New GPC met criteria for $1.252B sole sourced contracts

- Health Ministry PS

Explaining the Auditor General’s finding that over $1.252 billion in contracts were awarded to pharmaceutical manufacturer New GPC using sole-sourcing rather than competitive bidding process in 2010, Permanent Secretary of the Health Ministry Leslie Cadogan yesterday said the company had met the specifications laid down in law.

He made this disclosure while appearing before the Public Accounts Committee (PAC), where AFC MP Trevor Williams posed the first question on the issue, inquiring about the ministry’s justification for employing this procurement method.

 Leslie Cadogan
Leslie Cadogan

Attempting to defend the ministry’s decisions, Cadogan said it agency chose this line of action as it found that New GPC met the specifications as laid down in the Procurement Act of 2003.

The Act states that the successful provider would be determined by assessing prices, availability of goods, quality of goods as well as the service provided. Cadogan insisted that it was based on these criteria that New GPC continued to be awarded contracts to provide pharmaceuticals through sole-sourcing.

Auditor General (AG) Deodat Sharma said his office had recommended that the ministry abandon this method in favour of competitive bidding, since it was in violation of the correct procedure.

APNU MP Jaipaul Sharma stated that if sole-sourcing was used, it therefore meant that there were no checks to determine if prices paid to the supplier were higher than those being asked by other suppliers. Cadogan stressed that the lowest price or the lowest evaluated price available was being offered by the selected supplier.

At this point, Jaipaul Sharma asked the PS to specify which of the two evaluations was the basis for the contract being awarded, since the lowest evaluated price may not have been the lowest price among the lot. According to Jaipaul Sharma, another competitor may have been eliminated from the bidding process owing to deficiency in another criterion, although it may have had the lowest price. When asked if that was the case, Cadogan said he was not the PS at the time and could not say.

In its response to the AG’s report, the ministry had stated that acting upon the recommendations, it advertised for the pre-qualification of suppliers in November 2010 for drugs and medical supplies, and the National Procurement and Tender Administration Board (NPTAB) made its decision in 2010 for 2011. The ministry said that following submissions and evaluations, Medpharm Co and New GPC were approved to join a list of established international organisations, including PAHO, IDA, WHO, UNICEF, UNFPA and UNDP, to supply pharmaceuticals and medical supplies to the Government of Guyana. The ministry said it subsequently determined that New GPC was the best suited supplier, considering its ability to deliver on price, availability, quality and service. As such, though the method of sole-sourcing was abandoned, the New GPC was still the preferred provider, based on the pre-qualification criteria suggested by the Auditor General.

After an exchange be-tween Williams, PAC Chairman Carl Greenidge and the AG, Jaipaul Sharma stated Cadogan’s team was yet to answer the question.

Each time the PS was asked why the ministry chose sole-sourcing over competitive bidding prior to 2010, Cadogan stated that his ministry had taken the AG’s recommendations into consideration and had remedied the violation.

Greenidge, however, said all the ministry’s responses lacked an acceptable explanation and by extension an acceptable answer to the concerns raised by the AG as well as questions being asked by the PAC.

Pointing out further flaws in the ministry’s operating procedure, Williams inquired why the ministry continued to contract New GPC in spite of many instances of non-supply of goods that had been paid for. The AG’s report had found that the ministry failed to provide evidence of receipt of drugs and medical supplies to the value of $30.909 million purchased from New GPC in 2010. It also said that outstanding balances for the years 2008 to 2009, totalling $222.526 million, were still to be reconciled by the ministry.

Greenidge, weighing in on the issue, asked why the contract had not been terminated and reallocated, considering the supplier’s shortcomings.

In its response to the AG’s report, the ministry had stated that all deliveries in respect to 2010 and 2009 had been made, and it was working with the supplier to reconcile its records for 2008 and to have all outstanding deliveries cleared.

Cadogan yesterday added that several documents relating to the arrangements had been destroyed in the fire which ravaged the ministry in 2008. The lack of these documents, he said, was partly to blame for the slow movement of the process.

However, the AG said that the non-reconciliation was but a part of the problem, stating that the outstanding deliveries were still a substantial concern since records show that New GPC failed to deliver goods for 2008 to 2010.

Cadogan then stated that the problem was not so much the non-delivery of goods paid for, but an arrangement between the ministry and the supplier. He said the ministry lacked sufficient storage facilities to hold the drugs it paid for. In addition, he said, certain goods specified conditions to be properly preserved— amenities that the ministry simply did not have.

He said a system, where the supplier agreed to deliver goods when called upon, was therefore put in place. In addition, he said, the ministry, from August to December 2012, paid New GPC $1.5 million per month to store drugs in its facility. The rent was paid by Supply Chains Management Systems (SCMS), an international non-governmental organisation, which, among other things, assists with the procurement of warehouse facilities.

The PPP/C’s Manzoor Nadir and Odinga Lumumba maintained that they saw nothing wrong with the system employed by the ministry, especially considering it was in the business of saving lives. Nadir, in particular, said the non-delivery of goods was not as a result of any form of criminality, but the “just in time” system put in place. He said these were preferred options as opposed to having millions of dollars in pharmaceuticals and medical supplies spoil because of expiration or poor storage.

Cadogan explained that goods which were purchased in 2009 had been delivered in 2010, and those purchased in 2010 had been delivered in 2011.

When asked what steps were being taken to rectify this obviously unpopular system, Cadogan revealed that SCMS has facilitated the construction of a storage facility in Diamond, which should put an end to the storage woes. He also said that staff had been trained on proper treatment of these goods, so as to ensure minimum loss during storage.

Greenidge tore into the AG at this point, insisting that his office should have detected this and included it in his report. This opinion was shared by several other members of the committee, who agreed that the AG’s report had on more on one occasion misled the committee and caused unnecessary discussions. Lamumba called for a “do-over” of the AG’s report on this particular issue.

The AG himself admitted that there may have been an error in the report and stated that there may be need for some amount of rewording.

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