In the last few days, several controversial procurement issues were highlighted in the media, the latest being the Court battle and subsequent ruling in favour of the Government regarding the award of a contract for $4.6 billion for the Inter-American Development Bank-funded rehabilitation of the Guyana Power and Light’s medium voltage distribution. The Engineer’s Estimate was $3.8 billion while the lowest bid was $3.5 billion. The Permanent Secretary of the Ministry of Public Infrastructure is reported to have stated that the Procurement Act could not have been breached as the evaluation process used was in accordance with IDB rules. However, Section 4 of the Act specifically states that “The provisions of this Act shall apply to any procurement unless they conflict with any provisions made applicable by virtue of an international agreement”. It is, however, not clear whether a loan agreement between the Government and the IDB can be considered an international agreement, as the Act does not define such an agreement. That apart, it would be of interest to learn what section of the Procurement Act conflicts with the IDB procurement rules.
Though not an area of Central Government activity, the contract with Smart City Solutions for the installation and operations of parking meters in Georgetown is also a source of much controversy. This resulted in another Court intervention that the saw the contract being put on hold until the matter is finally determined. The Town Clerk has been given until 27 February 2017 to show cause why the three Orders granted by the Court should not be made absolute.
And at the latest hearing of the Public Accounts Committee, the expansion of the East Coast and East Bank Demerara road projects came under severe scrutiny where it was learnt that over $500 million has been lost because the related performance bonds had expired.
Importance of public procurement
Public procurement is the single most important activity of the State, consuming the greatest portion of public expenditure, estimated at approximately 70% of the National Budget. With a budget of $250 billion for 2017, this works out to $175 billion. As such, there must be strict and elaborate rules to ensure competitiveness, transparency, proper accountability and good value for money, supported by strong and effective oversight arrangements.
Various estimates, ranging from 15% to 20%, or $26.25 billion to $35 billion using 2017 budget figures, have been proffered about the extent of leakages in our procurement systems. The leakages include:
(a) inadequate or wrong specifications of goods and services and the execution of works;
(b) Poor selection of suppliers and contractors because of faulty tender evaluation and lack of expertise in doing so;
(c) faulty Engineer’s Estimates used as the main reference point for tender evaluation;
(d) leaking Engineer’s Estimates and other confidential information to favoured suppliers and contractors;
(e) collusion with suppliers and contractors to inflate contract prices, resulting in possible ‘kickbacks’;
(f) targeting major infrastructure works where the quantum of such ‘kickbacks’ is large;
(g) inadequate monitoring and supervision, resulting in defective work being performed;
(h) non-adherence to the requirements to submit valid bonds/guarantees for mobilization advances and to ensure satisfactory performance;
(i) absence of penalties for unjustified delays in the supply of goods/services and the execution of contracts;
(j) failure to withhold a percentage of final payment until the defects liability period is over; and
(k) short-delivery of goods and services, resulting in overpayment to suppliers.
Addressing the lacuna in oversight responsibilities
In addition to the above leakages, there existed a lacuna in the oversight of the procurement process and in monitoring the activities and performance of the various tender boards, including the then Central Tender Board. As a result, the Constitution was amended in 2001 to provide for the establishment of a Public Procurement Commission to “monitor public procurement and the procedures therefor in order to ensure that the procurement of goods and services, and the execution of works are conducted in a fair, equitable, transparent, competitive and cost-effective manner according to law and such policy guidelines as may be determined by the National Assembly”.
It, however, took 15 years before the Commission was activated, with the appointment of the Commissioners in October 2016. This hiatus was due mainly to the reluctance of the then Cabinet to give up its role in offering no objection to contracts of over $15 million. It took a long, sustained and dedicated struggle, including the efforts of this Column, for the Commission to become a reality.
Independence from the Executive
The Commission comprises five members who are to be independent of the Executive, with reporting relations to the Legislature. These members are required to ave expertise and experience in procurement, legal, financial and administrative matters. They are appointed by the President after they have been nominated by the Public Accounts Committee (PAC) and approved by no less than two-thirds of the elected members of the National Assembly. The intention was to have in place a commission that is comprised of independent, and technical and professionally competent persons. As in the case of other countries making non-political appointments, one would have expected adherence to a highly transparent and competitive procedure. This involves: (a) public advertisements inviting suitably qualified candidates to apply for the positions; (b) thorough assessment of the applications; (c) shortlisting candidates satisfying the job requirements; and (d) rigorous interviews before the candidates are recommended for appointment. Instead, political parties submitted the names of candidates, later to be followed by a request to other organisations to do the same. As far as this column is aware, no interviews were conducted, and the final selection was made from the names submitted by the two major political parties.
Once appointed, a member can only be removed from office except as provided for in the Constitution. This is an important safeguard to secure the independence and impartiality of the Members. In addition, none of the functions of the Commission can be removed or varied except by the votes of not less than two-thirds of the elected Members of the Assembly. However, any addition thereto requires the votes of a majority of elected Members.
The key functions of the Commission are to:
(a) monitor and review the functioning of all public procurement systems to ensure that they are in accordance with law and such policy guidelines as may be determined by the Assembly;
(b) promote awareness of the rules, procedures and special requirements of the procurement process among suppliers, contractors and public bodies;
(c) safeguard the national interest in public procurement matters, having due regard to any international obligations;
(d) monitor the performance of procurement bodies with respect to adherence to regulations and efficiency in procuring goods and services and the execution of works;
(e) approve of procedures for public procurement, disseminate rules and procedures for public procurement and recommend modifications thereto to the public procurement entities;
(f) monitor and review all legislation, policies and measures for compliance with the objects and matters under its purview and report the need for any legislation to the Assembly;
(g) monitor and review the procurement procedures of the ministerial, regional, and national procurement entities as well as those of project execution units;
(h) investigate complaints from suppliers, contractors and public entities and propose remedial action; and
(i) investigate cases of irregularity and mismanagement and propose remedial action.
The work of the Commission is aided by a Secretariat comprising a Chief Executive Officer to serve as Secretary, and such other officials as may be necessary for the Commission to discharge its functions. The terms and conditions of appointment of the Chief Executive Officer and two other most senior officers are subject to the approval of the Assembly. The Chief Executive Officer may, as directed by the Commission, attend meetings of procurement bodies. Given: (a) the lack of expertise and experience of the Commissioners in procurement matters; and (b) the intention of the Administration to surrender to the Commission the Cabinet’s involvement in such matters, it is of utmost important that the Commission’s Secretariat is staffed with persons possessing the requisite expertise and experience to assist the Commission in discharging its responsibilities in a competent and independent manner. This must be done through a fair, open, transparent and competitive process in order to ensure that the best persons are selected. At the time of writing, recommendations have made to the National Assembly regarding the appointment to the above-mentioned positions.
A decision of the Commission is subject to appeal to the Public Procurement Commission Tribunal established by Act No. 8 of 2004. The Tribunal is to consist of three members appointed by the President: one based on the advice of the Judicial Service Commission; and the other two based on the advice of the Public Service Commission (PSC). There is also to be a Registrar appointed by the PSC, who is also the Chief Executive Officer. A decision by the Tribunal can be appealed again to the Court of Appeal. Despite these requirements, the Tribunal is yet to be established and therefore any appeal against the decision of the Commission will have to be taken directly to the Court of Appeal.
As soon as possible, the Commission is required to present an annual report of its activities to the National Assembly, the executive summary of which is to be published. The Commission may also submit a special report at any time to the Assembly, if the Commission considers it in the national interest to do so. The special report is to be published in its entirety in the media having wide accessibility in Guyana within 45 days of its submission to the Assembly.
The Procurement Act 2003 acknowledges the non-establishment of the Public Procurement Commission. It accordingly vests the key responsibilities of the Commission with the National Procurement and Tender Board (NPTAB) until such time that the Commission is established. In addition, by Section 54 (1), the Cabinet shall have the right to review all procurements in excess of $15 million based on a streamlined evaluation report prepared by the NPTAB. As a transitional arrangement, the Cabinet and, upon its establishment, the Commission shall review annually the Cabinet’s threshold with the objective of increasing the threshold over time so as to promote the goal of progressively phasing out the Cabinet’s involvement and decentralizing the procurement process. The Cabinet can only object to the award of a procurement contract if it determines that the procuring entity failed to comply with the applicable procedures.
By Section 54(6), the Cabinet’s involvement shall cease upon the constitution of the Public Procurement Commission, except in relation to pending matters. The Government has indicated a preference for surrendering its role in the procurement process in its entirety once the Commission becomes fully operational. It would therefore appear necessary for the functions of the Commission listed above to be extended to include the right of review of contracts in excess of $15 million. Given the large number of contracts that the Cabinet reviews on a weekly basis, the challenge remains as to how soon the Procurement Commission can get its act together to efficiently and effectively take over the role of the Cabinet in the procurement process.