By P Sesh Kumar
In the previous part of this series, we explored how the Government e-Marketplace (GeM) transformed public procurement by replacing India’s outdated rate-contract system with one of the world’s largest digital marketplaces. We also examined what the Comptroller and Auditor General (CAG), Parliament, the World Bank and the United Nations have observed about electronic procurement. Their collective message was encouraging but cautious: technology can improve governance, but it cannot guarantee integrity. The real test begins after the platform is built—when millions of transactions, thousands of buyers and lakhs of sellers interact every day. That is where independent audits become indispensable.
Also read: Government e-Marketplace: India’s Procurement Revolution Under the Auditor’s Lens (Part I)
STATE AUDITS REVEAL THAT TECHNOLOGY ALONE IS NOT ENOUGH
As GeM expanded across all States and Union Territories, digital procurement became the norm rather than the exception. Yet, adoption should never be mistaken for accountability. The most telling evidence comes from the Comptroller and Auditor General’s audit of Chhattisgarh’s e-procurement system. The audit found that only four of the eight planned modules had been implemented, while the system failed to detect several classic indicators of bid collusion.
The same computers were used by bidders as well as government officials across nearly 1,921 tenders worth Rs 4,601 crore. Multiple contractors shared identical PAN numbers, common email IDs appeared across different bidders, and contractors could suppress their bid capacity to secure additional work. These were not minor software glitches but serious red flags of cartelisation, prompting the CAG to recommend vigilance investigations.
If such vulnerabilities could exist in a purpose-built digital procurement system, it would be prudent to subject similar platforms across other states to equally rigorous scrutiny. Surprisingly, comparable performance audits remain largely absent from the public domain.
THE LOOPHOLES THAT STILL REMAIN OPEN
Digitisation has undoubtedly closed many old loopholes, but it has quietly opened new ones. One of the most persistent concerns is specification capture. A tender may appear open, yet technical specifications can be drafted so narrowly that only one manufacturer or one model qualifies. Competition exists only on paper because the winner has effectively been decided before bids are invited.
Another area vulnerable to misuse is the Proprietary Article Certificate under Rule 166 of the General Financial Rules. While the provision serves a legitimate purpose where only one supplier exists, it becomes problematic when approvals are granted mechanically without adequate technical justification.
Demand splitting remains another recurring concern. Instead of combining similar requirements into one competitive procurement, purchases are divided into smaller packages that conveniently fall below financial thresholds requiring open competition. Likewise, the continued emphasis on the lowest-price (L1) principle often overlooks quality and lifecycle costs, resulting in cheaper procurements that may ultimately prove more expensive.
Procurement can also be diverted outside the digital ecosystem altogether. Departments may continue using manual tenders, financial bids may be opened outside the system, or contract awards may never be uploaded. Even sophisticated software struggles to detect front companies, shared ownership structures or coordinated bidding patterns. While GeM’s evolving vendor assessment mechanism has strengthened seller verification, it cannot by itself eliminate buyer-side collusion or specification manipulation.
WHAT EVERY AUDITOR SHOULD ASK
A good audit goes far beyond ticking compliance boxes. It begins with asking difficult questions.
Were the specifications genuinely performance-based, or were they designed to favour a particular supplier? If a Proprietary Article Certificate was issued, was the justification technically sound or merely procedural?
Competition also deserves close examination. How many genuinely independent bidders participated? Do their addresses, directors, bank accounts, phone numbers or digital identities overlap in ways that suggest cartel behaviour?
Auditors must also examine whether similar purchases have been artificially split into smaller procurements. Prices should be evaluated not only against market benchmarks but also against warranty obligations, maintenance costs, installation expenses and lifecycle value. Procurement timelines may also reveal hidden concerns, particularly when approvals are granted with unusual speed or awards remain indefinitely pending.
Finally, auditors should reconcile every stage of the transaction—from inspection reports and acceptance certificates to delivery records and payment documents. Where multiple irregularities appear together, they rarely indicate coincidence; they often point towards systemic weaknesses or deliberate manipulation.
THE UNTAPPED POTENTIAL OF INDEPENDENT EXTERNAL MONITORS
Among India’s least utilised procurement safeguards is the Independent External Monitor (IEM). Nominated by the Central Vigilance Commission and appointed by procuring organisations, the IEM oversees the implementation of the Integrity Pact in high-value procurements. Unlike internal vigilance mechanisms, the IEM enjoys unrestricted access to procurement records and functions independently of both buyers and bidders.
In the GeM era, this role assumes even greater significance. An effective IEM should not merely verify whether procedures have been followed but examine whether competition has genuinely been preserved. Tailor-made specifications, restrictive eligibility criteria, casually issued Proprietary Article Certificates and suspiciously coordinated bidding patterns deserve close scrutiny.
The IEM should also verify whether procurement notices were properly published, bids opened within the system, awards transparently disclosed and procurement files maintained in their entirety. More importantly, the IEM should identify structural vulnerabilities before they evolve into major scandals.
THE WAY FORWARD
None of these observations diminish the significance of GeM. On the contrary, it remains one of India’s most transformative governance reforms. It has expanded opportunities for MSMEs, start-ups, women entrepreneurs and artisans while making public procurement significantly more transparent and efficient.
Yet, the platform’s scale now demands equally ambitious oversight. While the CAG has examined important aspects of GeM, a comprehensive nationwide performance audit evaluating procurement outcomes, competition, pricing, quality and value for money is still awaited. Parliament has engaged with GeM primarily through the lens of e-commerce rather than procurement integrity, while international experience consistently shows that technology strengthens good institutions but cannot substitute for them.
India’s next step should therefore focus on strengthening institutional scrutiny. Vendor verification should continue to evolve, tender specifications must receive greater examination, and Independent External Monitors should play a far more proactive role in protecting procurement integrity.
TECHNOLOGY IS A TOOL, NOT A CONSCIENCE
GeM has demonstrated what technology can achieve in public procurement. It has digitised workflows, created transparent audit trails and expanded market access on an unprecedented scale.
But governance ultimately rests not on software, but on institutions.
A digital marketplace can record every transaction with remarkable precision. It can preserve every click, every bid and every payment. What it cannot do is distinguish between honest intent and manipulation.
That responsibility still belongs to auditors, vigilance institutions, Independent External Monitors—and ultimately to the conscience of those entrusted with public money.
About The Author– (Mr. P Sesh Kumar is a retired 1982-batch officer of the Indian Audit and Accounts Service (IA&AS) who served as Director General of Audit at the Comptroller & Auditor General of India.)
Disclaimer – (The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Indian Masterminds. For feedback or queries, please write to [email protected].)
Also read: Government e-Marketplace: India’s Procurement Revolution Under the Auditor’s Lens (Part II)
