In last week’s article, we began a discussion of the Public Procurement Commission’s (PPC) summary report on the award of the contract to Tepui Group in the sum of $865.5 million for the construction of a sluice and pump station at Belle Vue, West Bank Demerara. Tepui Group was not only the third lowest responsive bid but also lacked the requisite experience stipulated in the bidding documents. The company was formed in August 2022, while the invitation to tender for the works was advertised in May 2023.
So far, we have discussed the PPC’s assessment of the evaluation criteria relating to the bidder’s experience. This required the bidder to ‘demonstrate specific construction experience by providing copies of contracts with previous clients that show the bidder has completed one (1) project of similar nature within the past five (5) years. (Similar projects shall include pump stations, sluices and drainage structures)’. The National Procurement and Tender Administration Board (NPTAB) argued that the decisions regarding the bid evaluation were consistent with past practices, where ‘leniency was extended to bidders lacking direct pump station construction experience but demonstrating proficiency in similar projects’.
In rejecting NPTAB’s argument, the PPC stated while there may be precedent for the exercise of such professional judgment and or discretion, an Evaluation Committee should not assume such discretion onto itself but ensure that it is acting within the terms of the evaluation criteria for the specific tender being evaluated. Similarly, the procuring entity in setting the evaluation criteria should ensure that the criteria are expressed in simple, clear, and unambiguous terms.
In today’s article, we conclude our discussion of the PPC report on the award of the contract for the construction of a sluice and pump stion at Belle Vue, West Bank Demerara.
Evaluation Committee report
The Commission noted that by letter dated 27 July 2023, NPTAB requested from Tepui certain clarifications, one of which relates to the evaluation Committee report which was undated except for the cover page that bore the date “June 2023”. With the opening of bids on 27 June 2023, it therefore meant that the evaluation was completed in three days, assuming that the report was issued at the end of June 2023. That apart, we find it strange that NPTAB would have requested clarification after the evaluation report was issued. The PPC also commented that the report lacked analysis to indicate how the Committee arrived at its recommendation. The report merely listed the bids received, the criteria failed, and the recommendation.
Financial capacity
Bidders were required to provide evidence of financial capacity representing 30 percent of the bid price. They must provide a bank statement or a line of credit from a bank or a recognized financial institution within one month of the bid opening date. Financial capacity should cover the job being applied for as well as ongoing projects. Tepui provided a line of credit from Puran Brothers dated October 2022. Puran Brothers is, however, not a recognized financial institution. Additionally, NPTAB submitted a letter of credit dated 15 June 2023 issued by Caricom General Insurance Company Inc. which is also not a recognized financial institution within the meaning of the Financial Institutions Act. However, the Invitation to Bid (ITB) permitted acceptance of a line of credit from an insurance company, which is inconsistent with the Standard Bidding Documents.
The Commission concluded that the Evaluation Committee was bound to evaluate tenders in accordance with the evaluation criteria and not the ITB. Should there be any inconsistency between the two, the evaluation criteria must prevail.
Audited financial statements
Tepui was required to provide audited financial statements for the last financial year, certified by a Chartered Accounting firm. Since the company was only formed in August 2022, it did not complete a year in operation at the time of solicitation of bids. As a result, it was unable to meet this evaluation criterion, as acknowledged by the company. The financial standing of the company could not therefore be determined, especially as regards its assets and liabilities and the availability of funds to execute such a major project.
The Commission expressed the view that: (i) all evaluation criteria must be satisfied for a bid to be deemed responsive; (ii) failure to ensure that this so, ‘would create uncertainty, has the potential to interject unfairness in the system, undermine transparency and confidence in the evaluation’; and (iii) an Evaluation Committee should not take upon itself a discretion which is not expressly provided for in the evaluation criteria.
By way of comment, it boggles the mind that such an important criterion, that is, the financial standing of the bidder has been overlooked, thereby rendering the risk of jeopardizing the execution and completion of the project because of a lack of financial resources.
Ownership and/or possession of key equipment
Tepui was required to submit proof of ownership and possession of the required equipment to undertake the works, including agreements for the leasing of any equipment from a recognized leasing agency. However, the company did not adhere to this requirement. Additionally, Tepui’s listing of equipment did not include several key items such as hydraulic excavators, dragline or crave, pile driving hammer, dump druck, wheel tandem roller, and concrete mixers.
Bid Security
Bidders were required to submit bid security in the sum of one percent of the bid price in the form of a bank guarantee or a bid bond issued by a reputable financial institution. Tepui, however, submitted a bid security from Assuria, an insurance company which is a financial institution. The bid security was also less than the required sum by $863,450.
Contingency
There were arithmetic errors in Tepui’s bid which showed a higher bid price of $870.6 million, instead of $865.5 million. These errors were discovered by the procuring entity and not the Evaluation Committee whose responsibility was to conduct arithmetic checks as part of its evaluation. The contingency amount was fixed at $65 million and therefore the difference could not have been transferred to contingency as suggested by NPTAB. The contract was amended to reflect the higher sum.
Award to Third Lowest Responsive Bidder – Lots
Tepui’s bid was the third lowest responsive bid and not the lowest evaluated bid. In response to a request from the Commission for clarification, NPTAB stated that:
(a) National Drainage and Irrigation Authority (NDIA) advertised the construction of four new pump stations (all together) but in separate lots. Bidders were given the opportunity to bid for one or more lots. To qualify for a single lot, bidders were asked to demonstrate their equipment, financial, technical, and human resource capabilities to complete that lot.
(b) To qualify for two or more lots, bidders must demonstrate sufficient financial, technical, and human resource capacity to undertake all the lots that they proposed to bid for. Bidders were therefore qualified for lots individually and could not use the same equipment, financial, technical, and human resource capacity to qualify for additional lots.
(c) These criteria were used by the Evaluation Committee and supported by NPTAB. Tepui only demonstrated capacity (financial, equipment, technical & human resource) to undertake one lot. This meant that the company could not win the bid for a second or third or fourth lot even if it was the lowest price bidder. NPTAB supported the Evaluation Committee’s recommendation.
The Commission stated that it found the above explanations reasonable, commonsensical, logical, fair and a prudent course; and that the alternative would have resulted in one bidder receiving all four pump stations instead of four separate bidders benefiting from an award. The PPC, however, noted that the invitation to bid did not specifically state bidding was to be in lots and what chronological order the evaluation would be done. The Commission expressed the view that ‘in order to avoid uncertainty or misunderstanding and to promote transparency, the procuring entity ought to ensure that from the outset, it is clear whether the evaluation and thus award would be made in Lots or en block’.
The PPC, however, did not specifically comment on whether there has been a violation of the Procurement Act which requires that the lowest evaluated bid should be awarded the contract.
Status of Works
On 23 March 2024, the Commission carried out an inspection of the works undertaken by Tepui and noted, among others, the following:
(a) Preliminary works were completed (Survey Levels and Digital Models).
(b) Traffic Management Plans were to be published in April 2024.
(c) The contractor submitted mobilization bond of 30 percent of the contract sum and received 15 percent as mobilization advance which was the amount stipulated in the contract.
(d) Design review was completed by the consultant and approved by the procuring entity. The updated Bill of Quantities and drawings were received by the contractor on 21 March 2024.
(e) There was an addendum to the contract stipulating that: (i) equipment as well as pumps and motors would be supplied by the procuring entity; and (ii) the construction of new sluice at the project site.
According to the PPC, the Special Conditions of Contract provided for the start date of the project to be fourteen days after the signing of the contract with a completion period of 18 months thereafter. The contract was signed on 22 September 2023 and therefore the project should have commenced by 6 October 2023 with a completion date of 21 March 2025. The procuring entity acknowledged the delays in the commencement of the execution of the project, which they attributed to design review by the consultant. Accordingly, the commencement date was amended to 29 January 2024, 115 days after the original commencement date.
Recommendations
The Commission has made the following recommendations:
(a) The complainant (Mr. David Patterson) was not a bidder for the project and did not allege, demonstrate or prove to be directly affected by the tender award. Therefore, remedial recommendations to his benefit did not apply.
(b) Evaluators must strictly abide with the express terms of the evaluation criteria for the tender being evaluated.
(c) The Evaluation Committee should be very meticulous in its review of bids to ensure that they are evaluated in accordance with the evaluation criteria so that the Procurement Act is not breached.
(d) The evaluation report should give a true and complete account of the evaluation process. It must clearly set out all pertinent matters, including but not limited to, date of completion of the evaluation, analysis of the tenders, whether arithmetic checks were done and whether clarification was sought from any of the bidders and if so, the particulars thereof.
(e) Procuring entities should take care in crafting evaluation criteria to ensure that they meet the realities of the project and their intentions.
(f) Where there is inconsistency between the Instructions to Bidders and the evaluation criteria, the latter must prevail, as required by Section 39(2) of the Procurement Act.
(g) The procuring entity should strictly monitor the performance of the contract, and if the contractor is found in breach, the necessary steps, including termination if considered to be prudent, taken to ensure value for money is achieved. In light of NPTAB’s disclosure that the contractors for the other three pump stations at Jimbo, Meten Meer Zorg and Poudroyen also “lacked prior experience specifically in pump station construction” but were deemed to have “had completed a project of a similar nature” and therefore the “same leniency was applied”, this recommendation also applies to those pump stations.
(h) When tenders are being evaluated and awarded in lots, it must be clearly so stated in the Invitation for Bids.
(i) The Legislature should effect an amendment to Section 39(2) of the Procurement Act to clarify whether time runs for the completion of an evaluation from the date of opening of the tender or the date of receipt of the bids by the evaluators from the procuring entity.
(j) Legislation should be enacted to make provision for procurement breaches and the procedure therefor.
(k) Procuring entities are reminded of PPC Circular No. 8/2023 as regards their obligations and ensure compliance prior to entering into a contract award.
(i) Procuring entities should strengthen their administrative processes so as to be more responsive to requests for information from the Commission.
(m) The Tepui contract along with those of the ‘Jimbo, Meten Meer Zorg and Poudroyen’ pump stations are referred to the Auditor General for further investigation.
Our conclusion on the PPC report
As stated in last week’s article, none of the recommendations made relates to sanctions being imposed on the following:
(a) Members of the Evaluation Committee for their failure to adhere to the evaluation criteria set out in the bidding documents.
(b) Members of the NPTAB for what was clearly a dereliction of duty in relation to their responsibility for exercising effective jurisdiction over tenders above a certain value, appointing a pool of evaluators and maintaining efficient record keeping and quality assurances systems. NPTAB is not a “post office”, accepting evaluation reports without examining them to ensure that all the laid down requirements have been followed, and the determination as to the lowest evaluated bid can stand the test of independent scrutiny.
(c) The procuring entity, NDIA, which is required by Section 39 (3) of the Procurement Act to issue an advisory recommendation to the Evaluation Committee regarding which bidder should be the lowest evaluated bidder, if it does not agree with the Evaluation Committee’s determination as to the lowest evaluated bid
Should Cabinet also not be held liable? Section 54 (2) requires Cabinet to object to the award of the procurement contract if it determines that the procuring entity failed to comply with applicable procurement procedures.
On several occasions, we had stated that the chairperson of NPTAB is also the Head of the Project Cycle Management Division of the Ministry of Finance responsible for monitoring the implementation of the Public Sector Investment Programme. The official therefore holds two full-time positions and may be in a position of conflict of interest. Section 16(4) the Procurement Act specifically requires the chairperson to serve on a full-time basis.
We also expressed the view that the operations of NPTAB needs to be critically examined to ascertain to what event it is functioning without undue influence from the political directorate, especially considering that the Minister of Finance appoints the seven-person board, with the chairperson having a reporting relationship to him. Given what has taken place in relation to the Tepui and other contracts, we believe that the time has come for the Procurement Act to be amended to relieve the Minister of the responsibility for appointing members of NPTAB and vest that responsibility with the Commission or the Public Accounts Committee. And should not the Commission be vested with the responsibility of selecting evaluators?
