21 Apr 2008: CEO's Laptop: Opening up for a better tomorrow
By David Wong

The recent unexpected general election results in have triggered off debates on issues previously deemed "sensitive". One such issue is the open tender. The forthright and frank discussion on this subject by various parties is a step in the right direction. As Malaysia strives towards developed nation status, it is imperative that transparency and good corporate governance are well practised within the information and communication technology (ICT) industry, and the country as a whole.

So, what exactly are the positive and negative implications of an open tender system?

While open tender welcomes bids from scores of sellers, contractors, suppliers, and vendors, the sheer scale of response may overload the limited capacity of assessors or procurement agencies, which ultimately may hinder the proper evaluation of the bidders as well as the bids.

As such, restricted tender often tends to be favoured as this method involves less time and expenses. It's just a matter of accepting and considering offers from only a handful of pre-qualified bidders. For some, the concept also makes quality assurance easier.

The cost of closed tender
Procurements conducted through closed tenders run a higher risk of the project being awarded to an incompetent vendor. The lack of options will lead to overpaying and limit the government's ability to get the best possible deal. The common practice on the ground is that capable ICT companies have had to be sub-contractors to the incompetent main contractor who gets the award directly but who do not have the solutions or skills required for the job. A sub-contractor is often at the mercy of the main contractor in terms of low margins and delayed payments. Or worst still, the award recipient proceeds with the job without adequate solutions and resources, resulting in many ICT projects experiencing cost overruns and cancellations. Not only will this affect the local ICT industry, it will also have a negative impact on other sectors as well, which may mar Malaysia's reputation.

In fact, some ICT companies still shun government-led information technology (IT) project tenders for various known reasons. Some of these large-scale projects are typically conducted in a closed manner or on a negotiated basis and hence, are often viewed as unjust.

On the other hand, open tender encourages participation from many potential manufacturers or suppliers, some of whom will offer their services at a lower price. With more choices available, new and competent suppliers can be identified. This will ultimately produce greater competitiveness to further promote the growth of the local ICT industry.

Open tender also allows for greater transparency and accountability. The public will benefit from companies providing quality services to the government. Being more transparent about the winners of tenders, the value of the successful contracts, and the reason they won, will project a good image and boost confidence among investors. To address the issue of whether the practice of open tender will put certain groups at a disadvantage, proper guidelines or conditions can be drawn up to set a level playing field. For example, the problem of small players being victimised can be solved by calling for a special class of tender for small and medium enterprises (for example, jobs below RM500,000 for SMEs as defined by the Ministry of International Trade and Industry).

One practical suggestion is to set up an open tender web portal dedicated specifically to government IT projects. The site should be made accessible to the public to allow the government to collect feedback on how the procurement policies are working.

In New Zealand, for instance, an open tender website was launched to help the country gather direct feedback from business owners and managers on what is actually happening to all those government projects costing millions of dollars. The site allows people to post anonymously and stimulates an open and frank discussion about what's working and what's not.

Open tender with a transparent process, such as setting up a web portal for tendering of contracts, will be one effective way to combat corrupt practices in all forms. According to the Index of Economic Freedom, the perceptions of widespread corruption and "crony capitalism" persist in Malaysia. Malaysia ranks 44th out of 163 countries in the Transparency International's Corruption Perception Index for 2006.

Be that as it may, a full implementation of open tender is not going to be without challenges and will not be 100% fool-proof. There will still be issues, such as changing the mindset and culture, which need to be tackled. We need to inculcate the right culture and attitude towards this change.

Equitable society
A steadfast resolve to change is vital for the betterment of the nation. Pikom (the Association of the Computer and Multimedia Industry of Malaysia), as one of the nation's premier ICT associations, intends to sign a memorandum of understanding with Transparency International Malaysia (an independent, non-governmental and non-partisan organisation) to work for the promotion of a socially just and equitable society.

An open and transparent tendering process increases investors' confidence in the government and protects taxpayers via increased accountability in government expenditure. It also generates a competitive market economy that will accelerate Malaysia's goal of becoming the region's ICT hub.

Together, let us all work towards a more open and transparent system for a better tomorrow.

David Wong is Pikom chairman and group CEO of SnT Global