Telecom operators challenge procurement rule

The federal government, through SRO 834(I)/2021 issued in June 2021, inserted Rule 42(f) into the rules, allowing procuring agencies to directly contract with state-owned entities for certain works and services considered time-sensitive and in the public interest. TOA wants such entities to instead participate in competitive procurement alongside private-sector companies.

The association has framed the issue in the context of Pakistan's changing digital economy, where telecom companies are expanding beyond conventional connectivity into data centres, cloud infrastructure, artificial intelligence and digital services.

As these investments increasingly overlap with the technology requirements of federal and provincial governments, TOA argues that access to the domestic market is important for sustaining investment and developing local capabilities., the introduction of Rule 42(f) has shifted part of this opportunity towards government-owned companies through direct contracting.

The association argues that this creates conflicting incentives: private companies are expected to invest in infrastructure, technology and skilled workforces while contributing through taxation, employment and innovation, yet a significant potential customer can award projects outside the competitive market. TOA has also linked the issue with Pakistan's ambition to grow technology exports.

It says Pakistani companies need opportunities to deploy products and services at scale at home before pursuing customers overseas, with domestic deployments providing experience and credentials that can help them compete internationally. The association has questioned preferential procurement at a time when the federal government is seeking greater private-sector participation in the economy.

It cited Prime Minister Shehbaz Sharif's publicly stated position that running businesses is not the government's role, arguing that procurement policy should reflect the same direction. TOA has also raised concerns over projects awarded directly to government entities that are subsequently passed on to private subcontractors.

Rule 42(f) requires an organisation receiving a direct contract to execute the work through its own resources and does not allow private-sector involvement as a partner, joint venture or subcontractor. TOA argues that where outside private capability is ultimately required, competitive procurement would provide a more transparent route for selecting the company that executes the work.

The association has consequently asked the government to repeal Rule 42(f), allowing state-owned and private companies to compete for government-funded projects on the basis of capability, price and value. For telecom operators, the issue is also tied to the investment environment as the industry expands into new digital infrastructure and services.

TOA maintains that companies committing capital to these areas should have a fair opportunity to compete for government demand alongside state-owned providers.