Public Procurement Commission a must at all cost

Spirit and intent of the Act

The “To Do List” of the next government is a long one. On that list would be things like tax reform, passing strong anti-money laundering legislation, reforming the constitution, strengthening accountability institutions like the Office of the Auditor General, the Office of the Ombudsman and the Integrity Commission, and setting up accountability institutions such as the Public Service Appellate Tribunal and the Public Procurement Commission (PPC). Of all the things that must be pursued with some speed and alacrity under a new government, the establishment of the PPC is perhaps one of the most important. Part of the reason for taking this position is that the “Dax” deal on the fibre optic cable violates the spirit and intent of the Public Procurement Act of 2003 and increases the likelihood that the benefits that could accrue to the public from a fair procurement process will not take place.

Purpose of body

The value of the PPC is not well understood as persons continue to believe that the PPC will take over decision-making as it relates to the awarding of contracts. While it could influence the decisions in some instances, the purpose of the body is more fundamental than deciding on who should be awarded contracts and who should not. The critical need for the PPC has more to do with strengthening the economic fundamentals of the homeland and helping this country to compete successfully in the world economy. The improved competitive position would reflect itself in more efficient resource allocation, the emergence of better performance standards, increased productivity and, hence, in better incomes for workers and investors. The procurement process has two fundamental parts, the operational part and the oversight part. The government is in the habit of confusing the role of the PPC with its own obligations for public procurement in its call for a “No Objection” authority in the oversight responsibility of the PPC. Since the PPC is an institution, some clarity could be brought to this issue by looking at the institutional arrangement for the operation and oversight of public procurement activities.

Two institutions

According to the PPC Act of 2003, the procurement process is supposed to be conducted and managed through two institutions. One institution is the National Procurement and Tender Administration Board (NPTAB) and the other is the PPC. Understanding the roles of these two institutions is critical to understanding the value of the PPC to the process. The NPTAB is an organization like any other public sector organization. For example, just as the Guyana Revenue Authority is a public sector organization with responsibility for tax, trade and customs administration, the NPTAB is a public sector entity with responsibility for ensuring that public procurement takes place in Guyana when necessary. Compared to the GRA which is managed by a Commissioner-General and a pair of deputies, the NPTAB is managed by a National Board consisting of seven persons. In the same way that the GRA has a secretariat that houses its staff and in which it conducts its business, the NPTAB has a secretariat in which it houses its staff and conducts its business.

The Commissioner-General of GRA exercises jurisdiction over all matters pertaining to tax, customs and trade administration. Where public procurement is concerned, the National Board exercises jurisdiction over tenders, the selection of evaluators, the evaluation of tenders and the award of contracts. It currently carries out the work of the PPC. Procurement activities take place all over Guyana and it would not be feasible or practical to have the same set of persons of the National Board attempting to manage procurement activities throughout the length and breadth of Guyana. The dependence on a single group of persons to travel all over Guyana to ensure public procurement occurs would be costly and lead to delays in project implementation. As a consequence, the National Board has the right to delegate this authority to regional, sub-regional entities as well as to ministries, departments and agencies which it does.

Control

Given the way in which Guyana is managed, the central government has total control over all the procurement activities for public projects irrespective of where they take place. With the use of dollar value limits, the central government restricts the extent to which decentralized Boards can affect public interest in the awarding of contracts. Cabinet desires an explicit role in the award of contracts with a “No Objection” authority. This authority is being attached to the establishment and operation of the PPC. This request must be resisted at all cost for several reasons.

First, the desire for a “No Objection” role in the work of the PPC assumes that Cabinet is independent of the procurement process. That is not the case. The Minister of Finance exerts influence over the process. For example, the Minister appoints the members of the National Board who manage the procurement process. The Minister also has to be consulted on the establishment of the secretariat to run the affairs of the procurement administration.   The Minister is also responsible for determining the remuneration of Board members and this influence extends to boards that exist at the regional, sub-regional, ministerial, departmental and agency levels. Further, the Minister must approve the members of the panel that reviews decisions of the evaluation committees.

Second, the objection that Cabinet seeks to exercise is the responsibility of the government in the normal course of conducting business. The performance of that objection does not require any special dispensation since there are special provisions in the Act that gives Cabinet, through the subject minister the right to exercise the “No Objection” role. In fact, if Cabinet managed its affairs properly, it would have no need to request a special “no objection” role in the procurement process. This option is available to the Cabinet under Article 39, paragraph 3 of the Act given that all public procurement is directed by the government. Cabinet can decide for itself the threshold value at which it wants to intervene in any procurement decision using Article 39. In the view of this writer, there should be no linkage of the “No Objection” authority to the work of the PPC since Cabinet is not independent of the procurement process.

Oversight role

The PPC has an oversight role and there is nothing in the Act that says it must get involved in the day-to-day operations of the procurement process. According to the Constitution, the PPC is required to “monitor public procurement and procedures …” indicating that it stands outside of the contract award process and is only drawn in to resolve disputes. It has the role also of facilitating the process by making regulations and ensuring that the tender administration has the requisite materials and facilities to carry out its work. Among the things expected of the PPC is that it must be independent and impartial. Standing outside of the process with such a posture enables it to identify and develop standards and benchmarks by which competing contractors and companies could measure and improve their performance over time. Consequently, there is no room or need for a “No Objection” role. Such a role is out of place given that the government itself would have been involved in the contract award process that led to the appeal in the first place.

Poor track record

But Cabinet has a poor track record with respect to the exercise of its “No Objection” authority. Evidence has emerged that Cabinet selected inexperienced contractors to build the Skeldon Sugar factory, to construct the road to Amaila Falls, to build the Specialty hospital and kept the responsibility for itself and hired inexperienced persons to manage the fibre optic cable project. In addition, the Cabinet allocated G$800 million to build a technology park. Every one of those projects have had serious problems with a heavy price tag for taxpayers. In the case of the technology part, no such park exists and no one knows what happened to the G$800 million that was allocated in the 2009 budget for the building of the technology park.

More recently, Cabinet has undermined the work of the NPTAB by deciding on the pre-qualification criteria for the procurement of drugs and violated the spirit and intent of the Procurement Act of 2003 with the contract to “DAX” Engineering. The work on the fibre optic cable apparently was incomplete which meant that the government should have re-advertised for tenders to perform remedial and completion work on the project. This was not done in accordance with Article 2, paragraph c of the Act. Further, even if the government had accepted that the incomplete work represented assets of the government, it would appear that the sale of such assets should have been done through the Privatization Unit of the National Industrial and Commercial Investments Limited (NICIL). There is no evidence that such a course of action has been taken. All of these actions were possible because the PPC was not in place.

Best deal foregone

This means that the best deal for taxpayers has been foregone. DAX as this writer understands could enjoy the equivalent of G$250 million in tax concession every three years. If that were true then over a 25-year period those concessions would be worth close to US$10 million in today’s dollars. If extended to 40 years, those concessions would be worth US$13.5 million today. This means that DAX could sell its rights in this project and walk away with US$13.5 million without spending a single cent on this investment. The degree to which this PPP/C government has shown contempt for the taxpayers of this nation is unbelievable, and one must ask what else does it intend to do to the taxpayers of this nation if reelected? For now, it is good that the Opposition refused to give it a “No Objection” role in the PPC.