OIL, Bhel, and now Gail: PSUs’ tender prequalication norms favour Big Four, leave out Indian rms

 By N Sundaresha Subramanian

ET

Homegrown chartered accountantand consultancy rms are crying foul, alleging that the selection criteria applied by several public-sector undertakings (PSUs) while awarding work are unfavourable and against the spirit of the Prime Minister’s ambitious Atmanirbhar Bharat campaign. Calling it a deliberate attempt to favour the Big Four, they are blaming the state-owned behemoths for keeping Indian rms out of work by drafting conditions that aid only multinational entities. From Oil India Ltd (OIL) to Bharat Heavy Electrical Ltd (Bhel), several PSUs are seen either bluntly limiting tenders to the Big Four or cleverly couching the prequalication criteria to pre-empt the participation of potential competitors domiciled in India. The latest to join that list has been stateowned natural gas processing and distribution major Gail. In September, the state-owned Maharatna published a tender notice in which the rankings given by a foreign publication was taken as the criteria for selecting rms for Goods and Services Tax (GST) and customs laws-related consultancy work. A strange condition Gail’s invitation for bid document is sub-titled “limited tender”. Clause 2.0 of the letter states, “The tender is limited and hence open only to shortlisted rms based on tax consultants listed by International Ta Review (ITR) in tier 1 under indirectta category.” For other rms that don’t qualify under the criteria, it stated that the tender document is published on government procurement portals for information only. The 74-page document did not give any explanation or rationale for choosing this parameter as a precondition for the tender or details of the credentials of the publication. Only six rms — the Big Four (KPMG, PricewaterhouseCoopers, Deloitte, and EY) and two others, Dhruva Advisors, and Lakshmikumaran and Sridharan (L&S) — are listed as tier 1 under the indirect tax category. While Dhruva Advisors is a rm oated by former KPMG deputy CEO Dinesh Kanabar, L&S is a threedecade-old law rm founded by advocates V Lakshmikumaran and V Sridharan. E-mails sent to Kanabar and Lakshmikumaran asking the process followed in ranking them and whether the eligibility criteria were fair did not elicit any response. Spokespersons of EY, KPMG, and PricewaterhouseCoopers (PwC) did not immediately respond while a Deloitte spokesperson declined to comment. According to an executive with one of the Big Four rms, his rm did not submit any details with ITR and the rankings were based on publicly available information. Meanwhile, several domestic CA rms which have the capability to take up this kind of mandate feel such a prequalication is discriminatory. They say it’s a matter of concern that when it comes to GSTconsultancy assignments, PSUs prefer only international consultancy rms and no space is given to local rms. “India has a unique system of GST where the Centre and states charge taxes and the states are reimbursed by the Centre. Indian consultancy rms are most suited for handling such assignments, given the background of earlier tax regime of service tax and state VAT,” says Kanta Sharma, partner at Grandmark Consultants, a Delhi-based rm which / could not participate because of these conditions. Adding that the practice followed by PSUs is unfair, Sharma wonders, “What happened to the Prime Minister Narendra Modi’s slogans like Vocal for Local and Atmanirbhar Bharat? Why no levelplaying eld is provided to Indian rms when it comes to allotment of large consultancy assignments?” In a televised address to the nation amid the pandemic-forced lockdown in May 2020, Prime Minister Modi oated the idea of ‘Atmanirbhar Bharat’. Loosely translated as self-suiciency or selfreliance, the concept has ever since become the focal point of government’s economic policymaking. Academicians, too, nd Gail’s conditions for prequalication unreasonable and anti-competitive. “There is no reason given for prequalication of the selected rms. The work can be done by many CA and law rms with relevant experience in tax matters, perhaps at lower rates. Gail seems to have got it wrong,” says R Narayanaswamy, professor of nance and accounting, Indian Institute of Management - Bangalore. He adds that the credentials of ITR World Tax are also not very clear, though many industry professionals are featured in the website as tax leaders. “I don’t know what ITR World Tax is. In the ‘About us’ [section] on its website, all I could see was / ‘Coming soon’. Ditto for the methodology [followed in ranking rms]. Specifying prequalication should be ne, but it has to be reasonable. Gail is either lazy or biased by not stating why it has this prequalication. I am afraid Gail may not get competitive bids with this criterion,” he says. According to industry sources, domestic rms usually quote anywhere around INR1 crore for such contracts. “But a foreign rm can quote anything they could bargain on,” says Sharma. Thus, when such conditions for prequalication are introduced, it only helps foreign rms with their bargaining power. Narayanaswamy, meanwhile, believes many accounting and law rms that don’t gure in the ITR World Tax tier 1 list can still take up work related to direct and indirect taxes. “Gail can ask for prior experience with similar organisations,” he points out. Understanding ITR orld Ta Sources in Gail say the International Ta Review ranks leading tax-consultancy rms across the globe depending on their depth of resources, experience, and range of specialisation. Tax-consultancy rms listed by the International Tax Review in tier 1 under the indirect tax category in India were considered for limited tendering process by Gail. The website says: “Our primary focus is now to uncover and explain the tactics and opinions of the world’s leading tax departments. We do this by talking to market leaders and tax directors of the world’s biggest businesses. Our subscribers in industry, government, and private practice can apply this insight to their workows and learn how these gures are dealing with the issues that matter most.” “ITR caters for our community of in-house tax teams within the areas of direct and indirect tax and transfer pricing. Within these areas, we also focus on controversy and litigation, technology and automation, tax compliance, and much more,” it adds. Besides rankings, it features proles of some of the rms prominently in what look like paid advertisements. For example, the brand image of PwC keeps ashing on the top right corner of its India pagewhile a prole of Dhruva Advisors and Advaita Legal appears on the left. ET Prime tried to reach out to Jonathan Moore, editor of ITR World Tax, to understand the ranking methodology and business model, but didn’t receive any response. CVC guidelines on prequalication A Gail spokesperson did not respond to an e-mail from ET Prime seeking comments. However, replying to a grievance led in the petroleum ministry’s public grievances portal last month, a senior company oicial said, “As per our understanding, no empanelment is done by www.itrworldta.com and only ranking is done by them of the tax-consultancy rms operating in various tax jurisdictions of the world including India depending on depth of resources, experience, and range of specialisation. The six consultancy rms/vendors operating in India were considered for participating in limited tender on the basis of ranking declared by the International Tax Review in tier 1 under indirect tax category in India as per Gail selection procedure.” On the question as to whether this condition discriminates against local rms, the oicial added, “The ranking declared by the International Tax Review in tier 1 under indirect tax category include / tax-consultancy rms registered and operating in India and as such, there is no question of preference to international rms.” The oicial did not directly answer queries on how the decision to choose ITR’s ranking was arrived at and the ownership of this portal and its methodologies. “No Indian rms are kept out of this tender or international rms are preferred,” the Gail oicial said in response to the complaint. As a PSU, Gail is bound by Central Vigilance Commission (CVC) guidelines. The CVC 2002 circular on prequalication (PQ) criteria says that “a vaguely dened PQ criteria results in stalling the process of nalising the contract or awarding of the contract in a non-transparent manner”. The circular added thatat times, organisations pick up the prequalication criteria from some similar work executed in the past without appropriately amending the dierent parameters according to the requirements of the present work. “Very often, it is seen that only contractors and architects known to the oicials at the organisation are placed on the select list. This system gives considerable scope for malpractices, favouritism, and corruption,” the commission said in the circular. “Therefore, it is necessary to x in advance the minimum qualication, experience, and number of similar works of a minimum magnitude satisfactorily executed in terms of quality and period of execution,” it added. ‘They wantto keep us away’ To be sure, Gail is not the only PSU limiting tenders. As mentioned earlier, OIL issued a tender for hiring a consultant (in July 2018) for commercial and nancial due diligence and buy-side advisory services of its coal bed methane block in India. This participation in this tender was limited to the Big Four. It did not even create any restrictive prequalication like Gail did. OIL’s tender directly listed Deloitte Touche Tohmatsu India, Ernst & / Young LLP, KPMG Advisory Services, and PwC as “name of bidders allowed to participate”. Complaints led with the Institute of Chartered Accountants of India (ICAI) were of no avail. Earlier this year, capital-goods major Bhel oated a tender for tax-consultancy services. This was issued as a general tender that was open to all, but the terms and condition for applying were very much specic. Under the prequalication criteria, the bid document says the “bidder should have oice in at least 10 countries and should have handled at least 40 assignments in those countries”. This betrays the intention of the management to indirectly invite only multinational accounting rms to take up such assignmentsas they want to keep local Indian CA rms at bay, alleges Sharma of Grandmark Consultants. She says she has written to the chief vigilance oicer of Bhel, apart from the ICAI, and the Centralized Public Grievance Redress and Monitoring System (CPGRAMS). While prequalication is a process to select competent contractors having the technical and nancial capability commensurate with the requirements of the particular procurement, a plain reading of the principles laid down by CVC shows that three key ingredients are essential for good prequalication criteria in such large assignments in the public sector. They are transparency, fairness, and competition. / 16 hours ago 17 hours ago 10 COMMENTS ON THIS STORY zongri8 This is a very good move. we have seen in the past that small rms participate in the auction and win contracts by quoting the lowest price but unable to complete the work because of low prices and hence the work gets delayed and the cost overrun. so only those rms that have deep pockets should attain these auctions. MEHAK KHURANA Mentioning conditions like "ofces in 10 countries, projects in 40 countries" clearly shows the malade intentions of PSUs where they prefer signing contracts with big foreign rms which can ll their pockets heavily under the table from top to bottom. The bottom line The selection procedure should attract the participation of reputed and capable rms with proven track record. Therefore, the CVC requires the eligibility criteria be exhaustive yet specic, and there is fair and adequate competition. However, these bids by the PSUs fall short of pass marks on these parameters. Yet, they get away with it sometimes, but not always. Sharma had attended the pre-bid meeting of the Bhel tender earlier this year. “As expected, only representatives of the Big Four rms were there. Only four rms participated in the tender and the fth was mine. All other CA rms chose to remain silent and bound themselves with the criteria, but I took this opportunity as platform to raise my concern. I escalated the matter with the CVO and the CPGRAMS, and of course with the ICAI,” she says.

Source: https://economictimes.indiatimes.com/prime/corporate-governance/oil-bhel-and-now-gail-psus-tender-prequalification-norms-favour-big-four-leave-out-indian-firms/primearticleshow/79355417.cms?utm_source=newsletter&utm_medium=email&utm_campaign=prime_dailynewsletter_paid&utm_content=heading_2&ncode=ae88c8a4f8742a8682bf7d9294253f7f