ISLAMABAD: The federal government is moving to introduce stricter public procurement rules aimed at reducing corruption, strengthening accountability and tightening the process for awarding government contracts, but differences with the International Monetary Fund (IMF) remain over direct contracts to state-owned enterprises (SOEs).
The proposed Public Procurement Regulatory Authority (PPRA) Rules 2026 would replace the existing 2004 rules and introduce tougher eligibility requirements for contractors, greater responsibility for senior government officials and additional safeguards for large public-sector procurements.
However, a key disagreement remains over the circumstances in which government agencies can award contracts directly to SOEs without competitive bidding.
IMF Seeks Tighter Controls on Direct Contracts
Under the IMF’s governance and corruption reform agenda, Pakistan was required to approve and notify the new procurement rules by June 2026.
The deadline was missed amid differences over provisions dealing with direct contracting.
The IMF has proposed that government agencies should generally avoid directly awarding contracts to state-owned, autonomous or semi-autonomous organisations unless exceptional circumstances exist.
These exceptions would include time-sensitive projects, work in remote or scattered locations and situations where direct contracting is considered to be in the public interest.
The government, however, has proposed language that would allow procuring agencies to engage in direct contracting with SOEs subject to specified conditions.
The difference between the two positions is now expected to be considered during the approval process.
IMF Wants Direct Contracts Publicly Disclosed
One of the key IMF proposals concerns transparency.
Under the lender’s suggested framework, a head of the procuring agency would be required to provide a written determination explaining why exceptional circumstances justified a direct contract.
The determination and an undertaking confirming compliance with the relevant conditions would then be made publicly available through the E-Pak Acquisition and Disposal System (E-PADS).
The government’s draft reportedly requires an undertaking to be submitted through E-PADS but does not explicitly provide for public disclosure of the determination explaining the exceptional circumstances.
The issue could still be addressed before the rules are placed before the federal cabinet.
Restrictions Proposed on SOE Subcontracting
The IMF has also sought restrictions on the extent to which an SOE receiving a direct contract can outsource the work to private companies.
Under the proposed framework, an SOE would generally be expected to complete the contracted work using its own resources rather than relying on private-sector partners, joint ventures or subcontractors.
Where specialised components need to be outsourced, subcontracting would be limited to 40 per cent of the total value of the work.
The government has accepted the 40pc threshold but has proposed allowing the relevant authority to modify financial thresholds under the rule from time to time.
The IMF’s concern is that SOEs could otherwise secure government work without competition and subsequently pass a substantial portion of the contract to private companies, potentially undermining the purpose of competitive procurement.
Exceeding the permitted subcontracting limit would be treated as a material deviation and could bring practices such as collusion, corruption, fraud and coercion into consideration.
Tougher Eligibility Rules for Contractors
The proposed procurement framework also seeks to prevent individuals and companies facing serious legal or financial risks from participating in government tenders.
Contractors, owners, beneficial owners and directors facing cases that could result in bankruptcy or conviction would reportedly be excluded from bidding.
The rules would also give procuring agencies the authority to blacklist bidders for serious violations.
According to the proposal, bidders could be blacklisted for up to 10 years for corrupt or fraudulent practices and for up to five years for submitting false information.
The measures are intended to strengthen the government’s ability to deal with malpractice in public procurement.
Senior Officials to Face Greater Responsibility
The proposed rules would place greater responsibility on federal secretaries and heads of procuring agencies.
These senior officials would have overall supervision and control of public procurement conducted by their respective organisations and would be responsible for ensuring that contracts comply with applicable laws and regulations.
The rules would also introduce additional scrutiny for large-value tenders.
A third-party validation committee would be established to review bids ranging from Rs500 million to Rs2 billion, while an external evaluation committee would be required for bids exceeding Rs2 billion.
All public procurements above Rs700,000 would continue to be subject to competitive bidding requirements.
PPRA Says Existing Rules Are Outdated
PPRA Managing Director Hasanat Qureshi has said that the existing 2004 procurement rules have become outdated and that the authority has proposed amendments to modernise the framework.
The new rules are being developed as part of broader efforts to improve governance and address weaknesses that can facilitate corruption in public contracting.
The proposed framework is now moving through the government’s legislative approval process.
Sources said the draft rules had been endorsed by the Prime Minister’s Office and were awaiting consideration by the Cabinet Committee on Legislative Cases (CCLC).
The committee could make further changes to the disputed provisions before the rules are presented to the federal cabinet for final approval.
IMF Reform Commitments Remain Under Focus
The disagreement over direct SOE contracts highlights the wider challenge Pakistan faces in implementing governance reforms agreed with the IMF.
While the government wants to retain flexibility for awarding contracts directly in certain circumstances, the IMF is seeking stronger safeguards to ensure that exceptions do not become an alternative to competitive bidding.
The final wording of the direct-contracting provisions, particularly those dealing with exceptional circumstances, subcontracting limits and public disclosure, will therefore be closely watched.
If approved, the new PPRA rules could significantly change how federal government contracts are awarded and how senior officials, contractors and state-owned entities are held accountable for procurement decisions.