Accountability Watch

Report of the Public Procurement Commission on the procurement of emergency drugs (Part II)

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Last week, we began a discussion of the report of the Public Procurement Commission (PPC) on the procurement of pharmaceuticals for the Georgetown Public Hospital Corporation (GPHC). So far, we dealt with two of the five conclusions relating to the Minister of Public Health’s involvement in the transaction which saw ANSA McAL Trading Ltd. being awarded a contract in the sum of $605 million.

We had stated that the threshold for sole source emergency procurement is one million dollars. Upon further review of the Procurement Act and the related Regulations, it does appear that this limit is only applicable to restricted tendering and not sole source procurement. That apart, the PPC report referred to a figure of $3 million as the limit for restricted tendering, citing a Cabinet decision dated 26 January 2016 on the matter. However, to give legal effect to this decision, the Minister of Finance has to issue a Regulation under the authority vested in him by Section 61 of the Act, which Regulation has to also be gazetted. It does not appear that this was done.

Suffice it to state that the $605 million contract with ANSA McAL was not based on sole sourcing but rather restricted tendering involving four suppliers.  The other three suppliers – New GPC, Health 2000 and Chirosyn Discovery Technologies – were awarded contracts to the value of $25.8 million, representing a mere 4.1% of the total procurement. It is relevant to note that the evaluation of the tenders for 2017 annual procurement that was annulled due to certain irregularities, did not recommend ANSA McAL since it did not satisfy all the criteria and was therefore not considered substantially responsive.

In today’s article, we will examine the three remaining conclusions of the PPC relating to the Minister’s involvement in the controversial procurement, after which we will discuss the PPC’s recommendations. The three remaining conclusions are:

The GPHC officials’ intention to sole source the emergency drugs was conveyed to the NPTAB, but they did not follow through with the established procedures for sole sourcing supplies and, thus, breached the Act by making awards to suppliers prior to receiving NPTAB’s approval and Cabinet’s “No objection”.

The PPC was not presented with any information which indicated that the Minister was informed by the GPHC officials that they had made the awards to suppliers without seeking the approval of NPTAB and Cabinet.

The Minister assigned Mr. Oneil Atkins to the GPHC team specifically to identify the emergency drugs needed and not to select and contract suppliers. The GPHC officials ultimately made the decision to engage the four suppliers who were awarded contracts to supply the hospital with drugs.

Comments on the above conclusions

First, it is not within the authority of the National Procurement and Tender Administration Board (NPTAB) to approve of restricted tendering or sole source procurement whether on an emergency basis or not. Except for the transitional arrangements involving the Public Procurement Commission (which are no longer applicable since the Commission has since been established), Section 17(1) of the Act requires the NPTAB to be “responsible for 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 assurances systems”. This is in addition to the NPTAB’s involvement in the creation of Ministerial and Regional tender boards, and the approval of procurement rules for public corporations and other bodies in which controlling interest vests in the State.

The criteria and the established procedures for undertaking procurement based on restricted tendering are set out in Section 26 the Procurement Act and the related Regulations. The latter provides for a threshold limit above which the open tender approach has to be adopted. To the extent that the four suppliers were awarded contracts in excess of this limit, the Procurement Act was breached. The PPC attributed blame on the GPHC’s officials and has exonerated the Minister.

Second, the conclusion that the GPHC failed to inform the Minister of the non-involvement of the NPTAB and the Cabinet, is at variance with the contents of the PPC report for the following reasons:

  1. The Minister was actively involved in the decision to procure $632 million of pharmaceuticals for the GPHC, having called two meetings on 3 February 2017 with senior officials of the GPHC to discuss how the procurement could be ‘fast-tracked’;
  2. The Ministry admitted to the Minister’s decision to “fast-track” the procurement. Given the magnitude of the procurement, there is no way such “fast-tracking” could take place using the restricted tender approach without breaching the Procurement Act;
  3. The Minister’s admission that she “made the decision to shortlist the critical but unavailable items and the suppliers with the ability to provide them on time to avert deepening the drug demand difficulties”. As a former Chairperson of the Public Accounts Committee, the Minister ought to have been aware that her decision would have breached the Procurement Act;
  4. At the first meeting, the CEO of the GPHC advised the Minister that whatever approach agreed on to ‘fast-track’ the procurement of pharmaceuticals “will have to go to the tender board”, to which the Minister retorted that: she can make decisions, she is the Minister of Public Health, and she was sent there to make decisions;
  5. When the CEO did seek the approval of the NPTAB, albeit retroactively, the Chairman of the NPTAB wrote to the Minister expressing his concern. The PPC report did not indicate what was the reaction of the Minister. The NPTAB had given an earlier approval on 30 January 2017 for the GPHC to engage in restricted tendering based on a request from the CEO, an authority the NPTAB does not have;
  6. At the second meeting held on 3 February 2017, the Minister introduced the Clinical Pharmacist attached to her Ministry as her representative on the GPHC’s team to advance the ‘fast-tracking’ of emergency procurement of drugs, including the identification of suppliers. The representative was identified as her point person to facilitate communication between the GPHC and the Minister on the issue;
  7. The spreadsheet allocating the award to the four suppliers was compiled by the Finance Controller responsible for procurement, and the Minister’s representative. According to the former, the representative was to have taken the spreadsheet to the Minister, but he was not sure if this was done;
  8. The Minister admitted that she was handed an envelope from the Chairperson of the Board, containing a letter to the NPTAB for her signature, requesting approval of the emergency procurement. In her testimony, the Minister indicated that she did not sign it, as it was not her role to do so but that of the GPHC. According to the Chairperson of the Board, when the Minister opened the package, she (the Minister) uttered the following words: “what is this?” and “where are the documents in support?” She then shook her head and put the package aside; and
  9. The Minister, as a member of the Cabinet, ought to have been aware, without being formally notified by the GPHC, that the emergency procurement was not taken to the Cabinet for its review and offer of ‘no objection’. Since the NPTAB was bypassed in the first place, the Cabinet could not have been involved.

The PPC’s recommendations

The PPC has made the following recommendations:

 

  1. All procurement transactions are to be executed in accordance with the Procurement Act and appropriate procedures to be put in place to avoid contract-splitting. In this regard, the GPHC should work assiduously to develop a Procurement Policy and Procedures Manual and have it approved;
  2. The GPHC must prepare a comprehensive annual procurement plan and effectively monitor its execution;
  3. The GPHC, as a separate legal entity, must not be subjected to the direction and control by persons external to the organisation. The Minister’s involvement should be one of giving directions of a general nature as regards policy matters and not operational ones. It is the responsibility of the Board to provide the necessary oversight of management;
  4. Drugs and medical supplies loaned to other agencies should be recovered in an organized manner;
  5. The GPHC should take steps to delink Procurement from Finance, with appropriate training provided to procurement staff;
  6. The GPHC needs to urgently assess and plan for adequate storage facilities for pharmaceutical and other medical supplies;
  7. The NPTAB should ensure that the evaluation process for tenders is conducted efficiently and in accordance with the Act; and
  8. The GPHC must end the practice of operating an Agency Tender Board without the approval or input from the NPTAB. Given the specialized nature of the needs of the GPHC, the procurement thresholds need to be reviewed.

Comments on the recommendations

This Column is in agreement with all of above recommendations, except (e).  It has always been the practice for Procurement to be an integral part of the operations of a Finance Department. To delink it from Finance would mean an essential aspect of checks and balances, indeed monitoring, will be lost. In the circumstances, the Corporation could end up being in a worse off position. The Procurement Department’s reporting relationship with the Director of Finance should be such that the efficient and effective execution of the GPHC’s annual procurement plan is not adversely affected.

As a separate legal entity, free of day-to-day ministerial involvement, the GPHC needs to have its own procurement rules that can cater for its specific requirements, as provided for by Section 24 of the Procurement Act.  On the question of procurement planning, this is an area of particular weakness throughout the operations of government. Recently, the Minister of Finance had cause to bemoan the fact that the budgets of constitutional agencies were not supported by procurement plans. The GPHC’s procurement plan should be prepared by management and approved by the board at the time of approval of the GPHC’s budget, and pre-qualification should be adopted in the selection of suppliers. In this way, the need to apply open tender procedures each time drugs and medical supplies are needed, would be avoided.

All in all, the PPC report is a useful one in terms of providing a sense of direction to the GPHC in avoiding the problems associated with the procurement of drugs and medical supplies and of improving its operations. One disappointment, however, is the PPC’s attribution of blame entirely on the GPHC’s officials when the evidence presented to it showed a significant ministerial involvement and decision-making in relation to the procurement fiasco.

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