Fedders Lloyd and the specialty hospital

If the Ministry of Finance, or indeed, the government tried really hard enough and were adept at gymnastics it may be possible to present a plausible case for the MoU with Fedders Lloyd for the Specialty Hospital. But even if that were the case,  the MoU sealed with the company on Tuesday jars resoundingly with the quality of governance that had been promised by the APNU+AFC administration and the almost fanatic dedication to the cause of the Public Procurement Commission (PPC) espoused by the AFC. This MoU has the attributes of unprincipled behaviour and should be instantly cancelled. An entirely new invitation for tenders should be issued while urgent steps are taken to have the PPC established.

Having abandoned the Specialty Hospitality in the weeks after it was elected in May, the public was taken by complete surprise when the project was rapidly resuscitated at the behest of the Indian government earlier this month but without the administration here providing a cogent explanation. Even more surprising was the announcement of a MoU in short order with one of the earlier bidders. This was the procurement version of speed dating with a broad cloak as the media were shut out even though they had been well employed at the ministry for less significant events.

Though the MoU was not released, an initial defence of the signing was contained in the joint statement issued by the government and Fedders Lloyd on Wednesday. It said that having examined the merits of New Delhi’s proposal the government began searching for a “willing partner” to complete the Specialty Hospital using the remainder of the Exim Bank Line of Credit. There was no information in the statement on what the search entailed or if this was by the use of speed dialing.

In the “interest of time”, the Government said that it approached Fedders Lloyd to explore the possibility of them completing the project. Fedders Lloyd, unsurprisingly, expressed continued interest and was prepared to complete and fully equip the facility, the statement said. As pointed out by Mr Goolsarran in his accountability column in today’s Stabroek News, there is no provision in the Procurement Act for time constraints, only sole sourcing in periods of catastrophe as set out by Section 28 of the Act. So the Ministry’s initial defence was woeful and completely dismissive of intelligent thought.

Amid mounting criticism, the Ministry of Finance on Saturday evening made a second attempt which was just as unsuccessful. It however did release some of the commitments in the MoU which begs the question as to why the MoU was not issued in the first place on Wednesday. This should be a lesson to the government on handling public information.

The second statement said that the advantages of proceeding in this manner were many, including the fact that “Fedders Lloyd expressed in the MOU its intention to hold its prices expressed in its original bid made some four years ago. In addition to being time consuming, a new tender will result, obviously, in price escalation due to inflation.

“Fedders Lloyd intends to examine works already done by the previous contractor and to integrate those works within its proposed current design options, so as to lessen the burden of loss of funds already spent.

“Fedders Lloyd intends to complete the designs and finalize the list of equipment (which was not completed by the previous contractor) to the satisfaction of the Ministry of Public Health.

“Fedders Lloyd intends to hold the overall cost of the project within the available balance of the Line of Credit from Exim Bank of India.”

Those points helped to clarify the thinking behind the MoU even if it couldn’t still provide sound justification. The statement on Saturday then went on to argue a different case from time constraints.  It cited Chapter 42:05 of the Procurement Act as follows:

“If the supplier or contractor whose tender has been accepted fails to sign a written contract, if required to do so, or fails to provide any required security for the performance of the contract, the appropriate board shall refer the matter to the Evaluation Committee to determine which of the remaining tenders is the second lowest evaluated tender based on the evaluation criteria outlined in the bid documents subject to its right, in accordance with section 40(1), to reject all remaining tenders.”

Even a layman’s reading would find this argument untenable. This section relates to the failure to follow through on a successful tender. The first contractor, Surendra Engineering Construction Limited signed a contract with the then PPP/C government and began executing the project and so therefore this section is not applicable as is evidenced by the fact that the standing evaluation committee would have had to have proceeded immediately to the second responsive bid.

Furthermore, based on the original tender process under the much-criticised PPP/C administration, Fedders Lloyds’ bid was disregarded on administrative grounds and could therefore under no circumstances be considered to be a responsive bid. Even then as Mr Goolsarran notes in his column today there is no provision in the Procurement Act for a terminated contractor to be replaced by the next contractor in line based on the original tender evaluation.

The Ministry of Finance in its second statement also belabours the point that a contract has not been signed with Fedders Lloyd. However, the contract is a fait accompli. The joint statement issued on Tuesday stated that Fedders Lloyd “will review the works already started; conclude a design of the Hospital that is acceptable to the GOG; and commit to fully equip the facility on completion of its construction. Fedders Lloyd also undertakes to commence work on the facility immediately following the signing of the MOU.” In its statement on Saturday, the Ministry of Finance said that it is its intention that should the conditions in the MOU be satisfied by Fedders Lloyd, then the “Tender Board will be invited to make an award of contract to Fedders Lloyd.” This is as airtight a commitment to a contract as can be. It is also unclear how the Tender Board will be invited by the Ministry of Finance to make this award.

The unconvincing statements from the Ministry of Finance aside, one has to question the decision-making process of this six-month-old government. Who arrived at this decision to sign a MoU with Fedders Lloyd? Was this done at Cabinet level? Was there a full discussion on the concerns about shady and questionable procurement under the presidencies of Messrs Jagdeo and Ramotar? Was there due diligence on Fedders Lloyd?

More troubling is the unsophisticated decision by the government to attempt to piggyback on a tainted procurement process under the PPP/C. Given the loud declamations by APNU and the AFC when in opposition of unfairness and suspect behaviour in procurement under the PPP/C administration is it sensible to continue with this process rather than going de novo? Even for the sake of argument if the government wanted to piggyback off of the earlier process, did it write the National Procurement and Tender Administration Board seeking guidance on the possible reopening of the process? If not, that was pure commandeering of the procurement system. Three years after the fact who knows how many other better bidders may be around waiting for an opportunity to tender for this hospital contract.

Disturbingly, it is known to all and sundry that Vice President and Minister of Public Security Khemraj Ramjattan represented the interests of Fedders Lloyd during the initial bid when Surendra was chosen and which led to a storm of protest from Fedders Lloyd. By virtue of this relationship alone, it behoved whoever gravitated towards the MoU with Fedders Lloyd to pause and consider how such an arrangement would appear to the public. Minister Ramjattan might not have had anything at all to do with this decision however on appearance alone the arrangement would have an unhealthy stench similar to Mr Jagdeo’s claim that when his Cabinet considered the Sanata deal for the Ramroop Group, he exited the session. The minute Fedders Lloyd reasserted its interest in the project that was the point at which a new public tender should have been announced.

Lastly, the AFC fought tenaciously and expended enormous political capital while in opposition on securing the setting up of the PPC, precisely to avoid unwholesome events like this one. It either lives up to this struggle or its risks subsumption in governance untethered to principle. Perhaps this is the point at which it should hold an urgent internal meeting and later explain to the public its position on Fedders Lloyd. The APNU+AFC goverment has again faltered on an important decision.

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