in the future.”
Discretionary powers
The legislator also noted that there is still some room for officials to exercise discretionary powers in the proposed procurement rules.
“[Some] government departments could ‘customise’ the bidding rules for a particular entity in an invited tender,” he said. “Then they could just invite the entity and other entities that do not fit the criteria to join the tender.”
The discretion power, or ‘the will of officials’, is also a key term highlighted by political commentator Larry So Man Yum, who says: “The city is under an administrative-led governance, giving a lot of room for public bodies to exercise their discretionary powers.”
He thinks the key is to enhance the supervision of procurement procedures, but “the Legislative Assembly here could not review and approve the detailed public expenditures.”
Unlike Hong Kong, where the detailed expenditure of different projects and procurement of services and goods are subject to the review and approval of the legislature, the Macau Legislative Assembly can only review and discuss the annual budget of the Administration. There have been calls for public projects larger than a certain amount to be subject to the review of the legislature, but the calls have fallen on deaf ears.
While the watchdogs and Macau Public Prosecutors Office could somehow oversee the procedures, Mr. So noted that “they are limitations on what they could do.”
According to the current rules, a representative from the Macau Public Prosecutor’s Office has to be present in the process of opening a tender for construction projects worth MOP10 million or more, or for the procurement of goods and services worth MOP5 million or more.
An annual report for 2017 of the Office remarked: ‘We think there has to be an instant supervision mechanism for the entire process of major procurement activities, guaranteeing every step of the process from preparation to payment is compliant with the rules, as well as ensuring the entire process is just and fair.”
Variable thresholds for procurement practices
| Current practice | Proposed practice |
| Public Tender
- Over MOP2.5 million for public works - Over MOP750,000 for procurement of goods and services |
Public Tender
- Over or equal to MOP15 million for public works - Over or equal to MOP4.5 million for procurement of goods and services |
| Invited Tender with Preliminary Assessment
- Over MOP15 million for public works - Over MOP7.5 million for procurement of goods and services |
Invited Tender with Preliminary Assessment
- Over or equal to MOP15 million for public works - Over or equal to MOP4.5 million for procurement of goods and services |
| N/A | Competitive Negotiation
– No particular amount is set for this practice |
| Written Enquiry
- Enquiring quotations from at least three entities for public works worth less or equal to MOP2.5 million - Enquiring quotations from at least three entities for procurement of goods and services worth less or equal to MOP750,000 |
Enquiry*
- Enquiring quotations from at least five entities for public works worth over or equal to MOP7.5 million and less than MOP15 million; the threshold is over or equal to MOP2.5 million and less than MOP4.5 million for procurement of goods and services - Enquiring quotations from at least three entities for public works worth over or equal to MOP250,000 and less than MOP7.5 million; the threshold is over or equal to MOP100,000 and less than MOP2.5 million for procurement of goods and services - Enquiring quotations from at least three entities for other conditions |
| Oral Enquiry
- Enquiring quotations from at least three entities for public works worth less or equal to MOP150,000 - Enquiring quotations from at least three entities for procurement of goods and services worth less or equal to MOP15,000 |
N/A |
| Direct Grant
- No particular amount set
|
Direct Grant*
- Normal procedures for public works worth over or equal to MOP100,000 and less than MOP250,000; the threshold is over or equal to MOP10,000 and less than MOP100,000 for procurement of goods and services - Fast-track procedures for public works worth less than MOP100,000, and less than MOP10,000 for procurement of goods and services |
* Government departments can choose to adopt this practice regardless of the amount of the project based upon a wide range of factors, namely urgency, complexity of the project, national security and others.
Applicability of proposed procurement rules
The proposed procurement rules are applicable for government departments, public bodies like the Monetary Authority of Macau, and companies fully controlled by government, but the rules are not applicable to situations as follows:
- Contracts inked between government departments
- Contracts inked between Macau Administration and Hong Kong and Mainland Chinese authorities
- Contracts inked between Macau Administration and any international organisations
Situations authorised by Chief Executive for ensuring national security or protecting interests of
