Good afternoon ladies and Gentlemen of the press. Thank you for coming on such short notice.
There’s a Ghanaian saying which goes like” Obaa a onim s3 onky3 wo aware ase no, otu bankye aa, ondua” akin to saying literally; that a lady whose days in her marital home are numbered, does not bother to re-plant uprooted cassava.
We called you here today because weare extremely worried by a sudden mad rush in awarding sole sourced contracts. Before the Public Procurement Authority this week are a tall list of contracts which various Ministries, Departments and Agencies are seeking approval of the PPA to award them without competitive tender.
Since 2003, there is clear Act of Parliament that was passed to govern the award of public procurement transactions with the ultimate view of tackling corruption and achieving value for money. It is the Public Procurement Act, 2003, (Act 663). However, there has been a deliberate, consistent and dangerous unofficial policy to disregard the tenets of the public procurement law in recent years.
As we stated in a publication a month ago, a study done by DI discovered that the national coffers were being critically abused through sole sourcing. Our findings indicated that an estimated 65% savings could have been made if contracts awarded that way were rather subjected to competitive tendering. Our researchers painstakingly undertook due diligence on a number of public procurement contracts awarded on either sole sourcing or restrictive tender basis since 2010, involving over GH¢12 billion (US$2.96 billion in nominal terms).
What we found was that the decision to award a vast majority of those contracts without competitive tender was not supported by the governing law. The financial cost of that blatant disregard of the law can be seen in the inflated nature of those deals. The 65% savings that could have been made translates into GH¢7.8 billion of public funds, equivalent to US$1.93 billion, nominally. Essentially, our findings suggest that public procurement contracts appear to be motivated more by corruption than development. The actual cost of the current situation is that we are throwing too much money at far fewer projects and the nation could have developed far more faster if only government would adhere to the letter of and principles behind the public procurement law.
value of public procurement contracts in the last six years to September 2016 awarded on sole sourcing and restrictive tender basis totalled was well over GH¢12 billion (US$2.96 billion in nominal terms). That translates into GH¢7.8 billion savings in public funds, equivalent to US$1.93 billion, nominally.
We called you here today because the situation appears to have worsened alarmingly in the last month.
We have noticed a sudden huge jump in the monthly list and value of contracts being taken to the PPA for approval to be awarded on sole sourcing or restrictive tender. The only thing that appears to be happening now is that we have general elections coming up this Wednesday and the results could lead to a change of government. In such a situation, institutions of state, such as PPA, must be very cautious in acting effectively as a conveyor belt for corrupt deals.
Ladies and Gentlemen of the press, our study of such contracts sent to the PPA in November and awaiting approval of the PPA board show the total value to the Ghanaian exchequer to be GH₵1,741,850,715.00. have been hurriedly awarded through sole sourcing. This amount constitutes about 3.5 % of the 2016 annual budget. Again, this amount, covering just one month, is four times bigger than the total amount allocated to the Ministry of Food and Agriculture this year. The question then is, why are MDAs in such a rush to push through deals? What is the need in hurriedly awarding over GH¢1.7 billion worth of contracts without competitive bidding? And, why use such a method with only a month to the end of the year?
Our fear is that it is being done because of the general elections. The quantum and nature of the contracts, and the apparent inflated values of many of them can only suggest that it is a last-minute surge to raid the national coffers. To paraphrase the words of the Supreme Court, we dare say, this looks like a situation of “CREATE, LOOT AND DEPART.”
Let us look at some of the details, which we have here. The mad rush to sole-source is most obvious in awards from COCOBOD. 40% of the GH¢1.7 billion worth of sole sourcing applications before the PPA are awards which the Cocobod is ready to award. We understand the need to procure and supply cocoa-spraying materials (insecticides and fungicides especially) and fertilizer for farmers at this time. The question is this, are we getting value for money at GH₵688,484,589.00?
Nobody has suggested that sole sourcing is illegal. Indeed, the law makes provision for sole sourcing. It is the prevalence of sole sourcing contracts that defies logic. Over 90% of government contracts are sole sourced in this Mahama-led NDC government.
We wish to highlight one such award before the PPA to drum home the point. This is a contract under the signature of Sedina Christine Tamakloe, CEO of MASLOC. She is prevailing upon the Public Procurement Authority to award via restricted tendering a Gh₵10,000,000.00 motor tricycle contract to three companies, CRISJOE COMAPANY LTD, SPELL TRUST LTD AND IEL LOGISTICS LIMITED.
The reasons for the award of the contract as stated by the MASLOC CEO are as follows:
- They are the only companies with these types of motors locally available and designed for passenger services
- The urgency of the need for these motor tricycles limits our ability to source for other companies internationally
- Their bucket sizes are bigger and this fulfils the requirements of our clients.
But a cursory check by our researchers identified over a dozen other companies in the capital city alone who can supply to the specifications stated above. Our checks from these dealers, including those selected, reveal that contrary to the stated MASLOC price of GH¢10,000, such a motor tricycle,even at retail price, can be purchased at GH₵5000.00. This means that, for every motor tricycle acquired by MASLOC, the Ghanaian tax payer is charged an extra GH¢5000. This means that at least 50%, half of the GH¢10 million that the Ghanaian taxpayer is being asked to pay for this deal is unjustified and arguably criminal. Half of the asking price is inflated. Which means at GH¢10 million, MASLOC could have easily procured 2,000 motor tricycles instead of the 1,000 it is getting if the PPA approves the deal.
The law provides for the establishment of a procurement board with the primary objective of harmonizing the processes of public procurement in the public service to secure a judicious, economic and efficient use of state resources in public procurement and ensure that public procurement is carried out in a fair, transparent and non-discriminatory manner.
The law states under Section 40, which deals with single-source procurement, as follows:
40. (1) A procurement entity may engage in single-source procurement under section
41 with the approval of the Board,
- where goods, works or services are only available from a particular supplier or contractor, or if a particular supplier or contractor has exclusive rights in respect of the goods, works or services, and no reasonable alternative or substitute exists;
- where there is an urgent need for the goods, works or services and engaging in tender proceedings or any other method of procurement is impractical due to unforeseeable circumstances giving rise to the urgency which is not the result of dilatory conduct on the part of the procurement entity;
- where owing to a catastrophic event, there is an urgent need for the goods, works or technical services, making it impractical to use other methods of procurement because of the time involved in using those methods;
- where a procurement entity which has procured goods, equipment, technology or services from a supplier or contractor, determines that
- additional supplies need to be procured from that supplier or contractor because of standardization;
- there is a need for compatibility with existing goods, equipment, technology or services, taking into account the effectiveness of the original procurement in meeting the needs of the procurement entity;
- the limited size of the proposed procurement in relation to the original procurement provides justification;
- where the procurement entity seeks to enter into a contract with the supplier or contractor for research, experiment, study or development, except where the contract includes the production of goods in quantities to establish commercial viability or recover research and development costs; or
- where the procurement entity applies this Act for procurement that concerns national security, and determines that single-source procurement is the most appropriate method of procurement.
(2) A procurement entity may engage in single-source procurement with the approval of the Board after public notice and time for comment where procurement from a particular supplier or contractor is necessary in order to promote a policy specified in section 59(4) (c), (d) or 69(2) (c) (i), and procurement from another supplier or contractor cannot promote that policy.
The financial cost of such reckless election year spending was seen in 2012 and have been felt ever since. In 2012, an unbudgeted amount of over $2 billion was recklessly spent in the last four months leading to the general elections. It led to a record high budget deficit, and the inability of the Mahama administration to manage the dislocation of the economy the deficit caused, led to Ghana going to the IMF for a bailout.
Contract Awards in the Road sector
The procurement of most road works has mainly been by sole sourcing since January 2009 when the Mahama-led NDC government took over the administration of this country, in spite of being in an environment where expertise for construction and maintenance of roads and related structures is in abundance. The nation is blessed with many well established and experienced road contractors.
This form of procurement is detrimental to the nation’s economy because such projects are awarded at high contract prices and no negotiations by the Road Agencies can prevent the contractor from making ‘disproportionally huge profit’ at the expense of the State. This procurement method had failed to introduce competitiveness into selection of contractors for road works and the result is poor and sluggish performance at project sites.
The responsiveness, competitiveness and activeness of the road construction industry developed over the years have gradually been killed by this method of procurement.
In the Public Procurement Authority’s report for 2010 fiscal year, at pages 51 to 74, out of 364 requests to procure road works by sole sourcing only 29 were turned down. This shows that 92% of the requests were approved. This was in the early stages of the “Better Ghana Agenda”.
In the Authority’s recent annual report for 2014 fiscal year the usual request for sole sourcing cunningly changed to “Restricted Tendering” and from pages 56 to 75 all the 40 requests on road works were approved.
Recently, the awards of contracts for roadworks to be funded by COCOBOD engendered a lot of heated controversy. No single project went through the preferred competitive tendering process. It was “projects for sale” at COCOBOD office.
The NPP used $1.3 B to tar 3875 Km of Roads between January 2005-2009.
The NDC used $2.0B to tar 1190 Km of roads between January 2009-2013.
A dollar under NPP gives you 2.98 meters of tarred road.
A dollar under NDC gives you 0.59 meters of tarred road
This tendency to apply sole sourcing in most of government contracts. especially in the last days to the general election, as witnessed in 2012 and as being repeated now, should not continue. It is reckless, unpatriotic and corrupt. It is a culture that must be tackled or else it will continue to arrest our national development, leaving in its trail, unsustainable debt burdens, unemployment, high cost of living, etc. as we are seeing now.
We are also aware of moves to award a GH₵200 million contract for the supply Digibox to rlg. We understand that the PPA tender committee has rejected this particular contract on a few occasions but it keeps coming back.
We charge the Public Procurement Authority to consider the preponderance of the hard facts provided to:
- Hasten slowly in scrutinizing the awards before it now and make proper assessment of its value for money content and subject each of the contract to the strict wording of the Public Procurement Act.
- A freeze in awarding all but the most imperative ones among the GH¢1.7 billion deals before it now.
A public institution such as PPA has a legal obligation to guard the national purse .
God bless our homeland Ghana!