Revisiting that $605 million contract for the procurement of drugs and medical supplies

The Board of the Georgetown Public Hospital Corporation (GPHC) investigated the circumstances surrounding the procurement of drugs and medical supplies early this year in the sum of $632 million. The Board found that the Chief Executive Officer (CEO) acted “recklessly” in initiating the procurement but did not find any evidence that the Minister of Public Health gave any instructions for the procurement procedures to be bypassed.

The violations relate to the failure to follow the following: public advertisement inviting suppliers to tender for the supply of the specified items; the involvement of the National Procurement and Tender Administration Board (NPTAB) to which tenders must be sent; the appointment of a technical evaluation committee so as to arrive at the most competitive bid; and the granting of the no objection by the Cabinet in the award of the contract.

 

Background to the matter

By letter dated 28 February 2017, the then acting CEO sought approval from the NPTAB to undertake the procurement of $605 million worth of drugs and medical supplies from ANSA McAL Trading Ltd. on the grounds that: (a) the items requested were only available from that company; and (b) the emergency procurement was authorised by the Minister of Public Health. Attached to the letter was an invoice from ANSA McAL of the same date. The Chairman of the NPTAB is reported to have stated that he saw the letter on the same day Stabroek News carried an article on the matter and that he was rather surprised at the sequence of events. As a result, he wrote to the Minister expressing his concern.

In response to the said article on the matter, ANSA McAL stated that a meeting was held on 16 January 2017 with all suppliers to address the shortage of drugs at the GPHC and the urgent need to procure such items. At that meeting, it was learnt that the invitation to tender in November of 2016 had been compromised, resulting in the need to procure the items on an emergency basis. ANSA McAL indicated that: (a) four suppliers were asked to submit bids based on a list of items that the GHPC had supplied; (b) it submitted a bid on 14 February 2017 for over 300 items; and (c) it was awarded a contract in the above sum for 118 items.

There were a number of concerns regarding the prices of certain items supplied by ANSA McAL, compared to those charged by other pharmaceutical suppliers. For example, an antibiotic 20g clotrimoxazole cream was listed in the invoice at a unit price of $1,750 while the price charged by other suppliers was $95, a more than 18-fold difference. Similarly, a 30g anti-haemorrhoidal ointment, which previously had been sourced from other suppliers at $200, was listed at $2,150, a more that 10-fold difference. The Ministry of Public Health issued a statement acknowledging the fast-tracking of the procurement. It, however, maintained that there was no breach in public procurement procedures, and blamed the situation on a conspiracy between suppliers and the staff of the Ministry.  As a result, the Minister made the decision to proceed with the emergency procurement. Additionally, the Ministry stated that the supplier was one of only two companies in Guyana that provided appropriate cold storage for drugs and medical supplies and that the company not only airfreighted the required drugs but also donated four refrigerators to GPHC to store the emergency supplies! However, there was no explanation as to why the approval of the NPTAB was sought after the decision was taken to procure the items from ANSA McAL.

In the midst of a public outcry at what was a glaring breach of the Procurement Act, the Board of the GPHC, the Public Procurement Commission and the Auditor General announced their intention to mount separate investigations into the matter. Last Friday, GPHC’s board announced the results of its investigation in which it indicted the then acting CEO but exonerated the Minister.

 

Comments on the findings of the GPHC board

The GPHC was established by Order No.1 of 1999 under the Public Corporations Act and is therefore a separate legal entity with a board that provides the necessary oversight of the organization. The current members of the Board were appointed by the Minister, and the Chairperson reports to the Minister. In such a circumstance, the Board would have found itself in a difficult situation when assessing the role of the Minister on the matter. Indeed, it would have been more appropriate for the Board to avoid making any statement about the Minister’s involvement because of this reporting relationship. Better yet, it should have stepped aside to allow for the independent investigation into the matter. As it turns out, the Board’s conclusions were at complete variance with not only the contents of the letter from the CEO to the NPTAB but also the statement put out by the Ministry in the midst of the controversy and public outcry.

There was no board at the time the procurement took place. From a governance standpoint, no public corporation, statutory body or other entity is which controlling interest vests in the State, should be allowed to function, even for one day, without a board. That this has happened in the case of the GPHC is a serious indictment against the person responsible for making the appointment. Suffice it to state that it is the Board that is required to provide the much-needed and necessary oversight of the management and operations of the Hospital. The Minister’s role is restricted to one of giving directions of a general nature regarding policy only as well as specific directions as regards the disposal of capital assets and the accountability of the proceeds. She cannot step down from that policy directive position and get involved in operational matters, since in doing so, she would be not only usurping the role of the Board but also exposing herself to personal liability in the event of any violation of the law. The Minister’s utmost priority should have been to appoint the members of the GPHC board so that they can critically examine the apparent shortage of drugs and medical supplies at the Hospital and take urgent measures to address the matter, within the confines of the Procurement Act.

If it was decided that supplies should be acquired on an emergency basis, whether through selective tendering or sole source procurement, the logical course of action should have been the acquisition of the minimum quantities to cover the period it would take to acquire larger supplies through the application of the full tender procedures. The fact that the procurement of such a large quantity using the emergency route did take place, would suggest a complete disregard for the requirements of the Procurement Act.

NPTAB’s role in public procurement

Section 16 of the Procurement Act outlines the NPTAB’s role in the procurement process. This involves exercising jurisdiction over tenders the value of which exceeds such an amount prescribed by regulations, appointing a pool of evaluators for such period as it may determine, and maintaining efficient record keeping and quality assurances systems. There is no provision in the Act for the NPTAB to approve of a particular method of procurement, whether by way of restricted tendering, sole source procurement or emergency procurement.

By Section 24 of the Procurement Act, public corporations and other entities in which controlling interest vests in the State are required to have their own procurement rules and regulations approved by the NPTAB. To the extent any provision conflicts with the Procurement Act, the latter takes precedence. The GPHC, however, does not have its own procurement rules and regulations, and therefore reverts to the Procurement Act in relation to its procurement activities. This shortcoming needs to be addressed urgently.

Restricted tendering and sole source procurement

The Procurement Act distinguishes between restricted tendering and sole source procurement. Restricted tendering occurs where the goods/services or construction, by their highly complex or specialized nature, are only available from a limited number of suppliers or contractors. In this case, all such suppliers or contractors are invited to submit tenders, and all other procedures relating to open tendering are applicable, including the involvement of the NPTAB depending on the amount involved, assessment by a technical evaluation committee, the determination of the lowest evaluated tender, and the ‘no objection’ from the Cabinet for contracts in excess of $15 million.

 

Sole source procurement, on the other hand, occurs where: (a) the goods or construction are available only from a particular supplier or contractor, or a particular supplier or contractor has exclusive rights with respect to the goods or construction, and no reasonable alternative or substitute exists; or (b) the services, by reason of their highly complex or specialized nature, are available from only one source. It is also applicable where, owing to a catastrophic event, there is an urgent need for the goods, services or construction, making it impractical to use other methods of procurement because of the time involved in using those methods. Again, depending on the amount involved, the involvement of the NPTAB and the Cabinet would remain be obligatory.

Conclusion

Considering all of the above, we feel obliged to disregard, indeed set aside the Board’s findings, and await the outcome of the investigations by the Public Procurement Commission and the Auditor General. It is difficult to imagine that, in the absence of a board, an acting CEO can make a decision regarding the use of $605 million in public resources without consultation and agreement with the Minister. The Minister was the chairperson of the PAC for several years after the death of the respected Winston Murray. In that capacity, she would have acquired in-depth knowledge of the workings of the Procurement Act. It should have dawned on both the Minister and the GPHC management that fast-tracking the procurement the way the GPHC did would constitute a serious violation of the Act. And, considering the amount involved, why was the matter not taken to the Cabinet with a request for a waiver of the tender procedures to facilitate the procurement?

This unfortunate episode should never be allowed to rear its ugly head in our system of public management, especially as regards transparency and proper accountability of public funds. It also reflects badly on ministerial, board level and senior management decision-making and actions.

 

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