Recently I was called for a meeting by one of the ministers in the new government and was stumped by the important challenge he posed to me. He said you work with the public sector and come up with such good suggestions on what they should do, and then you also help them do it. But can I ask you to add one thing to your mandate for the benefit of the whole system?how can contracting by government and public sector enterprises be speeded up. He referred to the specific client we were working on and said even after two years they have been unable to do a contract which their private sector competitor has done in a period of four months. The private competitor has thereby taken the lead and is building on it, while our client keeps dealing with procedural hassles and complying with all the government contracting procedures without success.

This huge competitive disadvantage may be more than all your good suggestions in a world that moves faster and faster. The minister?s insight was deep and pithy. In fact Kaplan and Foster had calculated that in 1920s a company in the S&P index stayed there for 65 years but by 1998 this period was down to 10 years. Today I guess that time period may be even less. When time itself is a major source of competitive advantage, as my colleague George Stalk from BCG had shown in his seminal book on time based competition, slow contracting can adversely affect a company?s market position.

Given that there are quite a few important sectors where the public sector has a significant and continuing presence?financial services, oil and gas, heavy industries, telecom?this disadvantage has deleterious consequences for the economy as a whole. Clearly then this is not a trivial problem. My attempt in this piece is to spur debate and do some loud thinking rather than propose a conclusive solution. Awarding contracts is the simplest way to do corrupt rent seeking. Public sector agencies need to be both transparent and equitable in their contracting. This promotes good corporate governance. But if the procedures to promote good corporate governance are so cumbersome and based entirely on preventing fraud with no cost to inaction then the system is not serving the public well. Most people in the public sector hate to deal with any form of external contracting. The rules are cumbersome, emanating from multiple agencies, continuously being updated and subject to inspection and oversight by people without any commercial experience or stake in their enterprise. This creates a natural inability for any contract to move fast.

Procedural compliance is much more important than the entity?s commercial interest and there is no penalty for inaction or delay. As these procedures are primarily meant to deal with corruption and foster equity, the need for commercial success is not part of the design. This tends to create a certain impotency for operating managers to take quick decisions on contracts. Even the highest bodies of the organisation?say a board of a public sector company?focuses primarily on the conformance part of the contracting process not the performance implication of any contracting delay. Given that public sector has to be an important part of our economy for the foreseeable future, the Minister?s question on creating more contracting efficiency in public sector enterprises has to be answered. So what can be attempted? To begin with, we must restore the importance of time in the contracting equation. There needs to be the creation of a contracting turn around time (TAT). Some work needs to be done in determining different types of contracts by complexity with contracting time lines defined for each type. Then organisations should be expected to run contracting processes within the stipulated timelines and held accountable for delays.

The Board should be updated every quarter in respect of contracts awarded outside the prescribed time with reasons. Some level of discretion, which is already present in CVC guidelines, should be made easier to exercise by saying some percentage of contracts can be awarded fast track. Over time as these companies get listed and the government permits more market related salaries and performance incentives the fears of the past will abate substantially. Company performance will then get more attention than compliance with contracting procedures. But till then let us introduce a PSU contracting TAT.

?The author is managing director, The Boston Consulting Group, India. These are his personal views