Ejeg Volume13 Issue2 Article418

8/20/2019 Ejeg Volume13 Issue2 Article418

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E-Procurement: A Tool to Mitigate PublicProcurement Fraud inMalaysia?

Khairul Saidah Abas Azmi1

and Aliah Aida !o"e Abdul #ahman$

1Esse% &usiness School' (ni)ersity o Esse%' (K

$School o Architecture' *om"uting and Engineering' (ni)ersity o

East !ondon' (K ks baba@ess ex .ac.uku1220872 @ u e l .ac .uk

Abstract: The major aim of this paper is to explore and analyse the vies of !alaysianpublic officials on ho e" #rocurement helps miti$ate procurement fraud. %hile it is fullyle$itimate for private enterprises to bid for public orks& in many cases there is inappropriate$rantin$ of public money to non"'ualifyin$ private business in a fraudulent manner. The visibility of fraud losses in the public sector has undermined the delivery of public services. (ecrease of fraud

incidents can improve the country)s $roth in terms of infrastructure& by providin$ facilities toimprove healthcare and education& to combat poverty& and to fund security and defence. Thispaper analyses the implementation of *"+overnment in !alaysia& hich has transformed the publicservice into a dynamic and diverse environment for $overnment activities. *lectronic #rocurement,e"#rocurement- can be used as a tool to miti$ate fraudulent activities in public or$anisations byensurin$ accountability& transparency and the achievement of best value for money contracts. nthis 'ualitative study& a political economy approach as used to investi$ate the socialphenomenon. (ocumentary analysis and semi"structured intervies via the /noball /amplin$!ethod ,//!- ere conducted for investi$atin$ public procurement fraud in !alaysia. The personalvies of 1 procurement oicers from various !alaysian $overnment a$encies ereexamined. Their perspectives& vies and individual experiences shed li$ht on ho e"#rocurement helps to alleviate public procurement fraud in !alaysia. The findin$s shoed that e"#rocurement can ,1- dispute political and economic forces in $overnment purchasin$ processes&,2- mana$e demands and interference hen reardin$ $overnment contracts& and ,- be usedeiciently at the nexus of $overnment and businesses. Thus& this study has a number of practicalimplementations and contributions based on the experience and vies on e"#rocurement by!alaysian public oicials. t can also facilitate policy makers& enforcement a$encies andresearchers in understandin$ ho to miti$ate public procurement fraud usin$ an automated andonline environment. oever& this study also concludes that e"#rocurement is just a 3tool) tomoderate public procurement fraud& not the solution to this problem.

Key+ords4 e"procurement& public procurement& fraud& political economyapproach& !alaysia

1,ntroduction

5oncerns about fraud in public procurement have been of practical si$nificance becauseof massive public spendin$ and deficiencies amon$ various public or$anisations,5aulfield& 2016-. n many countries& public procurement has devoted a lar$e share of public funds to procure necessary $oods& services and orks to deliver public services.or example& the %orld ank reports the value of 10&88 contracts prior revie as of ebruary 2016 to be 9/:12.8 billion in various re$ions of the orld ,%orld ank& 2016-. This includes ;frica ,9/:.atin ;merica and 5aribbean ,9/:1. billion-&!iddle *ast and ?orth ;merica ,9/:0. billion-& and /outh ;sia ,9/:2. billion-.olloin$ this& ;( ,2016- reported that procurement fraud has created lon$"termbusiness opportunities beteen state oicials and businesses. /uch opportunities resultto a ide ran$e of activities4 bribery and kickback for financial $ains and incentivepayments& bid ri$$in$ and collusive biddin$& falsified amounts and many others. The

%orld *conomic orum provided the fre'uency rates of bribery in public procurement invarious countries in 200


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contact& is seen as a 3tool) to miti$ate public procurement fraud ,?eupane et al.& 2016&Coman& 201-.

The emer$ence of information and communication technolo$y ,5T- has made *lectronic+overnment ,*" +overnment- a platform hich can increase eiciency and eectivenessof the public"sector service delivery. The technolo$ical push for implementin$ e"

+overnment results in transformin$ public or$aniDations and it //? 167="6=E1 Ceference this paper;Dmi G and Cahman ; He"#rocurement4 ; Tool to !iti$ate #ublic #rocurement raud in!alaysiaIJ The Electronic Journal of e-Government Volume 13 Issue 2 2015 ,pp 1


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Khairul Saidah Abas Azmi and Alifah AidaElectronic Journal of e-Government Volume

. eje$. c 151 //? 1677" . eje$. c 151 F;5#

promotes collaboration beteen business a$ents and the $overnment. ;ccordin$ to!ansor ,2008-& the need for the implementation of e"#rocurement in !alaysia is drivenfrom the 5T)s evolution in order to4 ,1- ensure continuous supply of products andservices& ,2- achieve best value for money contracts& ,- encoura$e local industries$roth& ,6- encoura$e technolo$y of transfer and ,


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Khairul Saidah Abas Azmi and Alifah AidaElectronic Journal of e-Government Volume

om 152 //? 1677"om 152 F;5#

services ,?;A& 2016& Musoff et al.& 2010-& in creatin$ opportunities for cost reduction,Coman& 201-& and in promotin$ transparency and accountability ,ertot et al.& 2010&Grishnan et al.& 201-. +enerally& the implementation of 5T in $overnment purchasin$usin$ e"#rocurement has been idely applied to procure $oods and services ,!c5ue andComan& 2012-.

*"#rocurement involves procurin$ $oods or services via electronic means ,/un et al.&2012-. Nonsson et al. ,2011- and +amal ;boelma$ed ,2010- su$$est that the

di$italiDation of the procurement system is aimed at the reduction of costs& a hi$hermarket transparency and a better coordination and collaboration. !oreover&

http://www.ejeg.com/http://www.ejeg.com/


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+ardenal ,201- illustrated that e"#rocurement can be used to measure or$aniDationalperformance. %ithin this context& the adoption of the e"#rocurement platform en$a$esprocurement activities by employin$ 5T at all levels of the procurement cycle includin$selection of sellers& control over orderin$ supplies& purchasin$& payment& receipts andrevies after procurement process in the electronic marketplace. Thus& the mechanismof e"#rocurement& hich increases transparency and accountability for many

$overnment contracts& has to some extent been desi$ned ith the aim of curbin$ fraudand corruption activities.

The complexity of the procurement system in the pre"contract& contract and post"contract phase makes it vulnerable to fraud and corruption ,e$$stad et al.& 2010-.nevitably& the process of reardin$ a contract is influenced by the poer relations of political and economic institutions hose aim is to sustain the status 'uo ,/ar$iacomo etal.& 201


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to sensitivity of the research& the name& position and the name of $overnmenta$encies are not revealed. #ublic procurement officers play a substantive role inaccessin$& evaluatin$ and decision makin$ in reardin$ the $overnment contract. They face considerable risks hen doin$ their day to day job and they aresometimes pressuriDed to obey demands from a hi$her authority ,/ikka and>ehman& 201


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ell as establish ne themes hen needed. y employin$ this method& !yers ,200=-ar$ues that the analysis and interpretation of 'ualitative data such as documents canbe incorporated and form similar themes ith the intervie data . Thus& interconnectedmeanin$s of various sources of data and various methods of data analysis can provide athick description of a social phenomenon ,olliday& 2007-.


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/, #esults anddiscussions

The results and findin$s of this study& hich are thematically or$aniDed& sho ho e"#rocurement miti$ates public procurement fraud in !alaysia. The emer$ent themesshoed that e"#rocurement4 ,1- can escape the influence exercised by political and

economic forces hen reardin$ $overnment contracts& ,2- mana$e demands andinterference from third parties& and ,- is useful at the nexus of public"private relations.

/,1 Political andeconomic orces

The interest of political and economic forces in $overnment procurement takesthe form of fraudulent activities and corruption in the public offices ,Cose";ckerman&1===-. ; number of previous studies shoed the role of political and economic forcesand poer relations in deviatin$ the principles of transparency and accountability in aprocurement process ,(astidar and !ukherjee& 2016& Thai& 200=-. or example& theprotectionist policy hich has been implemented in !alaysia to favour domestic

companies has to some extent resulted to fraud and corruption activities. raud andcorruption in !alaysian public procurement is associated ith the entrenched poer of political and economic institutions in distributin$ public resources. n this context& onecan say that distribution of public funds may open up an opportunities for fraudand corruption throu$h rent"seekin$ activities& political patrona$e& cronyism andfavouritism ,+omeD et al.& 201& /undaram and ui& 2010-. %hat is more& hen theprocurement biddin$ process is not transparent& but there is conflict of interest& a biddercan be selected not due to their capacity but due to their relation ith the rulin$ party,Ghalid& 2016& %elsh and 5hin& 201-. Therefore& *"#rocurement helps reduce the riskof abuse& fraud and corruption by $ivin$ transparent information from all bidders.

Ce$ulator 6 ar$uedthat& 3

E-Procurement helps b sho!in" that onl relevant bi##ers can bi# for selective "overnment contracts$ If the bi##ers have not submitte# all therelevant re%uirements to the sstem &for e'ample the #i# not provi#e the(inistr !ith the har# an# soft copies of procurement #ocumentation)* !e !illautomaticall !ith#ra! their application$ This is clearl state# in all"overnment purchasin" instructions an# it is a##resse# to all bi##ers in e-Procurement$+

%ith e"#rocurement& the system obli$es the bidders to submit all the relevantinformation. ailin$ to do so& the system automatically rejects the application&re$ardless of hoever may favour a particular bidder. ence& a transparent process of selectin$ and rejectin$ the bidder makes it possible to miti$ate fraudulent practicesithin the procurement life cycle.

?ext& the ability of e"#rocurement process to be unbiased toards certain $roups ,frompolitical and economic institutions- helps reduce the level of fraud and corruption in$overnment contracts. t is said that feer interactions ith the potential bidders mayprevent the bribes and kick"backs& collusive biddin$& mispricin$& conflict of interestsituations and many other fraud schemes in public procurement ,5aulfield& 2016& %orldank& 201-. n relation to that& Ce$ulator 10 stated that&

,E-Procurement #oes not favour an# it is not biase# to!ar#s certaincompanies$ e evaluate the companies base# on the information the "iveus - their financial con#itions* their previous e'perience* their pro#ucts an#

services an# all other relevant matters$ e #o not have to meet them personall$ There are fe!er human interactions in this !a an# this process isthus less vulnerable to frau# an# corruption$+


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>astly& e"#rocurement is able to choose the best value for many contracts for any$overnment projects. *iddin$& as one of the beneficial models bein$ developed in thee"#rocurement system& provides a different ay to procure $oods and services ith a$reater eiciency of the purchasin$ process. Ce$ulator 11 said&

,I prefer to use E.i##in" for an procurement process in m #epartment$ Thebi##ers nee# to "ive us their best value #urin" the bi##in" time so as to"et the contract$ The #o not /no! our bu#"et for that contract$ Thissstem encoura"es open competition amon" the bi##ers$ Thus* at


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the en#* those oerin" the lo!est price !ill "et the contract$ urin" thebi##in" process* !e #o not /no! !hether a compan has an lin/s !ith an ,bi" cable+ &from political an# economic institutions)$ I stron"l believe that this helps for more transparent an# value for mone contracts in the"overnment #epartment$+

n short& e"#rocurement provides an avenue to alleviate fraud and corruption activities inthe $overnment procurement. #ublic procurement fraud is miti$ated throu$h theimplementation of the e"#rocurement system hich allos for transparenttransactions& value for money contracts and an opportunity to conduct one)s ork iththe hi$hest inte$rity. #olitical and economic forces cannot easily dispute ith the e"#rocurement system since it is an online interactive environment.

/,$ 0emands and ntererence in re+ardinggo)ernment "roect

(ecisions to reard $overnment projects are subject to valuation by theprocurement committee via a technical and finance committee. This committee isresponsible for evaluatin$ procurement documentations submitted by contractors basedon the key principles of $overnment procurement4 ,1- public accountability& ,2-transparency& ,- best value for money& ,6- open competitors& and ,


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spectrum of interference from vested interests. Therefore& the reardin$ of $overnmentcontracts follos key principles of $overnment procurement.

/,. nteractions bet+eengo)ernment and business

nevitably& the nexus beteen $overnment and business or$aniDations is evidencedin many $overnment purchases. The fact that it is le$itimate for private enterprises to

bid for public orks has to some extent increased fraud and corruption activities. Theintimate relationship beteen the state and business or$aniDations has opened upopportunities for fraud and corruption practices in relation to biddin$


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$overnment contracts ,!c5ampbell and Cood& 1==7-. y abusin$ their position in thepublic oices& business leaders ith a closely"connected relation ith somepoliticians and top bureaucrats can easily secure a $overnment contract,/ar$iacomo et al.& 201ehman& 201


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authoritarian re$ime like !alaysia ,/uaram& 201


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throu$h recommendations. %ithout any doubt& the //! is a useful and efficient ay to$enerate positive responses ,+oodman& 1=1& eckathorn& 1==7-. ,astly& it as very time consumin$ to transcribe asell as translate the intervie transcripts from !alay to *n$lish.

3,*onclusion

Throu$h the lens of the political economy approach this research sheds li$ht on ho e"#rocurement is able to curb public procurement fraud in !alaysia. The findin$sindicate that ,1- e"#rocurement can be used as a3$atekeeper) for all bidders in ensurin$ that they follos the 3rules) as stipulated in the

system. y usin$ e" #rocurement& the bidders must comply ith all rules otherisetheir application ill simply be rejected ,;laeti et al.& 201-. The system is notbiasedL rather it chooses the best value for money contract. Thus& e" #rocurement is ableto stop any political and economic forces from interferin$ ith procurement processes.,2- e"#rocurement helps to safe$uard many public officials throu$h its transparent andeicient system. t can be used as a 3barrier) to avoid unnecessary demands andinterference from people ith a vested interest. ,- e"#rocurement is also useful indealin$ ith intertined relationship beteen public and private or$aniDations. (espitefacilitatin$ business to business transactions& e"#rocurement does not compromise theay they do business. The system 3demands) and makes it compulsory to the supplier to$ive proof of their capability to do specialiDe thin$s for $overnment a$encies ,e.$. proof of experience& certificates of 'ualifications-. Therefore& businesses cannot simply $etaay ith fraudulent transactions by havin$ connections ith the poerful $roup. The system is clear and unbiased& ith feer human interactions. Therefore& e"#rocurement can be used to minimiDe the risk of public procurement fraud.

The paper has taken a 'ualitative approach in explorin$ the vies and perspectivesof !alaysian public oicials in relation to the aids of e"#rocurement in alleviatin$ fraudin the public offices. The most important contribution of this study is that it explored and$ained an understandin$ of this very difficult matter from the personal experiences of 1 procurement officers. ;s such& the study as able to $ather professionalknoled$e that is often confidential& privile$ed and hidden from the public domain,5hristopoulos& 200=-. Therefore& the efficient use of /noball /amplin$ Techni'ue ,//!-for the current study si$nificantly contributed to the investi$ation of this socialphenomenon. The detailed implementation of //! ,as explained in methodolo$y

section- can be considered by other researchers& too. n re$ard to this& the richmosaic of vies on curbin$ public procurement fraud throu$h e"#rocurement can havepractical implementations and contributions for policy makers& enforcement a$enciesand researchers. urther& the political economy approach $ives fruitful evidence to3unpack) the praxis of e"#rocurement in curbin$ public procurement fraud in !alaysia.


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The fact that this study has a lot of contributions does not mean that it is ithout itschallen$es and limitations in investi$atin$ public procurement fraud in !alaysia ,asexplained in section -. Ather researcher can take those into account hen investi$atin$other social practices.

; number of points have to be raised in future research re$ardin$ the use of e"#rocurement as a tool to miti$ate public procurement fraud. (ierent methods& forexample 'uantitative or mixed methods and dierent theoretical frameorks could

be employed in future studies. t ould also be beneficial to study


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dierent settin$s ,e.$. the private sector-. inally& more participants could be involvedfor a more robust research. oever& one need to bear in mind in future studies as ellthat e"#rocurement is only a 3tool) employed to miti$ate public procurement fraud in!alaysia. t is not the one and only ay of fi$htin$ and eliminatin$ fraudulentactivities in the !alaysian public sector.

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