Legal battle over award of huge tender for medical air
Action has been filed in the Supreme Court against a large Health Ministry tender to supply medical air, which is used in ventilators, incubators and for administering anaesthesia in public hospitals.
It is the latest Government tender to run into controversy over allegations of bid- rigging. The contract is to supply, deliver and unload medical air as well as provide maintenance services for the storage of gas and gases in liquefied form. It was awarded earlier this year to Gas World (Pvt) Ltd, an associate company of Industrial Gases (Pvt) Ltd.
There were only two applicants. The selection is being challenged by the unsuccessful bidder, Ceylon Oxygen Ltd, on several grounds including “ambiguous and obvious vagueness associated with the terms and conditions” of the tender document that was not clarified despite being questioned by the petitioner.
The petitioner Ceylon Oxygen used the Right to Information Act (RTI) to obtain records to support its case in the Supreme Court. It contends that the entire tender document was prepared in an ambiguous and vague manner for the ministry procurement committee (MPC) and technical evaluation committee (TEC) to retain a certain degree of discretion and flexibility in the evaluation of bids. It also says it was “crystal clear from the outset” that the process was designed to unduly and illegally favour and award the tender to Gas World.
The majority shareholding of Ceylon Oxygen is the Munichheadquartered Linde Group. Gas World is the recently incorporated medical arm of Industrial Gases Ltd, newcomers to the medical gases industry in Sri Lanka.
The petition cites 50 respondents, including Health Minister Rajitha Senaratne, Health Ministry Secretary Jagath Sugathadasa and the Directors and Medical Health Officers of 32 hospitals. The first respondent is Gas World.
The petitioner says it has provided medical gases to the Health Ministry for more than 80 years. It questions the capacity and quality controls of the winning bidder, Gas World. “...the effects and drastic consequences of procuring medical gases (most notably oxygen) from untested suppliers were illustrated in the recent medical disaster in India where more than 60 children lost their lives”, the petition states.
This refers to the Gorakhpur tragedy in August this year where at least 60 children died over five days at a State-run hospital due to infections and the possible disruption of oxygen supply in the paediatric ward. The hospital and district administration rejected oxygen shortage as a reason.
Given the dengue epidemic in Sri Lanka, the petition observes, “the effects of inferior and/ or short supply of medical gases such as oxygen will pave the way for a national disaster of epic proportions especially where the selected supplier does not even meet the specified technical specifications/ requirements and whose capacity and safety methodologies largely remain untested”.
With the limited information disclosed in the tender document, Ceylon Oxygen submitted a bid. In April this year, it was informed the MPC decided to award 32 hospitals to the lowest responsive bidder-the first respondent, Gas World. The petitioner’s bid was not considered due to the quoted prices being higher than the recommended bidder’s offer.
Ceylon Oxygen is challenging the award on the grounds that, among other things, clarifications it sought which had a direct impact on price were not addressed by the TEC. It says the tender document and evaluation of bids were also not in accordance with the 2006 Government guidelines for procurement of pharmaceuticals and medical devices.
From records secured through RTI, the petitioner found that Gas World had not submitted a good manufacturing practices ( GMP) certification or GMP site inspection report with its bid. The MPC or TEC had then exceeded its mandate and obtained letters from the National Medicines Regulatory Authority and the Director of the Kurunegala Teaching Hospital in support of the first respondent, thereby demonstrating “pre-determination and blatant bias”.
A review of the first respondent’s bidding document, meanwhile, indicated that Gas World did not meet the technical specifications or requirements contained in a section of the tender document. As a result, Ceylon Oxygen wrote in August to the Health Ministry Secretary requesting an investigation and a suspension of the award of the tender considering “serious lapses and non-compliances that could result in serious negative consequences with regard to patient safety”. This was not done.
The petition reveals that two anesthetists on the TEC have disagreed with the selection of the first respondent on several grounds. This includes doubts over whether the company could meet island- wide medical gas requirements (going by its production, storage capacity and distribution fleet) and the non-availability of backup which is critical in times of unanticipated events leading to a breakdown.
While the petitioner made its case to the Health Ministry’s procurement appeals committee ( PAC), it “did not find any valid substance to reject the recommended bidder”. The committee comprises all the members of the MPC and a majority of the TEC, “in violation of the requirement of impartiality and the principle of natural justice”.
The matter was taken up for support this week. The first respondent, Gas World, moved the Supreme Court to file limited objections to petitioner Ceylon Oxygen’s application for granting of leave. Gas World's counsel claimed the petitioner had misrepresented facts by stating its majority ownership is held with the Linde Group. The truth is that sole ownership is with Linde, he said, and foreigners do not have a right to fundamental rights petitions.
Gas World was directed to file its limited objections by October 12, while the petitioner’s reply is to be filed on or before October 16. The matter was formally re- fixed for support on October 24.