Before beginning today’s article, we invite readers to view a BBC documentary to be found at https://www.youtube.com/watch?v=UlTXRWMYpzQ&feature=youtu.be regarding a $10 billion scandal involving oil and gas exploration off the coast of Senegal, West Africa. (The video was forwarded to us by Mr. Glen Lall from the Kaieteur News.)
In 2011, the Senegalese government granted two exploration concessions covering 6,700 square miles to an unknown company with no record of off-shore drilling. The agreement was entered into on 8 December 2011, but the company, Petro-Tim Ltd., was not formed until six weeks later. Its headquarters in the UK could also not be traced as the address stated in the agreement contained apartment block buildings. Petro-Tim is owned by a Romanian businessman, Frank Timis, who has a chequered past, having been convicted in the 1990s for trafficking in heroin. He lives a lavish lifestyle in a luxury apartment flat in London on which he spends £40,000 monthly. Mr. Timis’s income tax payment for 2017 was a mere £35.20 and there is no evidence that he paid any taxes for 2016. He is alleged to be involved in tax evasion, having received dividends from his secret off-shore trust and converted them into loans via a backdated loan agreement.
Mr. Timis is also alleged to enjoy a close relationship with Mr. Aliou Sall, the brother of the Senegalese President, Macky Sall who, in his election bid, promised to deal condignly with corruption in Senegal. On assuming office, the President ordered an investigation into the granting of the two concessions to Petro-Tim. The investigation recommended that the concessions be taken back, but the President took no action in this regard.
During the period 2012 to 2017, companies linked to Mr. Timis are alleged to have paid the President’s brother a monthly consulting fee of US$25,000 as country manager, with a promise of $3 million worth of shares, should Petro-Tim be allowed to keep the concessions. This was despite the fact that Mr. Aliou Sall has no training or experience in oil and gas matters. Additionally, an amount of $250,000 purportedly representing the payment of taxes to the Senegalese government by Timis’s off-shore trust, was instead paid into the bank account of a company owned by Mr. Aliou Sall.
Mr. Timis did not have the wherewithal to undertake the exploration work on the two concessions. It was therefore not surprising that in 2014, an American oil company, Kosmos Energy, agreed to finance the exploration and to provide funds to Mr. Timis to help him the develop the blocks. The exploration resulted in the discovery of a major oil field. In April 2017, the UK oil giant British Petroleum (BP) bought out Timis’s interest in the concessions for $250 million with an agreement to pay Timis between $10 billion and $12 billion in royalties over a 40-year period. BP is also aware of the relationship between Mr. Aliou Sall and the President.
The BP scandal is reminiscent of what took place in Guyana just days before the May 2015 national and regional elections. The previous Administration had granted exploration licences to four unknown companies – JHI Associates Inc., Mid-Atlantic Oil and Gas Inc. (MOGI), Ratio Energy Ltd. and Ratio Guyana Ltd. – in the Kaieteur and Canje blocks covering 4.8 million acres. These blocks are adjacent to ExxonMobil’s 6.6 million Stabroek block that contain more than 5.5 billion barrels of recoverable crude oil.
JHI was incorporated in June 2015 in the British Virgin Islands, a known tax and potential money-laundering haven. This meant that the company was not in existence at the time when the licence was granted to it. Ratio Energy Ltd. and Ratio Guyana Ltd. were incorporated in April 2015 in Gibraltar, also a known tax and money-laundering haven while MOGI was incorporated in April 2013. From all indications, these companies are small and do not have the technical and financial capacity to carry out exploration activities. According to the Guyana EITI report for 2017, only MOGI and Ratio Guyana Ltd participated in the EITI process but did not submit audited financial statements, and only MOGI submitted information on beneficial ownership. The Report also indicated that EEPGL, one of Exxon’s three subsidiaries awarded the concessions in the Stabroek Block, has 35 percent and 50 percent equity interest in the Canje and Kaieteur blocks respectively. The State Assets Recovery Agency has launched an investigation into the granting of exploration licences to these four companies.
Now for today’s article. On 15 May 2019, the National Assembly approved of certain amendments to Procurement Act 2003 mainly to provide for small businesses to be given preferential treatment as specified in the Small Business Act 2004. In today’s article, we discuss these amendments. Efforts to access a copy of the amendments via the Ministry of Finance and Parliament’s websites were unsuccessful. We therefore compile this article from the various news reports in the print media.
Applicability of the Procurement Act
The Procurement Act applies to all procurement except those relating to national defence or national security. A new Section 3A has now been inserted requiring procuring entities to acquire goods, services and works only from small businesses approved under the Small Business Act 2004. To give effect to this requirement, the Minister, with the advice of the Public Procurement Commission or the National Board, is required to make the necessary regulations.
In our article of 24 December 2018, we outlined the requirements of the Small Business Act, in particular, Section 11 which provides for the Government to use its best endeavours to ensure that at least 20 percent of the procurement of goods/services and works required annually are obtained from small businesses. Procurement is to be based on competitive bidding and in accordance with the provisions of the Procurement Act and its related Regulations.
We had stated that there is no provision in the Procurement Act that allows for preference to be given to a particular group of suppliers or contractors and that it would be necessary for the appropriate amendment to be made to the Act to give effect to the requirements of the Small Business Act. With the insertion of Section 3A to the Principal Act, the inconsistency between these two pieces of legislation has now been resolved.
General provisions
Section 4 of the Procurement Act deals mainly with qualifications of suppliers and contractors, prequalification proceedings, and participation of suppliers and contractors. A new Section 4A has been inserted requiring procuring entities to maintain a register of bidders to enable them to identify suppliers and contractors who are suitable to participate in the procurement proceedings. All suppliers and contractors are now required to apply to be part of that register at least seven days before they intend to participate in procurement proceedings.
A new Section 11A has also been inserted requiring procuring entities to submit procurement plans to the Public Procurement Commission (PPC) in support of their budgetary allocations. It is not clear what action the PPC will take on the receipt of such plans, considering that its mandate is to monitor public procurement and related procedures to ensure that goods, services and works are acquired in a ‘fair, equitable, transparent, competitive and cost-effective manner…’
In our article of 6 May 2018, we emphasised that procurement plans are not mere shopping lists of items required or services needed. Rather, they must be based on precise and concise technical specifications of items, detailed enough to enable individual items to be costed using the latest available estimates of costs to arrive at the dollar value to be reflected in the budget. In this regard, the NPTAB should prepare a template, approved by the PPC, to be used by procuring entities in developing their procurement plans. The Guyana Power and Light Inc.’s procurement plan could be a useful starting point in developing the template.
Procurement plans should be phased at least on a quarterly basis and reflect the categorization of items by authority levels and limits – Ministerial/Departmental Tender Board, Regional Tender Board, NPTAB and the Cabinet. Additionally, the plans should be approved centrally by the NPTAB, and placed on the websites of the procuring entities and the NPTAB. This will alert prospective suppliers and contractors of the procurement requirements of procuring entities so that they can prepare themselves well in advance to offer their goods, services and works.
Restricted tendering
Section 26 of the Act sets out two criteria for the application of the restricted tender approach to procurement: (i) where goods, services or works are of a specialized and highly complex nature and are only available from a few suppliers or contractors; and (ii) where the estimated cost is below the threshold set out in the Regulations. Schedule 2 of the Regulations has placed a threshold of $1 million for goods and services (other than consulting services), and $5 million for the execution of works. Suppliers and contractors who meet these requirements are contacted directly and invited to submit tenders. All the other procedures, such as tender opening, technical assessment and award based on the lowest evaluated tender, must be followed.
In our article of 28 July 2018, we referred to the award of contracts for the procurement of drugs and medical supplies from ANSA McAl and HDM Labs in the amounts of $605 million and $367 million respectively, based on the restricted tendering approach. We made it clear that these awards were in breach of the Procurement Regulations and by extension the Procurement Act, since they exceeded the threshold of $1 million set by the Regulations.
Section 26 has now been amended to provide for suppliers and contractors to meet one of the two criteria and not both, through the insertion of the work “or” between the two above-mentioned requirements. This means that there is now no dollar value limit where the goods, services or works are of a highly complex and specialized nature available only from a limited number of suppliers and contractors. However, to avoid possible abuses and/or manipulations, the NPTAB should approve the list of all suppliers and contractors that satisfy the first criterion.
Conclusion
The Procurement Act was passed some 16 years ago without any effort being made to review its provisions in the light of developments over the years. The amendments are therefore to be welcomed. However, more needs to be done, especially in the light of the discovery of significant amounts of oil resources off Guyana’s coast and increasing calls for transparency in the award of concessions for the exploration and extraction of oil and gas. The Minister of Finance has indicated that a more comprehensive effort aimed at reforming our procurement legislation, is in the works. Meanwhile, we look forward to development and publication of the Regulations to give effect to the amendments to the Act.
