The National Procurement Commission (NPC) was last week informed of an alleged subversion of procurement guidelines when an Indian bidder for a charter of tug boats, wrote to the NPC, seeking its intervention over alleged malpractices and suppression of facts contained in a Cabinet memorandum, submitted to the Cabinet on Tuesday, August 14 2018.
According to the letter, addressed to the NPC Chairman, Eng. B.N.I.F.A. Wickramasuriya and copied to several others including the Secretaries to the President, Prime Minister and the Ministry of Ports and Shipping, Ocean Sparkle Limited (OSL), is one of the largest Indian companies engaged in giving towage services at several ports in India and overseas.
OSL claims, they have a long-standing association with Sri Lanka Ports Authority (SLPA). They took part in a Tender in March 2018 for the charter of three tug boats for the SLPA. Although OSL’s price bid was determined to be the lowest, their bid had been rejected claiming it was not responsive, the letter, seen by Sunday Observer states.
They then appealed against the decision of the Cabinet Appointed Procurement Committee (CAPC). The appeal had included a written submission from President’s Counsel, Sanjeewa Jayawardena, supporting the appeal.
The company contends that while the Procurement Appeals Board (PAB) upheld their appeal, the Ministry of Ports and Shipping sent a Cabinet memorandum, averring that the PAB decision was flawed and therefore the award should be made to Ceylon Shipping Company Ltd, a division of Hayleys PLC.
Minister of Ports and Shipping, Mahinda Samarasinghe, in his observations made in the Cabinet Memorandum (MP&S/2018/22) states that the decision of the PAB “choosing to recommend the award of charter of two tugs” to the appellant, OSL, is ‘incomprehensible” as the OSL was disqualified at Stage-1 of the bidding process, under section 7.8 of the Procurement Guidelines of 2006, and hence, no proper technical or financial assessment was made.
In the letter sent by OSL to the NPC, the company says, Stage I of Section 7.8 of the Procurement Guidelines 2006 is to find whether the bidder is eligible, if the bid is signed, bid is legally valid, and the bid is accompanied by the required bid security. “Based on Section 7.8 of the guidelines, OSL is not disqualified on any account and no proof has been provided otherwise or set out in the letter with reasons for rejection of OSL’s bid dated June 6, 2018. Therefore, the statement in the Cabinet Memorandum is factually incorrect and is misleading the Cabinet of Ministers,” the Company states.
The Sunday Observer learns that the PAB’s full recommendation and reasons therein has not been given to the Cabinet by the Ministry of Ports and Shipping. OSL had written to the Minister of Finance and Mass Media, Mangala Samaraweera, requesting to reconsider the findings of the Ministry of Ports and Shipping given the complete background and the set of facts in relation to OSL’s bid submission, appeal and the decision of the PAB were not provided along with the Cabinet paper.
However, when contacted Sri Lanka Ports Authority (SLPA) sources denying allegations confirmed that the PAB recommendations are sent to all Ministers of the Cabinet, and that this too was sent a week prior to the approval of the memorandum by the Cabinet.
In their submission to the NPC, invoking Chapter 156 C which gives the power to the NPC to investigate reports of procurements made by government institutions outside established procedures and guidelines, the company states that the Cabinet memorandum submitted by the Ministry of Ports and Shipping, subverts the procurement process and damages the credibility of the Procurement Appeals Process.
According to OSL, at the PAB hearing, the Technical Evaluation Committee (TEC) and the CAPC both agreed on many separate instances that OSL was the lowest cost bidder and the most responsive, other than for the procedural issues that were then dealt with at the hearing.
Separately, the allegation that OSL’s wholly owned subsidiary – Ocean Sparkle Ceylon (Private) Limited (OSCPL) is an unknown entity was duly addressed at the PAB hearing. The PAB reviewed the relationship between OSL and OSCPL in depth and only upon being completely satisfied that OSCPL is wholly owned and controlled by OSL and is essentially the alter ego of OSL incorporated only for satisfying the Sri Lankan Flagging requirement in the Bidding Document, accepted that it is not an “unknown entity”, the NPC submission says. “There is no valid commercial practise anywhere in the world that says one must sign a joint venture agreement with one’s own 100 percent owned subsidiary,”Chairman, OSL told the Sunday Observer.
According to SLPA sources the Cabinet of Ministers have decided to award the contract to Ceylon Shipping based on the recommendations of the Cabinet appointed negotiation committee (CANC). The recommendation was never by the Sri Lanka Ports Authority or the Ministry of Shipping. It was not based on the SLPA recommendations. It was a recommendation by the CANC based in the technical evaluation committee.
“PAB recommendations are sent to the Cabinet of Ministers and not to the Minister. This is an attempt to muddy the water or fog the mirrors,” the source told the Sunday Observer.
According to the Ministry of Ports and Shipping any approval is subjected to the observation of the Ministry of Finance and the observations are very clear that they are agreeable to the recommendations of the Cabinet appointed negotiations committee. “They have explicitly done so. The Cabinet will not approve unless they are presented with the Finance Ministry recommendations, especially, a tender of this magnitude,” a Ministry source told the Sunday Observer.