The activation of the Public Procurement Commission (Part II)

Before proceeding with today’s article, a comment on the work of the Public Accounts Committee (PAC) would not be inappropriate. At a recent meeting to examine the report of the Auditor General on the public accounts for 2015, the Chairman of the Committee requested the Regional Executive Officer (REO) of Region 1 to leave the meeting because of the inconsistent answers he gave in relation to some $30 million in overpayment to eight contractors undertaking works in the Region. The REO had informed the Committee that none of the contractors were currently involved in doing work for the Region. However, when pressed further on the matter, he admitted that two contractors were still dong work.

The above incident raises the issue of the need for adequate preparation by heads of budget agencies and other senior officials when appearing before the PAC to offer clarifications and explanations in relation to issues raised in the Auditor General’s report.  It is refreshing that the PAC is taking firm action to protect public resources, an observation not seen since the days of the late Winston Murray when he was Chairman of the PAC.

The last report of the PAC was in respect of the years 2010-2011, and therefore the PAC is in arrears by four years in its examination of the public accounts. We had advocated that, given the backlogged work of the PAC, a two-pronged approach should be taken to clear the backlog.

This involves the examination of the latest report of the Auditor General after which the backlogged reports would be dealt with. We are therefore pleased that the PAC has taken our suggestion on board and is now examining the 2015 public accounts. We had also suggested that the Auditor General make a concerted and dedicated effort to shorten his report by undertaking “exception reporting” i.e. reporting only deficiencies/shortcomings to the National Assembly, as was done in respect of the 2003 report. This approach will facilitate the work of the PAC in terms of the timely examination of the public accounts and reporting thereon.

But more needs to be done to ensure that the accountability cycle is completed in a timely manner. This cycle involves: (a) budget preparation and approval; (b) budget execution and related financial accounting; (c) annual financial reporting of the public accounts; (d) auditing these accounts by the Auditor General and reporting thereon; (e) PAC examination and reporting, and (f) issuing of Treasury Memorandum.

These activities need to be completed before the budget for the following year is presented to the Assembly. Instead of the Ministry of Finance and heads of budget agencies submitting the Public Accounts to the Auditor General four months after the close of the year, the submissions could to be made by 28 February.

The four-month rule was made when we were operating a manual system. With IMFAS in place, notwithstanding the non-activation of the Purchasing and Asset & Inventory modules, there is hardly any reason why an earlier submission cannot be made. The Auditor General, for his part, could produce his report by 30 June after which the PAC could immediately begin its examination. Such examination and reporting could be concluded by September, and the Treasury Memorandum, setting out what action the Government proposes to take in relation to the PAC findings and recommendations, could be issued before the Estimates for the following year are considered. These revised deadlines are reflected in the Budget Transparency Action Plan (BTAP) that the Government had signed on to with the European Union.

Today’s article is a follow-up on our last week’s article on the activation of the Public Procurement Commission which took place October 2016 following the appointment of the five Commissioners. Amid concerns that the Commission has been slow to get its act together in ensuring that it is fully functioning within the shortest timeframe, the Commission issued a media release outlining its achievements to date as well as the difficulties it is experiencing in terms of funding, office accommodation, the recruitment of staff, and lack of clarity in relation to its mandate.

Brief background to the 2001 constitutional amendment

The 2001 constitutional amendment was made to establish the Procurement Commission, amid concerns about the extent of leakages in the procurement systems, as highlighted in last week’s article. At the same time, legislators recognised that there was a gap in oversight of the operations of the various tender boards – Ministerial, Departmental, Regional and Central Tender Boards, and that the Cabinet could not have been looked upon to play that role.

The Commission was meant to be a part-time body, serviced by a full-time secretariat headed by a Chief Executive Officer to provide the necessary technical support. There was no intention for the Commission to take over the role of the Cabinet in granting no objections to the award of contracts exceeding G$15 million, and it is for this reason that it was not included in the terms of reference of the Commission.

Requirement of the Procurement Act of 2003

Two years later i.e. 2003, the Procurement Act was passed. (I was in Sierra Leone and Liberia at the time with the United Nations Peacekeeping Operations and therefore did not have an input into the law by way of comments on the draft legislation.)  Section 54 (1) of the Act provides for the progressive phasing out of the Cabinet’s involvement in the procurement process and replacing it with a decentralised process. It reads as follows:

…The Cabinet and, upon its establishment, the Public Procurement Commission, shall review annually the Cabinet’s threshold for review of procurements, with the objective of increasing that threshold over time so as to promote the goal of progressively phasing out Cabinet involvement and decentralising the procurement process.

On Saturday evening, I had an interesting discussion on the matter with Public Security Minister Khemraj Ramjattan who was a PPP/C parliamentarian at the time the law was passed.  We agreed that the above-mentioned section makes no mention of the Cabinet surrendering its role to the Procurement Commission. Rather, such surrendering is to a decentralised process to be worked out between the Commission and Cabinet. This would suggest, as a minimum, a strengthened and enhanced role of the National Procurement and Tender Administration Board (NPTAB) since the Cabinet would no longer be involved. Other reforms may have to take place at the levels of ministerial, departmental and regional tender committees.

However, the reporting relationship of these bodies should remain with the Executive Branch and not the Procurement Commission, to enable the latter to play a meaningful oversight role. It is important to emphasise that the Procurement Act does not provide for the Procurement Commission to take over the role of the Cabinet in granting no objection to the award of contracts in excess of G$15 million.

The awarding of contracts and the offer of no objection by the Cabinet is the function of the Executive Branch of Government since it is accountable to the Legislative Branch for the proper accountability, and economic, efficient and effective use of funds approved by the latter through the National Budget.

On the other hand, the Procurement Commission is an oversight body with a reporting relationship to the Legislative Branch. The Commission would therefore be in a position of conflict of interest if the Cabinet were to surrender to the Commission its role in the procurement process. The situation is analogous to that of the Auditor General’s Office which cannot prepare the public accounts and at the same time audit those accounts.

In this regard, I am of the view that there is no need for an amendment to the law or the Constitution as it relates to the work of the Commission.

Having said that, there appears to be a conflict between Section 54 (1) of the Act and Section 54 (6). The latter reads as follows:

“Cabinet’s involvement under this section shall cease upon the constitution of the Public Procurement Commission except in relation to those matters referred to in subsection (1) which are pending matters”.

We should, however, not get too hung up by apparent conflict, since it is a transitional arrangement, and the transition is in progress. Taken together, the two sub-sections require the Cabinet to surrender its role to a decentralised structure either progressively or immediately upon the establishment of the Procurement Commission.

The Commission is now in place, and the Administration has indicated its willingness to give up the Cabinet’s involvement in its entirety once the Commission is up and running.

It is also important to note that the Cabinet’s offer of no objection to the award of a contract must in no way be construed to mean that the Cabinet is awarding the contract. The Inter-American Development Bank (IDB) offers its no objection to contracts that it funds under the various loan agreements with the Government of Guyana.

This action does not constitute an award by the IDB. I raise this matter because there is some confusion as to whether the offer of no objection is synonymous with the actual award of the contract.

A contract proposal, having gone through the various stages in the procurement cycle, including adjudication by the NPTAB and the offer of no objection by the Cabinet, eventually translates into the execution of a contract between of head of budget agency and the supplier/contractor.

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