The Ministry of Health should revisit the evaluation criteria set out in new prequalification documents in consultation with all potential suppliers of pharmaceuticals, former Auditor-General Anand Goolsarran says.
“It is evident that the application of the evaluation criteria in the prequalification exercise for the supply of drugs and medical supplies is likely to result in manufacturers and distributors being unable to achieve prequalification status,” Goolsarran wrote in his Stabroek News column published today. “They will therefore be excluded from supplying the Ministry with these essential items, or given orders for minimal quantities, with possible adverse effects on their operations,” he added.
“This will leave the local organization in question, which did not have a good track record in meeting its contractual obligations,
with a virtual monopoly over such supplies,” Goolsarran warned.
The Ministry of Health has put together new criteria for prequalified bidders for the supply of pharmaceuticals and critics say the awarding of maximum points for turnover of $1 billon, assets of $500 million, warehousing facilities and local registration are tailor-made to ensure that the New Guyana Pharma-ceutical Corporation (GPC) continues to harvest billions in contracts while other contenders here and abroad are shut out.
As reported in Stabroek News on January 1, 2014, according to the evaluation criteria, bidders will be awarded points according to how they score on a number of questions in the categories of ‘General Information’, ‘Financial Capacity’, ‘Infrastructure’, ‘Previous Experience’, ‘Established Linkages’, ‘Manufacturer/Distributor Information’, ‘Quality Information’ and ‘Product Information.’ It said that out of a total of 200 available points, all entities seeking to prequalify to bid must score 80 percent.
Goolsarran had previously said that government’s reliance on a Cabinet decision of 2003 for prequalification of a major pharmaceutical company for supply of medical drugs at the expense of other suppliers is not consistent with the Procurement Act of 2003’s criteria and methodology for prequalification.
Goolsarran, also head of the local transparency group, said that it would be advisable for the Ministry of Health to revisit the evaluation criteria set out in the prequalification documents in consultation with all potential suppliers. “While previous experience, ability to perform, infrastructure, storage and laboratory facilities are important considerations, one hopes that the assignment of points to each criterion will be reworked to create as much of a level playing as possible to enable organizations interested in supplying the Ministry with drugs and medical supplies to be able to do so. It is not in the best public interest to have one supplier having a virtual monopoly in the supply of drugs and medical supplies to the Government,” he wrote.
Although not naming the company, Goolsarran said that the New GPC has become the Government’s main supplier since 2005, delivering over 75 per cent of the Government’s requirements and virtually displacing specialized overseas agencies that had previously supplied over 90 per cent of the Government’s requirements.
In analyzing government’s procurement, he said that between 2005 and 2012, the government’s expenditure on drugs and medical supplies more than tripled, increasing from $1.357 billion to $4.393 billion. In particular, 2007 and 2011 recorded increases of 50 per cent and 56 per cent respectively. No figures are available for 2008 because of the fire that destroyed the Ministry of Health building in July 2009.
“These are extraordinary increases considering that for the corresponding seven years earlier, i.e. from 1998 to 2004, procurement increased from $651 million to $1.165 billion or by 79 per cent. It is not clear what was the rationale for such increases in budgetary allocations and hence expenditure. Correspondingly, procurement from the local organization also tripled, increasing from $973 million to $3.033 billion,” the former AG said.
“Since 1997, the Ministry undertook the procurement of drugs and medical supplies by selective tendering, as authorised by Cabinet. Such authorisation continued until 2010 through two successive renewals in 2003 and 2008. This is despite the fact that the Procurement Act 2003 restricted Cabinet’s role in the procurement process to one of offering “no objection” to contracts valued at $15 million or over. With the establishment of the Public Procurement Commission, Cabinet’s role was to have been progressively phased out or ceased altogether. Regrettably, the Commission is yet to be established,” he said.
“Under the selective tendering arrangement, the Ministry would contact the pre-selected suppliers and request them to quote for the items to be supplied. On this basis, contracts were awarded. There was no independent review to ensure that the best prices were obtained for the various items supplied as the relevant tender boards, in particular, the National Procurement and Tender Administration Board (NPTAB), were not involved,” Goolsarran wrote.
He noted that for the period 2011-2013, prequalification proceedings were applied for the identification to suppliers. The same procedures as those of selective tendering were used, except that Cabinet was not involved. However, the various tender boards, including the NPTAB, were again not involved in the prequalification exercise nor were they involved in the selection of suppliers based on their quotations, he pointed out.
For the period 2014 -2016, the Ministry has advertised for interested suppliers to apply for prequalification. However, the advertisement is not applicable to the specialized overseas agencies as well as the New GPC as they had already been previously granted prequalification status, he noted.
“A comparison of the prequalification documents for the period 2011 to 2013 with those of 2014 to 2016 revealed that the former did not include a document outlining the evaluation criteria to be used so that potential suppliers could have ascertained the basis under which they were prequalified. This is notwithstanding that, in reaching a decision regarding the qualifications of each supplier or contractor, the procuring entity is required to apply only the criteria set forth in the prequalification documents.
The current advertisement therefore seeks to remedy this apparent deficiency by including in the package of prequalification documents such evaluation criteria,” Goolsarran noted.
He pointed out that a review of the evaluation criteria to be used revealed that manufacturers are to be evaluated on a score of 190 while for distributors the score is 180. At least 80 per cent is required for prequalification in addition to meeting the criteria dealing with financial and infrastructure capacity as well as the ability to supply 75 per cent of GMA certified items.
Manufacturers will therefore have to score at least 152 points and this is very unlikely, considering the requirements, Goolsarran said, even as he outlined four requirements that could hinder the companies from reaching these points. Distributors are required to score at least 144 points but their ability to do so will also be affected by the same four considerations identified for manufacturers, he said.
Good track record
The former Auditor-General noted that one of the evaluation criteria is that the supplier must have a good track record with the Ministry. The Auditor General’s reports over the years, however, revealed a number of unsatisfactory features in respect of the performance of the New GPC, he noted and pointed out that as at 30 September 2013, medical supplies valued at $58.583 million had not been delivered to the Georgetown Hospital and the related bank guarantee had expired in April 2013.
“As regards the Ministry of Health, as at 30 September 2013, medical supplies valued at $164.603 million had not been delivered, and there were no bank guarantees in force to cover this amount. There were also outstanding deliveries for 2011 totalling $59.835 million while for 2008 there was no evidence of the delivery of supplies valued at $79.262 million. Despite these shortcomings, no action was taken against the organisation for non-compliance with its contractual obligations,” Goolsarran wrote.
“As regards the Government’s storage facilities, there was evidence of significant amounts of pilferage, damaged and expired drugs; poor recordkeeping in respect of receipts, issues and balances on hand; and high levels of discrepancies between physical balances and the recorded amounts. Given this situation, and the fact that manufacturers and distributors are required to have 30,000 square feet of storage with three separate temperature zones, would it not be more cost-effective to have an arrangement whereby deliveries are staggered, for example, every quarter, instead of bulk deliveries,” he questioned.
“If this happens, the requirement for the Government’s warehousing and storage facilities can be significantly reduced. According to industry experts, the cost savings are likely to be between 16 per cent and 20 per cent. Using the figure of $4.393 billion, representing the purchase of drugs and medical supplies in 2012, these savings could be at least $700 million annually,” Goolsarran said.