Improving Government Procurement: Samenta

PETALING JAYA: The government can address the twin goals of improving the efficiency and effectiveness of its procurement while supporting small and medium-sized enterprises (SMEs) through a transparent disability system, said Small and Medium Enterprises Association (Samenta) national secretary Yeoh Seng Hooi (Picture).

Commenting on Economy Minister Rafizi Ramli’s call for optimizing costs and reducing leaks as a strategy for the future, Yeoh said a new way for the government to encourage and support SMEs is to address the demand component.

He added that government procurement accounts for a significant portion of gross domestic product as it buys a plethora of goods and services, but “we are reminded of the abuse of the government procurement process, with middlemen with no economic role increasing the cost of purchases without appreciably adding value.” “.

“The addition of nepotism and corruption would skew the pricing even further,” he told SunBiz.

Regarding the government procurement overhaul, Yeoh said many recommendations have been made to allow manufacturers and distributors to submit their bids online via an open bidding process, and that effective implementation of such new policies is needed, rather than remaining as mere political rhetoric , and cited World Bank procurement procedures and policies as a model to follow.

On the subject of transparency, he called for successful tenders to be published on the website where the details are available to the public.

Meanwhile, the association is lobbying for the government to support SMEs by allocating 20-30% of government procurement to SME companies that are at least 75% owned by Malaysians, allowing SMEs to compete with each other for the dedicated slice of the pie to compete.

“If there are no suitable SME suppliers, the 20-30% goes back into the pool for all types of companies. The SMEs should not be subsidiaries of limited liability companies, multinational companies or government-affiliated companies due to unfair advantage,” Yeoh said.

In addition, he said that another approach is to adopt the approach taken by the small business administration and the US government, where SMEs are awarded a margin of preference (MOP), which gives SMEs a certain handicap. This MOP will be made known to everyone at the tendering stage.

“The middle class has a fighting chance against the larger companies because there is a price cushion for them. There is less selection bias due to subjective choices that are more biased in nature as the SME would still have to compete.

“The final results of the tender would be announced, listing all the awards submitted, but without the names of the companies that took part. There would be transparency in pricing, but confidentiality about who the suppliers are would be protected. The companies that submitted their bids would know where they stand in terms of their price competitiveness,” he said.

Citing the US Small Business Act, he said the US Congress had set a government-wide target of 23% for small business contracting, with support for small businesses regulated by law and the same in Malaysia with a different percentage could be applied.

He said that under the law, both the Set Asides and Preference programs rely on self-declarations and require participants to submit annual reports and certifications to maintain eligibility. Heavy fines and harsh disclosures are self-regulatory measures to ensure compliance.

Yeoh believes Malaysia could introduce a policy if shutdowns and preferences are offered to local SMEs.

As Malaysia’s first SME Association, Samenta remains committed to the development of SMEs in Malaysia.