HDM drug deal breached procurement regulations

-Goolsarran

Anand Goolsarran

The Ministry of Public Health  breached the country’s procurement regulations when it went to restricted tendering for the $366.9M in pharmaceuticals to HDM Labs last year and the act was condoned by the National Procurement and Tender Administration Board (NPTAB), former Auditor General Anand Goolsarran says.

He has also recommended that both the GPHC and the Ministry initiate annual prequalification of suppliers to prevent the need to engage in open tendering whenever supplies are needed.

“The procurement of drugs and medical supplies from HDM Labs Inc. in the sum of $366.9 million was in clear breach of Schedule II of the Procurement Regulations which set a limit of $1 million for restricted tendering,” Goolsarran wrote in his accountability column in Monday’s Stabroek News.

Pointing to the Procurement Act of 2003, Goolsarran said it speaks to both restricted tendering and sole source procurement. He laid out how both the agency and the NPTAB breached the laws.

“Section 26 permits restricted tendering where the goods/services or construction, by virtue of 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 assessment by a technical evaluation committee and the determination of the lowest evaluated tender. However, the estimated cost of the contract must be below the threshold set in the regulations. Schedule II of the Procurement Regulations of 2004 has set the threshold for restricted tendering at $1 million for materials and services. Considering the amount involved, i.e. $366.9 million, the Ministry has clearly breached the Procurement Regulations, and by extension the Procurement Act, in initiating procurement proceedings based on restricted tendering. The NPTAB ought to have been aware of this breach and should have advised the Ministry not to proceed with this route,” he said.

“As provided for under Section 28, single source procurement occurs where: (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; or (ii) 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”, he added.

Dealing only with  sole-sourcing, Minister of Finance Winston Jordan has distanced the NPTAB from bearing responsibility for the deal, saying that its approval is usually determined by the case put forward by the procuring entity. He said that the agency works strictly within the confines of the laws. Its role, Jordan said, does not include questioning agencies if they claim they have emergencies.

But Goolsarran noted that NPTAB should be aware of its role in this contract and act accordingly. He does not believe this was done and said that NPTAB took on a role it should not have when it advised on the method of procurement to be used.

He explained, “The NPTAB’s role in the procurement process is outlined in Section 16 of the Act. 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 assurance systems. There is no provision for the NPTAB to approve of a particular method of procurement, whether by way of open tendering, restricted tendering, single source procurement or emergency procurement.“

 

Inappropriate

 

“Therefore, any request for the NPTAB to do so was inappropriate. The decision as to which method of procurement to adopt is entirely a matter for the head of budget agency. The NPTAB should therefore avoid getting involved in deciding which form of procurement a Ministry or Department should engage in.”

Minister of Public Health, Volda Lawrence, has defended the integrity of the award of the contract saying all the necessary procedures were followed. Her justification and defence was also made to the National Assembly last week. She reported that on April 28th, 2018, a request for restricted tendering was made to the NPTAB for the procurement of emergency pharmaceutical supplies from ANSA McAL, IPA, Global Healthcare Supplies Inc., CMS, Meditron Inc., and HDM Labs Inc. Tenders were subsequently opened on May 23rd, 2017, she noted, and only three bids were received. However, she said on June 19th, 2017 the NPTAB recommended that no award be made to any of the three bidders as all had failed to meet the evaluation criteria at the preliminary stage.

On June 29th, 2017, Lawrence said, the Ministry of Public Health sought permission from NPTAB and restricted tendering for the retender was approved on June 30th, 2017. As a result, all six companies were then asked by email, on July 12th, 2017, to resubmit bids and only one company, HDM Labs Inc. responded when bids were opened on July 18th 2017. “On August 16th 2017, the evaluation report for retender was received by NPTAB with recommendation that the sole winner be awarded with the contract. Mr. Speaker I wish to emphasize that NPTAB recommended that the contract be awarded to the sole winner HDM Labs,” she told the National Assembly.

“I wish to remind this Honourable House that in 2017, it was under this government that the procurement department [of the] Ministry of Public Health was established to ensure that there was segregation of duties, transparency and accountability in the procurement of items and services for the Ministry of Public Health while ensuring that the ministry followed and adhered to the regulations and procedures stipulated by law,” she added.

While Lawrence and Permanent Secretary Colette Adams have said that the six companies were invited to participate in the second restricted tendering process, a representative of one of the companies has said it was unaware of the invitation.

Goolsarran says that Lawrence in her answer ruled out that the contract was a single source one and was adamant that restrictive tendering was used and if it was it was unlawful. If the single sourcing method was used, he explained, there would be no spending threshold.

However, using sole sourcing, the Permanent Secretary would have had to justify that it was warranted.

“Was the procurement of drugs and medical supplies as a result of the application of the single source method?  Based on the Minister’s explanation of the events leading to the award, the answer is no. The restricted tender approach was used which produced a sole bidder. However, in so doing, the Procurement Regulations were breached. On the other hand, the PS’s letter of 19 June 2017 indicates an intention to adopt the single-source method based on an emergency. However, the PS would have had to justify that a catastrophic event had occurred and that, given the urgent needs for the pharmaceutical supplies, it was not possible to engage in other forms of procurement. Unlike restricted tendering, there is no limit for emergency procurement.” Goolsarran pointed out.

He believes that to rid the system of having to go to restricted or sole source tendering without an emergency, careful planning and record keeping is needed.

“It calls for detailed procurement planning well in advance of the fiscal year in question which should include: consideration of the pattern of usage; the maintenance of maximum and minimum inventory levels and re-order points; comprehensive lists of items that will be needed and when; and consideration of procurement lead times, among others,” he said.

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