Fatal flaw in procurement law
Trinidad and Tobago
SOME weeks ago, I penned an article voicing my scepticism regarding the call by one of the most powerful local companies for the Government to sell national assets to private corporations. The concern was grounded principally on the disastrous socio-economic impact of the recommendation on reducing income inequality—a necessary prescription for sustainable national development.
One legislation that aims to promote national development, which was referenced in the article, is the Public Procurement and Disposal of Property Act (the PA)—in particular, Section 7 as amended by Act 27 of 2020.
Section 5 of the procurement legislation provides that its objective is to promote the principles of accountability, integrity, transparency and value for money in the sale and procurement of public goods and services.
In other words, to ensure equity and equality in the award of contracts.
Although Section 7(1) expressly provides that the legislation shall apply to public bodies and public-private partnership arrangements, Section 7(2), both in its original, and moreso in its amended version, is effectively a betrayal by the Government of the very purpose of the act.
Prior to the enactment of the legislation, procurement and disposal of public goods and services were governed by the Central Tenders Board Ordinance 1961 (CTBO).
Gaps and weaknesses
In 2008, the Ministry of Finance published a booklet on the purpose and objective of the then-CTBO.
As with the current act, it emphasised the main goals of the CTBO were to promote the principles of integrity, transparency, accountability, equity, value for money and high performance in government procurement.
However, several gaps and weaknesses in the CTBO were identified as major obstacles to achieving these objectives, according to the 2008 booklet of the Ministry of Finance and the 2005 Procurement White Paper. These included:
a. The Board’s role was essentially relegated to the tendering process in which offers of supply were identified and contracts awarded;
b. The Board took no part in the design stage where needs would be identified, scope of works determined, costs estimated, bid packages presented, resulting in a regulatory vacuum and leading to escalating costs and poor-quality products and costly delays;
c. The Board did not participate in the implementation stage in which the contract is managed, nor was it responsible or equipped to monitor projects;
d. Inadequate public information was provided as there was no system in place to provide suppliers of property and services as well as the wider public with comprehensive up-to-date electronically accessible information on tender opportunities and the status of bids and awards and the progress of these awards; and
e. The final blow to the relevance and role of CTB was the decision to permit statutory entities such as NIPDEC full procurement powers while other State-owned enterprises simply ignored the CTB.
The result of these developments was a mishmash of procurement contracts and procedures which were often not aligned or inadequate to the objectives of the procuring agency, coupled with poorly trained or inexperienced staff.
Major lacuna
It was against this background that the procurement legislation replaced the CTBO. The legislation, most significantly, addressed a major lacuna in the former CTBO by creating the position of procurement regulator with expanded and unprecedented monitoring and oversight by the regulatory authority regarding contracts involving public bodies and public-private partnerships at the design stage, the tendering stage and implementation or performance stage.
These regulatory powers can substantially reduce the opportunity for corruption whether with respect to the choice of contractor, the terms and conditions of the contract, the completion of the design stage prior to selection, and monitoring capacity during the performance of the contract.
In addition, the regulator has the power to make a report to the DPP where he deems appropriate, or upon receipt of an application for review, and can order the suspension of the performance of a contractor and the operation of a framework agreement that has been entered into force.
So, how does such a laudable piece of legislation facilitate the concentration of wealth in a few hands, while increasing the income inequality at an exponential rate? The answer lies principally in Section 7(2) in its original configuration and its amendment by Act 27 of 2020.
Section 7(2)’s original wording succeeds in creating a semantic conundrum by removing the application of the legislation to the contracts listed in the subsection, but in the same breath it provides that where there is a conflict with those listed categories of contracts/agreements, the terms and conditions of those contracts shall prevail, except that the procurement of goods, works and services shall be governed by this act.
A contradiction in object and purpose if ever there was one. The listed Section 7(2) agreements are (a) treaty or other form of agreement to which Trinidad and Tobago is a party with one or more states or entity within a state; (b) an agreement for technical corporation between Government and an international financing institution; and (c) an agreement for technical or other cooperation between Government and the government of a foreign state.
It is submitted that the subsection was not intended to include public-private partnerships and contracts for public services and goods whether with a foreign entity or local entity.
Quite apart from defeating the very purpose of the act to create a monitoring and oversight agency at every stage of these contracts, the words after “treaty or other form agreement… or entity within a state” create uncertainty when viewed in the context of the category of excluded agreements.
All of the contracts excluded from the oversight of the Regulator at Section 7(2) (a) to (c) involve international treaty and financing international technical support agreements.
Strictly regulated
These agreements are already strictly regulated by the specific classes of international institutions to which they apply.
This restrictive application to the category of excluded contracts is bolstered by a generous application of the ejusdem generis rule of construction to the entire subsection.
This rule essentially means “of the same kind” and provides that where general words or phrases follow a number of specific words or phrases, the general words are specifically construed as limited by those specific words.
In addition, the purposive rule of construction permits the reading of a provision consistent with the object and purpose of the act.
This view is further bolstered by the 2008 Ministry of Finance tendering booklet, which states that the Central Tenders Board rules did not apply to international lending and technical organisations, mainly because these entities are well known to have strict procurement regulations and, as is often the case, the Government has to align its requirements and procedures to the more stringent procurement requirements of the lending agencies such as the Inter-American Development Bank World Bank and Caribbean Development Bank.
Contracts excluded
Instead of the 2020 amendment addressing this blatant ambiguity in the subsection and ensuring the objects of the procurement legislation are realised, the amendment simply excluded the words after “prevail”; reinforcing that the act would not apply to the very contracts it was intended to monitor. Even more contracts were excluded from the oversight of the Regulator by the addition of Section 7 (5). These include:
• legal services;
• financial services—on that point, many construction contracts fall into that category, as BOLT, BLT and BOOT contracts are deemed to be financial contracts, according to the Ministry of Finance booklet;
• accounting and auditing services;
• medical emergency services; or
• such other services as the minister may, by order, determine.
What that means is that the failed contracts for the 5,000 houses to be built by a World Bank-blacklisted Chinese construction company; the PoS hospital construction contract which was terminated by Shanghai Co; the AV Drilling Company oil supply contract’s questionable findings; the closure and potential sale of the refinery, the construction of the Creek Road, the potential criminal wrongdoings of the Firearms Department and the many more that have yet to come to light could have potentially been avoided, or effects minimised, if the regulator had monitoring oversight from design to performance.
Instead, this lack of transparency merely allows the wealthy to become wealthier in an environment that is facilitative of unchecked corruption.
Such legislative provisions ensure the gap between the wealthy and those in other socio-economic groups grows even wider, making the promotion of fair and equitable socio-economic policies an unattainable goal for so many outside of that privileged group.
Recommendations
It is my recommendation, for starters, that Section 7 be amended to ensure the oversight of the public-private partnerships and contracts with public and private entities other than those specifically excluded by Section 7(2) of the procurement legislation and, in particular, construction contracts that utilise the BOLT, BLT and BOOT models which are classified as financing contracts.
The public should also demand that the details of these contracts awarded over a specified sum should be disclosed on the website of the relevant State enterprise or Government authority, stating the nature of the contract, the company/person awarded the contract, the monetary value, the intended and actual date for completion, and any cost overruns.
This information should be collated and placed on the regulator’s website so that the public can have a greater insight and understanding as to how our public funds are being spent, and to whom these contracts are awarded.
And, more importantly, achieve the very objects of the legislation of transparency, accountability, value for money, equity and fairness, providing a meaningful opportunity for a wider cross-section sector of our national community to participate in entrepreneurial opportunities and reduce the growing income inequality.
Image: Law-scrabble-tiles