The Inter-American Development Bank recently released its latest quarterly economic review in which it warned that Guyana’s macroeconomic outlook is highly uncertain, given the impact of ‘persistent geopolitical tensions on oil prices’. It stated that oil shocks can lead to the risk of being inflected by the Dutch disease and with the influx of oil revenues, caution needs to be exercised against excessive government spending. As a result, there is a need for having in place strong institutions to ensure that oil revenues are properly and transparently managed. The Bank further stated that Guyana still produces 90 percent of its energy from imported oil, which can have a negative impact on the economy.
These are strong words of caution which the Authorities need to seriously reflect on and act accordingly. We note that legislation for the establishment of a Petroleum Commission is still in draft although it was prepared nine years ago. That draft legislation provides ‘for monitoring and regulating the efficient, safe, effective and environmentally responsible exploration, development and production of petroleum in Guyana’. The related Bill, suitably amended to, among others, address the over-concentration of powers in the hands of the Minister of Natural Resources, should be re-tabled in the National Assembly as a matter of urgency. Given the importance of this legislation, it should also be referred to a Special Select Committee for detailed review, and key stakeholders invited to offer inputs.
As regards Guyana almost exclusive dependence on imported oil, it would be of interest to learn of the extent of the net benefit, if any, that has so far been derived since crude oil production began in 2020, considering that we sell our share of production on the world market while at the same time we buy refined oil to meet our energy needs.Perhaps, the Guyana Energy Agency can provide information on oil imports over the last six years in terms of quantities and prices paid.
In last week’s article, we began a discussion of Guyana’s public procurement system in the light of concerns raised by key stakeholders about its lack of effective functioning, resulting in all sorts of irregularities. We traced the development of our procurement system over the years that culminated in the constitutional amendment of 2001 providing for the establishment of the Public Procurement Commission (PPC) and the passing of the Procurement Act of 2003.
In today’s article, we conclude our coverage of the subject by highlighting the key provisions of the Procurement Act.
Brief background
The Procurement Act replaces the Tender Board Regulations which had been in force since 1992 and earlier years. In several of the Auditor General’s reports going back to the early 1990s, the lack of effective functioning of the Central Tender Board was drawn to attention, especially as regards record keeping and filing as well as the absence of minutes of the Tender Board meetings. Recommendations had been made for a complete reorganization of the Board. It, however, took almost a decade for legislation to be enacted in June 2003. The earlier legislation of 2002 was repealed.
Key provisions of the Act
The main purpose of the Act is to regulate the procurement of goods, services and execution of works to promote competition among suppliers and contractors as well as transparency and fairness in the procurement process. Key elements include: (i) qualifications of suppliers and contractors; (ii) various forms of tendering, the most important being the open tender; (iii) procedures for assessing bids; (iv) award of contracts to the lowest evaluated bidder; (v) establishment of the various tender boards, including the National Procurement and Tender Administration Board (NPTAB) for the evaluation of bids above certain amounts; and (vi) the Cabinet’s review of contracts in excess of a certain amount.
Qualifications of suppliers and contractors
Two key qualification requirements for suppliers and contractors desirous of bidding for government contracts are: (i) they must have technical competence or access to such competence, financial resources, equipment and other physical facilities, managerial capability, reliability, experience and reputation, and personnel to perform the contract; and (ii) a track record of satisfactory past performance in relation to the supply of similar goods/services or the execution of works, as the case may be. These are in addition to certain specific requirements set out in the bidding documents.
Over the years, there was evidence that contracts were awarded to suppliers and contractors who did not meet the qualifications requirements, especially as regards relevant experience for the works to be undertaken. This had resulted in significant delays, cost overruns, defective works performed, and overpayments, among others. In some cases, contracts were terminated, and the related works re-advertised at significant additional cost to the State.
Prohibition of contract-splitting
Section 14 of the Act prohibits contract-splitting to avoid adjudication by higher authority levels and/or circumvention of the application of open tendering. Despite this, over the years, contract-splitting has been a source of concern, especially by the Guyana Defence Force, the Police and the Supreme Court of Judicature.
Establishment of the NPTAB
Section 16 of the Act provides for the establishment of the NPTAB with reporting relationship to the Minister of Finance. It is to comprise of seven members appointed by the Minister from among persons of ‘unquestioned integrity who have capacity in business, law, audit, finance and administration’: not more than five from the Public Service, and not more than three from the private sector after consultation with their representative organisations. Two members are to serve on a full-time basis, with the Minister appointing the Chairperson from one of the full-time members. Their tenure of office is restricted to two years, and there is no provision for the renewal of appointment. This is unlike the case of the PPC where members of the Commission are to serve for a period of three years and can be appointed for another term not earlier than three years after the end their first term. Four members of the NPTAB, including the Chairperson, constitute a quorum, with the Chairperson having a casting vote.
The current members of the NPTAB have been in place since 2020 when there was a change in Administration. However, there is no publicly available evidence to suggest that they were re-appointed at the end of their term of office in 2022 and 2024, in which case this would have been contrary to the requirements of the Act. Unless there is a justifiable explanation, these persons’ continuation in office beyond 2022 would appear to lack legal support.
The Chairperson also holds a senior position at the Ministry of Finance responsible for monitoring the Government’s infrastructure development works. He therefore holds two full-time positions. When he was appointed in 2020, the Minister of Public Works, who presented the 2020 Estimates of Revenue and Expenditure, had stated that the appointment was a temporary one. That apart, concerns have been expressed about a potential conflict of interest since the Chairperson is in a unique position to influence the award of contract to persons/entities who/that can expedite the execution of the works without due regard to factors such as qualifications, experience and proven track record, among others, especially since he has a casting vote.
Considering the above, the selection of members of the NPTAB, their appointment and the Chairperson’s reporting relationship provide little comfort that this important body charged with the responsibility of approving the award of major contracts can act independently and without interference and/or influence from the Government.
Appointment of Evaluation Committees
The Act also provides for the assessment of bids to be undertaken by three-person Evaluation Committees appointed by the NPTAB to determine which bidders have submitted the lowest evaluated bids. It is the responsibility of the NPTAB to scrutinise the evaluation reports to ensure that the recommendations of the Committees can stand the test of independent scrutiny before approving contract awards. The NPTAB cannot escape this responsibility by attributing blame on a Committee when an improper award is made. That apart, the names of the evaluators and their professional and technical backgrounds are not publicly known. It would be desirable for another independent body, such as the PPC or the Public Accounts Committee, to be responsible for appointing Evaluators, and their names and professional backgrounds made public.
Lowest bid and lowest evaluated bid
Over the years, there was evidence of contracts not being awarded to the lowest evaluated bids. The lowest bid is not necessarily the lowest evaluated bid in that all the evaluation criteria outlined in the bidding documents, including qualifications, experience, financial capability and price, among others, have to be quantified using a points system to determine the lowest evaluated bid.
Cabinet’s involvement in the procurement process
In accordance with Section 54, the Cabinet has the right to review all procurements in excess of G$15 million using a streamlined evaluation report submitted by the procuring entity. It may object to the award of a contract only if the procuring entity failed to comply with the applicable procurement procedures. Additionally, the Cabinet and the PPC were to review annually the above threshold with a view to increasing it over time and progressively phasing out the Cabinet’s involvement in favour of decentralized process.
The Cabinet’s involvement in the procurement process was to have ceased upon the constitution of the PPC, a constitutionally mandated oversight body. However, it took 15 years for the Commission to be activated through the appointment of its members. This was due mainly to the reluctance of Cabinet to surrender its role in the procurement process, a practice that still continues to date. At the moment, there are no Commissioners since the tenure of office of the previous Commission ended more than a year ago.
Conclusion
Is our public procurement broken? The constitutional amendments of 2001 provide for a public procurement oversight mechanism to ensure that the procurement of goods and services and the execution of works are conducted in a fair, equitable, transparent, competitive and cost-effective manner. However, this mechanism was circumvented for more than 16 out of 25 years through the non-activation of the PPC. Additionally, during its period of activation, the way members were selected provided no comfort that the interest of the public was being protected. In all of this, a significant gap in procurement oversight remains.
Several deficiencies can be identified in relation to the Procurement Act, including the composition of members of the NPTAB, the Minister of Finance’s involvement in the selection and appointment of its members as well as the Chairperson, and the selection of the pool of evaluators. Additionally, there were several instances of non-adherence to the requirements of the Act, the most significant being the failure of the Cabinet to surrender its role in the procurement process.
Yes, our public procurement is broken and needs to be fixed so that the public can have confidence that an effective mechanism is in place to ensure that the best value for money is achieved for the acquisition of goods and services, and the execution of works. An independent and effective PPC, free of political interference, is indispensable to ensure that this is so. A comprehensive review of the Procurement Act to identify weaknesses and to strengthen its provisions will be a welcome initiative.
Finally, we can have the best of laws, rules and regulations but if persons appointed to administer them are politically tainted and/or easily malleable to political influence, this will have negating influence. Unfortunately, there is strong evidence of this being the case in several areas of the operations of the Government.
Discussion