Evolution of Procurement Processes
The procurement processes have transitioned from ancient record-keeping practices to advanced strategies driven by Artificial Intelligence (AI), reflecting a historical shift from control to creativity in procurement.
Challenges with Traditional Procurement Policies
- Traditional procurement policies prioritize transparency and cost-efficiency, often at the expense of innovation.
- These policies have resulted in procedural compliance overshadowing scientific needs, particularly in research and development (R&D).
- India's pre-reform procurement framework was a significant barrier to innovation due to rigid rules like the mandatory Government e-Marketplace (GeM) purchases.
Recent Reforms in India's Procurement Policies
India implemented reforms in its General Financial Rules (GFR) to address the issues of outdated procurement systems.
- Exemptions from the GeM portal and increased financial thresholds for R&D procurement were introduced.
- Institutional heads can now bypass GeM for specialized equipment, and the direct purchase limit has been raised from ₹1 lakh to ₹2 lakh.
- Approval for global tenders up to ₹200 crore is delegated to vice-chancellors and directors, reducing bureaucratic delays.
Global Best Practices in Procurement
- Leading nations in R&D have reimagined procurement as a catalyst for innovation rather than merely a cost-control mechanism.
- Germany's federal procurement emphasizes innovative solutions through its High-Tech Strategy, employing agencies like KOINNO.
- The U.S. Small Business Innovation Research (SBIR) program supports early-stage technologies with phased procurement contracts.
Lessons from Global Models
- Germany's approach institutionalizes "mission-oriented procurement" to shape technological markets.
- India's GeM reforms partially align with this philosophy but lack Germany's market-shaping elements or the SBIR's structured funding.
- South Korea's "pre-commercial procurement" pays premium prices for prototypes meeting ambitious criteria.
Potential for Privatization in National Labs
- There is a debate on the privatization of India's national labs to enhance procurement efficiency.
- The U.S. model shows privatization can increase innovation if managed with performance-based contracts.
- India’s CSIR could adopt a hybrid model, balancing corporate agility with government oversight.
Recommendations for Further Procurement Reforms
- Implement outcome-weighted tenders, evaluating bids on cost and qualitative factors such as R&D investment.
- Allow innovation-focused institutions certain exemptions from the GFR, evaluated by third-party audits.
- Deploy AI-augmented sourcing to streamline procurement decisions and reduce decision cycles.
- Create co-procurement alliances to aggregate demand for high-cost items, achieving economies of scale.
Conclusion
India's recent procurement reforms are an essential step towards an innovative procurement system that balances cost, time, and technological ambition. By adopting global best practices, the nation can transform procurement from being a barrier to becoming an accelerator for research and development.
