This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide.
Recent Jamaican audits have revealed a series of procurement infractions in public institutions, including weak oversight and planning, inadequate record-keeping, improper contract-splitting, unlawful sole-sourcing, and flawed acceptance testing.
In its October 2019 report entitled Special Report of Investigation Conducted Into Allegations Concerning Certain Donations which were made by Petrojam Limited to Organisations and Causes for the period April 2016 to March 2018, Jamaica’s Integrity Commission found that Petrojam’s donations policy, through which the public agency funded certain school procurements, lacked proper administration. The audit found a lack of documentation confirming that the funds were spent for their intended purpose.
The report found that the agency needed to bolster its donations policy and required better record-keeping of those expenditures. The Commission recommended that “Petrojam Limited, in the management of its donations budget, ensure greater accountability and efficient management of the funds earmarked for donations” and that “the entity’s donations policy and procedures should also be revised to ensure that recipients of donations provide evidence that the funds received were utilised for their intended purpose.”
Dealing with the same entity, in its October 2019 report entitled Special Report Conducted Into Allegations of Acts of Irregularity and/or Impropriety, Conflict of Interest, Corruption, Nepotism, Cronyism and Favouritism at Petrojam Limited, Jamaica’s Integrity Commission found nepotism in the hiring of unqualified people, as well as improper expenditures relating to birthday parties for senior officials that contravened Jamaica’s procurement rules.
The Commission questioned whether “the strategic placement of certain individuals in key positions at Petrojam Limited served as corruption enabling mechanisms” and recommended that its findings be forwarded to the Director of Corruption Prosecution for further investigation.
In the interim, the Commission recommended that the government agency “refrain from employing persons who do not meet the minimum academic and professional qualifications and experience required to adequately execute job functions.” The Commission also found “a breach of the public trust rules by the organization’s procurement head who approved the improper expenditures.”
In fact, the report stated that this failure to act and raise concerns over the improper expenditures “amounts to a breach of duty which is tantamount to a gross dereliction of duties” contrary to Section 16 of the Financial Administration and Audit Act and Section 17 of the Public Bodies Management and Accountability Act. As the Commission stated, the head of procurement “was duty bound to raise pertinent questions concerning the procedures” related to the improper expenditures.
The report concluded that there was “evidence of a conspiracy to defraud Petrojam Limited and by extension, the Government of Jamaica” in relation to the improper use of public funds for the hosting of the birthday parties. The Commission therefore recommended a further investigation by the Director of Corruption Prosecution.
In its October 2019 performance audit entitled RADA’s Management of the Rehabilitation of Farm Roads, Jamaica’s Auditor General found that weak portfolio management practices led to a series of procurement irregularities in the rehabilitation of agricultural roads by the Rural Agricultural Development Authority (RADA).
The Auditor General found that RADA lacked a proper roads inventory management system to support its road rehabilitation efforts. The Auditor General also found RADA failed to ensure transparent and open competitive procurement practices for the award of most of the reviewed contracts, and improperly relied on emergency exceptions as the reason behind failing to properly tender many of those contracts.
The Auditor General determined that the failure to properly plan procurement activities was a major contributing factor to the procurement irregularities.
As this report illustrates, the failure to implement proper planning and oversight practices increases the risk of downstream procurement irregularities.
In its December 2019 report Caribbean Maritime University (CMU): Governance, Procurement and Resource Management, Jamaica’s Auditor General found that weak internal governance practices led to a series of procurement irregularities at the new Caribbean Maritime University (CMU). The special annual report noted that “in some instances, questionable decisions by the President resulted in expenditures that created no apparent value for the University.”
The report noted that “CMU procured good and services totalling $217.7 million and US$989,485 without undertaking a competitive bidding process as required by the Government’s Procurement Guidelines”. The Auditor General called on the university to revisit its procurement practices to ensure that appropriate procurement methods, including open tendering, are used where appropriate and that proper due diligence is applied in the award and monitoring of contracts.
The Auditor General also called on better oversight practices, including regular meetings of oversight boards to better ensure compliance with appropriate procurement practices.
In its February 2020 report entitled Special Report of Investigation Conducted into Allegations Regarding Impropriety and Irregularity in the Signing of ‘cheques’ by Ms. Shernet Haughton in Relation to the Performance of a Contract Awarded to Mr. [BB], by the Hanover Parish Council, Jamaica’s Integrity Commission found that the municipality’s use of improper contract-splitting led to non-compliant sole-sourcing and recommended the implementation of better contracting procedures.
More specifically, the Commission found that the municipality engaged in “deliberately splintered/fragmented” contracting to avoid applicable invitational tendering procedures and engage in unlawful sole-sourcing.
The Commission recommended that Jamaica’s Ministry of Local Government and Community Development, the body responsible for municipal oversight, “immediately seeks to ensure that the Officers of the Hanover Municipal Corporation observe and abide by the procurement guidelines promulgated by the Government of Jamaica, particularly, those in relation to the appropriate methodology to be utilized in accordance with the value of the contract and the respective threshold.”
The report also recommended that the municipality “take a more proactive and aggressive role in developing, implementing and enforcing effective risk management systems, checks and balances and other appropriate management systems in an effort to mitigate against deviations from the procurement guidelines and other relevant policies.”
In its July 2020 report entitled Performance Audit Report: Jamaica Urban Transit Company Limited, Jamaica’s Auditor General found that the public transportation agency’s lack of proper planning adversely impacted timely bus maintenance, and that the agency engaged in improper sole-sourcing for most of its fuel purchases. The report also found that the agency’s flawed acceptance testing for a new bus fleet resulted in the purchase of buses that were not fit-for-purpose, resulting in additional costs for after-sale modifications.
The Auditor General found that the agency “did not produce detailed procurement plans, which outlined the necessary items, quantities and expected delivery periods as recommended by the Procurement Guidelines.” The report concluded that this lack of planning “often resulted in extended wait times for items based on availability of items and did not assure best price.” This resulted in unnecessary and avoidable delays in repairing buses and a resulting shortage of public transportation buses.
The report also raised concerns over the use of sole-sourcing for fuel procurements. The Auditor General found that the agency’s “frequent use of direct contracting procurement methodology for high value transactions, particularly fuel, did not meet the important principles of transparency, competition, and fairness” and, furthermore, that the “frequent use of the direct contracting methodology did not guarantee that the best prices would be obtained for goods and services.”
More specifically, the report noted that the agency’s fuel acquisitions “consistently utilised the direct contracting methodology, which offered the least assurance that value for money was obtained and did not facilitate an environment of assured transparency, competition and fairness in the procurement process.”
In fact, the Auditor General concluded that, during the review period, the agency’s “procurement of fuel totalled $10.5 billion (51.5 per cent of total procurements), with an average transaction value of $22.3 million, all of which was acquired via direct contracting” and that “these transactions exceeded the established threshold for use of direct contracting and did not meet any of outlined exemption criteria; therefore, constituting a breach of the Procurement Guidelines.”
The report also noted that the “procurement of fuel by direct contracting was done using the same supplier on each occasion, despite the existence of multiple local suppliers”. In conclusion, the Auditor General found no evidence that the agency “attempted to obtain comparable estimates from other suppliers” and as a result the agency “could not assure itself that it paid the best price for fuel.”
In its review of the agency’s acceptance testing procedures for a new bus fleet, the report noted that “the report and supporting documents of the testing were not provided for review” to the Auditor General, who was therefore unable to confirm the basis by which the agency determined that the prototype bus was fit for purpose.
In fact, the report found that the agency “did not have an effective mechanism to assess the overall suitability of buses for its operations prior to selection for procurement”. The report also found that a review of the documentation that was provided to the Auditor General “revealed a lack of rigour and detail in the assessment of the prototype buses when compared to international benchmarks”.
For example, the Auditor General noted that “data collected during the test period were either incomplete or missing and, in some instances, we found inconsistencies with results stated in the evaluation reports relative to the support documents.” More specifically, the incomplete data indicated that the buses “were not suitable for the hilly terrain and would have to be replaced within a year”.
However, notwithstanding its acceptance testing findings, the bus agency then reported that “there were no major concerns and with proper maintenance there was no reason why the units should not perform well”. The Auditor General ultimately determined that the agency “would have spent in excess of US$581,000 above the contract value for these buses” so they could be modified to function as required on Jamaica’s hilly terrain.
In its July 2020 audit entitled Management System for the Maintenance of Parochial Roads (St. Catherine Municipal Corporation), Jamaican’s Auditor General found that the municipality failed to properly plan and prioritize its road repairs. The report also found a lack of procurement documentation in relation to those expenditures. The Auditor General found that the “deficiencies in record-keeping limited verification that funds allocated from the Parochial Revenue Fund (PRF) were appropriately spent”.
The report also stated that the municipality “could not readily provide a list of the contracts entered into during the period under review, due to the absence of a contract register.” The Auditor General concluded that the “absence of critical documentation to verify the procurement process involved in the engagement of contractors, impeded our ability to conclude that the procurement activities for road works were economical and transparent.” The audit highlighted systemic mismanagement in Jamaica’s road management portfolio.
In fact, the Auditor General noted similar audits in the prior five years dealing with national roads under the National Works Agency and farm roads under the Rural Agricultural Development Agency, where those reports also “highlighted weaknesses in their quality management system that provided weak assurance that the country’s main road network and related infrastructure were being constructed and maintained based on acceptable quality standards.”
Similarly, in its December 2020 report entitled Management System for the Maintenance of Parochial Roads (Kingston & St. Andrew Municipal Corporation), Jamaica’s Auditor General found that the municipality’s failure to monitor road conditions and engage in long-term planning for prioritizing road repairs led to widespread sole-sourcing. The report determined that better systems were required to maintain roads and comply with open tendering procedures.
The Auditor General found that the “absence of a strategic approach to road maintenance heightened the risk of critical scarce resources being diverted to road projects with little economic or social impact for communities and stakeholders”. The report also concluded that “budgets were not always aligned with planned road works to facilitate adequate funding for quality road maintenance.”
The Auditor General also found that the municipality failed to maintain proper records to document the justification for the widespread sole-sourcing of the road repair works. As the report stated, in the period under review “direct and emergency contracting procurement methodologies accounted for 89.84 per cent (566) of the 630 contracts, however we could not verify whether the allowable circumstances permitting these procurement methodologies were met as the necessary supporting documentation was not provided.”
Furthermore, the report found that the agency used invitational, rather than open tendering, for most of the remaining contracts, without documenting how suppliers were short-listed for the invitational tendering. As the Auditor General concluded, the municipality “used the limited tender (LT) methodology for the award of 64 contracts (10 per cent), valuing $253 million, but we saw no records to support the basis on which contractors were pre-selected for invitation to bid.”
As these recent road reports illustrate, the lack of long-term portfolio planning can result in further downstream procedural irregularities, when operational needs ultimately overtake due process requirements.
In summary, these Jamaican audits provide multiple examples of the need for systemic improvements to the procurement procedures of public institutions and serve as a wakeup call to public institutions across all jurisdictions to align their procurement governance practices with global due diligence standards.
