Report of the Public Procurement Commission on the procurement of emergency drugs (Part I)

This is our fourth article for the year on the procurement of pharmaceuticals for the Georgetown Public Hospital Corporation (GPHC). To refresh our memories, by letter dated 28 February 2017, the Chief Executive Officer (CEO) of the GPHC sought the approval of the National Procurement and Tender Administration Board (NPTAB) to procure on an emergency basis $605 million worth of pharmaceuticals from ANSA McAL on the grounds that: (a) the items requested were only available from that supplier; and (b) the emergency procurement was authorised by Minister of Public Health. Attached to the letter was an invoice from ANSA McAL of the same date. The Chairman of NPTAB was reported to have stated that he saw the letter on the same day of the Stabroek News 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.

Stabroek News had raised 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 than 10-fold difference.

Responses to the Stabroek News article

ANSA McAL issued a statement indicating 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 further stated that: (i) four suppliers were asked to submit bids based on a list of items that the GHPC had supplied; (ii) it submitted a bid on 14 February 2017 for over 300 items; and (iii) it was awarded a contract in the sum of $605 million for 118 items.

On 12 March 2017, the Ministry of Public Health issued a statement in which it acknowledged ‘fast-tracking’ the purchase from ANSA McAL because the shortage of pharmaceuticals at the GPHC, which it blamed on conspiracy between suppliers and Ministry staff, had reached crisis proportions. It, however, maintained that the procurement process was not breached. The Ministry also stated that ANSA McAL was one of only two suppliers in Guyana that provided appropriate cold storage for pharmaceuticals and that the company not only airfreighted the required items but also donated four refrigerators to GPHC to store the emergency supplies! The Ministry, however, did not explain why the NPTAB’s approval was sought after the decision was taken to procure the items from ANSA McAL. In addition, the fact that the items were airfreighted would suggest that the supplier did not have the items in stock at the time, contrary to the explanation the CEO had given to the NPTAB.

Stabroek News also reported the Minister as having stated that, “My priority is to ensure the nation’s health is given top priority. The health system will not be held hostage by unprincipled persons and therefore I made the decision to shortlist the critical but unavailable items and the suppliers with the ability to provide them on time to avert deepening the drug demand difficulties.”

In the midst of a public outcry at what appeared to be a glaring breach of the Procurement Act, the board of the GPHC, the Auditor General, and the Public Procurement Commission (PPC) announced their intention to mount separate investigations into the matter. The GPHC board concluded that the CEO acted “recklessly” in initiating the procurement but found no evidence that the Minister of Public Health gave any instructions for the procurement procedures to be bypassed. This was despite the fact that the Minister acknowledged her active involvement as reflected in the above quoted statement from her. That apart, it was inappropriate for the GPHC board to pronounce on the matter, considering that its members were appointed by the Minister and there is a direct reporting relationship to her.

The Auditor General’s report for 2016, which was laid in the National on 2 November 2017, made no mention of the issue, perhaps because it took place in 2017. However, the compromising of the tender process for the annual supply of pharmaceuticals for 2017 took place in 2016 and should have attracted the Auditor General’s comments. In addition, the violation was “a post-balance event” in the context of the 2016 public accounts and as such should have been reported on by the Auditor General. As it stands, we will not hear from the Auditor General on the matter until October 2018, some 18 months later!

The PPC, for its part, began its investigation in March 2017 and finalized its report on 9 August 2017. The report was laid in the National Assembly on 2 November 2017.

PPC’s conclusions on the Minister’s involvement

The PPC’s main conclusion is similar to that of the GPHC board: it was the CEO who was responsible for the breaches in the Procurement Act and not the Minister. This was despite: (i) the CEO’s statement to the NPTAB that the Minister had authorized the emergency procurement; (ii) the Ministry’s statement of 12 March 2017 of ‘fast-tracking’ the procurement; and (iii) the Minister’s admission that she “made the decision to shortlist the critical but unavailable items and the suppliers with the ability to provide them on time to avert deepening the drug demand difficulties”. The text of the PPC’s conclusions on the Minister’s involvement is as follows:

The Minister of Public Health, by all accounts, was made aware of the emergency tender and concluding that the timeframe for delivery was too long, instructed the GPHC to ‘fast track’ the procurement of emergency drugs as a means of assuaging the acknowledged, continuing shortage of these items at the hospital.

The PPC was not presented with any information which indicated that the Minister instructed the GPHC to breach the Procurement Act. Approval to ‘fast track’ does not translate to ‘bypass’ the NPTAB. The GPHC was asked to devise a plan that reflected a delivery of two weeks for the drugs. The Minister’s approval related to her instruction for them to present a plan as to how they could bring in emergency drugs in the shortest possible time. The sole source method that they ultimately adopted was the fastest means of achieving this because it avoids a tender and evaluation process.

The GPHC officials’ intention to sole source the emergency drugs was conveyed to the NPTAB, but they did not follow through with the established procedures for sole sourcing supplies and, thus, breached the Act by making awards to suppliers prior to receiving NPTAB’s approval and Cabinet’s “No objection”.

The PPC was not presented with any information which indicated that the Minister was informed by the GPHC officials that they had made the awards to suppliers without seeking the approval of NPTAB and Cabinet.

The Minister assigned Mr. Oneil Atkins to the GPHC team specifically to identify the emergency drugs needed and not to select and contract suppliers. The GPHC officials ultimately made the decision to engage the four suppliers who were awarded contracts to supply the hospital with drugs.

Comments on the above conclusions

According to the PPC report, senior GPHC officials and the Minister met twice on 3 February 2017 to discuss the shortage of drugs at the Hospital. At the first meeting, the Minister stated that the delivery time for the procurement of pharmaceuticals via emergency tender was too long and requested the GPHC officials to develop a plan for a shorter delivery period, in time for the second meeting later in the day. The CEO then informed the Minister that whatever procedure agreed on to ‘fast-track’ the procurement of pharmaceuticals “will have to go to the tender board”, to which the Minister retorted “she can make decisions: she is the Minister of Public Health and she was sent there to make decisions”.

Contrary to the PPC’s assertion, there is no way to ‘fast-track’ (i.e. using a method other than open tender) the procurement of the magnitude of $605 million without breaching the provisions of the Procure-ment Act. By Section 26, a procuring entity may engage in procurement by means of restricted tendering when: (i) the goods, construction or services by reason of their highly complex or specialized nature, are available only from a limited number of suppliers or contractors, in which case all such suppliers or contractors shall be invited to submit tenders; and (ii) if the estimated cost of the contract is below the threshold set forth in the regulations which is $1 million for goods and services. When the restricted tendering procedure is used, only suppliers or contractors invited by the procuring entity due to their qualifications can submit tenders. All other steps and requirements applicable to open tendering, especially in relation to the evaluation of tenders to determine the lowest evaluated bid, shall be complied with.

By Section 28, a procuring entity may engage in single-source procurement when: (i) 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; (ii) the services, by reason of their highly complex or specialized nature, are available from only one source; and (iii) 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. The PPC asserted that the sole source method, which was eventually adopted, was the fastest means of achieving the objective of ‘fast-tracking’ because it avoids a tender and evaluation process. This assertion, however, ignores the fact that sole source procurement cannot be used if the value of the procurement exceeds $1 million.

Next week, we will continue our analysis of the PPC’s conclusions on the Minister’s involvement in the procurement of pharmaceuticals for the GPHC as well as other conclusions. We will then examine the PPC’s recommendations.

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