SUSTAINABLE PROCUREMENT IN POWER SECTOR OF

BANGLADESH: A CASE STUDY ON DESCO

Dissertation submitted in partial fulfillment of the requirements for the

Degree of
Masters in Procurement and Supply Management

Submitted by
TOWFIQUR RAHMAN
MPSM, ID – 15382004

MASTERS IN PROCUREMENT AND SUPPLY MANAGEMENT

July 2018

BRAC Institute of Governance and Development,

BRAC University
SUSTAINABLE PROCUREMENT IN POWER SECTOR OF
BANGLADESH: A CASE STUDY ON DESCO

Submitted by
TOWFIQUR RAHMAN
MPSM, ID – 15382004

Supervised
By
MD. MOSTA GAUSUL HOQUE, PMP
Principal Project Management Consultant
DIMAPP Project, CPTU, Ministry of Planning
Government of Bangladesh

BRAC Institute of Governance and Development,

BRAC University
SUSTAINABLE PROCUREMENT IN POWER SECTOR OF
BANGLADESH: A CASE STUDY ON DESCO

Dissertation submitted in partial fulfillment of the requirements for the

Degree of
Masters in Procurement and Supply Management

Submitted by
TOWFIQUR RAHMAN
MPSM, ID – 15382004

MASTERS IN PROCUREMENT AND SUPPLY MANAGEMENT

July 2018

BRAC Institute of Governance and Development,

BRAC University
SUSTAINABLE PROCUREMENT IN POWER SECTOR OF
BANGLADESH: A CASE STUDY ON DESCO

Submitted by
TOWFIQUR RAHMAN
MPSM, ID – 15382004

Supervised
By
MD. MOSTA GAUSUL HOQUE, PMP
Principal Project Management Consultant
DIMAPP Project, CPTU, Ministry of Planning
Government of Bangladesh

BRAC Institute of Governance and Development,

BRAC University
 DECLARATION

It is hereby declared that the dissertation titled “Sustainable Procurement in Power Sector of
Bangladesh: A case study on DESCO” has been performed by me and this dissertation
hasn’t been submitted elsewhere for the award of any degree or diploma.

TOWFIQUR RAHMAN

Student ID: 15382004

BIGD, BRAC University

a
 ACKNOWLEDGEMENT

The author wishes to express his deepest and sincerest gratitude to his respectful supervisor
Md. Mosta Gausul Hoque, PMP, Principal Project Management Consultant, DIMAPP
Project, CPTU, Ministry of Planning, Government of Bangladesh, for his constant support,
guidance and spirited encouragement during the course of this research work. He has
contributed to the preparation of this dissertation by his valuable comments, criticism,
constructive suggestions and lot of time for this dissertation paper.

The author sincerely acknowledges Md. Jashim Uddin, Superintending Engineer of

Bangladesh Power Development Board, Md. Shamim Sarker, Executive Engineer (CC) of
Bangladesh Rural Electrification Board, A S M Kaes Uddin, Assistant Engineer of Power
Grid Company of Bangladesh and Wajeeha Farah, Assistant Engineer of Dhaka Electric
Supply Company Limited for their courageous response in conducting interview.

The author is grateful to the colleagues and fellow students for their companionship and
sincere co-operation extended to him during this study. The author wishes to express his
special thanks to different power sector organizations officials for their spontaneous and
courageous response in conducting questionnaire survey.

The author is grateful to the members of his family, friends and well-wishers for their
assistance, encouragement and inspiration from the outset to the end of this study. The
author also appreciatively remembers the assistance and contribution of the BRAC Institute
of Governance and Development, BRAC University, for providing him with all the facilities
and equipment, which enabled him to carry out this research work.

TOWFIQUR RAHMAN

Dhaka,

July 2018

b
 ABSTRACT

The Public Procurement Act, 2006 is the only established law for procurement in any sector in
Bangladesh. In the Public Procurement Act, 2006 (PPA 2006), the term ‘procurement’ has been
defined as ‘the purchasing or hiring of goods, or acquisition of goods through purchasing and
hiring, and the execution of works and performance of services by any contractual means’. As
power sector of Bangladesh mainly govern by public organizations, so procurement can broadly
be defined as the purchasing, hiring or obtaining of goods, works or services by the power
sector by any contractual means.

The items involved in procurement of DESCO and power sector range from simple goods or
services such as clips or cleaning services to master plan, environmental assessment, large
commercial projects, such as the development of infrastructure, installation of large turbine,
generator, transformer installation, of automation system like SCADA etc., billing software,
operation and maintenance by outsource people etc. The purpose of procurement in the private
sector is basically straightforward whereas that in the public sector complex as considers the
economic development and welfare of the country rather than the commercial profits.
Furthermore, unlike other private procurement, power sector as well as DESCO’s procurement
needs to address the considerations of integrity, accountability, national interest and
effectiveness since power sector deal with common people’s money.

Sustainable Procurement (SP) is procurement that is consistent with the principles of

sustainable development, such as ensuring a strong, healthy and livable society for all, living
within environmental limits and promoting good governance. Sustainable procurement is an
approach that takes economic, environmental and social sustainability into accounts during
making any purchasing decisions.

An analysis through the review of DESCO’s procurement as a subject of case study to find out
the possible scope of sustainable procurement in present power sector procurement framework
reveals that although there are some provisions in the PPR, 2008 and STDs which relate to the
sustainability issues, these are not sufficient in introducing sustainability in the power sector
procurement.

c
The current scenario of sustainable procurement practice in the power sector and DESCO has
been studied through analyzing the Annual Reports, interviews with key procurement
professionals and survey with procurement officers of different power sector organizations
addressing three aspects namely economic, environmental and social aspect of sustainable
procurement. The analyses indicate that although there are a few cases where some sustainability
issues are in practice, these are not very common as a whole in the power sector of Bangladesh.

Existing tendering system in Bangladesh is still based on the lowest price approach and whole
life costing approach is rarely considered in power sector organizations except project
procurement. There are no provision for environmental performance in the power sector
except nuclear power plant and coal based power plant. The study indicates that at present
there is virtually no mechanism in our power sector procurement system to check the
environmental performance of contractors/ suppliers.

Sustainability criteria should be embedded in the tendering system of any organization.

Knowledge and awareness at the individual procurement professional level seem important in
order to make active sustainable procurement choices. A clear commitment is necessary from
the very top of the management which has to be transferred to everyone involves in
procurement or consumption. It is necessary to formulate a sustainable procurement policy and
to align the procurement framework with the policy.

Finally, there is a huge scope to further study about the sustainability issue. Advanced research
needs to be conducted in order to get a deeper insight into the sustainability issue in relation to
DESCO’s procurement as well as the power sector procurement in Bangladesh.

d
 TABLE OF CONTENTS

Serial Contents Page no.

no.
1 Declaration a
2 Acknowledgement b
3 Abstract c
4 List of Contents e
5 List of Figures h
6 List of Tables i
7 List of Abbreviation j
CHAPTER - 1 INTRODUCTION
1.1 Introduction 1
1.2 Objectives of the Research 2
1.3 Research Questions 2
1.4 Scope of the Study 2
1.5 Methodology of Research 3
1.6 Arrangement of the Thesis 4
CHAPTER - 2 LITERATURE REVIEW
2.1 Introduction 5
2.2 Sustainability 5
2.3 Sustainable Development 6
2.4 Sustainable Procurement 6
2.5 Procurement Cycle 7
2.6 Whole Life Costing 9
2.7 Ecolabel 9
2.8 Triple Bottom Line 9
2.9 Potential Drivers for Sustainable Procurement 10
2.10 KPI’s for Sustainable Procurement 11
2.11 Sustainability and Power Sector Procurement 13

e
CHAPTER – 3 POWER SECTOR & DESCO AND SUSTAINABILITY ISSUES IN
PROCUREMENTRULES IN BANGLADESH
3.1 Introduction 14
3.2 Power Sector of Bangladesh 15
3.3 Dhaka Electric Supply Company Limited (DESCO) 18
3.4 Power Sector Procurement in Bangladesh 22
3.5 Procurement in DESCO 23
3.6 Regulations in Power Sector 23
3.7 Sustainability Issues in PPR 2008 24
CHAPTER – 4 SUSTAINABLE PROCUREMENT IN DESCO AND POWER SECTOR OF
BANGLADESH: AN ANALYSIS
4.1 Introduction 28
4.2 Procurement Procedure of Power Sector 28
4.3 Procurement Methods 33
4.4 e-GP 33
4.5 Tender Committee 34
4.6 Sustainable Procurement in Procurement Policy 35
4.7 Sustainable Procurement in Procurement Policy of DESCO 35
4.7.1 Social/ Ethical Issues 35
4.7.2 Economic Issues 36
4.7.3 Environmental Issues 37
4.8 Interview Findings 37
4.8.1 Social Aspects of Sustainable Procurement 38
4.8.1.1 Equal Opportunity for Tenderers/ Bidders 38
4.8.1.2 Labor Practices 38
4.8.1.3 Female Participation 38
4.8.1.4 Child Labor 39
4.8.1.5 CSR Activity 39
4.8.2 Economic Aspect of Sustainable Procurement 40
4.8.2.1 Key Criteria During Procurement 40
4.8.2.2 Participation of Local Firms During Procurement 41

f
4.8.2.3 Whole Life Costing 41
4.8.3 Environmental Aspect of Sustainable Procurement 42
4.8.3.1 Environmental Policy or Environmental Management System 42
4.8.3.2 Environmental Performance of Suppliers or Contractors 43
4.8.3.3 Environmental Initiatives by Power Sector 43
4.8.3.4 Enhancement of Supplier’s Environmental Performance 44
4.8.3.5 Ecolabel 44
4.8.3.6 Compliance of the Minimum Legal Standard 44
4.8.4 Procurement Life Cycle 45
4.8.5 End Use of Procured Products or Works 45
4.9 Summary of the Analysis 46
CHAPTER - 5 CONCLUSION AND RECOMMENDATION
5.1 Introduction 47
5.2 Conclusion 48
5.3 Recommendations 50
List of references 56
Survey questionnaire 57

g
 List of Figures
Serial Topics Page no.
No.
2.1 Procurement Cycle in the supply chain 8
3.1 Power Division Segments of Bangladesh 16
3.2 Power Sector Segments from Generation End to Distribution End 17
3.3 Consumer Category in DESCO 19
3.4 Consumption Category of DESCO 19
3.5 Consumer Growth in DESCO 20
3.6 Load Growth in DESCO 20
3.7 Trend of System Loss of DESCO 21
4.1 Organogram Showing Procurement Department of BPDB 29
4.2 Organogram Showing Procurement Department of DESCO 30
4.3 Organogram Showing Procurement Department of DPDC 31
4.4 Organogram Showing Procurement Department of PGCB 32
4.5 Female labor participation in suppliers firms or organization 39
4.6 Organization’s CSR Activity 40
4.7 Key Criteria During Procurement of Product, Service or Works 41
4.8 Whole Life Costing Consideration During Procurement 42
4.9 Environment policy 43
4.10 Procurement Life Cycle Considerations During Procurement of Products, 45
Services or Works

h
 LIST OF TABLES
Serial Topics Page no.
No.
2.1 External Drivers for Sustainable Procurement 10
2.2 Internal Drivers for Sustainable Procurement 11
2.3 KPIs for Sustainable Procurement 12
3.1 Brief Data of Power Sector 15
3.2 Sustainability Issues in the Public Procurement Rules 24

i
 ABBREVIATIONS

ADP Annual Development Plan

BADC Bangladesh Agricultural Development Corporation
BPDB Bangladesh Power Development Board
BCIC Bangladesh Chemical Industries Corporation
BIGD BRAC Institute of Governance and Development
BJMC Bangladesh Jute Mills Corporation
BPC Bangladesh Petroleum Corporation
BSEC Bangladesh Steel & Engineering Corporation
BUET Bangladesh University of Engineering and Technology
BWDB Bangladesh Water Development Board
CDM Clean Development Mechanism
CFL Compact Fluorescent Lamp
CGFR Compilation of General Financial Rules
CPAR Country Procurement Assessment Report
CPTU Central Procurement Technical Unit
CSR Corporate Social Responsibility
DESCO Dhaka Electric Supply Company Ltd.
DoE Department of Environment
DoFP Delegation of Financial Powers
DPDC Dhaka Power Distribution Company Ltd.
DPHE Department of Public Health Engineering
DPM Direct Procurement Method
EED Education Engineering Department
EIA Environmental Impact Assessment
EMS Environmental Management System
ERD Economic Relations Division
GCC General Conditions of Contract
GoB Government of Bangladesh
GHG Green House Gas
HED Health Engineering Department
IMED Implementation, Monitoring and Evaluation Division
ISO International Organization for Standardization
ITT Invitation to Tender
KII Key Informant Interview
KPI Key Performance Indicator
LGED Local Government Engineering Department
LTM Limited Tendering Method
NGO Non-Government Organization
OPM Open Tendering Method
PE Procuring Entity
PPA 2006 Public Procurement Act, 2006
PPPA Public Procurement Processing and Approval Procedures

j
PPQ Pre Purchase Questionnaire
PPR 2008 Public Procurement Rules, 2008
PWD Public Works Department
RFQ Request for Quotation
RFQM Request for Quotation Method
RHD Roads and Highways Department
SC Supply Chain
SP Sustainable Procurement
SRFP Standard Request for Proposal
SRM Supplier Relationship Management
STDs Standard Tender Documents
UN United Nations
WLC Whole Life Costing

k
 CHAPTER - 1

INTRODUCTION

1.1 Introduction
Sustainable procurement is that kind of procurement when an organization purchase goods,
works or services in a way that achieves value for money by considering social, economic and
environmental aspects. Sustainable procurement as a broad concept first emerged following the
Rio Earth Summit in 1992 (Sustainable Procurement Guide published by the department of
Sustainability, Environment, Water, Population and Communities of Australian Government).
During the 1990s, environmental procurement policies started appearing at the European and
international levels. Sustainable procurement aims to reduce the adverse environmental, social
and economic impacts of purchased products and services throughout their life. In 2005, the
UK Government set up a Sustainable Procurement Task Force which developed a definition
for sustainable procurement. This definition is now used by the Australasian Procurement and
Construction Council (APCC), the UN and the UK Government:

“A process whereby organizations meet their needs for goods, services, works and utilities in
a way that achieves value for money on a whole life basis in terms of generating benefits not
only to the organization, but also to society and the economy, whilst minimizing damage to the
environment”. (APCC 2007, Australian and New Zealand Government Framework for
Sustainable Procurement) or perhaps better explained definition would be by Bryde and
Meehan (2010).

“Sustainable procurement means appreciating and managing social, ethical, safety,

environmental and economic value associated with the supply chain and materials selection.
Improving procurement performance helps to establish purchasing social responsibility;
making common sustainable procurement in line with Legislations/initiatives for the selection
of materials, suppliers and subcontractors, takes account of impacts on environmental,
community, responsibility, selection and improved usages of products, works and services”.
(Bryde and Meehan, 2010)

Due to the intermediary role in the economy, power sector hold a unique position with regard
to sustainable development. This intermediary role is both quantitative and qualitative. Due to
the efficient generation, transmission and distribution systems, power sector are being capable
to foster sustainability. Power sector expands rapidly to achieve sustainable goal. So,
1
continuous investment took place through various projects in power sector by Bangladesh
government and also some other private company invest in power sector. In addition, there is
great scope for power sector agencies like BPDB, BREB, PGCB, DESCO, DPDC etc. to
improve their environmental, ethical and economic performance.

1.2 Objectives of the Research

Extensive practice of Supply Chain Management is mainly happens in manufacturing

industries. Procurement holds a part of Supply Chain Management. Like any other industry,
procurement is one of the important section for power sector organizations. Thus procurement
is considered one of the core management skills for power sector organization. To ensure
sustainable development in this sector, power sector organizations should practice sustainable
procurement. The objective of this research is to identify the scope of sustainable procurement
in the power sector and have a clear understanding on the practice so that we can recommend
a way forward to achieve sustainable procurement in DESCO and power sector.

1.3 Research Questions

In response to the objectives mentioned above, the following research questions have been
proposed.
I. What is the scope of Sustainable Procurement in DESCO and Power Sector of
Bangladesh?
II. To what extent DESCO and other Power Sector organizations practice Sustainable
Procurement?

1.4 Scope of the Study

This study is basically focused on power sector procurement. In this study, we will provide
comprehensive insight into the state of sustainable procurement practice in DESCO and other
power sector organizations in Bangladesh. Since no dedicated works have been done on power
sector procurement it is important and pertinent to research on how money is spent and how
green issues can be introduced in power sector procurement. Information gathered through
analyzing annual report and Key Informant Interviews (KII) will lend support to the research
on what are the steps taken by DESCO and other organizations of power sector to incorporate

2
sustainable procurement in their system and to what extent they practice sustainable
procurement extent of sustainable procurement.

1.5 Methodology of Research

To achieve the research objectives as mentioned above, initial approach is to review the
relevant literature to strengthen the knowledge background in order to proceed with the task.
Then we will review the annual report of DESCO and other power sector organizations and
finally in depth interviews along with survey among the procurement professionals of
different functions of DESCO and other power sector organizations will be performed for
the research in order to achieve a better insight and understanding of the use of sustainable
procurement in power sector and DESCO.

Annual report of an organization is the most authentic information that is publicly available.
In order to understand the formal position of power organizations or agencies as far as the
sustainable procurement is concern we will review the annual report.

For the purpose of preparing the interview schedule, both open ended and close ended
questions were included to gather the required information. Information regarding
departmental expenditure on procurement, relative expenditure on procurement of goods,
works or services was sought in the interviews. The main focus of the interviews was the
preparedness and practice of the organizations through addressing the three aspects of
sustainable procurement namely economic, environmental and social aspects.

The data collected through the key informant interviews and survey questionnaires have been
analyzed based on the questions asked in the interviews. An individual analysis has been
made on each of the questions which would help find a complete picture of the matter. Most
of the analysis has been done qualitatively from the perception based interviews with the
respondents. However, some quantitative analyses have also been made based on the
supplied data by the respondents. The data and the detailed analysis have been presented
using different analytical and presentation tools such as table, graphs, figures, pie chart etc.

The research outcome has been revealed through the production of a dissertation paper which
was prepared under the guidance of the supervisor and as per the instructions given by the
BRAC Institute of Governance and Development (BIGD), BRAC University.

3
1.6 Arrangement of the Thesis

This thesis has been developed in five distinct Chapters. General introduction of sustainable
procurement is included in Chapter 1. This chapter also includes the overall objectives of the
study including research question, the scope of research, methodology of the study and finally
the chapter outline. Chapter 2 titled “Literature Review” introduces the concept of
sustainability, sustainable development and sustainable procurement in order to give a
theoretical view of the subject matter. The concepts of various sustainable procurement
terminologies have also been elaborated in this chapter. The chapter also presents a brief
overview of sustainable procurement practices including organizational best practices in the
various part of the globe. Chapter 3 is completely dedicated to capture the theoretical
background and the chronological evolution of procurement in Bangladesh emphasizing
power sector and DESCO. In chapter 4, the data and information regarding sustainable
procurement scenario in DESCO and power sector collected through key informant interviews
with a number of procurement professionals is analyzed and presented. This chapter gives a
clear view of sustainable procurement practices in DESCO and the power sector in
Bangladesh. In chapter 5, Conclusion and recommendations are given. And references,
appendices and survey questionnaire are placed at the end to support the research work.

4
 CHAPTER - 2

LITERATURE REVIEW

2.1 Introduction

This chapter introduces the theoretical background of the sustainable procurement under the
study and explains on why it is a relevant issue from a power sector procurement perspective.

Public Procurement Act 2006, the basic legal document for power sector procurement in
Bangladesh and Public Procurement Rules 2008, have been extensively reviewed to know the
potential scope and current practice of sustainability in the power sector procurement in
Bangladesh. Bangladesh government policy, PSMP 2010, PSMP 2016, previous reports etc.
have also been gone through for identifying the current position in this subject matter. Reports
of different government organizations on procurement performance, annual reports of various
power sector organizations, reports of various development partners have helped a lot to
enhance the knowledge base of the subject matter.

2.2 Sustainability

The concept of sustainability first emerged into mainstream discourse in 1972, during the
United Nations Conference on the Human Environment (According to Blackburn 2007). In the
same time, serious environmental concerns were beginning to be raised in relation to industrial
development and practices like deforestation, pollution and the use of toxic pesticides etc. The
conference delegates debated which was more important: economic development or
environmental protection? After a series of discussions, the United Nations had recognized that
economic development and environmental protection were intimately linked. Economic
development would be required to raise living and working conditions, and to support
investment in environmental conservation and viable technologies. At the same time, any
attempt that threatened the environment would not be a good choice for human being in the
long run because this attempts lead the depletion of resources, the degradation of environment
and the pollution of air and water.

5
2.3 Sustainable Development

Development is a term which consists of activities aimed at improving human and social well-
being, through the creation and maintenance of wealth, social infrastructure, equity, education,
employment, enabling technologies and so on. Sustainable development can be considered as
the development activity that can be sustained, or kept up, over the long term; that does not
undermine or put at risk the conditions and resources, required preserving well-being into
future. So, sustainable development has two distinct dimensions; one is to achieve economic
development to secure higher standard of living, for present and future generations, and the
other is to protect and enhance the environment, for present and future generations. The
Brundtland Commission Report (1987), initiated by the UN, focused on the need to develop a
stable relationship between human activity and the natural world, which would not reduce the
prospects of future generations to enjoy a quality of life at least as good as that of the present
generations. These ideas were refined by the 1992 Rio Declaration on Environment and
Development (issued by a UN Conference held in Rio de janeiro), in which social justice and
human rights issues were explicitly added to the mix.

Sustainable development has been defined in many ways. However, the definition of the
Brundtland Commission (1987) is widely used: ‘Development that meets the needs of the
present without compromising the ability of future generations to meet their own needs.’ So,
humanity must take no more from the nature than nature can replenish or repair. There should
be a balance between improving human and social well-being and preserving natural resources
and ecosystems.

The three-dimensional view of sustainability subsequently became widely adopted. In 1997,

the term ‘triple bottom line’ (TBL) was coined by John Elkington to highlight the need for
nations and organizations to measure their performance in all three areas.

2.4 Sustainable Procurement

Sustainable procurement (SP) is procurement that is consistent with the principles of
sustainable development, such as ensuring a strong, healthy and just society, living within
environmental limits, and promoting good governance. Sustainable procurement is an
approach that takes economic, environmental and social sustainability into account when
making any purchasing decisions. It is about looking at what purchased items are made of,

6
where they come from, how they are made and by whom, how they will be used and whether
they are in fact necessary. It looks at the answers of the following questions:

Sustainable procurement also known as Responsible Procurement, Socially Responsible

Procurement, Green Procurement, Environmental Procurement, Affirmative Procurement, and
so on.
From the United Nations procurement website sustainable procurement definition is:
‘Procurement is called sustainable when it integrates requirements, specifications and criteria
that are compatible and in favor of the protection of the environment, of social progress and in
support of economic development, namely by seeking resource efficiency, improving the
quality of products and services and ultimately optimizing costs” (UNGM, 2011).

Sustainable procurement should consider the economic, environmental and social

consequences of design, non-renewable material use, manufacture and production methods,
logistics, service delivery, use, operation, maintenance, re-use, recycling options, disposal and
suppliers’ capabilities to address these consequences throughout the supply chain. In other
words, sustainable procurement takes into account the whole lifecycle of a purchase and
purchased items and the chain or network of supply relationships.

2.5 Procurement Cycle

According to CIPS, The Procurement cycle is the cyclical process of key steps when procuring
goods or services. Total 13 steps included in the procurement cycle. These are-

1. Understand need and develop a high level specification

2. Market/ Commodity and options (including make or buy assessment)
3. Develop Strategy/ Plan
4. Pre Procurement/ Market test and market engagement
5. Develop documentation, PPQ/ Detailed specification/ Combine with 1
6. Supplier selection to participate in ITT/ RFQ/ Negotiation
7. Issue ITT/ RFQ
8. Bid/ Tender evaluation and validation
9. Contract award and implementation
10. Warehouse, logistics and receipt
11. Contract performance review and continuous improvement

7
 12. SRM and SC management and development
13. Asset management/ End of life and lessons learnt

Blue color area indicates:

 E-commerce/systems
 Stakeholder engagement
 Sustainability/CSR/Ethics/Security
 Risk Assessment/Mitigation
 Continuous improvement
 People and skills

Figure 2.1: Procurement Cycle in the supply chain (Source: CIPS website)
8
Every organization wants to have their required works, service or products in lowest price with
high level of satisfaction. No one wants to procure as losing side in the negotiation table. So,
these above steps should be followed by any organization during procurement to procure
properly.

2.6 Whole Life Costing

Whole-life cost or Life-cycle cost (LCC) means the total cost of ownership of a product or asset
over the whole-life. This is also known as "cradle to grave" or "womb to tomb" costs.
According Chartered Institute of Purchase and Supply (CIPS), “ Whole life costing takes into
account the total cost of a product or service over its lifetime, from concept through to disposal
including purchase, hire or lease, maintenance, operation, utilities, training and disposal. It is
important for procurement to take all these elements into consideration when making decisions
and comparing the costs of buying, renting or leasing equipment particularly. In most cases the
purchase costs are only a small proportion of the cost of operating it”.

2.7 Ecolabel

Eco-labels and Green Stickers are labeling systems for products. Ecolabels are voluntary, but
green stickers are mandated by law. Ecolabelling systems exist for both food and consumer
products. Both systems were started by NGOs, since then the European Union have
developed legislation for conduct of ecolabelling and also have created their own ecolabels,
one for food and one for consumer products.
"Ecolabelling" is a voluntary method of environmental performance certification and labelling
that is practiced around the world. An ecolabel identifies products or services proven
environmentally preferable overall, within a specific product or service category.
According to International Organization for Standardization (ISO), Ecolabel is classified into
three major types. These are- Type-I, Type-II and Type- III.

2.8 Triple Bottom Line

The phrase “the triple bottom line” was first coined in 1994 by John Elkington, the founder of
a British consultancy called Sustainability. First one is the measure of profit. The second is
social issues related to people. The third is the planet which measures the environmental issues.
The triple bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims to
9
measure the economic, social and environmental performance of the organization over a period
of time.

2.9 Potential Drivers for Sustainable Procurement

Drivers are the factors that impel actions for sustainable procurement. So, factors such as
resource scarcity, legislation, reputational risk/ opportunity, shareholder pressure etc. are likely
to drive organizational measures for sustainability. Drivers come before the introduction of a
sustainability program, as a contributing factor in it. Drivers for sustainable procurement may
be classified as external and internal. Table 2.1 and Table 2.2 show some of the key general
external and internal drivers for sustainable procurement.

Table: 2.1 – External Drivers for Sustainable Procurement

Drivers Indicators of the drivers
Political factors Government policy, targets and standards, incentives
and penalties, Government practice as a buyer/ supplier
and employer.
Economic factors Loss of market demand for unsustainable products/
services, rising market demand for sustainable products/
services.
Social/ Ethical factors Social attitudes and values creating media, banking,
labor and consumer pressure for sustainable practices,
emerging social justice and ethical issues (e.g. corporate
governance, citizenship, corruption, trading ethics, fair
trade, human and labor rights), industry/ professional
codes of ethical practice.
Technological factors Competitor/ market innovation and take-up of
sustainable technologies (new products, materials, and
processes), exposure of unsustainable technologies (e.g.
resource usage, wastes), and opportunities in new
sustainable technology markets (e.g. alternative
energy).
Legal factors National and international legislation on sustainability (or
threat thereof), waste, pollution, emissions, employment
rights, health and safety, consumer rights, corporate
governance, banking sector procurement etc.
Environmental factors Resource depletion and costs (especially energy costs),
issues of concern to key stakeholders (e.g. climate
change, GHG emissions, deforestation, water
management, conservation, biodiversity, pollution, waste
reduction), national targets under international
agreements.
External factors Stakeholder Interest and pressure in any or all of the above
factors creating threats and opportunities for the

10
 organization in obtaining resources and collaboration (e.g.
customers, labor, investors, pressure group activism,
potential for cause-related marketing).
[Source: Sustainable Procurement, the official CIPS course book in partnership with
PROFEX publishing]

Table 2.2 – Internal Drivers for Sustainable Procurement

Drivers Indicators of the drivers

Corporate Goals Corporate vision, mission and objectives including
sustainability values and aspirations.
Organizational status Existing CSR and/ or corporate citizenship objectives/
policies
Top level buy-in Senior management visionaries, champions and supporters
of sustainability.
Business factors Business case arguments for sustainability, enhanced
reputation, brand strength and sales revenue, cost/ waste
reduction (eco-efficiencies), enhanced supply chain
innovation and efficiency, reduced regulatory burden.
Accountability factors Accountability mechanisms which demonstrate seriousness,
and make reward contingent on sustainability progress/
performance.
Risk awareness Priority given to risk management, perception of business,
reputational and supply risk from non-sustainability,
reputational damage.
Stakeholder factors Internal stakeholder demand for sustainability (e.g. need to
attract and retain quality managers, employees, investors and
supply chain partners).

[Source: Sustainable Procurement, the official CIPS course book in partnership with
PROFEX publishing]

It should be obvious that some of these factors will be more immediately relevant and
influential in some sectors than others. So, power sector organizations need to decide which
drivers it might most effectively use as leverage to champion a sustainable procurement
initiative.

2.10 KPIs for Sustainable Procurement

Key performance indicators (KPIs) are agreed, specific measures of the performance of
a unit or organization, against which progress and performance can be evaluated. KPIs
should be such that they are relevant, clear and unambiguous and capable of direct,
consistent measurement at operational level. Table 2.5 shows some of the representative
KPIs for sustainable procurement.

11
Table 2.3 – KPIs for Sustainable Procurement

Area of performance Procurement KPIs

Economic  Cost (e.g. procurement costs as a percentage of spend) or
performance cost savings (annual cost savings as a percentage of spend).
 Productivity (e.g. cost per procurement cycle,
time taken per procurement cycle).
 Supplier leverage (e.g. percentage of suppliers
providing 80% or more of annual spend).
 Customer satisfaction (e.g. percentage of deliveries
received on time in full).
Environmental  Percentage reduction in energy, water purchase.
performance  Percentage reduction in supplier (or logistics or
procurement), GHG emissions.
 Percentage reduction in supplier water and energy
usage.
 Percentage purchase of recycled materials.
 Percentage of vehicle fleet which is hybrid.
 Volume of waste to landfill (buyer and supplier).
 Percentage of spend with suppliers who report on
environmental impacts, or operate Environmental
Management System (EMS).
Ethical/Social  Diversity and equal opportunity among procurement
performance
staff.
 Training/ development opportunity (and percentage
of take- up)
 Compliance with workplace law and standards,
ethical sourcing, and trading standards/objectives.
 Reduction in health and safety incidents, grievance,
proceedings etc.
 Supplier diversity (number of women-owned,
minority-owned, small suppliers)
 Percentage supply chain monitored and managed for
compliance.
 Supply chain compliance (e.g. year on year reduction
in the incident of non-compliance).

[Source: Sustainable Procurement, the official CIPS course book in partnership with
PROFEX publishing]

12
2.11 Sustainability and Power Sector Procurement

Environmental issues becomes the international agenda for several decades. Both public and
private sectors are concerned about the role they play in these issues. Recently, the focus has
expanded to broader topics such as sustainability. However, while sustainable procurement
activities are common in many developed countries, the awareness and implementation of
sustainable procurement is still comparatively low in most developing countries like
Bangladesh.

Power sector procurement is concerned with how power sector expense money on procuring
goods, works and services. Power sector has particular reasons for demanding greater levels of
sustainability from its supply chain as it is directly and explicitly responsible for economic
growth to maximize benefits to the society as well as the country. Power sector procurement
accounts for the strategic growth of the economy of any country. So, power sector procurement
is an attractive policy instrument for effecting positive changes by adopting long term
sustainable program in the broader economy. In particular, power sector procurement could be
used to stimulate the production of quality power in an effective and efficient way with a
competitive tariff so that influence in the industrial sector of Bangladesh. If reliable,
uninterrupted and quality supply of electricity ensured, investment will increase as well as GDP
will increase which is the main indicator for economic growth of any developing country.
Electricity distribution organizations are responsible to ensure reliable power supply to end
user. In power sector proper energy management is very much important to give energy in a
reliable way. In this regard, some steps are being taken by DESCO and DPDC. Different
regions markets weekly holidays scheduled by DESCO and DPDC in different day of the week
of Dhaka city. Using of energy shaving equipment like energy bulb, light, fan are being
encouraged. And if total projection of load demand are needed to make strategic decisions
whereas these projection mainly estimated by the distribution company. If it is not done
properly National Load Dispatch Center (NLDC) will fail to handle power inappropriately
which will occur blackout throughout the country or partly some part of the country. So, to
ensure quality power supply in a reliable way Distribution Company like DESCO, DPDC etc.
should use proper technology, upgrade their existing technology, equipment etc. and build
capacity according to increasing load in an efficient and effective way without making harmful
any impact on environment. To ensure these, procurement of quality work, equipment and
service is very much important for sustainable development of this sector.

13
 CHAPTER – 3

POWER SECTOR & DESCO AND SUSTAINABILITY ISSUES IN

PROCUREMENT RULES IN BANGLADESH

3.1 Introduction

This chapter provides a picture of power sector scenario and sustainability issues addressing in
PPR 2008 of Bangladesh by incorporating the legal framework, under which power sector
procurement is done and regulated, the general principles and features of power sector
procurement currently in practice.

The Public Procurement Act, 2006 is the only established law for procurement in any sector in
Bangladesh. In the Public Procurement Act, 2006 (PPA 2006), the term ‘procurement’ has been
defined as ‘the purchasing or hiring of goods, or acquisition of goods through purchasing and
hiring, and the execution of works and performance of services by any contractual means’. So,
power sector procurement can be defined as the purchasing, hiring or obtaining of goods, works
or services by the power sector by any contractual means. Power sector procurement is
alternatively described as the acquisition of goods, works or services if such acquisition is
effected with resources from power sector organizations funds or government funds or aided
agencies funds.

The items involved in power sector procurement range from simple goods or services such as
clips or cleaning services to large power plant projects, such as the development of
infrastructure, purchase of large machineries like generator, turbine and power transformer etc.,
and installation of automation system like SCADA etc. Procurement in the power sector hardly
differs from that in the power sector. The purpose of procurement in the private sector is
basically straightforward whereas that in the public sector complex as considers the economic
development and welfare of the country rather than the commercial profits. Furthermore, unlike
other private procurement, power sector procurement needs to address the considerations of
integrity, accountability, national interest and effectiveness since this sector deal with common
people’s interest.

14
3.2 Power sector of Bangladesh

Power sector of Bangladesh is booming fast. Bangladesh government takes long term initiatives
to make a sustainable power sector. To attain sustainable development government make PSMP
2010 and then make PSMP 2016.
PSMP 2016 aims to create a well-balanced power generation environment that maximizes the
respective advantages of different types of power generation methods, including nuclear power,
thermal power, hydro power generation, and power imports from neighboring countries, from
the comprehensive perspective of stable supply, or energy security, environmental performance,
and economic efficiency. Bangladesh government also tries to increase infrastructure for power
sector as early as possible to mitigate the upcoming challenges and also tries to make an optimum
fuel mix to generate electricity as we know most of the power plants main fuel is gas whereas gas
decreases day by day.

Table 3.1: Brief data of power sector

Power sector at a glance
Maximum generation till now (as on 18th 11387 MW
July, 2018)
Installed Generation Capacity (as on 16046 MW
December, 2017)
400 KV transmission lines (as on December, 559.76 Circuit km
2017)
230 KV transmission Lines (as on 3322.996 Circuit km
December, 2017)
132 KV transmission lines (as on December, 6486.828 Circuit km
2017)
Grid Substation (as on December, 2017) 114 nos. (27272.5 MVA capacity)
Transmission and distribution loss (FY 12.19%
2016-17)
Distribution loss (FY 2016-17) 9.98%
Villages getting electricity from gird About 60000 nos.
network
Per Capita generation 351 kwh
Per Capita consumption 308 kwh
Per unit fuel cost for thermal power plant 2. 76 tk/kwh

[Source: BPDB website; PGCB website; System planning division of BPDB, Annual Report
2016-2017 of BPDB, Power Division website.]

Bangladesh power sector is mainly look after by Ministry of Power, Energy and Mineral
Resources (MoPEMR). Power division is a wing of ministry of power, energy and mineral

15
resources. Power division has for sub sectors. These are- Power Cell, CE & EIA, SREDA,
Bangladesh Energy and Power Research Council.
An electrical power system has three major segments. These three segments are generation,
transmission and distribution. Electricity is produced from primary fuel in the generation sub-
sector. The transmission network carries power produced at generation to the major load
centers like grid known as transmission and finally connects to the end users i.e. retail
customers though distribution system. As economically viable utility-scale electricity storage
system is yet to be developed, demand created at the distribution system must be met
instantaneously by producing power at the power generating stations and transmit through the
transmission network, which bridges generation and distribution.
(Ministry of Power, Energy and Mineral Resources )

Power Cell
Power Division

CE & EIA

SREDA

Bangladesh Energy and Power

Research Council

Figure 3.1: Power Division segments of Bangladesh. (Source: Power Division,

MoPEMR)

16
 BPDB

APSCL

EGCB

NWPGCL

RPCL
Generation
CPGCBL

Joint Venture

B-R Powergen
Ltd.

IPP

Utility SIPP

Transmission PGCB

BPDB

BREB PBS

DESCO
Distribution
DPDC

WZPDCO

NESCO

Figure 3.2: Power sector segments from generation end to distribution end. (Source:
Power Division, MoPEMR)

In Bangladesh, both public and private organizations responsible for generation. BPDB,
APSCL, EGCB, NWPGCL, RPCL, CPGCBL, Joint venture, BPDB- RPCL Powergen Ltd. are

17
public power generation entity. IPP, SIPP (Summit, Orion, Sinha etc.) are treated as private
power generation entity. Apart from these some renewable energy resources and imported
power also contribute to generation.
Only PGCB is responsible for transmission of electricity from generation end to distribution
end. PGCB maintain the only grid of Bangladesh. National Load Dispatch Center (NLDC)
always keeps the load balance with generation. NLDC is one of the wing of PGCB.

Only government organizations are responsible for power distribution. BPDB, DESCO, DPDC,
BREB, PBS, NESCO, WZPDCL are responsible for electricity distribution in Bangladesh.

3.3 Dhaka Electric Supply Company Limited (DESCO)

Dhaka Electric Supply Company Ltd. (DESCO) is a distribution company responsible for
supplying electricity a part of Dhaka City. As a part of on-going power sector reforms by
government, Dhaka Electric Supply Company Ltd. (DESCO) was created as a distribution
company in November 1996 under the Companies Act 1994 as a public limited company.
The authorized capital was TK. 5 Billion. Operational Activities at field level started on
September 24, 1998 by taking over of the electric distribution system of Mirpur area from
Dhaka Electric Supply Authority (DESA). In that time, total number of consumer was 71,161
and a load demand 90 MW. In the subsequent years of successful operation and better
performance, the operational area of DESCO was expanded through inclusion of Gulshan
Circle in April, 2003 and Tongi Pourashava Area in March, 2007. Total number of employee
is about 3200 where more than 1500 people directly employed and around 1700 people
indirectly employed (outsourced). These outsourced people responsible for the services of
Commercial Operation Support, Line and Equipment Maintenance, Substation Maintenance,
Office Security and Office up keeping and also most of the people related to transportation
are outsourced.

The company obtained license from Bangladesh Energy Regulatory Commission (BERC). The
total distribution is about 850 MW and total area is around 400 square kilometers. As per the
License, DESCO can receive power at 132KV & 33KV voltage levels and distribute the power
at 33KV, 11KV & 0.4KV voltage level.

Presently in DESCO mainly four types of consumer get service. These are Residential
consumers (90%), Commercial consumers (7%), Industrial consumers (1%) and others

18
(2%). But, in terms of consumption these percentage becomes Industrial consumer
consumes 36%, Residential consumers consumes 49%, Commercial consumers
consumes 11% and others consumes 4% of total delivered energy.

Consumer Category
Industrial
1% Others
2%

Commercial
7%

Residential
90%

Figure 3.3: Consumer Category in DESCO. (Source: Annual Report 2017 of

DESCO)

Consumption Category

Commercial
11% others
Industrial 4%
36%

Residential
49%

Figure 3.4: Consumption Category of DESCO (Source: Annual Report 2017 of

DESCO)

19
Consumers increases rapidly in DESCO now a days. In fiscal year 2002-2003, total
number of consumer was 205803 but in fiscal year 2016-2017, this number becomes
818156. This shows in an average about fourty thousand consumers added to the
consumer list each fiscal year and as a result load also increases. In fiscal year 2002-2003,
total load was 315 MW but in fiscal year 2016-2017, this becomes 934 MW. This shows
about fourty one megawatt load increases each fiscal year.

Consumer Growth
900000 818156
760844
800000
Number of Consumers

700000
600000
446429 449063
500000 385037
400000
281960
300000 241964
205803
200000
100000
0

Fiscal Year

Figure 3.5: Consumer growth in DESCO. (Source: Annual Report 2017 of DESCO)

Load Growth
1000 934
900 845
800 715
700
Load in MW

600 545
500 397
400 315
300
200
100
0
2002-2003 2005-2006 2008-2009 2011-2012 2014-2015 2016-2017
Fiscal Year

Figure 3.6: Load growth in DESCO. (Source: Annual Report 2017 of DESCO)

As the consumer increases, total load also increases. This results the operational revenue
increases every year. In last fiscal year earnings from operational revenue was 34012 million
taka and the cost of sales was 31535 million taka which means the total gross profit was 2477
20
million taka of DESCO. But, net profit was 176 million taka after different kind of expenses.
Net profit of DESCO decreases during last couple of years because the increasing rate of tariff
during import of energy as compare to tariff in the consumer premises still though system loss
decreasing in every year gradually. In 2012-2013 fiscal year, system loss was 8.44% which
decreases to 7.24% in the fiscal year 2016-2017.

System Loss
50 46.67%
System loss in percentage

45
40
35 29.86%
30
25 19.24%
20 13.44%
15 8.86% 8.44% 8.37% 8.03% 7.24%
10
5
0
1997-1998 2000-2001 2003-2004 2006-2007 2009-2010 2012-2013 2014-2015 2015-2016 2016-2017
Fiscal Year

Figure 3.7: Trend of System Loss of DESCO. (Annual Report 2017 of DESCO).

Presently, DESCO have 6567 no. of distribution transformer, 2 no. of 132/33 KV grid
substations, 34 no. of 33/11 KV substations and 108.80 circuit kilometer 33 KV Overhead
line, 417.95 circuit kilometer 33 KV underground line, 1394.65 kilometer 11 KV, 540.48
kilometer 11 KV underground line and 2057.66 kilometer low tension line.

Recently, a study has completed by DESCO to ascertain the load demand and consumer growth
in DESCO area up to the year 2030 with every 5 years phasing. In this report, the projected
load demand will increase to 1,964 MVA, 3108 MVA, and 4827 MVA by the year 2020, 2025
and 2030 respectively. In this regard, 72 nos. of new 33/11 kV Substations and 17 nos. of new
132/33kV Grid Substations will be required. So, this substations have to construct along with
up gradation of some existing sub-stations. This will increase the total load capacity of DESCO.

Two new townships namely “Purbachal Model Town” and “Uttara Model Town (3rd Phase)”
are being developed by RAJUK in the DESCO area. The load demand of “Purbachal Model
Town” and “Uttara Model Town (3rd Phase)” are expected to be about 500 MW and 352 MW
respectively.

21
3.4 Power Sector Procurement in Bangladesh

Power sector is one of the most important sector in Bangladesh. This sector has contributed a
lot to the development of the country. It has created employment facilities, influence in
economic growth, contributed to eradicate poverty and many more. Like any other country in
the world Bangladesh power sector divided into three segments. These are generation,
transmission and distribution. The first segment is generation where electrical energy are
produced. Both public and private sector generation take place in Bangladesh whereas public
sector is the most of the percentage responsible for generation. Different types of fuel,
renewable energy are used to produce electricity. In near future nuclear energy will also
contribute to the generation. And also some of the power imported from India. The second
segment is transmission where electrical energy carried major distance from generation end to
distribution end through grid. The third segment is distribution where received electrical energy
from transmission and distributed to consumer premises.

However irrespective of their activity any power sector organization operating in the country
directly or indirectly has to follow the regulation of Bangladesh Energy Regulatory
Commission (BERC).

Bangladesh Energy Regulatory Commission (BERC) as the regulator of all the organization of
power sector has no specific guideline on procurement. But by default the public power
organizations are bound to follow the government rules and regulations since they are funded
by public money. As such all the public power organizations are following the PPR 2008 as
the basis of their procurement. For project procurement, organizations own fund, government
fund and donor agencies fund are also used for procurement. If donor agencies funded,
instructions or guidelines from them also being followed during procurement. Though most of
the project of power sector are done by turnkey basis. But for private sector there has no
significant guidelines for procurement. For example, rental or quick rental power plants mostly
operated by private sector. They procure their power plant machineries themselves. Bangladesh
Power Development Board (BPDB) buy energy from them and also fuel is given to them by
government. This selling price and fuel cost is preset by government through a contract. So,
here is wide range of opportunity to do works related to sustainable procurement. Another issue
is renewable energy. Most of the solar system of Bangladesh are implemented by private
organizations. They are not the manufacturer. They procure this system from foreign country
and only responsible for the installation whereas the end user not very concern for using this

22
solar systems. So, here is also many opportunity for doing works related to sustainable
procurement. Also nuclear power plant installation works going on. Here, waste management
is a vital issue. Bangladesh power sector booming fast day by day to achieve sustainable
development though maintaining proper economic growth. To maintain proper economic
growth power sector has a vital role to play. So, a proper sustainable procurement is needed for
sustainable development in power sector as well as for Bangladesh.

3.5 Procurement in DESCO

Dhaka Electric Supply Company Limited (DESCO) is one of the government owned electricity
Distribution Company. DESCO has several departments like engineering, operation, legal,
audit, procurement etc. Among them DESCO gives a huge importance to its Procurement
Department. This Department has dedicated man power to manage the procurement related
tasks. An executive director led this department to manage all the procurement functions within
this organization.
As a government owned company DESCO have to follow PPA 2006, PPR 2008 and guidelines
from CPTU during procurement of goods, works or services. DESCO has its own procurement
guidelines.

3.6 Regulations in Power Sector

We have searched the official website of Bangladesh Bank and found three basic documents
governing the entire procurement of Bangladesh Bank. These documents are;

a. PPA, 2006
b. PPR, 2008
c. E-tendering
d. Procurement guidelines from CPTU
e. Self-Procurement Guidelines if exist (i.e. DESCO procurement guidelines, 2015)
f. BERC regulations/guidelines (i.e. tariff establishment for different power sector
organization, conflict resolution etc.)
g. Electricity Act, 1910
h. Basically above mentioned three documents are the official procurement references for
the public power sector procurement in Bangladesh. But, for private power sector

23
 organizations, no specific procurement guidelines exist. They mainly go for value for
money criteria.
i. Bangladeshi power sector mainly govern by public sector. A very little percentage
responsible for private sector. So, in public sector procurement mainly PPR 2008, PPA
2006 and e-tendering are being followed during procurement. For foreign aided project,
guidelines from aided agencies are being followed in parallel with government
procurement guidelines.

3.7 Sustainability issues in PPR 2008

In Chapter 1, two research questions have been proposed which are; i) what is the scope of
sustainable procurement in the Power Sector? And ii) to what extent your organization practice
Sustainable Procurement as a power sector organization?

This section addresses the 1st of the research question and represents a search for any
component of sustainability in the current procurement framework of Power Sector.

At present the Power Sector procurement in Bangladesh is regulated by three principal

documents which are the Public Procurement Act, 2006, the Public Procurement Rules, 2008
and the Procurement Policy of the Concern Organization. Besides these documents, the CPTU
has prepared a number of Standard Tender Documents (STDs) for goods and works and
Standard Request for Proposals (SRFPs) for services depending upon basically the size or
volume of procurement. Table 4.2 shows some of the points made in the public procurement
documents which relate to the sustainability issues.

Table 3.2 – Sustainability Issues in the Public Procurement Rules

Performance Area Relevant points in the procurement documents

Economic Performance “The Procuring Entity shall take into account the following
when determining the method of Procurement and
consolidating of Goods packages:
(a) availability of the relevant Goods in the local market;
(b) quality, sources and brand of the Goods available in
the local market;
(c) price levels of the designated Goods;
(d) Risks related to supply in the local and
international markets”. [Rule 15(2), PPR, 2008]
24
 In the case of determining the method of Procurement for
Works, the Procuring Entity shall considering the prevalent
conditions of the contracting industry and expected
competition;
[Rule 15(7), PPR, 2008]

Technical Specifications prepared by Procuring Entities

shall, where appropriate, be expressed in terms of
performance or output requirements, rather than
specifications linked directly to design or descriptive
characteristics which may tend to limit competition. [Rule
29(2), PPR, 2008]

There shall be no reference, in technical specification of

goods to a particular trade mark or trade name, patent,
design or type, named country of origin, producer or service
supplier. [Rule 29(3), PPR, 2008]
Environmental The Contractor shall throughout the execution and completion
of the Works and the remedying of any defects therein take all
performance
reasonable steps to protect the environment on and off the Site
and to avoid damage or nuisance to persons or to property of
the public or others resulting from pollution, noise or other
causes arising as a consequence of the Contractors methods of
operation.
[GCC 27.1, STD-PW3]

The Contractor, in particular, shall provide proper

accommodation to his or her laborers and arrange proper water
supply, conservancy and sanitation arrangements at the site for
all necessary hygienic requirements and for the prevention of
epidemics in accordance with relevant regulations, rules and
orders of the government.
[GCC 29.2, STD-PW3]

Social performance The Procuring Entity shall take into account the following
when determining the method of Procurement and
consolidating of Goods packages:
(a) capacity of local Suppliers to supply the required
quantities;
(b) capacity of the national industry and quality of its
products;
(c) market conditions and expected competition;
[Rule 15(2), PPR, 2008]

In the case of determining the method of Procurement for

Works, the Procuring Entity shall consider the capacity of
local Contractors. [Rule 15(7), PPR, 2008]

Procuring Entities shall, where possible, prepare the

specifications in close cooperation with the concerned user
or beneficiary of the Goods or Works or Service

25
[Rule 29(5), PPR, 2008]

The Tender Document may allow for a domestic preference

as defined in Schedule II. I to provide local manufacturers,
Suppliers and Contractors with a price advantage over their
international competitors for the purpose of promoting
domestic products or industries.
[Rule 83(1)(e), PPR, 2008]

The Contractor shall throughout the execution and

completion of the Works and the remedying of any defects
therein take all reasonable steps to safeguard the health and
safety of all workers working on the Site and other persons
entitled to be on it, and to keep the Site in an orderly state.
[GCC 27.1, STD-PW3]

The Contractor shall not perform any work on the Site on the
weekly holidays, or during the night or outside the normal
working hours, or on any religious or public holiday, without the
prior written approval of the Project Manager.
[GCC 28.1, STD-PW3]

The contractor shall comply with all the relevant labor laws
applicable to the contractor’s personnel relating to their
employment, health, safety, welfare, immigration and shall
allow them all their legal rights.
[GCC 29.1, STD-PW3]

The Contractor, further in particular, shall pay reasonable

wages to his or her laborers, and pay them in time. In the
event of delay in payment the Procuring Entity may effect
payments to the laborers and recover the cost from the
Contractor.
[GCC29.3, STD-PW3]

The Contractor shall not employ any child to perform any

work that is economically exploitative, or is likely to be
hazardous to, or to interfere with, the child's education, or to
be harmful to the child's health or physical, mental, spiritual,
moral, or social development in compliance with the
applicable labor laws and other relevant treaties ratified by
the government.
[GCC 30.1, STD-PW3]

The Contractor shall provide, in the joint names of the Procuring

Entity and the Contractor, insurance cover from the Start Date
to the end of the Defects Liability Period, in the amounts and
deductibles specified in the PCC for the following events which
are due to the Contractor’s risks Personal injury or death.
[GCC 37.1, STD-PW3]

26
However, although these points in the public procurement documents as mentioned above
relate somehow to the different aspects of sustainable procurement, these are not sufficient for
introducing sustainability issues in the procurement system. It is noticeable here that very few
points are made regarding environmental performance in the public procurement documents.

27
 CHAPTER – 4

SUSTAINABLE PROCUREMENT IN DESCO AND POWER

SECTOR OF BANGLADESH: AN ANALYSIS

4.1 Introduction

In Chapter 1, two research questions have been proposed which are, firstly what is the scope
of Sustainable Procurement in DESCO and Power Sector of Bangladesh? And secondly to what
extent DESCO and other Power Sector organizations practice Sustainable Procurement?
This section addresses the second of the research question and represents a search for to what
extent Power Sector organizations practice Sustainable Procurement.

Here, power sector divided into three segments. These are generation, transmission and
distribution. In generation several organizations exists. BPDB, RPCL, BPDB-RPCL,
NWPGCL, CPGCL, imported power from India, Renewable energy (for example hydro power,
solar energy, wind energy), IPP and some private organizations contributed to generation.
Nuclear power plant will also contribute to generation in near future of Bangladesh. BPDB is
the largest contributor for generation still now. Very small percentage of generation done by
private agencies in Bangladesh. So as a generation organization in this study BPDB is taken
into account. For transmission only one organization exists named PGCB. So as a transmission
organization in this study PGCB is taken into account. For distribution several organizations
exists. BPDB, BREB, DPDC, DESCO, WZPDCL, NWPDCL, NESCO responsible for
distribution of electrical power. All of the distribution organizations are public agency still
now. So as a distribution organization in this study DESCO is taken into account.

4.2 Procurement Procedure of power sector

Several organization plays an important role for power sector of Bangladesh. These are
BPDB, PGCB, DESCO, DPDC, BREB etc. Some private organization also contribute in
the power sector. Over the period of time power sector has become matured in all aspect.
To support growth of power sector require well organized Procurement function. This
function accomplished by procurement department or purchase department. This
department is headed by departmental head. Organogram of the purchase function in some
power sector organizations is as follow -
28
 Chairman

Member Member
Member Member Member
Planning and Company Member Admin
Distribution Finance Generation
Development Affairs

Director Controller
DS P&D DS Company DS Distribution Director Director DS Generation
DS Admin(DD) purchase Accounts & Director Audit DS Finance (DD)
(XEN) Affairs (XEN) (XEN) Accounts Finance (XEN)
DD-4 (XEN-2) Finance

Figure 4.1: Organogram showing procurement department of BPDB. (Source: BPDB

website)

29
 Board of Directors

Managing Director

Director Director Finance & Director

Director Engineering Director Operation
Administration Accounts Procurement

GM Procurement

DGM Material DGM Procurement,

planning & Store Inspection & Testing

Manager Material Manager

planning & store 3 Procurement 2

Figure 4.2: Organogram showing procurement department of DESCO. (Source:

DESCO website)

30
 Managing
Director

Executive Director
Executive Director Executive Director Executive Director Executive Director
(T/ICT), ICT &
Admin & HR Finance Engineering Operation
Procurement

GM (T/ICT) ICT,
CE Contract &
Energy &
Procurement
Metering

SE Security, safety
SE contract SE store manage
& Env.

Figure 4.3: Organogram showing procurement department of DPDC. (Source:

DPDC website)

31
 Board of
Directors

Managing
Director

Executive Executive
Executive Executive
Director Director
Director HRM Director P&D
Finance O&M

General
Manager

Deputy
General
Manager

Manager Manager

Figure 4.4: Organogram showing procurement department of PGCB. (Source: PGCB

website)

From the above mentioned hierarchy of different organization it is established that power
sector organizations have given due importance to the purchase function. In fact the
management of above have considered the purchase activities as one of their core function.
This is a good progress in context of development of power sector of Bangladesh. Annual
purchase value of each organization of power sector is huge and this expenditure is
controlled by well-defined process. Power sector organization follows PPR 2008, PPA
2006 and also guidelines from CPTU during purchasing through the approval of proper
channel.

32
 4.3 Procurement Methods

Since most of the organizations are public so it is mandatory for them to follow the PPR
2008. However, it is observed that they are practicing most of the PPR standards. Several
power sector organizations also follow their procurement guidelines along with PPR 2008.
Procurement guidelines of DESCO, 2015 is one of the example. Power sector
organizations procure goods & services, works & physical services, outsourcing services
and consultancy services.
List of procurement method practiced by power sector organizations are –
 Direct Procurement Method(DPM)
 Quotation Method(QM)
 Limited Tendering Method (LTM)
 Open Tendering Method (OTM)
 Direct Cash Purchase Method (DCPM)
 Framework Contract Method (FCM)
 QCBS/FBS or Others Method For Consultancy Services
Depending on volume of procurement, nature of procuring item(s) and estimated price,
power sector organizations adopt the applicable method of procurement.

DESCO follows these above methods during procurement of goods, works or service.
These above methods are described widely in DESCO’s procurement guidelines, 2015 by
which employees related to procurement activities may follow if needed.

4.4 e-GP

The elaborated form of e-GP is e-Government Procurement. e-Government procurement

(e-GP) as the collaborative use of Information and communications Technology (especially
the Internet) by government agencies and other actors of procurement community in
conducting all activities of Government Procurement Process Cycle (GPPC) for the
acquisition of goods, works, and consultancy services with enhanced efficiency in
procurement management. e-GP is a web based system. e-GP records all the procurement
activities occurs in a purchase. e-GP encompasses all the procurement life cycle. The
purpose of this system is to maintain complete and up-to-date Public Procurement System
activities of all public agencies as well as provide tender opportunities to all potential
tenderers from Bangladesh and abroad.
33
Central Procurement Technical Unit (CPTU), IMED, Ministry of Planning is developing the e-
GP System using the cutting edge technology and global expertise complying with the Public
Procurement Act 2006 and Public Procurement Rules 2008.

Bangladesh e-Government Procurement (e-GP) system consists:

1. Centralized Registration (Contractors/Suppliers/Consultants, Procuring Entities and

other actors of e-GP)
2. Workflow management System
3. e-Tendering (e-Publishing/e-Advertisement, e-Lodgment, e-Evaluation, e-Contract
award)
4. e-Contract Management System (e-CMS)
5. e-Payments
6. Procurement Management Information Systems (PROMIS)
7. System and Security Administration
8. Handling Errors and Exceptions
9. Application Usability & Help

In power sector, almost all the power sector public organizations like BPDB, BREB, DESCO,
DPDC, PGCB etc. already introduce e-GP in their procurement system. But, procurement
functions are not fully done through e-GP till now.

4.5 Tender Committee

All purchase whether against Press tender or against Limited Tender or against Single Tender
or against Spot Tender, is processed through Tender Evaluation Committee. The composition
of tender evaluation committee varies considering the procurement method. Generally,
Technical evaluation committee and Financial evaluation committee responsible for the
evaluation of tender. If the supplier offer or sample technically qualify then the financial offer
evaluated. Then lowest rate given by the technically responsive tenderer awarded the tender
after the evaluation of financial offer by financial evaluation committee.
In DESCO, Tender evaluation committee generally working in three steps. At first, technical
evaluation done by technical evaluation committee. Technical evaluation committee select the
suppliers whether they are responsive or not. Secondly, the responsive suppliers financial offers

34
evaluated by the financial evaluation committee. Financial evaluation committee ranking
technically responsive buyers according to their financial offer. Finally, qualified lowest
evaluated bidder negotiated by the tender negotiation committee. The Tender Evaluation
Committee has the right to negotiate the price with the qualified lowest evaluated bidder only.

4.6 Sustainable Procurement in Procurement Policy

The objective of Procurement Policy as it is aims to set out the parameters for contributing
towards sustainable growth of the power sector through the application of a sustainable
procurement policy and address the key issues and principles associated with this object.

There are no specific procurement policy for sustainable procurement in power sector of
Bangladesh. But, Bangladesh government taking some initiative to attain sustainable goal
through sustainable development. Large amount of money being invested in power sector to
increase the economic growth. So, sustainable procurement is a vital issue for sustainable
procurement in power sector. Specific KPI for sustainable procurement is not set yet in power
sector. But some issues related to sustainable procurement is maintained during procurement.
These are value for money, no child labor, equal opportunity, ISO 2008-9001 standard
accredited organizations (i.e. BPDB, BREB, DESCO) etc. But, these are not enough for sustainable
procurement.

4.7 Sustainable Procurement in Procurement Policy of DESCO

Like any other power sector organization, Dhaka Electric Supply Company Limited (DESCO)
also follows the PPA 2006, PPR 2008, guidelines from CPTU during procurement. DESCO
has its own procurement guideline which known as procurement guidelines of DESCO, 2015.
DESCO has no sustainable procurement policy of its own. But, indirectly DESCO perform
some of the functions which is related to sustainable procurement during procure of goods,
works or equipment’s. These sustainable issues which are being done during procurement are-

4.7.1 Social/ Etical issues

Social issues are given below-

 Child labor are not allowed.
 DESCO also prohibit its outsourced organization from the recruitment of child labor.
35
  During recruitment, dedicated quota for women are given according to government
rules to promote women participation.
 Besides running on commercial basis, DESCO also recognizes some social
responsibilities such as collects electricity bills at a nominal rate from the Ijtema
Committee, provides support to the freedom fighters & the family of the National Poet
Late Kazi Nazrul Islam and also contribution to other social activities as decided by the
Board from time to time.

 Since the Government has decided to introduce e-Tender system to put an end to tender
manipulation, DESCO has introduced e-Tendering system to facilitate its procurement
process. The main functions are online bidder registration, email acknowledgement of
new tender according to bidder’s interest list, online bid participation, edit submitted
documents/bids till closing date online tender specification with a comprehensive
security. This system prepares customized comparison sheet of
the submitted bids to accelerate the evaluation process.
 DESCO introduces e-Governance system by using internet to ensure good governance
in all functional areas of the establishment. This enables an accountable and transparent
governance system by using advanced IT (Information Technology) systems. As a
result, One Point Service Centre, Complaint Management, New Connection, Monthly
Bill Collection, Miscellaneous Bill Collection, DESCO Website and E-mail
Communication, Inter Office Wide Area Network (WAN) Connectivity has been
successfully developed and implemented.
 Both internal and external audit done every year. Internal Audit division is responsible
for performing various Audit program relating to different functions and activities of
DESCO for ensuring transparency & accountability in its activities with aim to provide
better service to its valued customers. As a government owned public sector company,
external audit done by authorized agencies in every year. This audit ensures
transparency.
 DESCO awarded ISO 9001:2008 certification for quality management system in 2016.

4.7.2 Economic issues

Economic issues are given below-

 System Average Interruption Duration Index (SAIDI) and System Average Interruption
Frequency Index (SAIFI) both reduces every year. As a result operational revenue
increases and also it shows that no of fault decreases which means maintenance cost
also reduces.
36
  DESCO outsourced people to do some of its logistics functions like cleaner, security
guard, some sort of transport, maintenance and operational gang etc. As a result
management able to reduce some sort of operational cost every year.
 DESCO has already two grid sub-station. DESCO also have an ongoing project to build
another 5 no. of grid sub-station. As a result, DESCO can buy electrical energy in a
lower tariff in 132 KV side.
 DESCO encourages consumers to use energy saving bulb, electric appliances etc.
 DESCO install pre-paid meter to reduce misuse of electricity.

4.7.3 Environmental Issues

Environmental factors are given below-

 DESCO install solar panels to its different office premises to extract green energy.
 Accordingly order from Ministry of Power, Energy and Mineral Resources (MoPEMR),
DESCO ensures the implementation of solar panel to consumer premises according to
sanction load at consumers own cost and also monitor whether consumer use solar
properly or not.
 One solar charging station has been installed in Uttara, Sector 6 of Dhaka city to charge
the easy bike or Auto rickshaw and another solar charging station is under construction
in Baunia under turag thana of Tongi by DESCO.

4.8 Interview Findings

Sustainable procurement has three dimensions. These are economic, environmental and
social aspects. The operational definitions of these three aspects are outlined in Chapter 1.
A questionnaire was designed including a number of questions which covered not only the
above mentioned three aspects of sustainable procurement but also the information about
the organization’s procurement.

To evaluate the understanding of Sustainable Procurement issues by the officials directly or

indirectly related to procurement of different power sector organizations as well as DESCO,
we have conducted in depth interview and also conducted survey among 30 officials of
various level. The list of officers was chosen from different divisions so that we can get a
holistic view of entire organization. The findings and analysis of the survey data are
presented. Every questions individually analyzed which would help to find a complete
37
picture of the matter. Most of the analyses have been done qualitatively from the perception
based interviews with the respondents. Some quantitative analyses have also been made
based on the supplied data by the respondents.

4.8.1 Social Aspects of Sustainable Procurement

The sustainable procurement encompasses three dimensions. These are social/ ethical,
economic and environmental aspects of procurement. The respondents were asked a number
of questions about the social aspect of sustainable procurement.

4.8.1.1 Equal opportunity for Tenderers/ Bidders

The respondents were asked whether there specifications comply equal opportunity for all the
potential suppliers or contractors. Everyone gives a positive response regarding this issue and
all of them said that equal opportunity ensured to all the potential suppliers or contractors. The
Public Procurement Rules, 2008 does not allow making specifications which may exclude
some of the suppliers or contractors. In this regard, mentioning of any brand name or country
of origin according to PPR, 2008 is prohibited. Everyone said that potential suppliers or
contractors are treated equally during procurement of goods, works or services.

4.8.1.2 Labor practices

The respondents were asked to share their views about the labor practices whether ethical or
not regarding equality, terms &conditions, health & safety, diversity, compliance with ILO
standards or country’s labor law etc. 22 out 30 respondents said that some sort of ethical labor
practices take place during procurement and execution of works by the contractors or supplier.
Insurance coverage for the laborers, technicians working for gang (outsourced technicians
known as gang in DESCO) which is the responsibility of the contractors and binding upon
them as per the terms of the contract is one example of ethical labor practice and also these
criteria are extensively used in international bidding. Eight of them said that they have no idea
about this criteria are used in the contract document.

4.8.1.3 Female participation

The respondents were asked about the female participation. Almost all of them said that in
terms of DESCO and other power organization own recruitment, a percentage of total
38
recruitment are dedicated for female but for outsourced people or contractors no provision
exists in the tender document or contract regarding this issue. They also said female
participation depends upon the contractors or suppliers. Some female being outsourced as
cleaner in the office and sometimes during construction works, some suppliers ensure female
participation for lower wages than men. Total 21 out of 30 respondent said that 10 or less than
ten percent of the total employees are female, 7 out of 30 respondents said that 10 to 25 percent
of total employee are female and another two said it may be more than fifty depending on the
supplier for example in cleaner supplier agency most of the cleaner is women.

Female Labor Participation

25

20
No.of respondents

15

10

0
Female Labor in percentage

0 to 10 11 to 25 26 to 50 above 50

Figure 4.5: Female labor participation in suppliers firms or organization

4.8.1.4 Child Labor

The respondents were asked about the child labor participation. Everyone said that child labor
is strictly prohibited during recruitment not only for own recruitment but also for contractors
or outsourced employees.

4.8.1.5 CSR activity

The respondents were asked about the CSR activity of their organizations. 2 out of 30
respondents said that philanthropic initiatives being followed, 6 out of 30 respondents said
that ethical business practice being followed, 7 out of 30 respondents said that economic

39
activity being taken of CSR activity. 5 out of 30 respondents said that several types of activity
taken depending on situation and 10 out 30 respondents said that their organizations have no
CSR activity.

CSR Activity
12

10
No. of respondents

environmental responsibility philanthropic initiatives ethical business practice

economic responsibility Several types All types
Have no CSR activity

Figure 4.6: Organization’s CSR Activity

4.8.2 Economic Aspect of Sustainable Procurement

The respondents were asked a number of questions about the economical aspect of sustainable
procurement.

4.8.2.1 Key criteria during procurement

A question was made to the respondents in order to know the key criteria during procurement.
Most of the respondents said that the main criteria is the lowest price. It is found from the
interview that whole life costing is rarely considered in various public sector organizations.
Some of them also said in the project procurement whole life costing taken into consideration
during procurement. 19 respondents out of 30 mentioned the lowest price as the main criteria.
6 respondents out of 30 respondents mentioned lowest price with better quality as the main
criteria. Only one respondents out of 30 respondents mentioned that it depends on the
importance of the product, service or works.

40
 key criteria during procurement

4
1

6
19

lowest price
lowest price with better quality
depends on importance of product, service or work
did not comment

Figure 4.7: key criteria during procurement of product, service or works.

4.8.2.2 Participation of local firms during procurement

The respondents were asked about the use of any criteria in the tender documents during
procurement to encourage the participation of local firms. Almost everyone said the same
answer regarding this question. It is clear from the responses that all the procurement functions
have to follow the PPR 2008, PPA 2006 and own guidelines if any organization have (i.e.
DESCO have a procurement guideline which is Procurement Guidelines of DESCO, 2015).
The mentioned guidelines have no criteria for encouraging participation of local firms in the
case of national competitive bidding. But, a significant number of respondents (21 out of 30)
said that in international competitive bidding, there exists a provision for encouraging
participation of local firms. Others respondents said that they have no idea on this issue. This
term known as ‘domestic preference’. It can be said from this question that there is little scope
in our procurement practice to involve local firms for development of the local community
because most of the project procurement of power sector carried out through international
bidding/tender.

4.8.2.3 Whole life costing

The respondents were asked about the consideration of whole life costing during procurement
of their organization. 14 out of 30 respondents said that whole costing is not considered. 9 out

41
of 30 respondents said that during project procurement whole life costing considered and 5 out
30 respondents said that they have no idea on this issue.

Whole life costing consideration during

procurement

14

Did not consider During Project Procurement Have no idea on this issue

Figure 4.8: Whole life costing consideration during procurement.

4.8.3 Environmental Aspect of Sustainable Procurement

Several question asked to respondents to know the environmental aspects consideration during
procurement of goods, works or services.

4.8.3.1 Environmental policy or environmental management system

The respondents were asked whether they have any idea about the environment related policy
or management system in their organization for procurement. 6 out of 30 respondents said
that they have no policy for environment or no environmental management system
certification. 2 out of 30 respondents said that they got ISO: 14000. 3 out of 30 respondents
said that they follow several environment regulations. And 19 out of 30 respondents said that
in every project, an Environmental Impact Assessment (EIA) report on must be approved by
environmental ministry of Bangladesh and then after taking clearance the execution of project
works started.

42
 Environmental Policy
20
No. of respondents

15

10

ISO 14000
Own environmental management policy
Only before project implementation, Environmental Impact Assessment (EIA) done
Several of the above
do not follow any environmental related standard or regulations

Figure 4.9: Environment policy

4.8.3.2 Environmental performance of suppliers or contractors

The respondents were requested to describe the mechanism briefly to check the environmental
performances of the contractors/ suppliers about the environmental performance of
contractors or suppliers. Majority of the respondents given a negative response. Some of the
officials mentioned the ignorance about the existence of any such mechanism to check the
environmental performance of contractors/ suppliers in their organizations. But they also said
that there are no criteria except PPR 2008 regarding the environmental performance of
suppliers for contractors but contractor should follow the EIA report during project
implementation and for procurement.

4.8.3.3 Environmental initiatives by power sector

Respondents were asked about the environmental initiatives taken by their organization. 24
out of 30 respondents said that solar charging station has been installed and also solar system
has been installed in their own office premises as a part of green energy extraction from sun.
6 out of 30 respondents gives negative response on this issue.

43
4.8.3.4 Enhancement of supplier’s environmental performance

A question was asked to the respondents they use any criteria which could enhance supplier’s
environmental performance. This is the question where most of the respondents (23 out of 30)
have given negative answer and others have no idea regarding this issue. But they said that
they use indirectly in the RFP because in this regard PPR 2008 clearly mentioned that “the
contractor shall throughout the execution and completion of the works and the remedying of
any defects therein take all reasonable steps to protect the environment on and off the site and
to avoid damage and nuisance to persons or to property of the public or others resulting from
pollution, noise or other causes arising as a consequence of the Contractors methods of
operation. Again it has been advised that the Contractor, in particular, shall provide proper
accommodation to his or her laborers and arrange proper water supply, conservancy and
sanitation arrangements at the site for all necessary hygienic requirements and for the
prevention of epidemics in accordance with relevant regulations, rules and orders of the
government.”

4.8.3.5 Ecolabel

The respondents were asked about the ecolabelling of products or service whether they
consider this issue during procurement. Everyone said that ecolabelling is not taken into
account during procurement of products or services. One respondents also said that no
guidelines available in the procurement guidelines, PPR 2008 or from CPTU on this issue.

4.8.3.6 Compliance of the minimum legal standard

The respondents were asked whether they use any criteria so that the suppliers or contractors
comply with the minimum legal standard. In this question majority of the official interviewed
have mentioned that they always ensure that the suppliers are maintaining minimum legal
standards. They also said that they use this criteria during procurement of goods, works or
services, otherwise the supplier or contractors treated as non-responsive and any supplier
found in violation of any legal standards become blacklisted. They also said that they use
suitable clauses to ensure compliance of legal standards.

44
4.8.4 Procurement life cycle

The respondents were asked to whether they follow every step of the procurement life cycle
during procurement. 3 out of 30 respondents said that they follow every step. 5 out of 30
respondents said that they follow partly and also said this varied with the procurement method
and products, service or works types. 22 out 30 respondents have no idea about procurement
life cycle but they follow defined guidelines of their organization, PPA 2006, PPR 2008 and
CPTU guidelines.

Procurement life cycle considerations during

procurement

22

follow every steps of procurement lifecycle

partly follow steps of procurement lifecycle
follow own procurement guidelines, PPA 2006, PPR 2008 and CPTU guidelines

Figure 4.10: Procurement life cycle considerations during procurement of products,

services or works.

4.8.5 End use of procured products or works

Majority of the respondents said that there is no specific guideline for disposal of products or
works procured in power sector organizations. One of them said that the product or
equipment’s should store or sell them after a certain period of time by auction. The latter is
the most common process of end use of materials. Some of them said that there are no specific
guideline for end use of product or works but in special cases like shifting a substation to a
higher capacity different elements to be replaced. In that case, older elements are being stored
or used in other substation of same capacity if needed by proper authority otherwise these
would be auctioned by the authority.

45
4.9 Summary of the Analysis

In this chapter, analysis has been done dividing the whole study into two parts. The first part
was the analysis of procurement documents of Power Sector Organizations and DESCO to
determine whether there is any provision in the procurement documents which address the
issues of sustainable procurement. The analysis indicates that although there are some
provisions in the Procurement Documents but these are not sufficient to achieve sustainability
in procurement.

The second part of the analysis was based on the current scenario of sustainable procurement
practice in Power Sector Organizations and DESCO. In addition to the interviews/survey
thirty officers who are involved directly or indirectly in procurement related activities have
been provided with printed questionnaires or soft copy of questionnaires with a view to get a
holistic view of sustainable procurement scenarios of power sector as well as DESCO. To do
this, the interview and survey questions were divided into three categories addressing three
aspects of sustainable procurement which are economic, environmental and social aspects.
And also some additional procurement related questions were asked. The analyses done on
the responses against the set questions indicate that although there are a few cases where some
sustainability issues are in practice.

The analysis made from the questionnaire gives a realistic picture of procurement practices in
DESCO and the public sector in Bangladesh. Lowest price is still the key criteria for selection
of suppliers. Whole life costing is only considered for project procurement. Participation of
local firms is not adequately encouraged through the criteria put in the tender documents in
terms of local bidding. In power sector, specific environmental policy or environmental
management system is unavailable. Ecolabelling is not taken into account of product or
services during procurement. Moreover, the present procurement system of power sector
provides little scope for ensuring environmental performances by the suppliers/ contractors.
On the other hand, equal opportunity to all the participants is generally ensured. Ethical labor
practice, female labor force participation, prohibition of child labor etc. are present in the
current procurement system. However, it should say that sustainability issues are not well
embedded in the procurement system of DESCO as well as power sector of Bangladesh.

46
 CHAPTER – 5

CONCLUSION AND RECOMMENDATION

5.1 Introduction

For a long time economic factor has been the single most important indicator in the practice
of procurement in the Public Sector of Bangladesh. Environmental and social factors have
always been neglected in the procurement system. However, the importance of non-economic
factors in the procurement increased significantly with the development of the concept of
sustainable development worldwide.

Power Sector in Bangladesh is one of the most important sector which has direct impact on
GDP. So, it is evident that what and how power sector organizations buy and acquire in terms
of goods, works and services contribute significantly in the overall economy of the country,
both to its ability to deliver sustainable development and to its credibility with its development
partners. By using their market leverage to opt for goods, works and services that also respect
the environment and the society, they can have a major influence on suppliers and stimulate
the production of more sustainable goods, works and services. Power Sector procurement,
therefore, needs to consider sustainability issues seriously to ensure real value for money over
a longer term without compromising environmental and social responsibilities. This would
further ensure that development targets are achieved through the acquisition of goods, works
and services without much damage to the society and the environment.

Sustainable procurement indicates that day by day modern technologies will become more
and more low carbon, low rubbish and energy/water conservation, and beneficial to broader
sustainable development goals. In Bangladesh, sustainable procurement is not a legal concept
under the current public procurement laws or other related laws. However, perceptions
gathered through the interviews with different procurement professionals in different power
sector organizations give a moderate indication about the awareness of sustainability issues
because several professionals has no idea about sustainable procurement so more awareness
of professionals about sustainable procurement would be expected that this will lead to
development of the sustainability issues embedded in the public procurement framework.

47
5.2 Conclusion

In order to find the answers of the research questions made in Chapter 1, effort has been made
in this dissertation paper to explore the scope of sustainable procurement in DESCO and the
power sector of Bangladesh.

The first part of the research questions was about the scope of sustainable procurement in
DESCO and the power sector. In response to the first part of the research questions, it is found
from the analysis that there is limited scope of practicing sustainable procurement in the
current procurement framework of power sector organizations and DESCO. The analysis
made in Chapter 4 from the response of procurement officials of DESCO and other power
sector organizations gives the similar view that sustainability issues are not well embedded in
current procurement practice.

Tendering system is still based on the lowest price approach. However, environmental and
social factors are not used consciously in the specifications and whole life costing approach is
rarely considered. While making lots in a package, sometimes, the issue of local participation
is ignored.

It is mandatory for public sector organizations except the private organizations like summit,
orion etc. to follow the standard tender documents prepared by the CPTU. And the standard
tender documents prepared by the CPTU do not include any criteria for encouraging
participation of local firms in the case of national competitive bidding. Although a few points
are made in the PPR, 2008 as outlined chapter 3, these do not directly address the issue.
However, in international competitive tendering, there is a provision for encouraging
participation of local firms using a term known as ‘domestic preference’. Power sector
organizations do not have any type of environmental management system. Although some
environmental criteria seem to be used in large procurement contracts like Environmental
Impact Assessment (EIA), most of the contracts have been pointed out by the respondents as
problematic as regards environmental considerations. The study also indicates that there is
virtually no mechanism in PPR 2008 to check the environmental performance of contractors/
suppliers.

The procurement professionals in DESCO and power sector organizations have very limited
scope of using any environmental criteria in the tender document for enhancing the

48
contractor’s or suppliers environmental performances. Similarly, they lack the mechanism to
make the contractors or suppliers comply with minimum legal standard regarding
environment.

At present there is no specific guidelines for disposal of products or works procured in Power
Sector. At present DESCO and other power sector organizations sale the old items through
auction. However, for procurement of works, some criteria are put so that the rubbish,
disposable waste, exhaust, nuclear waste etc. produced during the construction or production
are collected and removed by the contractor at their own cost and responsibility as per the
conditions of contract. But Government takes some steps in specific areas to address
environmental factors. For example, Rampaul power plant and Matarbari coal based power
plant both are located in the coastal region of Bangladesh. Rampaul is located near sundarban.
A huge pressure group also give pressure to government regarding environment. So, policy
maker designs the chimney to transmit the exhaust flue gases into a certain safe level in a
specific height so that no unwanted impact will occur in the environment. In the upcoming
nuclear power plant waste management issues being negotiated with Russia and Russia
willing to take the nuclear waste. And also government initiate an agency named SREDA who
are responsible to improving, enhancing and initiating renewable energy throughout the
country.

It is evident from the above analysis based on the responses that Power sector has taken some
initiatives on the environmental issues though these are not significant enough.

In addressing the social aspect of sustainability, power sector organizations and DESCO
ensures equal opportunity to all. The preferred method is the Open Tendering Method (OTM)
which ensures opportunity for participation of all interested suppliers through sufficient
advertisement. It is also mentioned that while preparing specifications, all the potential
suppliers/ contractors are treated equally. The PPR 2008 does not allow making specifications
which may exclude some of the suppliers/ contractors. For ensuring equal opportunity to all,
it is prohibited to mention any brand name or country of origin. However, this reminds the
requirement of skilled and experienced specification writer which many of the organizations
lack.

Another issue of social aspect of sustainability is the ethical labor practice which is present in
the procurement system of power sector organizations. Some points have been made in the

49
procurement documents regarding health and safety of all workers, prohibition of working in
the holidays, complying with the relevant labor laws, wages of laborers, prohibition of
engaging child laborers, insurance in case of personal injury or death etc. Participation of
female labor force is not ensured though the contract terms in the public sector procurement.

The second part of the research questions was that – to what extent DESCO and Power Sector
organizations practice Sustainable Procurement? The findings of this study indicate that the
idea that economic, environmental and social criteria are equally important as other criteria is
gaining acceptance in the public sector procurement.

If sustainability issues included in the procurement guidelines and followed during

procurement, it can be highlighted to foreign aided agencies like World Bank, Asian
Development Bank, Asian Infrastructure Investment Bank, JICA etc. so that they get more
interest to invest in the power sector of Bangladesh.

5.3 Recommendations

Although sustainable procurement is an important issue in most of the developed countries, it

has not become an important matter of concern in developing countries like Bangladesh.
However, it is a matter of hope that this issue is gaining acceptance in our country which may
be a potential driver for introducing sustainability in the power sector procurement.
Sustainable procurement is particularly important in the power sector as electricity has a direct
impact to economic growth. Uninterrupted quality power is expected by the people. To supply
uninterrupted quality power stable, reliable power system, grid and power plants needed. So,
in order to introduce sustainable procurement in the power sector it is necessary to take steps
as the short-term, medium-term and long-term solutions.

As a short-term activity, sustainability criteria should be embedded in the tendering system.

For example, Environmental parameters can be considered in various stages of tendering: it
can be used in the pre-qualification of the tenderers; environmental requirements that must be
fulfilled in the contract; and environmental criteria applied in the tender evaluation. The
criteria should be focused on environmental management measures and the way the
contractors are planning to perform the work. For example, ISO 14000 family of standards
provides practical tools for organizations to manage all the environmental responsibilities,
Eco label in the product ensure whether the product environment friendly or not etc. So, these

50
parameters should be focused in the tender. Similarly social criteria should also be included
in the tendering process. The criteria can thus be regarded as a way of selecting a contractor
or supplier that is likely to fulfill the environmental and social requirements along with the
economic requirements. In this way, requirements, prequalification criteria and evaluation
criteria can be combined in order to support each other. BPDB, DESCO, BREB are the ISO
9001:2008 certified organizations of power sector in Bangladesh. Others organizations should
also take necessary steps to get this certification. And power sector organizations also should
give preference to the tender selection criteria if supplier have ISO 14000, ISO 9000
certification. BREB also gets the ISO 14000:2004 certification and OHSAS 18001: 2007
certification.

A sustainable procurement policy should be formulated by CPTU or CPTU should revised

PPR 2008 by inserting sustainable procurement regulations in the PPR 2008 and then the
power sector organizations should follow the sustainable procurement policy or the revised
PPR 2008. This policy formulation should be considered as a medium-term activity to
introduce sustainability. Regulators willingness is required at the initial stage for such a policy.
A clear commitment is necessary from the CPTU to all the public sector organizations. This
will keep everyone in a same platform and encourage them to follow the sustainable
procurement agendas. Many procurement professionals of power sector lack of clear direction
from the top of the organizations on the priority to be given to delivering sustainable
development objectives through procurement. This should be cascaded down through both
government targets and performance management systems and progress monitoring.

Education and training on sustainable procurement at the individual professional level seem
necessary in order to increase knowledge base for implementing sustainable procurement.
Only the formulation of a policy and including sustainability criteria in the documents are not
enough to introduce a sustainable procurement system. It should be considered in long-term
basis. There is lack of capacity to address the issue of sustainable development within the
context of procurement. Procurement professionals suffer from lack of proper information and
training and lack of tools showing how to put sustainability into practice. This indicates that
cognitive aspects such as knowledge and awareness at the individual procurement professional
level seem important in order to make active sustainable procurement choices.

Top level management or government decision maker should take necessary steps and come
forward to implement sustainable procurement issues or include this issues in the procurement

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guidelines or PPR 2008. All procurement should be carried out by people whose procurement
skills have been developed appropriately. Because sustainable procurement cannot be
undertaken effectively unless procurement activities are carried out professionally and
effectively. So, procurement should be done by the full-time procurement people; and people
who do procurement as a significant element of their work. Also, related procurement officials
need to be trained up on sustainable procurement so that they can easily implement their
knowledge when they doing purchasing activities. The regulator needs to come forward to
remove the barriers to sustainable procurement – whether actual or perceived. Awareness
campaign should be arranged focusing on how to take account of non-monetary benefits of
sustainable procurement. All public power organizations should be called upon to examine
their budgeting arrangements to make sure they encourage and support sustainable
procurement. CPTU may play the leading role in this regard. They have been conducting
various awareness programs about the public procurement among the organizations. Similarly
awareness programs should be arranged addressing the necessity of sustainability issues.

Optimum fuel management is a challenge to make a sustainable power sector. Cause fossil fuel
will decrease day by day. So, alternative options should adopt like renewable energy, nuclear
energy in a planned manner. Necessary steps should take to increase imported electrical power
in a competitive tariff from foreign country.

During procurement of goods or equipment’s, energy saving equipment’s, advanced

technologies, reusable goods, renewable energy products should give preferences. Awareness
program on domestic use of renewable energy use like solar, wild etc., energy saving
equipment’s like CFL bulb, energy light, LED light, LED TV etc., eco-friendly equipment like
AC should take by government or power sector organizations so that energy efficiency
increases. As a result, with the same electricity production, government would be capable to
give electricity to more people from grid.

Due to an order from power division of Ministry of Power, Energy and Mineral Resources
(MoPEMR) on 7th November, 2010 to install solar system to consumer premises according to
their sanction load, consumer install solar panel to their premises. This limit varies from 3% to
10% depending on consumer category and consumers lighting load like light, fan etc. In
Bangladesh, solar system imported from China, Germany, and Japan etc. foreign country. In
this regard a survey is also done regarding installed solar panel in DESCO area of Dhaka city.
Solar survey being made on 100 no. installed solar system of consumer premises in Dhaka city

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where 28 no. off grid solar system and 72 no. on grid solar system. we find 44 no. consumers
solar system are functioning properly and another 66 no. consumers solar system does not
functioning properly. From the above survey, it is evident that for lack of knowledge,
willingness to use after getting electricity connection, natural calamity like storm etc. proper
utilization of procured solar system couldn’t be ensured. But, in the rural area where people do
not have power from grid use solar system efficiently to fulfill their needs. So, government
should take necessary steps to ensure proper use of solar system in the urban area or government
may raise a fund by taking as a charge/donation during new connection in the urban area and
then use this fund to make solar park in a defined area and give the responsibility to a dedicated
government organizations to look after so that efficient and effective operation may ensure.

DESCO and BREB installed a number of solar charging stations to different areas where auto
rickshaw or easy bike can charge their vehicles in a very reasonable price. An easy bike will
take 6 hours a day to be fully charged. DESCO started to install two solar charging station
within its area. One in Uttara sector 6 and another in Baunia of Turag thana. Uttra sector 6
already starts operation. As the salary range is quite high of DESCO’s own employees, this is
not a good choice operate the solar charging station by DESCO’s employees. Operational cost
would be high than collected revenue. So, DESCO can operate this solar charging stations by
outsourced people or authority which will minimize the operational cost.

From table 3.3 and table 3.4 we see that the though operational income increases every year,
net profit is decreases every year. So, as a government shareholder limited company, DESCO
should focus on cost reduction. Tariff is fixed, so cost of sales cannot be reduced. Again, system
loss also decreases every year. So, DESCO management should focus on others cost like
operational cost reduction. In this regard, DESCO has one Central store situated in Mirpur
section 13 and one sub-store situated in Uttara. DESCO has 16 local office divided into 3
regions which are- Gulshan Zone, Uttara Zone and Mirpur Zone. Here, for any kind of products
needed by local office should come to central store in Mirpur. Which will kill time and increase
transportation cost. So, DESCO can make Zone wise sub store from which zonal office can
able to take necessary products by saving time and low transportation cost. During, reception
of products from supplier, DESCO can receive products in zone wise sub store. Central store
can monitor and control the supplied products being supplied properly or not in respective sub
stores with right quantity and quality.

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DESCO should focus on waste management for example there are no guidelines for re use of
degraded transformer oil or wasted insulator which is aseptic. Clear guidelines should make by
top level management of DESCO as well as power sector organizations.

DESCO and other power sector organization should emphasize on participation of women in
the supplier’s firm or organization and also monitor whether they follow labor rules, safety
issues etc. before and after awarding contract as well throughout the procurement cycle.

Whole life costing should be introduced in the regular procurement mainly during strategic
items procurement by DESCO management and others power sector organizations.

DESCO and others power sector organization should procure environmentally friendly
products. During procuring, they could procure respective ecolabelling product from buyers or
suppliers.

Uninterrupted power supply is badly needed for any country to sustain current globalized
environment of trade and investments. Bangladesh increases exports with a rapid growth in
manufacturing output and employment. To maintain this growth in diversified field will
require an efficient and lower cost power infrastructure which may strengthen the
competitiveness of Bangladeshi exports as well as increases the GDP. To maintain the
increasing demand of electricity government should take National Energy Policy or develop
an Energy Master Plan which includes Gas allocation policy, Energy subsiding and pricing,
domestic coal utilization, Improved Cooking Stove, Domestic gas exploration policy, Energy
import, Demand side management and energy conservation, rapid infrastructure installation
etc. Government and DESCO should take necessary steps to minimize operational and
maintenance cost and also government may repower and replace existing simple cycle gas
turbines into combined cycle power plants so that the efficiency will increase to a significant
value. Efficient procurement decisions will be important to meet up the upcoming challenges
in the power sector of Bangladesh. For the quick buildup of power sector investment of donor
agencies is much important so that turnkey type investments will help to reduce procurement
problems and ease project implementation.

Power sector booming in Bangladesh for last few years. This is the right time to focus on
sustainable issue during procurement of goods, works or services by restructuring the contract

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conditions, introducing socio-economic issues in the contract, formulating a national
sustainable policy, introduction of environmental aspects and CSR activity etc.
As most of the power sector organizations are government so that they have to follow PPR
2008, PPA 2006, directions from BERC or CPTU and sometimes from the aided agencies
guidelines also specially for project procurement. That’s why government should make a
sustainable procurement policy for power sector or introduce more terms related to sustainable
issues in the PPR 2008. DESCO should also focus on this issue.

A clear commitment is necessary from DESCO’s management and other organizations of

power sector and also from the top to bottom officials throughout the organization for
sustainable procurement implementation.

Finally, there are scope to further study about the sustainability issues of power sector and
DESCO. The concept of sustainable procurement has not been well embedded in the
procurement system of DESCO and other power sector organizations till now. So, this paper
gives an overall scenario of sustainable procurement practices in DESCO and other power
sector organizations. Advanced research needs to be conducted in order to get a deeper insight
into the sustainability issue in relation to DESCO’s procurement as well as power sector
procurement.

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 List of References
7th Five Year Plan of Bangladesh (FY 2016- FY 2020)
APCC 2007, Australian and New Zealand Government Framework for Sustainable
Procurement.
Blackburn, W. R, 2007. The Sustainability Handbook. pp 2-3.
BERC website, www.berc.org.bd/
BPDB website, https://www.bpdb.gov.bd/
Brundtland Commission Report, 1987: “The Report of the U.N. Brundtland Commission,
Our Common Future, 1987” as Report of the World Commission on Environment and
Development.
Bryde and Meehan, 2010
Elkington, 1997: “Cannibals with Forks: The Triple Bottom Line of 21st Century
Business.”
DESCO website, https://www.desco.org.bd/
DESCO Procurement Guidelines, 2015
DPDC website, https://www.dpdc.org.bd/
Ellmers, Bodo, 2011: Helping or hindering? Procurement, tied aid and the use of country
systems in Bangladesh
Kraljic, P, 1983: Article “Purchasing must become supply management” published in the
Harvard Business Review.
Ministry of Power, Energy and Mineral Resources of Bangladesh website,
https://www.mpemr.gov.bd/

PGCB website, https://www.pgcb.org.bd/

PPA, 2006: Public Procurement Act, 2006.
PPR, 2008: Public Procurement Rules, 2008.
Power Sector Master Plan, PSMP 2010.
SREDA website, www.sreda.gov.bd/
SDGs, http://www.un.org/sustainabledevelopment/sustainable-development-goals/
UNGM, 2011, United Nations Global Marketplace. Retrieved 09 October 2011 from
http://www.ungm.org/sustainableprocurement/default.asp
Wikipedia, http://en.wikipedia.org/wiki/Procurement

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 Survey Questionnaire

Title of Dissertation: “Sustainable Procurement in Power Sector of Bangladesh: A case study

on DESCO”.
This is a questionnaire for conducting a research on scope and practice of sustainable
procurement in DESCO as well as Power Sector of Bangladesh. It is a requirement for the
fulfillment of the degree ‘Masters in Procurement and Supply Management’ at the BRAC
Institute of Governance and Development, BRAC University. Your honest response is valuable
for the researcher. The researcher does assure that the information given by you will be kept
confidential and will be used only for the academic purpose.

1.0 General Information

1.1 Name
1.2 Organization Name
……………………………………………………………………………………..
1.3 Designation of the Officer
………………………………………………………………………………….......
1.4 Name of the Department
……………………………………………………………………………………...
1.5 Working Experience
…..............................................................................................................................
2.0 Social/ Ethical Aspect
2.1 Do your specifications ensures equal opportunity to all the potential suppliers/
contractors?
a) Yes b) No
If No, DO you agree that equal opportunity to all the potential suppliers/ contractors
should be ensured?
a) Agree b) Moderately agree c) Strongly agree d) Not Agree
2.2 Do you put any criteria for evidence of ethical labor practices (terms & conditions,
health & safety, equality, diversity, compliance with ILO standards etc.) from the
suppliers/ contractors?
a) Some of the above criteria b) All of the above criteria
c) Depending on type of procurement d) No criteria
2.3 What is the percentage of female participation in the suppliers/ contractors firms or your
organizations?

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 a) 0-10 b) 11-25 c) 26-50 d) more than 50
2.4 Do the suppliers/ contractors or your organization allow child labor?
a) Child labor allowed b) Child labor prohibited c) Sometimes allowed depending
on type of procured goods or service d) have no idea on this issue
2.5 What type of CSR (Corporate Social Responsibility) activity your organization have?
a) Related to environmental responsibility
b) Related to philanthropic initiatives
c) Related to ethical business practice
d) Related to economic responsibility
e) Several types
f) All types
g) Have no CSR activity
3.0 Information Regarding Economic Aspect
3.1 During preparing specifications which criteria do you consider?
a) Lowest price b) Lowest price with better quality c) Depends on importance of
product, service or work d) None
3.2 During procurement do you consider whole life costing?
a) Yes b) No c) only during project procurement d) have no idea on this issue
3.3 Do you put any criteria in the tender documents to encourage participation of local firms?
a) Yes b) No
if No then, then do you agree that participation of local firms should encouraged for
power sector organizations?
a) Agree b) Moderately agree c) Strongly agree d) Not Agree
4.0 Information Regarding Environmental Aspect
4.1 Do your organization follow any environmental policy or environmental
management system or environmental management standard?
a) ISO 14000
b) Own environmental management policy
c) Only before project implementation, Environmental Impact Assessment (EIA) done
d) Several of the above
e) do not follow any environmental related standard or regulations
4.2 Do you have any mechanism in your organization to check the environmental
performance of your contractors/ suppliers?
a) Yes b) No
If yes, please write below-

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 …………………………………………………………………………………………….
4.3 Do you consider ecolabel during preparation of specifications of prodeucts or
services?
a) Yes b) No
If yes, what type of Eco label you consider most during procurement?
a) Type I b) Type II c) Type III d) depends on procured item

4.5 Do you use any criteria so that the suppliers/ contractors comply with the
minimum legal standard?
a) Yes b) No
If No, Do you think minimum legal standard should maintained?
a) Agree b) Moderately agree c) Strongly agree d) Not Agree
5.0 Do you follow the steps of procurement life cycle during performing procurement
related activities?
a) All the steps of procurement life cycle
b) Several steps of procurement life cycle
c) Depends of types of procured item
d) Do not follow any prescribed steps of procurement life cycle
6.0 What type of waste your organization takes step to recycle or ensure end use?
a) Nuclear waste b) Oil of machineries like transformer etc. c) Reuse of end products
or obsolete product in other field d) Do not perform any recycling activities
7.0 Your comments about the sustainability issue or sustainable procurement?
…………………………………………………………………………………………

Thank you very much for your co-operation.

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