Another controversy in public procurement has erupted in recent weeks. This time it is for the design, building and equipping of the Specialty Hospital at Turkeyen. It followed the announcement of the award of the contract for US$18.1 million to Surendra Engineering Corporation.
This article examines the issue surrounding the award of the contract and considers to what extent there was compliance with the Public Procurement Act 2003.
Advertisement and bidding
The invitation to bidders was issued in January 2012 and was open to contractors in India. Of the 34 firms that expressed an interest, five were shortlisted to submit bids. By letter dated 13 April 2012, Guyana’s High Commissioner to India informed the potential bidders that: (a) the date of pre-bid meeting and site visit was set for 23 April 2012; (b) the bid opening would be on 15 May 2012; and (c) there would be no further extension to bid opening date.
The Ministry of Health subsequently announced in a letter dated 4 May 2012 additional information to bidders. The letter also stated that, following the pre-bid meeting and at the request of two bidders, it had extended the bid submission deadline to 26 June 2012.
Bid opening and contract award
The National Procurement and Tender Administration Board (NPTAB) opened the bids on 26 June 2012. Following an evaluation by a technical committee, review by the NPTAB and “no objection” from Cabinet, the Head of the Presidential Secretariat (HPS) announced the award of the contract on 22 August 2012 in the sum of US$18.1 million. Although he did not mention the awardee’s name, it was clear that he was referring to Surendra Engineering.
Bid protest procedures
Sections 52 and 53 of the Act states that a bidder whose tender or proposal has been rejected may submit a written protest to the procurement entity within five business days following the publication of the award decision. If the procurement entity does not review the protest within five business days, the bidder may submit a request for review to the NPTAB. When this happens, an independent three person Bid Protest Committee is appointed to review the matter. The committee is to comprise of one person appointed by the Minister, one by the Association appearing to the Minister to represent contractors and one by the Attorney General. These persons are to be professionals who are particularly competent in the field of procurement.
Within fifteen business days of the conclusion of the review, the committee issues the results of its review, stating the reasons for its decisions and remedies granted, if any. The committee’s decision is final and binding on the procuring entity. Meanwhile, the final contract award is suspended during this period.
Fedders Lloyd’s bid protest
Fedders Lloyd was one of the lower bidders with a bid price of $17.69 million after a discount of 23% of its initial bid of US$22.96 million. In a letter dated 30 August 2012 to the Ministry of Health, the company contended that there were irregularities in the bidding and evaluation process, and identified a number of areas of concern. These include:
* Extension of time for the submission of bids which Fedders claimed violated international competitive bidding rules;
* Numerous changes to the tender documents just five days before the bid opening, as opposed to the stipulated 14 days;
* Failure of the selected bidder to submit a bank guarantee from an Indian bank to be confirmed by a local bank; and
* Lack of experience of the selected bidder.
On 5 September 2012, the HPS confirmed that one of the bidders had lodged a protest and that the award would be re-assessed. However, the Ministry released a letter the following day in which it disputed the charges and indicated that Fedders was disqualified on “administrative grounds”.
The Ministry’s letter complies with Section 52 of the Procurement Act since it was issued within five working days of the receipt of Fedders Lloyd’s protest. Fedders Lloyd was not satisfied with the Ministry’s explanation. However, it is unclear whether it officially protested to the NPTAB and whether the Bid Protest Committee was appointed to look into the matter.
Section 5 of the Act provides for qualification of suppliers and contractors as follows:
* Technical competence, financial resources, equipment and other facilities, managerial capability, reliability, experience and reputation, and personnel;
* Legal capacity to enter into the contract;
* They are not insolvent, in receivership, bankrupt or being wound up;
* Fulfillment of obligations to pay taxes and social security contributions of their employees;
* No conviction of any criminal offence relating to professional conduct or making false statements or misrepresentation of qualifications to enter into a procurement contract within the last 10 years, or no disqualification pursuant to administrative suspension or debarment over the last three years; and
* Documentary evidence to substantiate good past performance;
A procuring entity shall impose no criterion, requirement or procedure other than those set forth above or in the regulations. Suppliers or contractors cannot also be disqualified if they
submitted inaccurate or incomplete information in a non-material respect. However, failure to take corrective action for non-material deficiencies will result in disqualification.
The Ministry’s letter did not cite any of the above qualification requirements to justify its decision to disqualify Fedders Lloyd on administrative grounds. The letter went on to state that “clearly neither technical nor financial compliance is of material value if tenderer fails administrative compliance”. However, the Ministry had an obligation to provide detailed information to enable Fedders Lloyd to ascertain why it has lost the bid and to enable the company to feel reasonably satisfied that it was not unfairly treated in relation to the award of a contract. This is fundamental to any bid protest procedures.
Extension of time for submission of bids and numerous changes to the tender documents
Section 33 of the Act states that at any time prior to the deadline for submission of tenders, the procurement entity may for any reason, whether on its own initiative, or as a result of a request for clarification by a supplier or contractor, modify the tender documents. In addition, if the procuring entity convenes a pre-bid meeting of contractors and suppliers, the minutes of the meeting shall be made available to all suppliers and contractors who were provided with the tender documents. All modifications to the tender conditions shall be issued in the form of amendments and shall be binding on all tenders. Section 35 also states that where the procuring entity issues a clarification or modification of the tender documents, it shall extend the deadline for the submission of bids to afford suppliers or contractors reasonable time to take the clarification or modification into account in their tenders.
Fedders Lloyd claimed that the extension from 15 May 2012 to 26 June 2012 violates international competitive bidding rules. The Ministry disputed this and argued that it is standard practice to facilitate widest possible participation. This apart, Section 33 does allow for such extension.
As regards the 20-25 pages of amendments to the tender documents that were made just five days before the deadline for the submission of bids, no reference could be found in the Procurement Act of a stipulated 14 days. However, the question remains whether five days were enough to make all the related amendments to the tenders. Was Fedders Lloyd the only bidder that was adversely affected by this changed arrangement?
Fedders Lloyd claimed that: (a) the bidding documents specified that the tender security should be from an Indian bank with correspondence relations with a local bank; (b) Surendra Corporation did not comply with this requirement since its bid security was only from Axis Bank of India; and (c) Surendra should have been disqualified on this count alone. However, Section 37 states that a tender security shall not be rejected on the grounds that it was not issued by an issuer in Guyana if the tender security and the issuer otherwise conform to the requirements set forth in the solicitation documents.
Lack of experience of the selected bidder
A review of Surendra’s website confirmed that the company has no experience in the construction of hospitals. On the other hand, for the purpose of bidding for the project, Fedders Lloyd formed a consortium with NOUS Hospital Consultants which has expertise in building specialized hospitals and has commissioned about 90 hospitals and other healthcare facilities around the world.
The Ministry contended that “the fact that Fedders Lloyd works in many areas and in several countries and is engaged in an assortment of activities is not a unique nor (proprietary) feature of the Fedders Lloyd Corporation…and while it is information that is useful to know, such information was not factored into the rigorous and detailed criteria used to assess the lowest evaluated bid”.
The Procurement Act does not prohibit a bidder from forming a consortium with another firm or agency with the appropriate expertise for the purpose of bidding for a contract. In addition, the invitation to bidders did allow for joint venture of two or more firms as partners. The Ministry’s statement therefore contradicts its invitation to bidders.
The Ministry of Health has failed to take into account the fact that Fedders Lloyd formed of a consortium with NOUS Hospitals for the purpose of bidding for the contract. In addition, the lack of requisite experience should have prevented Surendra Corporation from winning the award. This raises serious questions about not only the functioning of the NPTAB and the various evaluation committees but also the appointment, competence and independence of their members.
To the extent that the Public Procurement Commission established by the Constitution in 2001 is not made operational, problems in public procurement will continue to occur. At the moment, there is no oversight mechanism for the work of the NPTAB.