Two weeks ago, we began a discussion of the revised prequalification criteria for the supply of drugs and medical supplies to the Ministry of Health and the Georgetown Hospital for the period 2014 to 2016. This discussion took place against the background of allegations that the new requirements were biased in favour of a particular local company. Over the years, this company has become the main supplier, accounting for over 75 per cent of the Government’s requirements. It also virtually displaced the overseas specialized agencies – PAHO/WHO, UNICEF, UNFPA and IDA – which had provided 90 per cent of the Government’s requirements.
Recapitulation of 11 August 2014 Article
The revised criteria were based on a points system with a maximum score of 200. However, certain mandatory requirements were also included in the points system and we suggested that for future prequalification exercises, these be separated out, and a two-stage evaluation carried out. In addition, there was a lack of consultation with key stakeholders to secure the necessary buy-in of the new proposals. Had this been done, and the views of stakeholders were taken into account in formulating the new proposals, the allegations of bias might have been avoided.
Further, suppliers needed time to put in place arrangements to satisfy the new criteria, especially as regards the 30,000 square feet of storage with temperature-controlled environment. This apart, this requirement appears too stringent especially for distributors who, based on orders received, would import pharmaceutical supplies and deliver them to their customers without the need for elaborate storage for any extended period.
The requirements relating to financial capacity also appeared too stringent, as they would have placed small and medium sized suppliers as well as distributors in a position of disadvantage. Applicants for prequalification had to have an annual turnover over $1 billion; net assets over $500 million; at least $50 million per annum in corporate taxes; and over 50 full-time employees.
In terms of previous experience, which carries a score of 40 or 20 per cent of the maximum score, the supplier must have more than seven years’ experience in supplying the Ministry without any adverse reports as well as a proven track record in handling contracts over $500 million. It is obvious that the only the company that was prequalified would have met these requirements. They also pose a major entry barrier for new suppliers, and it would have been more appropriate if previous experience was not limited to supplying the Ministry.
Over the years, the Auditor General has commented adversely on the performance of the prequalified company without evidence of any action taken against it. For example, in his 2012 report, he reported that medical supplies valued at $58.583 million were not delivered to the Georgetown Hospital as at 30 September 2013 and the related bank guarantee had expired in April 2013. A similar observation was made in respect of the Ministry of Health where medical supplies valued at $164.603 million had not been delivered, and there were no bank
guarantees in force to cover this amount. There were also outstanding deliveries for 2011 totalling $59.835 million while for 2008 there was no evidence of the delivery of supplies valued at $79.262 million.
Communication of the results of prequalification
Section 6 of the Procurement Act provides for the procuring entity to communicate the results of the prequalification proceedings to all suppliers who have submitted applications to prequalify. This is to enable them to ascertain the basis under which they were not prequalified and to request a review if they are not satisfied. The procuring entity is also obliged to communicate, upon request from a supplier who has not been prequalified, the grounds therefor.
There was, however, no evidence that the six unsuccessful companies were informed of the results of the prequalification exercise. Needless to mention, the 23 July 2014 announcement by the Head of the Presidential Secretariat does not satisfy the requirements of Section 6 of the Procurement Act.
Procedures for dealing with dissatisfaction
In accordance with Section 52 of the Act, a supplier or contractor, who has applied for prequalification but does not satisfy the prequalification requirements, may request a review of the procuring entity’s decision. This takes the form of a written protest to the procuring entity and must be submitted within five business days of the announcement of the award decision.
By Section 53, if the procuring entity does not review the protest within five business days of its submission, the bidder may submit a request for review to the NPTAB in the absence of the establishment of the Public Procurement Commission. The review is undertaken by a three-person Bid Protest Committee comprising one member appointed by the Minister of Finance, one by the Association appearing to the Minister to represent contractors and one by the Attorney General. The members are appointed from among professionals who are particularly competent in the field of procurement. The committee is required to issue a written decision within fifteen business days of the conclusion of a review, stating the reasons for the decision and the remedies granted, if any. Damages may include only compensation to recover the cost of the bid preparation. Final contract award is suspended during this period. The decision of the Bid Protest Committee shall be final and immediately binding upon the procuring entity.
If the procuring entity responds within the five-day period to a supplier’s request for review, and the supplier is still dissatisfied, the Act does not provide for any mechanism for appeal to a higher level. However, Article 212AA (1) (i) of the Constitution provides for the yet-to-be established Procurement Commission to investigate complaints from suppliers, contractors and public entities, and propose remedial action. As it stands now, the only recourse an aggrieved supplier has is the intervention of the courts.
The ANSA McAL Case
One of the unsuccessful suppliers was ANSA McAL. On 25 July 2014, it requested the Ministry of Health to review the decision. According to the 18 August 2014 edition of the Stabroek News, the company received an acknowledgement from the Ministry but the contents were not made available. It is also not clear whether the Ministry’s response was issued within the timeframe allowed. Nor is it clear what further action the company proposes to take, assuming that it remains dissatisfied.
ANSA McAl had previously indicated that its storage facility had not been inspected. However, a news outlet linked to the prequalified company reported that the company was disqualified on the grounds that it did not provide evidence of manufacturer’s authorization, a claim that the latter disputed. Even if that were so, the failure to provide such authorization does not constitute grounds for disqualification since it is not a mandatory requirement. The worst that could have happened is a loss of a maximum of 20 points. What is distressing also is the fact that the news outlet linked to the prequalified company has in its possession detailed information as to what transpired at the level of the Ministry of Health in terms of the entire prequalification exercise and why the other six companies were not prequalified. The release of such information raises serious questions about ethical conduct on the part of the procuring entity.
Conclusion
Pulling together the discussion two weeks ago as well as today’s discussion, there is strong evidence to suggest that the revised evaluation criteria for the prequalification for the supply of drugs and medical supplies were biased in favour of a particular local company. Manufacturers and distributors who were not prequalified therefore have every reason to feel aggrieved. The results of the prequalification exercise have also resulted in a virtual monopoly situation and stifle competition.
The way forward is for the entire prequalification exercise to be set aside and a fresh start made. Any new proposal developed should result in the creation of a level playing field so as to enjoy the full confidence of all stakeholders and to allay fears of bias. Transparency, fairness, equity and competitiveness should be the watchwords. Every effort should also be made to avoid the outcome of any prequalification exercise resulting in a monopoly situation.
Finally, with some 70 per cent of the national budget being devoted to public procurement, the whole episode highlights the need for the activation of the Public Procurement Commission comprising members who are technically and professionally competent to oversee Government’s procurement. As it now stands, the National Procurement and Tender Administration Board is not perceived to independent enough to oversee this process since the Minister of Finance appoints the members. The Board’s chairperson also has a reporting relationship with the Minister who is a key member of Cabinet that approves of all major contracts. In the circumstances, a significant lacuna exists in the present arrangements. Once the Public Procurement Commission is activated, that lacuna will cease to exist.
