This is our concluding article on my assessment of the state of public procurement in Guyana. In our last article, we discussed some of the key requirements of the Procurement Act which in several instances are honoured in breach. These include:
- Placing no restrictions on invitations to bid on the basis of nationality;
- Ensuring the criteria used for selection are such that they do not discriminate against particular contractors and suppliers;
- Award of contracts based on the lowest evaluated bid, as opposed to the lowest bid;
Communicating with unsuccessful bidders the basis of the award of contracts;
- Having a Bid Protest Committee in place to address complaints from aggrieved bidders; and
- Ensuring valid and adequate performance bonds are obtained as a guarantee for satisfactory performance.
Today, we look at the remaining two areas that are a source of concern, before making some concluding remarks.
Sanctions for Unsatisfactory Performance
Although the Act is not specific on sanctions for unsatisfactory performance, Section 5 provides for the evaluation of bids to take into account record of good performance, substantiated by documentary evidence. One recalls the controversial prequalification exercise for the supply of drugs and medical supplies where one of the criteria used was more than seven years’ experience in supplying the Ministry without any adverse reports; proven track record in handling contracts over $500 million with the Ministry; and meeting contractual obligations.
The fact that the Act requires performance bonds to be lodged in respect of large contracts is clear evidence of the need to safeguard the interest of the State against unsatisfactory performance. However, not in all cases performance bonds are demanded, and when such bonds are secured there is evidence in some cases of a lack of due care in ensuring that the bond is genuine. The Specialty Hospital contract, which was recently terminated, is a case in point. There has also been some laxity in monitoring performance bonds to ensure that are promptly renewed when they expire, as in the case of the construction of the Amaila Falls access road. A performance bond is like a fire insurance policy for one’s residence and must always be renewed every year before the expiry date. In addition, care has to be exercised to ensure that the various clauses in the performance bonds offer
adequate protection for the State. The construction of the Leonora Synthetic Race Track is an example where the contract was terminated but the Government has to date not been able to levy on the bond.
Having determined that a supplier or contractor has consistently not delivered to expectation, it is reasonable to expect that he/she will not be considered for the award of future contracts of a similar nature unless and until such time that the contractor or supplier can demonstrate beyond doubt that he/she will deliver to satisfaction. Regrettably, there is evidence this important aspect of public procurement is not being enforced, resulting in additional cost being incurred to rectify deficiencies in the works execution. When sanctions are not imposed against a contractor for shoddy work, there is no incentive to improve performance, and the State does not receive good value for sums expended. The Auditor General’s reports are replete with evidence of such unsatisfactory performance, including substandard work and overpayments, and short-delivery of essential supplies; yet little or nothing is being done to protect the interest of the State.
Applicability to public corporations and other State-owned/controlled bodies
Section 24 of the Procurement Act refers to the procedures for procurement by public corporations and other entities in which controlling interest vests in the State. Subject to the approval of the NPTAB, these bodies may conduct procurement in accordance with their own rules and regulations. However, to the extent that these rules and regulations conflict with the Act and its regulations, the requirements of the Act take precedence. If funds have been received from the Treasury for a specific procurement, then the concerned entity is obliged to follow the Act and its regulations.
A significant violation of Section 24 relates to the operations of National Industrial and Commercial Investments Ltd. (NICIL), a State-owned company as well as a government company as defined by the Companies Act. Prior to 2001, this entity was serving the purpose for which it was established, that is, monitoring the government’s divestment programme and ensuring that all proceeds were paid over to the Treasury. This is in addition to monitoring Government’s investments in public corporations and other entities and ensuring that revenues derived therefrom, mainly in the form of dividends, are all paid over promptly to the Treasury.
Since 2001, however, as a result of a flawed arrangement, certain revenues meant for the Treasury, such as the sale of State assets and dividends received from public corporations, were intercepted and diverted into the coffers of NICIL in violation of Article 216 of the Constitution. There is also evidence of the illegal transfers to NICIL from entities such as the Guyana Geology and Mines Commission and the Guyana Forestry Commission. NICIL in effect became a parallel Treasury and is used to incur various forms of expenditure without Parliamentary approval. This is not only a clear violation of Article 217 of the Constitution but also a circumvention of the authority of Parliament to approve of all public expenditure. It is ironical that the Minister of Finance who watches over the Treasury is party to this breach since he is the Chairman of the Board of NICIL. The Head of the Presidential Secretariat is also one of the directors. He once boasted that he is the “gatekeeper of the Government” and, in defence of NICIL’s actions, had erroneously described NICIL as a private company.
Given the scale of operations of NICIL using the above resources, procurement becomes is a significant area of its operations. In the award of the various contracts for the procurement of goods and services and the execution of works, NICIL is required to have its own procurement rules subject to the approval of the NPTAB. It is, however, not publicly what those rules are and whether the NPTAB sanctioned them. Nor do we know whether there is any inconsistency with any of the requirements of the Procurement Act.
The construction of the Marriott Hotel has so far been financed by NICIL through its subsidiary Atlantic Hotel Ltd. It is, however, not known on what basis the construction contract was awarded and how the Engineer for the project was selected. NICIL was also involved in the aborted construction of the Amaila Falls Hydro Project. Indeed, operations of NICIL are shrouded in secrecy and there is a total lack of transparency. In particular, NICIL’s management has consistently refused to divulge information about the award of contracts. It has incorrectly argued that NICIL is not required to follow government procurement rules and that details relating to NICIL’s operations, specifically the award of contracts, are matters of confidentiality!
Another significant violation relates to the Lotto funds. Here again, revenue derived from the licence granted to the Canadian Bank Note for the holding of a lottery has been diverted away from the Treasury and placed under the control of the Office of the President to be used to meet public expenditure without Parliamentary approval. Significant sums are expended based on the award of contracts but it is not publicly known what procurement framework is used in relation to such awards.
Employees of any procurement entity, who by their job descriptions are responsible for procurement, must declare their assets with the Integrity Commission. The Commission has not been functioning as no Chairman has been appointed since the previous Chairman resigned in 2006, and no meetings of the Commission are held since then. It is also not clear whether such employees have been filing returns to the Commission.
Conclusion
There is no doubt that Guyana has a strong constitutional and legislative framework relating to public procurement compared with its Caribbean counterparts. However, the issue is one of implementation as well as the will and commitment to do so. It boggles the mind that after 13 years the constitutionally-mandated Public Procurement Commission is yet to be established by a government and its Cabinet that had initially supported the idea. Some of the very Ministers comprising the present Cabinet had expressed concerns that suppliers and contractors were approaching them directly to influence the award of contracts to them, hence the need for such a Commission.
The appointment by the Minister of Finance of the members of NPTAB and its reporting relationship to him remains a source of concern. Indeed, one would find it extremely difficult to consider that such an important body is independent of the political directorate. Besides, who oversees the work of the NPTAB? Certainly, not the Cabinet!
Finally, the Administration needs to demonstrate in a very tangible way its sincere commitment to adhering to the requirements of two international conventions against corruption on matters relating to public procurement. Our system needs to reflect greater openness and transparency; equity and efficiency; competitiveness; and the use of objective criteria in the selection of contractors and suppliers. At the moment, confidence in our public procurement systems is at an all time low. This should not be allowed to continue.
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