Emergency procurement of $605m in drugs - SN Editorial

Emergency procurement of $605m in drugs


In Wednesday’s edition, Stabroek News reported that the Georgetown Public Hospital Corporation (GPHC) had applied to the Chairman of the National Procurement and Tender Administration Board (NPTAB) for approval for the emergency purchase of a whopping $605m worth of drugs from Trinidadian conglomerate ANSA McAL. This application was reputedly part of an overall request for a staggering $1.5b in drugs and involving three other firms.

Up to Friday, neither the Ministry of Public Health nor the GPHC had sought to defend this extraordinary request or to explain how it complied with the provisions of the Public Procurement Act. However, on Thursday when contacted by Stabroek News, the Chairman of the NPTAB, Berkley Wickham expressed shock that such a request could have been made of him in the manner that it was and said he had contacted the Minister of Public Health, Volda Lawrence on the matter.

On Thursday Minister Lawrence promised a statement by Friday on the transaction but this was then deferred to Saturday. The statement issued on Saturday by the Public Health Ministry was a jumbled defence of the emergency purchase, an admission of deep-seated problems in health procurement and a declaration that key personnel of the ministry have been and are compromised. Importantly, nowhere in the statement was there a reference as to what provisions of the Public Procurement Act were activated to enable this $605m purchase.

The ministry’s explanation was as follows: “After meeting with public health officials around the country and at GPHC, the Honourable Minister was compelled in the interest of the health of the people of Guyana, to ensure that an adequate supply of drugs were immediately available in the country to meet the current crisis.

“To this end, she sought to fast track the procurement of these pharmaceuticals to minimise the negative effects on patients due to the shortage of some critical drugs. This influenced the decision to seek the green light from the National Procurement and Tender Administration Board (NPTAB) for ANSA McAL to supply drugs and pharmaceuticals to the tune of some G$605M.”

Based on the statement on Saturday, Minister Lawrence and her ministry appear to have devised their own procurement law and are now a law onto themselves.  It defies belief that Minister Lawrence, a former Chairman of the Public Accounts Committee (PAC) of Parliament, would engage in such unlawful conduct. An accounting officer appearing before the PAC with a story similar to the one presented by Minister Lawrence on Saturday would be immediately banished from the hearing.

More information has to be provided by the Public Health Ministry but it appears that what the Ministry engaged in was restricted tendering. However, the purchase does not meet the criteria set by law for restricted tendering and towers over the threshold of $1m set in the regulations for such a procedure.

Under Clause 26 of the Public Procurement Act restricted tendering is only possible if highly specialised goods available from only a few sources are being sought in which case all such suppliers have to be invited to bid. In any event the contract has to be below the $1m benchmark set by the regulations under the Act. The Ministry’s procedure does not appear to comply with the request for quotation system neither does it comply with the single-source method where it could have attempted to argue a case for a catastrophic event in terms of a crippling shortage of drugs at the national referral hospital.

Minister Lawrence must now state exactly which provision of the Public Procurement Act she operated under and what steps she took to ensure that advice and approval were sought from the NPTAB on the matter before the purchase was made from ANSA McAl. The NPTAB’s formal position on Minister Lawrence’s  actions will be awaited with great interest as would the stance of the recently established Public Procurement Commission.

It is mind-boggling that any procuring agency can operate in this manner even considering the major challenges posed by drug supply at the GPHC. This transaction and the fact that it appears to have proceeded must attract urgent and serious scrutiny by the government. The Granger administration cannot play fast and loose with the procurement law. Certainly not after it pilloried the PPP/C for years over the favouring of the New GPC. The law is the law. It is sacrosanct and inviolable. Those who breach its premises – minister or not – must be held fully accountable. The President and Cabinet also have to be heard from on this issue. Did Cabinet grant a no-objection for this massive contract?

It would have been perfectly reasonable for the Ministry to declare an emergency at the GPHC and to seek the assistance of the NPTAB to determine how best to meet the hospital’s need in the context of the law. This thought doesn’t appear to have entered the Minister’s matrix for these purchases.

In the statement on Saturday, the Ministry makes a series of alarming declarations including that there was “skulduggery, collusion, delinquency, deliberate breaching of established sector protocol by Public Health staff, manipulation of the …system by importers with the support of employees and fabrication of records including evidence of bogus receipts.”

The statement further asserted that the “current drug shortage was a ploy manufactured by some unprincipled importers and crooked Public Health staff to enrich themselves” and that some pharmaceutical supplies were overdue by as much as six months.

From these statements it appears that there is an enormous crisis in drug procurement and it requires the declaration of an emergency to ensure that patients in the public health system are not made to suffer. This however does not justify the bypassing of the procurement law. The present situation would call into question the performance of both the former Minister, Dr George Norton and the administration itself over the last 21 months of this burgeoning crisis. What did they do about this drug shortage? For many months, both Minister Norton and the GPHC had denied persistent reports about the shortage of drugs. Was the ministry and the GPHC covering up this problem and why was the government oblivious to it? How many items on the ANSA McAl list are indeed urgently required by the GPHC and why wasn’t the list just confined to those?

These latest developments in the drug procurement system – coming on the heels of an earlier inquiry that led to the removal of the Public Health Permanent Secretary – further attest to the fact that the Granger administration is yet to grasp control of vital administrative areas. Its leading officials continue to underperform, dissemble and manufacture unlawful manoeuvres. The Charlestown drug bond is a clear case in point at this very ministry.

The public will await with great interest further information from Minister Lawrence and the NPTAB about the details of this drug procurement and then it will be for the government to act.

Original Post

Excerpt from Anand Goolsarran's "Accountability Watch"

Today’s article is based on the latest controversy surrounding the procurement of $605 million in drugs and medical supplies for the Georgetown Public Hospital Corporation (GPHC).

Background information

Stabroek News reported that the GPHC sought approval from the National Procurement and Tender Administration Board (NPTAB) for the emergency purchase of $605 million worth of drugs from ANSA McAL Trading Ltd. In response to the article on the matter, ANSA McAL stated that a meeting was held on 16 January 2017 with all suppliers to address the shortage of drugs at the Hospital and the urgent need to procure such items. At that meeting, it was learnt that the invitation to tender in November of 2016 had been compromised, resulting in the need to procure the items on an emergency basis. ANSA McAL indicated that: (a) four suppliers were asked to submit bids based on a list of items that GHPC had supplied; (b) it submitted a bid on 14 February 2017 for over 300 items; and (c) it was awarded a contract in the above sum for 118 items.

Stabroek News indicated that its report was aimed mainly at pointing out that the GPHC’s procurement system appeared to be in significant upheaval to require the procurement of such emergency supplies. Since ANSA McAL was one of four suppliers, the extent of the emergency procurement would be significantly higher than $605 million. However, there was no information as regards the extent of emergency procurement from the other three suppliers. In addition, there was no announcement from GPHC or the Ministry of Public Health that emergency procurement would be initiated.

Stabroek News referred to a letter from the Hospital’s Chief Executive Officer to the Chairman of the NPTAB on February 28, 2017 seeking approval for the purchase of emergency medical supplies on the grounds that: (a) the items requested were only available from ANSA McAL at the time; and (b) the emergency procurement was authorised by the Minister of Public Health. Attached to the letter was an invoice from ANSA McAL of the same date. Considering the sequence of events, it is evident that the approval was sought only after the emergency procurement from ANSA McAL was initiated. The Chairman of NPTAB is reported to have stated that he saw the letter on the same day Stabroek News carried the article and that he was rather surprised at the sequence of events. As a result, he wrote to the Minister expressing his concern.

The Stabroek News article raised a number of concerns as regards the prices of certain items supplied by ANSA McAL, compared to those charged by other pharmaceutical suppliers. For example, an antibiotic 20g clotrimoxazole cream was listed in the invoice at a unit price of $1,750 while the price charged by other suppliers was $95, a more than 18-fold difference. Similarly, a 30g anti-haemorrhoidal ointment, which previously had been sourced from other suppliers at $200, was listed at $2,150, a more that 10-fold difference.

Explanations from the Ministry

The Ministry of Public Health issued a statement in which it acknowledged “fast-tracking” the purchase of $605 million from ANSA McAL. It, however, maintained that there was no breach in public procurement procedures, and blamed the situation on a conspiracy between suppliers and the staff of the Ministry.  As a result, the Minister made the decision to proceed with the emergency procurement. The Ministry, however, did not provide an explanation as to why the approval of the NPTAB was sought after the decision was taken to procure the items from ANSA McAL. The Ministry’s statement further indicated that ANSA McAL is one of only two companies in Guyana that provides appropriate cold storage for drugs and medical supplies and that the company not only airfreighted the required drugs but also donated four refrigerators to GPHC to store the emergency supplies.

 GPHC as a public corporation

The GPHC was established by Order No.1 of 1999 under the Public Corporations Act and is therefore a separate legal entity with a board that provides the necessary oversight of the organization. As in the case of all public corporations and other entities in which the State has controlling interest, the Minister’s role is restricted to giving directions of a general character on policy matters as well as specific directions as regards the disposal of capital assets and the accountability of the proceeds. It is the board of the GPHC that is required to make all major decisions relating to the operations of the Corporation. However, since its incorporation, the GPHC has been functioning as a programme under the Ministry of Public Health. It was not until 2016 that the GPHC was allowed to function as a corporate entity in relation to financial management matters in that it now receives a subvention as opposed to allocations on a line item basis under the Ministry.

Given the above situation, the issue regarding the shortage of drugs and medical supplies is a matter for the Board of the GPHC to consider and decide on the way forward, and not the Minister. The evidence, however, suggests that there was no involvement of the Board. In addition, by Section 24 of the Procurement Act, public corporations and other entities in which controlling interest vests in the State are required to have their own procurement rules and regulations approved by the NPTAB, and to the extent that any provision conflicts with the Procurement Act, the latter takes precedence. The GPHC, however, does not have its own procurement rules and regulations, and therefore reverts to the Procurement Act in relation to its procurement activities.

Restricted tendering versus sole source procurement

The Procurement Act distinguishes between restricted tendering and sole source procurement. Restricted tendering occurs were the goods/services or construction, by their highly complex or specialized nature, are only available from a limited number of suppliers or contractors. In this case, all such suppliers or contractors are invited to submit tenders, and all other procedures relating to open tendering are applicable, including assessment by a technical evaluation committee and the determination of the lowest evaluated tender. From the facts of the case, the Ministry started out with the adoption of the selective tendering approach but did not follow through to ensure adherence to the specified procedures in relation to this form of tendering. There was no evidence that the other three suppliers submitted tenders which would have required technical evaluation to determine the lowest evaluated tender.

Sole source procurement, on the other hand, occurs where: (a) the goods or construction are available only from a particular supplier or contractor, or a particular supplier or contractor has exclusive rights with respect to the goods or construction, and no reasonable alternative or substitute exists; or (b) the services, by reason of their highly complex or specialized nature, are available from only one source. It is also applicable where, owing to a catastrophic event, there is an urgent need for the goods, services or construction, making it impractical to use other methods of procurement because of the time involved in using those methods. It is evident that what started out as the application of the restricted tender approach turned to be sole source procurement. It is debatable whether the situation at the GPHC as regards drugs and medical supplies constitutes an emergency to justify the use of this method of procurement.

Involvement of the NPTAB

The NPTAB’s role in the procurement process is outlined in Section 16 of the Procurement Act. This involves exercising jurisdiction over tenders the value of which exceeds such an amount prescribed by regulations, appointing a pool of evaluators for such period as it may determine, and maintaining efficient record keeping and quality assurances systems. There is no provision in the Act for the NPTAB to approve of a particular method of procurement, whether by way of open tendering, restricted tendering, sole source procurement or emergency procurement. Therefore, any request for the NPTAB to do so is inappropriate.

Cabinet involvement

All forms of procurement whose values exceed $15 million must be referred to Cabinet for its no objection. Cabinet can only withhold its objections if the applicable procurement procedures have not been followed. If this happens, the matter is referred to the concerned procurement entity for reconsideration and resubmission to Cabinet. Given the quantum of the contract with ANSA McAL, it is unclear why Cabinet was not involved. While it is true that Cabinet’s involvement in the procurement process ceases upon the establishment of the Public Procurement Commission, or progressively phased out over time in favour of a decentralized structure, no firm decision has been made in relation to this matter. To this extent, the failure to obtain Cabinet’s no objection is a violation of the Procurement Act.

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