New Delhi: The government is finding it difficult to get consultants to prepare infrastructure projects it is planning to develop under partnerships with the private sector, as the guidelines, issued in December, prevent such consultants from working with companies that win the contracts.
Consultants help with design and cost details and also help work out how long the companies that are developing them should be allowed to hold the projects to make a reasonable profit. They also provide consultancy services to private companies, for instance advice on tax issues.
Under the new rule on conflict of interest, a consultant who worked with the government on a particular project will not be allowed to work for the company that won the same contract as long as the company is allowed to own the project. The rule is part of the guidelines issued in December. This rule is affecting the government’s ability to prepare projects, said an official at the National Highway Authority of India. “We have been trying to bid the projects out, but none of the major people (consulting firms) are applying. After a lot of trouble, we have found four small companies to bid for some of the projects,” the official said, asking not to be named.
Executives at consulting firms confirmed that they are not very keen on bidding to be the government’s consultants.
“We have decided not to bid for any of the projects for now,” said an analyst with a consulting firm. “We have decided to stay away from the Udaipur and Amritsar airport projects, as well as the New Delhi railway station project,” said the analyst, who did not wish to be quoted citing an ongoing government work.
Confirming that his company had chosen not to bid for certain projects, Arvind Mahajan, executive director of advisory services for consultancy firm KPMG Advisory Services Pvt. Ltd, said another problem was the government’s emphasis on lowest cost.
“If your structure is aligned towards the bidder with the lowest cost, then you are automatically not aligned towards (the idea of) the best possible bidder winning. And then, the government also wants to prevent us from providing other advice to companies, such as tax advice, which affect future revenue streams. So naturally some people will not bid,” Mahajan added.
Some consultants suggested that the restrictions could be open to negotiations.
“I think they are sensible that way. I think we can make ministries understand that we are not going to work with the company that is bidding (for the same project where we are the consultants). A blanket restriction is not necessary,” said Jayesh Desai, director of transaction advisory services at consulting firm Ernst and Young Pvt. Ltd. “But I would certainly not bid if someone insists that I cannot work with someone for 25 years.”
There are, however, indications that government is working on making some changes. A finance ministry official didn’t disclose the details, but said: “Globally, there are a lot more consultants and so the problem doesn’t arise.” He asked not to be named.
A Planning Commission official, who asked not to be named, defended the rules, saying it was the panel’s job to identify potential conflicts of interest.
“It is our job to keep identifying best practices, even if some people do not like them,” the official said.
Mint had reported on 25 November that contractors and highway builders were concerned about the new rule, which, they said, would prevent smaller companies from winning bids.