15 JANUARY 2014

To access the policy paper announced in this media statement, please visit

Malaysia can save up to RM2.3 billion if transparency in procurement improved

The Institute for Democracy and Economic Affairs (IDEAS) has released a new policy briefing paper by Dr Francesco Stolfi and Sri Murniati outlining four measures that can be adopted by the government to improve competitiveness and transparency in the public procurement system.

These measures are inspired by the European Procurement system, which is explored in the first part of the paper along with the benefits associated with greater transparency in public procurement. The calculation shows that Malaysia can save about RM400 million to RM2.3 billion, depending on the percentage of non-transparent public procurement, if measures of transparency are adopted.

The first measure that the paper propose s is for contracting agencies to add clearer and more detailed evaluation criteria in tender notices or tender documents. Such detailed information is important to be released in advance to prepare the contractors for bidding and to avoid confusion and unnecessary criticism. If questions later emerge on the award, all parties concerned and affected by the decision would be able to refer to the document.

Second, the paper urges the government to improve the awarding process of procurement by providing information about the reasons for choosing certain contractors and rejecting others, to both winning and losing contractors, as well as to the public.

Third, the paper propose s that a review phase is incorporated, which would allow contractors to file for complaints if they are not happy with the decision made by the agencies. The current practice is that objections are only allowed within the first 28 days (for international tenders) or 14 days (for local tenders) of tendering. Tenderers can submit objections to the agencies if they see the specifications put in the tender documents favour certain bidders. No objections are allowed after that, including objections to tender awards.

Lastly, learning from the European Procurement system that requires social inclusion measures are minimally distortive to competition, the paper urges the government to create parameters to ensure Bumiputera preferences in government procurement are less distortive to competition, and are awarded in a transparent manner.

The authors note that the government has started to improve transparency in government procurement such as publishing some information about direct negotiation contracts online and allowing the public to monitor the actions taken as a follow-up to the Auditor-General reports through an online dashboard.

However, more can be done to make the public procurement system meet the objectives of the National Development Policy. Such goals can be achieved by making the procurement process more competitive and open, and encouraging local actors to innovate and compete fairly with other players. Competition does not only benefit local players, but also the public at large. Competition would encourage suppliers to bid more aggressively, thus reducing prices and producing savings in public spending.

For that to happen, the paper urges the government to consider applying these four measures to the public procurement system.

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To access the policy paper announced in this media statement, please visit

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