Hurricane Helene that hit the southeastern part of the United States has so far claimed the lives of at least 226 persons while hundreds remain unaccounted for, as of last Friday. The damage is estimated at more than US$150 billion. Hundreds of roads remain closed, thereby hindering the delivery of much-needed supplies. Additionally, over 500,000 consumers are still without power. Helene was the second fiercest hurricane in the last 50 years in terms of its impact, the first being Hurricane Katrina in 2005 that resulted in the deaths of more than 1,800 people. The devastating impact of the hurricane was due mainly to climate change that causes ocean temperature to rise. According to scientists, for every one-degree Celsius temperature increase in the atmosphere, there is a seven percent chance of more moisture in the air which means more rainfall. It has long been established that global warming is the key driver of climate change caused mainly by the extraction and burning of fossil fuels.
During a recent interview with the New York Times, President Infaan Ali acknowledged that the 2016 Petroleum Sharing Agreement (PSA) between ExxonMobil’s subsidiaries and the Government of Guyana is heavily weighted in favour of the US oil giant. The Agreement provides for, among others: (i) the payment of a mere two percent royalty on production; (ii) a deduction of 75 percent of the value of crude oil produced to cover Exxon’s cost of operation (cost oil), while the balance (profit oil) to be shared equally between Exxon and the Government; (iii) the recognition of pre-contract costs of US$460 million covering the period 1999 to 2015 as recoverable costs; (iv) absence of ring-fencing provisions; and (v) generous tax concessions that include the requirement for the Government to discharge Exxon’s tax liabilities from its share of profit oil. In contrast, Suriname’s PSA with TotalEnergies provides for: (i) 6.25 percent royalty on production; (ii) profit split based on a certain formula that ensures “the higher the oil price the better” for Suriname, but the lower the oil price the contractor “gets protected”; (iii) a tax rate of 36 percent; and (iv) non-recoverability of pre-contract costs and interest on loans for the purpose of determining the value of cost oil.
It is unfortunate that the President continues to insist that the Government would not interfere with the PSA with Exxon on the ground that it will destroy the “sanctity of contract”. No one is suggesting that we should not honour the terms and conditions of the Agreement, and attempts at renegotiation do not in any way adversely affect the PSA currently in force. Once renegotiation is successful, the contract is amended, and all parties are bound by the amendment. If renegotiation proves unsuccessful, then we will have to live with the existing contract. But at least we should make an honest and genuine attempt at trying. Over the years, Trinidad and Tobago has successfully re-negotiated several of its oil contracts.
On several occasions we have had cause to refer to Article 31.2 of the Agreement which states that the PSA can be amended or modified with the written consent of all the parties to the Agreement. That apart, the PPP/C 2020 election manifesto specifically states that if the party wins the elections, it will renegotiate the Agreement. The relevant part reads as follows:
Even the lead Government Minister [under the APNU-AFC Administration] responsible for the sector, has admitted that in retrospect Guyana got a bad deal…To ensure that oil resources [are] managed responsibly, the PPP/C will: Immediately engage oil and gas companies in better contract management/re-negotiation….
One wonders how many persons from the electorate might have been influenced by the above statement in deciding which political party they would support in the 2020 elections.
In a recent column titled “Supplier Diversity”, former Speaker of the National Assembly and Chairman of the 1999 Constitution Reform Commission, Mr. Ralph Ramkarran S.C., argued for a law-based programme of supplier diversity in Guyana has become necessary in view of the significant expansion of public procurement and having regard to the country’s ethnic diversity. According to the former Speaker, an entrenched, law-based, programme of supplier diversity does not exist in developing countries such as Guyana, compared with the United States and some countries in Europe. In the United States, these programmes generally exist in large companies. However, the Federal Government and many States have passed laws that provide for supplier diversity in their own procurement practices.
Mr. Ramkarran referred to the establishment of the Public Procurement Commission (PPC) by the constitutional amendment of 2001 and the difficulties to have that body operationalized. This prompted former President Donald Ramotar to pen his version of events in a letter to the editor last Thursday. In today’s article, we discuss Mr. Ramkarran’s proposal for a law-based supplier diversity.
Situation prior to the 2001 constitutional amendments
According to the former Speaker, supplier diversity was not a major issue for Guyana in the pre-1992 years, given the relatively modest size of government at the time. With the restoration of democracy and the resolution of Guyana’s debt crisis in the early 1990s, there were large financial inflows from the international financial institutions, such as the Inter-American Development Bank and the World Bank, in an attempt to spur economic growth. The resulting significant increase in government spending on goods and services and infrastructure development gave rise to allegations of not only corruption but also discrimination.
It must be stated the two main political parties – the PPP/C and the APNU – derive their support overwhelmingly from the two major ethnic groups in the country. Over the years, whichever political party held the reins of power and considering “the winner takes all” approach to managing the affairs of the State, there have always been allegations of discrimination, especially based on ethnicity in the areas of government hiring and public procurement. In such a situation, whichever of the two political parties held the reins of power, supporters of the other party would feel discriminated against and marginalized. It happened during 1968-1992 when the PNC rigged the elections to remain in power, and it continued albeit to a lesser extent in the post-1992 period. Those who lived through the earlier period know what it felt like in being marginalized and discriminated against.
A particular area of concern was, and still is, is the tendency to reward individuals and businesses for their support, financially and otherwise, in the run-up to elections, especially in the award of government contracts for the provision of goods and services and the execution of infrastructure development works. This was despite the constitutional amendment of 2001 providing for the establishment of the PPC and the passing of the Procurement Act 2003. In the post-1992 period, the two main political parties held the reins of power for 27 and five years, respectively. It is therefore reasonable to consider that in relation to the former’s tenure, there were more allegations of not only discrimination but also corruption, compared with the latter.
Establishment of the Public Procurement Commission
By the time the Constitution Reform Commission was established, allegations of corruption in public procurement became a central issue. For example, in the 1999 Auditor General’s report, I had cause to refer to my previous reports in which I bemoaned the lack of progress in reforming the procurement system. I had recommended that the operations of the then Central Tender Board (CTB), the predecessor of the National Procurement and Tender Administration Board, be urgently reviewed to remove government control of this important procurement body, by including in its membership representatives of the professional engineering bodies, trade unions, the Consumers’ Association and the University of Guyana. My specific comments were:
The tender documents relating to the award of a significant number of contracts by the CTB were not made available during the audit. The minutes kept of meetings held were also found to be deficient. As a result, the basis of the award of these contracts could not be determined.
There were significant breaches in the Tender Board Regulations at the Guyana Defence Force, including the absence of a system of competitive bidding and numerous instances of contract-splitting to avoid adjudication by the CTB. In addition, the involvement of the Departmental Tender Board appeared to be mere cosmetic to facilitate payments by the Sub-Treasury. Similar observations were made at the Supreme Court.
The Ministerial Tender Board at the Ministry of Home Affairs functioned only in the last month of 1999. As a result, the basis of the award of most contracts entered into for goods and services and for works falling within the limits of $180,000 and $600,000 and $450,000 and $900,000 respectively, could not be determined.
In relation to the Ministry of Public Works, a number of irregularities were uncovered mainly in relation to building contracts. An official of the Ministry was in collusion with certain contractors, and in a number of cases there were overpayments on the contracts. The bridge at Mandela Avenue was also poorly constructed, resulting in a final construction cost of approximately $25 million, including rectification costs.
According to Mr. Ramkarran, the demands to reform the procurement system were largely resisted, and there were visible signs of corruption so much so that the Constitution Reform Commission was forced to recommend the establishment of a Procurement Commission to monitor procurement and the related procedures to ensure that the procurement of goods, services and the execution of works are conducted in a fair, equitable, transparent and cost-effective manner. I recall meeting with Dr. Roopnaraine and one other member of the Commission to discuss the strengthening the role of the Auditor General. At that meeting, I also raised concerns about the functioning of the entire procurement process and the failure of the Authorities to address the issue and to implement the recommendations I had made.
Soon after the approval of constitutional amendment, the Government began to resist all attempts to appoint the members of the Commission, and it was not until 16 years later, under the Granger Administration, that the first members were appointed. One of the requirements is for the Cabinet to surrender its role in the procurement process, which many believe was the main reason for the resistance shown. To date, the Cabinet’s involvement in the process remains intact.
Need for supplier diversity
Mr. Ramkarran expressed the view that, with the opening up of the economy, Indo-Guyanese were better positioned to take advantage of the vastly expanding procurement activity of government, compared with Afro-Guyanese. The latter, comprising the second largest ethnic group, continued to dominate the administrative and professional sectors. They were, however, placed in a serious position of disadvantage economically with the reduction of the State sector that had comprised 80-90 percent of the economy in the pre-1992 period.
Mr. Ramkarran further argued that, while representation was made from time to time to provide opportunities for Afro-Guyanese to be more involved in public procurement activities, there was no demand for a structured approach to address the issue, especially as regards a law-based system to ensure supplier diversity. He referred to other countries where this was done without compromising on standards.
The former Speaker, however, acknowledged that there may be resistance to this approach as in the case of the establishment of the PPC, but this is no reason for not pressing home the case:
It is in the interest of Guyana that all sectors of the populations, regardless of their history, capacity or location, be given the opportunity to participate in all business, procurement and supplier activity if they so wish. It is the duty and responsibility of the State to facilitate by legal and material means the equitable allocation of opportunity.
We cannot agree more with the above sentiments.
