Avoiding a spending frenzy
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China Daily, November 16, 2011
A general manager of an enterprise in Changsha, capital of Hunan province, took the provincial authority to court alleging corruption in its procurement process.
The authority won the first trial and the man is now preparing his appeal.
There have been a number of such cases recently where the prices for government procurement have reportedly been much higher than market prices, inviting public scrutiny of the procurement process of governments.
After the first trial brought its procurement spending into the public eye, the authority said: "Setting the minimum prices in procurement is to use up this year's budget."
That Chinese officials are racking their brains to "use up their budget" before the year-end is probably unimaginable for governments in many Western countries, which are trying hard to make ends meet.
But they should rest assured that this is not because Chinese officials have too much money to spend rather it is because of the Chinese budget system, which makes the end of the year the deadline for governments of various levels to use up their budget for that year.
Any money not used by the deadline must be handed over to higher financial authorities, and the budgets for the following year are based on the money spent the preceding year.
So under this system, using up all their budget before the deadline has become a crucial task for officials and some pay little attention to the rationality and effectiveness of their expenditures as the deadline approaches.
Only when the budgets of governments are determined reasonably and scientifically, can the money that would otherwise be hastily spent at the end of the year be used wisely in the public's interest. In this way a negative incentive can be transformed into a positive incentive.
Government procurement also needs to be transparent if it is to avoid being fertile soil for corruption. The pilot electronic platform some local governments have adopted could prove the ideal way to make the government procurement process more transparent to the public. Under such online platforms, irrational pricing and high minimum prices can easily be spotted in real time.
A fair and open selection process for bidders is also essential, if admission to the governments' procurement lists is to be free of any suspicion of corruption.
Auditing and supervision of government spending should also be further strengthened. Encouraging transparency and third-party supervision will be the best ways to ensure that taxpayers' money is put to the best use.
As for the year-end spending frenzy, the financial authorities and people's congresses at various levels can organize a national campaign to closely monitor the spending, with harsher punishments meted out for corruption in government procurement.
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