PUBLIC PROCUREMENT - A series of articles by Afra Raymond
15th May 2011
The PUBLIC PROCUREMENT proposals
These are main features of the Public Procurement proposals made by the Private Sector/Civil Society group, which comprised –
The members of that Private Sector group were part of the Working Party on the Public Procurement White Paper, which was published in August 2005 and laid in Parliament the following month.
The Peoples’ Partnership’s manifesto, at page 18, commits to –
In keeping with that, the Minister of Finance tabled two legislative proposals in Parliament on 25th June 2010. A Joint Select Committee (JSC) was established on 1st October 2010 to examine those proposals, invite submissions and make recommendations.
The stated target of the PP government is to have the new Public Procurement legislation in place by the first anniversary of their electoral victory – i.e. by 25th May 2011.
Our Private Sector/Civil Society group reconvened last year and made a joint submission to the JSC in December 2010.
The guiding Principles are –
One of the most serious findings of both the Bernard Enquiry (Piarco Airport Project) and the Uff Report (UDeCOTT and HDC) was the extent to which the largest State projects were being executed outside of a proper system of accountability. The very purpose of setting up these companies and procurement methods was to bypass the Central Tenders’ Board (CTB). If the CTB could be sidelined as a deliberate act of public policy, then other important elements of the regulatory framework are violated as a matter of course. In the case of both UDeCOTT and NHA/HDC, accounts were not filed for years – since 2006 for the former and 2002 for the latter – in flagrant violation of the rules and laws.
The largest State projects were breaking basic rules and getting away with it, which is a big part of the picture, because we never hear of any penalty being sought against those State Enterprise Directors who broke the governance rules.
A new approach is needed.
Central to the new proposals is that any new Public Procurement system must be in full effect whenever Public Money is spent.
‘Public Money’ is defined as money which is either due to, or ultimately payable by, the State.
The equation confronting us is –
Expenditure of Public Money
We must fix that.
So, what is at stake here?
As long as our society continues to applaud and reward dishonest, corrupt behaviour, we will continue sliding downhill.
The structure of our economy is that most of the country’s foreign exchange is earned by the State in the form of oil & gas earnings. The rest of the society relies on the State and its organs to recycle those earnings for the benefit of those of us not directly engaged in the energy sector.
For that reason, the State casts a very long shadow in our country, far more so than in other places. Virtually every substantial business relies on the State and its organs for a significant part of its earnings.
But that is where the particular problem is, since the conduct of the State and its organs is often lacking in fairplay, accountability and transparency.
If the State is the biggest source of funds in the place and the State is not playing straight at all, a serious question arises –
How can we hope to uplift our society?
The State has an over-riding duty to behave in an exemplary fashion in its policy and operations.
So, who spends Public Money?
For a country of about 1.4M people, we have 26 Ministries.
We propose three new independent organs –
All these agencies are to be appointed by the President in his own discretion and are required to report only to the Parliament, with funding from the Consolidated Fund.
A vital part of our proposals is that Cabinet, Government Ministers or politicians are prohibited from instructing or directing these new agencies in any way.
They are intended to be entirely independent of political influence, which conforms to the proposals in the White Paper, as well as the two earlier draft laws tabled in June 2010.
A Complaints Procedure
The proposed system will create clear rights to make three types of complaints or report wrongdoing, those are an important aspect of any modern procurement system -
There are strict time-limits for acknowledgement and resolution of complaints.
Our proposal is for the Public Procurement Commission to have powers to punish both frivolous complainants as well as parties found to be in breach of the new system. Those can range from fines to embargoes, during which offending parties can be banned from tendering opportunities. Offending public officers can be subject to both fines and/or imprisonment.
The cost of the new Agencies
We are proposing a new series of state-funded agencies and there is concern that these offices are unlikely to be cheap, particularly the PPC, which is to be constituted as a standing Commission of Enquiry under those existing legal provisions.
Given the recent revelations as to the cost of the Uff Enquiry – already estimated to exceed $50M - there are genuine concerns that we could soon have three new state-funded Agencies which could absorb maybe $100M a year.
Our proposals have the promotion of Value for Money as one of its founding principles and that is good for the public. So, how can we measure the value for money of these proposals, at this stage?
The scale of public procurement spending
In the case of expenditures direct out of the Ministries, the 2011 Budget has an anticipated capital expenditure for the Ministries of $7.050Bn, as per para 8 at page 4 of the Public Sector Investment Program (PSIP).
There is also an anticipated capital expenditure for the State Enterprises of $6.725Bn, as per the Foreword at page 4 of the Supplementary PSIP. The combined figure of $13.775Bn is only for projects, so it excludes the salaries, rents and normal running expenses.
Other public expenditure, beyond just capital projects, will be covered by these proposals. The guiding principle being that those activities involve the expenditure of Public Money.
There are very limited exemptions from the proposed provisions and those can be viewed at the JCC website.
There are other ways in which Public Money is being expended which are not shown in the national Budget, so the amounts are surely larger than my estimate.
Even if the new system only saves 5% of that sum every year, we can easily justify an annual running expense in the $100M range, as mentioned earlier. 5% of $14Bn is $700M.
In the next 30 days, we expect our Legislators to make the crucial decisions on this series of proposals and we all need to be vigilant to preserve the key points.
Those key points would include –
For these proposals to succeed, our legislators will have to vote in favour of a new law which reduces their power and discretion. That might seem to be an impossible contradiction and an unreasonable thing to expect, but there will be considerable political credit to the account of those who make this change happen. Our citizens deserve no less.
This episode is a vital opportunity for us to make the point that the public purse must be protected and Ministers insulated against constant temptation.
Afra Raymond is President of the Joint Consultative Council for the Construction Industry - http://www.jcc.org.tt/index.htm - and Managing Director of Raymond & Pierre Limited – www.raymondandpierre.com.