I was in Berbice last week to conduct a workshop/ seminar on procurement. On Wednesday evening after dinner, I retired to my room and turned on the television. There was the Leader of the Opposition holding a press conference. He was commenting on the statement I had made two weeks ago in our Accountability Watch column (and reproduced by the Kaieteur News) that an estimated 15% -20% is lost every year through various leakages in our public procurement systems.
I had listed eleven areas where such leakages occur and sought to quantify in dollar value the extent of the leakages. Using the 2017 Estimates of Expenditure of $250 billion, this works out to $26.25 billion – $35 billion, on the assumption that 70% of the expenditure relates to public procurement. This percentage was arrived at some years ago though a detailed examination of the various items of expenditure, both current and capital. However, if we were to use 60% instead, the extent of the leakages still remains significant at $22.5 billion to $30 billion.
On reflection, I should have included a twelfth area, that is, the extent to which contract variations are issued, especially in a situation where a contractor submits a tender that is significantly below the Engineer’s Estimate and is awarded the contract by virtue of being the lowest tenderer, as opposed to the lowest evaluated tenderer. The lowest evaluated tender is that tender that has been ranked lowest using criteria in addition to price that are quantified in monetary terms.
The Opposition Leader challenged the above figures and asserted that my assessment was not based on any surveys carried out. He also disputed my statement that the Engineer’s Estimate is used as the main reference point for tender evaluation, and contended that it is the “lowest prequalification cost” that dictates the basis of the award of contracts. The Opposition Leader then went on to make some false and misleading statements about me. These include: (a) I was absent from Guyana when the Procurement Act was passed, implying that because of this I have little or no knowledge of the Act; (c) I was Auditor General prior to 1992 when there were no audited public accounts for ten years; (d) I was in collusion with the then Government not to produce accounts of the country; and (e) since 1992, annual audited accounts have been produced, implying that I played no role in the restoration of public accountability in Guyana.
The former Attorney General had made a similar statement as regards (c) in in his opening remarks at an anti-corruption forum at the Marriott Hotel attended by our parliamentarians and some members of the United Kingdom Parliament. He was, however, gracious enough to accept my clarification in the presence of Member of Parliament Indra Chandarpal who confirmed what I said in relation to my tenure of appointment as Auditor General. He, however, chose not apologise for his misleading statement.
Leakages in our procurement systems
As the Auditor General for 14 years, l had the benefit of reviewing our procurement systems as an integral part of the audit of the public accounts. During those years, I also became familiar with the procurement rules of the World Bank and the Inter-American Development Bank since my responsibilities included the audit of projects funded by these two international lending agencies. In addition, I served the United Nations for nine years in a senior auditing capacity during which period I acquired a reasonable working knowledge of the United Nations Procurement Rules and Regulations. No procurement system has reached that level of efficiency and effectiveness, indeed perfection, to enable one to conclude that 100% value for money has been achieved. There is always going to be a certain amount of leakages in one form or another, and it is important to know what those leakages are to be able to take appropriate action to minimize the extent to which they take place.
Recognising the problems we had over the years as regards our procurement systems, the Audit Office had recruited three engineers in the late 1990s to provide technical assistance in the auditing of major infrastructure works. We introduced the “clipboard” approach to the physical verification of works, and auditors fanned out countrywide to conduct the exercise. It was when we studied the results that we came up with the estimate of 15%-20% in leakages in our procurement systems. In other words, for every $100 spent on procurement, we only received $80-$85 in real value. One recalls the Essequibo Road Project where four main forms of irregularities were uncovered – inferior quality of stone imported from Canada; short-shipment of stone; diversion of stone to other projects in the run-up to the 1997 elections; and falsification of invoices to reflect higher prices. The Work Bank reviewed the results of our audit, sent in their own investigators and concluded that the Project was riddled with fraudulent practices. As a result, the Bank terminated the loan agreement with the Government.
If a new assessment is carried out today, it is likely to reveal that the figure of 15% – 20% is a conservative one, considering, among others, the following:
(a) US$4 million in losses in respect of the Specialty Hospital because the guarantee for the payment of the mobilization
advance had expired;
(b) Out-of-court settlement of G$1 billion to BK International in respect of the Haags-Bosch Project;
(c) The court award of US$2.2 million to Dipcon in respect of the Mahaica-Rosignol Road Rehabilitation Project;
(d) The successful bid protest by Demerara Distillers (DDL) Ltd. in respect of the supply of boxed juice where the contract was
awarded to a Surinamese company in excess of G$100 million above DDL’s bid; and
(e) G$500 million in losses in respect of the East Coast Demerara and East Bank Demerara Road projects because
performance bonds had expired.
Restoration of public accountability
I was appointed Auditor General on 31 December 1990 i.e. 22 months before the 1992 national elections. The then Government had not produced accounts for 8 years on the grounds that the IBM main frame computer used for the processing of the Government’s transactions had “crashed” and there was no way of retrieving information to produce the accounts. I campaigned relentlessly and single-handedly for the restoration of public accountability using a two-pronged approach, with 1990 as the cut-off year. This involved: (a) preparing financial statements for 1991 onwards: and (b) setting up of a task force to put together the accounts for 1982 to 1990.
The then Minister of Finance agreed with my proposal but the Ministry of Finance vigorously opposed it on the ground that opening balances were needed. However, only two of the eleven consolidated statements comprising the public accounts needed opening balances while the accounts of Ministries/Departments/ Regions did not require such balances. Around the same time, the then President summoned me to a meeting in connection with my unsuccessful efforts to review the Government’s privatization programme amid allegations about the haste at which it was being done as well as the lack of transparency involved. At the meeting, I expressed my frustration to the President that he had appointed me Auditor General but there were no public accounts to be audited. The President responded by stating that he was having his own frustrations; we were serving the same interest; and that the Accountant General could not produce the public accounts unless instructed to do so. Despite this, I continued my vigorous and unrelenting campaign for the restoration of public accountability, and the media carried numerous interviews with me on the matter.
October 5, 1992 came and there was a change in Government. I renewed my representation to the new Administration for the restoration of public accountability based on the two-pronged approach referred to above. I then met with the then Head of the Presidential Secretariat (HPS) in the presence of the Accountant General, and I laid out my case. The Accountant General repeated his objection that: opening balances were needed; it was unprecedented to have accounts for later without producing accounts for the earlier years; and if my proposal was followed, the accounts would be substantially inaccurate. The HPS then enquired from the Accountant General as to what level of accuracy would achieved if my approach was followed, to which the Accountant General responded, 60%-70%. The HPS’s reaction was: Would such level of accuracy not be better than no financial reporting? The Accountant General fell into silence! Instructions were then given to implement my proposal.
Despite all the resistance shown by the Ministry of Finance, I was able to present the 1992 audited public accounts on 30 September 1993 to the then Minister Shree Chand. Since then, there is annual financial reporting and audit of the public accounts. I demitted office on 31 December 2004, the same day I submitted my report on the public accounts for 2003. Without being seen as attempting to blow my own trumpet, I left a solid foundation in terms of the audit process and the reporting of the results for my successor to carry on. A review of the subsequent reports of the Auditor General will confirm the solidness of that foundation in that the structure and content of the report substantially remains the same to this day. This is the story of the restoration of public accountability in Guyana!