Dr Taimoon Stew­art

The Pub­lic Ad­min­is­tra­tion and Ap­pro­pri­a­tions Com­mit­tee is con­duct­ing an ex­am­i­na­tion of the state’s ac­qui­si­tion of phar­ma­ceu­ti­cals as it re­lates to the cur­rent process­es ap­plic­a­ble to its im­por­ta­tion and ap­proval. This is very good since pub­lic pro­cure­ment should al­ways be brought un­der scruti­ny. Al­ready the com­mit­tee has re­vealed in its find­ings that there is a dis­con­nect be­tween the list of ap­proved drugs that Cus­toms of­fi­cials work with and the lat­est list of ap­proved drugs is­sued by the Min­istry of Health. There is cer­tain­ly a struc­tur­al prob­lem here that could be solved.

All the gov­ern­ment in­sti­tu­tions that are re­spon­si­ble for any de­ci­sion in the chain of ac­tion in­volved in the im­por­ta­tion of drugs and the ap­proval process should be re­quired to co­or­di­nate their ac­tions to pro­vide a seam­less con­duit for swift and eco­nom­ic clear­ance from the port.

Scruti­ny of the pro­cure­ment process is al­so re­quired as much mis­chief could take place by firms en­gaged in the ten­der process or by pro­cure­ment of­fi­cers, lead­ing to high­er prices be­ing paid by the gov­ern­ment.

As a re­sult, the pool of gov­ern­ment funds that could be spent on so­cial ser­vices such as ed­u­ca­tion and health are sub­stan­tial­ly re­duced when monies are si­phoned away through cor­rup­tion and bid rig­ging. In de­vel­op­ing coun­tries, where so­cial ser­vices are so un­der­fund­ed, and there is such dire pover­ty, this ab­scond­ing of monies from the pub­lic purse is crim­i­nal.

Ac­cord­ing to a pub­li­ca­tion by Trans­paren­cy In­ter­na­tion­al (2014), “The size, the num­ber and com­plex­i­ty of the trans­ac­tions in­volved, com­bined with the high lev­el of dis­cre­tion of pro­cure­ment of­fi­cials, pro­vide many in­cen­tives and op­por­tu­ni­ties for cor­rup­tion. It is es­ti­mat­ed that on av­er­age ten to 25 per cent of a pub­lic con­tract’s val­ue may be lost to cor­rup­tion.”

There is no doubt that we have had a lot of prob­lems here in T&T with cor­rup­tion in pub­lic pro­cure­ment both by the pri­vate sec­tor and gov­ern­ment pro­cure­ment of­fi­cials. Sev­er­al al­le­ga­tions of cor­rup­tion have been pub­li­cised over the decades, and many of the crim­i­nals were nev­er sanc­tioned. Re­mem­ber the case brought by the An­ti-Cor­rup­tion In­ves­ti­ga­tion Bu­reau against a for­mer Min­is­ter of Gov­ern­ment, four con­trac­tors, and se­nior em­ploy­ees of the state com­pa­ny, Es­tate Man­age­ment and Busi­ness De­vel­op­ment (EM­BD), for a fraud­u­lent scheme in award­ing con­tracts and pay­ments, col­lu­sion amongst con­trac­tors, fraud­u­lent pay­ments, and oth­er cor­rupt acts?

Road re­pair projects con­coct­ed with­out jus­ti­fi­ca­tion; se­lec­tive ten­der­ing, and Min­is­ter’s close ac­quain­tances in­vit­ed to bid; bid­ding com­pa­nies col­lud­ed with each oth­er to pre­de­ter­mine who would win which road project. And in­flat­ed prices with no jus­ti­fi­ca­tion. This con­duct took place in the run up to the gen­er­al elec­tion in 2015. Ev­i­dence was found on the com­put­er of one of the com­pa­nies and the case was tak­en to court.

The High Court or­dered EM­BD to pay the orig­i­nal amount agreed to in the pri­ma­ry agree­ment. In in­val­i­dat­ing the sup­ple­men­tary agree­ments, Judge Rahim found in­fer­ences of a “back-door agree­ment” be­tween the ex-EM­BD chief ex­ec­u­tive of­fi­cer and Na­mal­co to pay high­er prices. In his de­ci­sion, Judge Rahim said, “… The com­bi­na­tion of ac­tions on the part of Na­mal­co, Singh and BBFL, were com­mit­ted with on­ly one in­ten­tion. Put sim­ply, to ex­tract mon­ey from the state en­ti­ty, EM­BD, than Na­mal­co would have been en­ti­tled to …” So yes, pub­lic pro­cure­ment is rid­dled with prob­lems of cor­rup­tion and nepo­tism and needs to be scru­ti­nised.

My pri­ma­ry fo­cus in this ar­ti­cle is bid rig­ging. We saw in the ex­am­ple above that the com­pa­nies in­volved in the bid col­lud­ed with a pro­cure­ment of­fi­cial to di­vide up the mar­ket by pre­de­ter­min­ing who would bid on which road project. Prices were in­flat­ed through col­lu­sion. There are many ways in which com­pa­nies can col­lude when bid­ding for a project.

They can en­gage in cov­er bid­ding by which the firms agree amongst them­selves what would be the low­est bid and who should sub­mit it, with the rest bid­ding high­er. Or they could agree to sub­mit a bid con­tain­ing terms that are known to be un­ac­cept­able to the buy­er so they would be dis­qual­i­fied. It gives the im­pres­sion of gen­uine com­pe­ti­tion. And the ex­cess of charge above the com­pet­i­tive price is di­vid­ed amongst them­selves.

They could agree to bid ro­ta­tion by which the con­spir­ing com­pa­nies con­tin­ue to bid but take turns be­ing the low­est qual­i­fy­ing bid­der.

An­oth­er way is bid sup­pres­sion: one or more com­pa­nies agree to re­frain from bid­ding or with­draw a pre­vi­ous­ly sub­mit­ted bid.

Mar­ket al­lo­ca­tion oc­curs when com­peti­tors carve up the mar­ket and agree not to com­pete for cer­tain cus­tomers or cer­tain ge­o­graph­ic ar­eas. The low­est bid would be con­sid­er­ably high­er than what would have been the com­pet­i­tive price, and the ex­cess charge would be di­vid­ed up be­tween the com­pa­nies. And since many of the pro­cure­ment ten­ders are is­sued re­peat­ed­ly, and the same com­pa­nies bid, they could ro­tate who wins the bid each time. Small economies, with a few firms big enough to bid for the larg­er gov­ern­ment con­tracts, are par­tic­u­lar­ly sus­cep­ti­ble to such col­lu­sion.

The Fair Trad­ing Act (FTA) pro­hibits col­lu­sion. The Act does not in­clude cor­rup­tion which falls un­der the An­ti-Cor­rup­tion In­ves­ti­ga­tion Bu­reau. If ri­val firms en­gage in col­lu­sion in the ten­der­ing process and in­flate the price of­fered us­ing any of the above strate­gies, then that could be caught by the Fair Trad­ing Act. But let us con­sid­er who has con­trol over the ev­i­dence con­tained in doc­u­ments sub­mit­ted in bids. It’s the pro­cure­ment of­fices; and the pro­cure­ment of­fi­cers would need to de­tect where there is sus­pi­cious ac­tiv­i­ty that could in­di­cate that the firms bid­ding for the project have col­lud­ed.

There are ways to de­tect bid rig­ging, and pro­cure­ment of­fi­cials should be aware and vig­i­lant when ex­am­in­ing bid doc­u­ments. They should scru­ti­nise for a reg­u­lar pat­tern of bid prices, same cor­rec­tions and al­ter­ations in com­pet­ing bid doc­u­ments, same sig­na­tures in bid doc­u­ments (be­lieve it or not, firms can be slop­py and have the same per­son sign all the bids); bid doc­u­ments con­tain­ing same or sim­i­lar er­rors or ir­reg­u­lar­i­ties such as spelling, gram­mat­i­cal and cal­cu­la­tion; bid doc­u­ments for both or more firms sub­mit­ted by the same per­son; and bid doc­u­ments for both or more firms pack­aged by one per­son from the oth­er firms that sub­mit­ted their bids. A search for the com­put­er IP ad­dress is al­so re­veal­ing as some­times the same com­put­er is used to write up all the bids of the col­lud­ers.

Se­lec­tive ten­der­ing al­so presents prob­lems since it re­duces the num­ber of firms al­lowed to sub­mit bids.

In our small economies, this means that the same large firms would be cho­sen and this is even more so in the phar­ma­ceu­ti­cal sec­tor since drugs are sen­si­tive giv­en con­cerns about qual­i­ty, life span, and oth­er fac­tors that could en­dan­ger pub­lic health. All these re­spon­si­bil­i­ties fall un­der the purview of the pro­cure­ment of­fi­cers.

This brings me to what can the Fair Trad­ing Com­mis­sion (FTC) do about ir­reg­u­lar­i­ties in pub­lic pro­cure­ment?

The FTA pro­hibits col­lu­sion. Oth­er malfea­sances in pub­lic pro­cure­ment do not fall un­der the FTA. En­force­ment ac­tion un­der the FTA by the FTC against bid rig­ging in pub­lic pro­cure­ment can on­ly hap­pen if pro­cure­ment of­fi­cers de­tect sus­pi­cious ac­tiv­i­ty and con­tact the FTC and share doc­u­ments with its staff who could then con­duct an in­ves­ti­ga­tion and seek ev­i­dence of col­lu­sion.

The Par­lia­men­tary Pub­lic Ad­min­is­tra­tion and Ap­pro­pri­a­tions Com­mit­tee is cur­rent­ly ex­am­in­ing prac­tices in the pro­cure­ment of med­ical drugs. It is puz­zling why the ex­ec­u­tive di­rec­tor of the FTC was brought be­fore the Com­mit­tee and ex­am­ined when the pur­pose of the on­go­ing hear­ing is to ex­am­ine the process­es in pub­lic pro­cure­ment of drugs, specif­i­cal­ly the im­por­ta­tion and ap­proval process.

What does the FTC have to do with this? Let us be clear that the FTC has no purview over pub­lic pro­cure­ment ten­ders, has no ac­cess to bids doc­u­ments that are sub­mit­ted un­less shared by the pro­cure­ment of­fice, and is not in­volved in any way in the grant of awards.