In face of failed contracts… Goolsarran plugs need for adherence to performance bonds

The Public Procurement Commission (PPC) has a role in ensuring that the National Procurement and Tender Administration Board (NPTAB) and procuring entities adhere to guidelines of the Standard Bidding Document that performance bonds’ requirements are met and other documents are produced before a contract is awarded.

So said former Auditor General Anand Goolsarran in the wake of Parliament’s Public Accounts Committee (PAC) unearthing a series of flaws with contracts, including no performance bond, and the full contract sum being paid before goods were delivered.

“The PPC also has a role to play in terms of evaluating the effectiveness of the procurement procedures and in carrying out whatever tests as are considered necessary to ensure that procuring entities and the respective tender boards, including the NPTAB, discharge their responsibilities fully and faithfully in terms of compliance with these procedures,” Goolsarran said.

Recently, the PAC revealed that some $19.1 million were paid in full to the United States-based company MoonBlink to procure security cameras, but no bond was in place to guarantee that the contractor would fulfil its end of the deal. In the end, the company declared bankruptcy and government is now looking at how it can pursue litigation to recover the money.

In another instance, a vehicle procured for the Prime Minister, at a cost pegged at $13.8 million was paid for up front, not once but twice, and the agency had to wait for eight months before the vehicle was collected.

In another instance noted in the Auditor General’s report, $11.679 million of an allocated $12 million were spent on fencing and the installation of perimeter lights at Building E, Castellani Compound, where the National Intelligence Centre is based. After physical measurements were taken, it was discovered that the total overpayments amounted to $2,307,700.

Rush

Goolsarran believes that in the rush to exhaust budgetary allocations for respective years, procuring agencies make blunders and these are not picked up until audits or checking of accounts are done. “Budgetary allocations lapse on 31 December every year, and all unspent balances have to be returned to the Consolidated Fund. This is a requirement of the Constitution and the FMA [Fiscal Management and Accountability] Act,” he said.

“… If one were to examine the payment for goods/services and the execution of works close to the end of the year, in particular on 31 December, one cannot help but conclude that in many instances the payments were made to exhaust budgetary allocations; value was not received at the time the payments were made; and those responsible for monitoring the transactions merely pay passing interest since they become preoccupied with the current year’s transactions, hence the various discrepancies uncovered by the Audit Office during the audit,” he added.

He said that while the Procurement Act does not specify the circumstances under which bonds are required it makes reference to the bonds in the Act.

“Section 37(2) (iii) refers to certain actions to be taken by the procuring entity (ministry, department or region) for, among others, the failure by a contractor to provide a required performance bond for the performance of the contract after the tender has been accepted; Section 37(3) (c) refers to conditions under which a tender security is to be released, one of which is the entry into force of a contract and the provision of a security for the performance of the contract, if such a security is required by the solicitation documents; and Section 42 states that ‘Upon the entry into force of the contract and, if required by the tender documents, the provision by the supplier or contractor of a security or performance bond for the performance of the contract…” Goolsarran noted.

The former Auditor General noted too that the law also caters, with the advice of the NPTAB or the PPC, that the Minister may make regulations for the administration of the Act.

According to the Act, the Regulations were made on 25 November 2004 and stated that the NPTAB was to create a website for the purpose of giving publicity to the award of contracts and to disseminate information about public procurement.

Also, that pending the establishment of the PPC, the NPTAB was supposed to prepare and make available on its website and through dissemination of hard copies to procuring entities, various documents to be used in the procurement process, including standard bidding documents; and that tender security is required for contracts for goods/services in excess of $3 million and for construction in excess of $15 million.

Checks of the NPTAB’s website by this newspaper show that it does contain standard bidding document guidelines.

A review of these documents indicates that there is a requirement for the submission of a performance security within seven days of the award of the contract in the sum not exceeding 10% of the bid price.

The standard bidding documents contain penalties for non-performance as per rates prescribed for liquidated damages as well as provision for retention of 10% of the contract sum to correct possible defects during the defects liability period. It also make provision for all mobilization advances, advance payments, to be covered by bank guarantees.

Goolsarran noted that the NPTAB was also 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.

Responsible

Further, he pointed out that pending the establishment of the PPC, the NPTAB was also responsible for making regulations governing procurement to carry out the provisions of the Procurement Act. This included determining the forms of documents for procurement, including but not limited to, standard bidding documents; prequalification documents; contracts; evaluation forms; and procurement manuals, guidelines, and procedures.

Also, the NPTAB was responsible for organizing training seminars regarding procurements; reporting annually to the minister on the effectiveness of the procurement processes, and recommending any amendment to the Act that may be necessary to improve the effectiveness of the procurement process.

The PPC is still awaiting staffing and it

is unclear when it will begin working as it should. Its Chairman Carol Corbin had told Stabroek News that the commission would wait for the NPTAB to complete its training and programmes before it took over those responsibilities.

Goolsarran said given the fact that the Procurement Act places the burden on the procuring entity for ensuring that the resources of the state are adequately protected against non-performance and unsatisfactory performance by suppliers and contractors, they have to be held accountable.

“This is done through strict adherence to the Act and its Regulations in relation to the grant of mobilization advances to contractors, advance payments to suppliers for goods and services, unsatisfactory performance in executing the contract, unjustified delays, and defective work performed. The NPTAB adjudicates on the award of contracts exceeding the limits set for the ministerial, departmental and regional tender boards. It also provides the necessary oversight of the procurement process by ensuring that: (a) invitations to bid conform to the standard bidding documents and the related guidance provided; and (b) contracts provide for the necessary safeguards so as to protect the interest of the state,” he stated.

He said that should the state suffer a financial loss, as a result of the failure to strictly follow the requirements of the Procurement Act and its Regulations, the responsible officer, including a minister, is personally liable for the loss.

Quoting excerpts from the Procurement Act, Goolsarran added that the liability does not cease if the minister is no longer in the said position.

“Where the misconduct or disregard of the person is not the sole cause of the loss, the person shall be liable to pay only so much of the loss as is just and equitable having regard to the person’s share of the responsibility for the loss,” he read

“If a loss of public moneys should occur and, at the time of that loss, a minister or official had nominal custody of such moneys, that minister or official shall be personally liable to the government for the amount of the loss. A person’s liability is not terminated or avoided upon that person ceasing to be a minister or official,” he added.