Indian railway vendors performance evaluation systems efficacy and its impacts on public procurement effectiveness

Abstract

Indian Railway with its 70,000 route kms besides being the transport lifeline of the nation, also catalyst in triggering the socio-economic growth of India. Railway spends Rs.30, 000 crores per year on material procurement for its transport services operations with the objective of materials availability all the time and to reduce the risk/uncertainty. Procurement can never be back room operation, because Railway material savings of every 1% by any means improves its profit by 4%. The objective of this study is to examine the performance metrics of the mutually beneficial long term collaborative alliances with vendors that can create competitive edge to Railway operational effectiveness and possible future strategic decisions. While the private industry rate up to 63 different factors for selection of supplier, Railway just evaluate the Quality and Delivery ratings only and that too in very few procurement decisions. The ICT driven developments in Railway in the last 15years by way of online Material Management Information System, e-procurement, proposed ERP provides rich integrating opportunities to shift from competitive sourcing to strategic alliances with suppliers on par with industry SCM benchmarks. This survey study with 200 suppliers and Railway managers revealed that Railway and its suppliers are not satisfied with about 70% of the current systems followed in Vendor approvals, performance ratings, procurement decisions based on evaluations, implementation framework, matching standards with industry benchmarks and best practices. The major gaps were found in the evaluation criteria, rating factors, specifying criteria in the tenders, encouraging the new suppliers and absence of effective interactions. Perhaps due to Railway bureaucratic narrow thinking of treating suppliers just as monolithical entities, the full potential of its suppliers who are business partners to its operation is yet to be tapped. To avail the present opportunities and benefits in the long-term alliances, the top management initiative and commitment is the need of the hour that will not only bring mutual benefits but also fetches best value of the tax payers money spent on public procurement.