This is our third in a series of articles on the above subject. In the two previous articles, we noted that despite the lapse of 13 years, the constitutionally-mandated Procurement Commission has not been established, and several key provisions of the Procurement Act have been honoured in the breach. We discussed two of these, namely placing no restrictions on invitations to bid on the basis of nationality; and ensuring the criteria used for selection are such that they do not discriminate against particular contractors and suppliers.
Today, we continue our discussion of the remaining areas identified in these articles.
Lowest Evaluated Bid versus Lowest Bid
Section 36 of the Procurement Act provides for all evaluation criteria outlined in the tender documents for the procurement of goods, works and services, in addition to price, to be quantified in monetary terms. The Evaluation Committee is required to use only these evaluation criteria to determine which tenderer has submitted the lowest evaluated bid. It therefore does not necessarily follow that the lowest evaluated bid is the lowest bid.
In the case of the East Coast Demerara Road Extension Project, the Committee assessed the bids received and recommended that the tender be awarded to the third lowest bidder on the grounds that it had reservations about the lowest bidder’s ability to complete the works at the tendered price. The Cabinet, however, withheld its no objection, citing the lowest bidder as having had an established and demonstrated track record of road building in Guyana with a fleet of resident road building equipment. In addition, the lowest bidder’s price was some US$13.424 million lower than that of the recommended bidder. The National Procurement and Tender Administration Board (NPTAB) reconsidered the matter and revised its recommendation in favour of the lowest bidder.
The above example highlights the misunderstanding about not only the difference between the lowest evaluated bid and the lowest bid but also the implications of awarding contracts to the lowest bidders without due consideration of the Engineer’s Estimate. Experience has shown that when the latter happens, there is a tendency to recoup the additional costs through variation orders, and sometimes in the end, the project becomes significantly more costly. If such costs are not recouped, there will be a tendency to execute the works below the specifications. This will result in substandard work being performed. Both the Minister in the Ministry of Finance and the Head of the Presidential Secretariat lamented the prevalence of the practice of awarding contracts to the lowest bidders and the implications thereof.
Communicating the Results of the Award
Section 6 of the Act provides for the procuring entity to communicate the results of the prequalification proceedings to all suppliers who have submitted applications to prequalify. The procuring entity is also obliged to communicate, upon request from a supplier who has not been prequalified, the grounds therefor. In addition, in accordance with Section 43, the procuring entity must notify all unsuccessful bidders of: (a) the award of the contract; (b) the name of the successful bidder; and (c) the contract price. These two provisions are necessary for contractors and suppliers to ascertain the basis of the award and to ensure that they are reasonably satisfied that they were not unfairly treated. They are also an integral part of ensuring that public contracts awarded are above board and that there is transparency in the process.
There is, however, no evidence that procuring entities have been adhering to these requirements. Stabroek News spoke to several companies that regularly bid for government contracts, and they all indicated that they were never notified of awards. Another section of the media carried out a similar survey involving more than 30 contractors and suppliers, and the results were the same in addition to the claim that their applications were acknowledged. When asked about what action they took about this violation, some of them indicated that they preferred to remain quiet for fear of discrimination against in relation to future awards.
Two months ago, the Head of the Presidential Secretariat (HPS) announced that the Cabinet offered its no objection to the New GPC being the only prequalified supplier for the Government’s drugs and medical supplies for the period 2014-2016. One bidder requested an explanation why it was not selected. It received a response but the details were not publicly released although a news outlet reported that the company was disqualified because it did not provide evidence of manufacturer’s authorization, a claim that the latter disputed. One also recalls the announcement of the award of the contract for the design and construction of the Specialty Hospital which prompted one of the aggrieved bidders to file a protest, only to receive a stinging and arrogant response from the procuring entity. It is not clear why this bidder has not taken up the matter to the higher level, as provided for in the Act. The contractor has eventually been fired for unsatisfactory performance and there is a pending court action for the recovery of amounts paid and for damages.
The other bidder has since sought the intervention of the Court on the grounds that the prequalification award was “unfair, unreasonable, unconstitutional, unlawful, and null, void and of no legal effect”.
The Administration gave the impression that it was unaware that suppliers/contractors were not being notified of the award of contracts when in fact it is widely known that this is not so. When one considers that HPS’s announcement of the Cabinet’s no objection to a contract award as an authoritative pronouncement, it is not difficult to see where the problem lies. It is only reasonable for procuring entities and the NPTAB to consider that HPS’s announcement as a form of notification to unsuccessful bidders, notwithstanding that the Act does not envisage a role of the Cabinet in this regard. That apart, one gets the impression that the failure to notify in writing unsuccessful bidders of the award decision is a conscious act designed to avoid raising objections.
Bid Protest Committee
Section 52 provides for a supplier or contractor who has not been prequalified to request a review of the procuring entity’s decision in the form of a written protest 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.
It is not clear whether the Bid Protest Committee should be a standing one, or whether it is to be constituted on an ad hoc basis as and when a protest is lodged with the NTPAB. This has not been tested since there is no evidence of any protest being made to the NPTAB since the Act came into effect on 1 January 2004. As indicated above, some suppliers/contractors indicated that they preferred to remain quiet for fear of discrimination against them in relation to future contracts.
Performance bonds
Section 37 of the Act provides for a tender security to be lodged at the bidding stage to guard against the withdrawal or modification of a tender after the prescribed date; the failure to sign the contract; or the failure to provide a performance bond. A performance bond is executed as a guarantee against unsatisfactory performance. These stipulations, which are required to be detailed in the solicitation documents, are to apply to all bidders for the execution of the works in question or the provision of goods/services.
There are a number of cases where there has been laxity in ensuring that the State is properly protected in the event of suppliers failing to deliver to accepted standards. One recalls that in the construction of the access road to the Amaila Falls, the performance bond valued at US$1.5 million had expired at the time when the contract was terminated, leaving the Government uncompensated. Only recently, two other cases were highlighted in the media. The first relates to the design and construction of the Specialty Hospital where the Government claimed that the performance bond was fraudulently obtained and that the contractor’s performance was unsatisfactory. This contract was also terminated and the Government is suing the contractor for the recovery of G$1 billion, inclusive of damages.
The second case relates to the construction of the synthetic running track at Leonora. Again, the contract was terminated for unsatisfactory performance but the Government is experiencing difficulties in obtaining the proceeds of G$15 million from the performance bond from the concerned financial institution that issued it.
To be continued –
