No more junkets: Government imposes restrictions on overseas travel for procurement
03 February 2023
The Ministry of Finance, through the Malaysia Treasury, recently issued the
Treasury Circular 2.14 (“
Treasury Circular”) which sets out the procedures to be complied with by government agencies insofar as overseas travel related to government procurement is concerned.
1
Under the Treasury Circular, there are two categories of overseas assignments: (i) assignments before tender invitation (such as familiarisation/ factory visits and preparing specifications); and (ii) assignments after tender invitation (such as specification/ tender assessment, pre-delivery inspection, project management monitoring programme and training). The aforementioned assignments are official assignments and are subject to circulars relating to overseas travel.
Power of approval
Section 3 of the Treasury Circular provides for the authorisation of the Controlling Officer
2 to approve all types of applications for overseas assignments whether the assignment is before or after the tender invitation. The Controlling Officer must ensure that the authority given to approve overseas assignments is not misused and that only officers who are qualified will attend the relevant assignment. Additionally, the Controlling Officer is to ensure that no procurement-related assignments are repeated for the same procurement.
Funding of costs for overseas assignments
Pertinently, Paragraph 4.1 of the Treasury Circular states that the
costs of overseas travel related to government procurement must be funded fully through contractual obligations and not funded by private companies, subject to the following conditions:
- Funding is limited to pre-delivery inspection (PDI), factory assessment test (UPK), project monitoring report (PMR), executive reporting meeting (ERM), final acceptance test (FAT), transfer of title (TOT) and training.
- The necessity for and costs of funding the overseas assignment must be stated clearly in the bid as well as the procurement contract and the costs should be based on the official qualifications according to the officer’s grade including the following matters: the number of officers involved, allowance for food and drinks, travel costs, accommodation costs, other allowances, duration of the visit/ training, tentative date and the frequency of the visit/ training.
- The number of officers involved in the assignment must be limited only to those required and have the technical expertise for the relevant procurement. The number of government representatives should not be more than three officers only, consisting of one officer involved in the procurement and at least one technical officer. This condition is inapplicable to training assignments which will be determined based on the contract requirements.
- If the assignment costs are borne under the contractual obligations, then the officers are not allowed to make any claims.
- The costs of overseas assignments should not exceed the estimated costs stated in the contract notwithstanding that the supplier or contractor bearing the costs of the assignment has approved the same for that year.
- If all or part of the overseas assignment is not implemented, then the government agency is required to make a deduction/ adjustment of costs from the payment to the supplier or contractor.
Conditions for overseas assignments
The Treasury Circular also sets out several conditions applicable to overseas assignments related to government procurement which, among others, include the following:
- Approval for overseas assignments is subject to the relevant treasury circular in force in respect of official duties abroad. It is reiterated in the Treasury Circular that overseas assignments must be funded through contractual obligations only.
- The procurement value for overseas assignments after the tender invitation must exceed RM10 million except for procurement of animals.
- For procurement where there is a third party or the company itself has a testing/ accreditation/ calibration body for the goods purchased from abroad that can carry out testing/ accreditation/ calibration on behalf of the government (such as SIRIM in Malaysia), then the government agency may delegate the responsibility of inspecting those goods to the third party. This matter must be implemented by the agency to ensure that the overseas assignment is carried out properly in accordance with the procedures in force.
- Notwithstanding the aforesaid, the government reserves the right to reject the goods if there are any defects or non-compliance with the specifications/ obligations under the contract when actual delivery of the goods takes place.
- The necessity for and the number of government representative(s) required to carry out the overseas assignment must be clearly stated in the contract and the financing cost of the assignment is to be borne by the government. The agency must ensure that the company’s bid price includes the assignment costs for the government representative(s).
- The duration of the assignment must not exceed seven days (excluding travelling days) except for training programmes which must be determined based on the terms of the contract.
- The government agency must make adequate provisions for the overseas assignments.
Tender document
The Treasury Circular also provides guidance on certain details that should be set out in the tender document. The agency must first determine whether a particular procurement will involve training/ visit abroad. If affirmative, the agency is required to state so in the tender invitation document and to state clearly that the supplier/ contractor must state the estimate of related costs separately and clearly in the tender offer.
If a tender is invited without stating the amount of costs of visit/ training involved, then the agency is not permitted to make any visit/ training related to that procurement.
It is further stated in the Treasury Circular that the practice of receiving visits/ training funded by suppliers or contractors is strictly prohibited and government officers may be subjected to disciplinary action. Further, action may be taken against suppliers or contractors that offer overseas visits/ trainings, including being blacklisted and not being considered for other procurements.
Application process and timeline
An application for approval of overseas assignments related to government procurement must be submitted to the Controlling Officer at least 30 days before the date of the assignment. A prescribed format of the application form to be submitted to the Controlling Officer, including a checklist of supporting documents required, can be found in Appendix 1 of the Treasury Circular.
Requirement for a complete report
The Treasury Circular also requires the officers involved in the assignment to prepare a complete report on the assignment. One copy of the report must be submitted to the Ministry of Finance through the Controlling Officer no later than one month after the date that the assignment was completed.
Comments
The tightening of the procedures in the Treasury Circular is certainly a step forward towards saying no to junkets. The restrictions on the number of participants involved and the duration for overseas assignments, coupled with the requirement to specify the expenditure for such purposes in the tender or contract should deter the practice of lavish and unnecessary spending in government procurement. Further, the prohibition placed on a counterparty from absorbing the costs of overseas visits by government officials may be the death knell for large entourages of hangers-on.
Alert by Fariz Abdul Aziz (Partner) and Vanessa Ho Pei Wei (Associate) of the Corporate Practice of Skrine.
1 The Treasury Circular was issued on 30 November 2022 with effect from 29 November 2022. It was subsequently amended on 20 December 2022 and 21 December 2022 in which the amendments came into effect on 20 December 2022.
2 As defined under Section 15A of the Financial Procedure Act 1957 (Revised 1972).
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.