State contracts to small business must not become poisoned chalice

The announcement late last week that Cabinet had given the green light for the implementation of the clause in the Small Business Act that sets aside up to 20 per cent of state contracts for the provision of goods and services for small businesses, with effect from January next year, is good news, as much for ambitious small businesses seeking growth through the acquisition of bigger contracts as for job-creation since bigger contracts will, in some instances, give rise to the need for an expanded work force. And since it is reasonable to assume that some small businesses will want to position themselves to benefit from the 20% provision (under the rules these jobs embrace contracts worth up to $30 million) one would expect that those businesses will seek to further raise their operating standards in order to realize the qualification requirements.

Since the provision has been enshrined in the Small Business Act since 2004 when the legislation was passed in the National Assembly, its full implementation all of fourteen years later is not to the credit of government even though one accepts that implementation would have had to be preceded by a carefully drawn up set of rules that protects the integrity of the arrangement. Ensuring the integrity of the arrangement could easily turn out to be government’s biggest challenge.

Over time, the tender procedures associated with the acquisition of state contracts have been ruthlessly violated through a culture of unrelenting corruption designed to profit both public officials and contractors and which government has found it difficult to rein in. Over time, losses to the state accruing from overpricing, providing kickbacks, cutting corners and ‘signing off’ on incomplete jobs have amounted to billions of dollars. Disturbing though it may seem the 20% small business allocation of government contracts, unless it is scrupulously ring-fenced, not only by rules and procedures but by strict checks and balances, could easily provide scope for a further decline in the already long tarnished state tender regime.

If the whole altruistic idea behind the 20% provision in the Small Business Act is (as has already been mentioned) is to help small businesses to grow (and here one can think of a number of sectors including electrical installation, construction jobs, catering, agro-processing and transportation among others) it is important that the rules governing implementation not only leave no discretion whatsoever in the hands of those functionaries responsible for administering implementation but also pay

scrupulous attention to the various kinds of chicanery that could make a mockery of the system’s good intentions. It is not inconceivable, for example, that the 20% provision could be set upon by a swarm of artificial small businesses, creatures of conspiracies involving influential service providers and state officials, determined to ‘cream off’ sizeable helpings of the contracts, lining their pockets and in the process hopelessly undermining the intent behind the provision in the first place. So that setting aside the importance of scrupulously evaluating the delivery capabilities of contractors in the first place, the biggest challenge which the system will face reposes in the need to implement a measure of scrutiny that goes to every reasonable length to ensure that the system does not quickly become infested by corruption.

Here, one sees much merit in limiting the prerogative of evaluation to state officials. Evaluating teams should include not only private sector functionaries but reputable professionals prepared to put their good names on the line. Such protection should apply in even greater measure given the fact that the 20% allocation to small businesses will apply in the far-flung regions of the country where the levels of public scrutiny are far less intense.

Over time, we have seen persuasive evidence of small businesses in some sectors outdoing their bigger counterparts in their ability to offer high quality in the delivery of goods and services.

Sectors/sub-sectors like transportation, catering, agro processing and the delivery of limited quantities of some types of goods and services are examples of those areas. It would probably be unwise, at this stage, to saddle small contractors with jobs that would unduly test their ability to deliver since falling short of expectations as specified in the contracts would not only impact negatively on their overall reputations but could also result in a waste of public funds. The start of the process should begin with a healthy dose of realism.

By far the biggest responsibility facing government in this matter, however, is that of ensuring that a forward-looking mechanism intended to strengthen the small business sector and to create more jobs in an environment of high unemployment does not descend into a quagmire of graft, nepotism and corruption that benefits those entrusted with its effective implementation and their cohorts. It is government’s responsibility to guard against the provision becoming a poisoned chalice.