Case Study: Procurement Audit

Transcription

1 AfDB new Procurement Policy: Training Program for the Bank s Procurement Staff Case Study: Procurement Audit Required from the Participants: 1. Read the case individually. 2. Form working groups. 3. Within these working groups, based on the facts of the case study, prepare a summary of recommendations. 4. Assign a speaker for each group and present the group s recommendations. Objective: Prepare some recommendations to remedy the findings of the Procurement Audit and improve the procurement situation for this project. Two years into the execution of an AFDB-financed project in the amount of $50,000,000, a Procurement Audit has been performed to help identify and correct some procurement issues. The project is for the Strengthening and Development of Social Services (operation ABC/123). The Financing Agreement for this operation was signed on December 1, 2013, with a completion date of December The project includes the construction of buildings for community centers, covered-markets, the delivery of basic social and health services. These buildings house all the public entities delivering social services at the regional level in all five regional capitals. Below are some relevant excerpts from the Executive Summary of the Procurement Audit Report Objectives of the Procurement Audit: In accordance with the Terms of Reference, the objectives of the Procurement Audit were to conduct a procurement audit of: (i) the construction works and 1

2 supervision contracts for all five project sites; and (ii) a relevant sample of contracts included in the project. Limitations to Scope: There are several circumstances that have severely affected the scope and results of the procurement audit: Procurement documentation is incomplete. Probably due to the 2014 earthquake, in the Executing Agency, a significant percentage of the procurement documentation is missing (including key documents such as Procurement Plans, bidding documents, evaluation reports, no-objections, signed contracts, contract amendments, etc). Key Personnel not available. At the time this Procurement Audit was carried out, only one person from the Executing Agency was available for interview, the Deputy Coordinator who took office one month before the Procurement Audit. Sample of Contracts Reviewed: A sample of 28 procurement processes was selected and agreed with the Client (the Ministry of Social Affairs). It should be noted that all types of procurement (goods, works and consulting services) are represented in the sample with over 30% of each procurement type by contract value. Overall sample representation is of 59% in value terms, which is high, due to the selection of all 5 work and supervision contracts. This sample represents approximately 50% of the amount already disbursed for the project. Applicable Procurement Regulations: The National Procurement Law dated January 2010, its Implementation Regulation No. 01, No. 02 and No. 03, respectively dated April, May and June, 2010, as well as, the Ministry of Social Affairs Procurement Manual, apply to contracts below certain thresholds set forth in the project s Procurement Plan. For contracts above such thresholds, the AfDB Procurement Policy applies. 2

3 Our conclusions are the following: Low Procurement Capacity: Procurement planning does not seem to have always been given the importance it deserves in the entire project (See Substantial Findings 2 and 3). For instance, the splitting of construction contracts into two or three lots when this was not originally contemplated. Awarding lots for construction contracts at a price higher than what was originally estimated before the splitting into two contracts in one case, and into three contracts in the other case shows a low capacity in budgeting, as well as, procurement planning and packaging of contracts. Several procurement processes were launched by the Executing Agency with important information missing from the bidding documents at the time these were issued, resulting in several clarifications and amendments to the bidding documents, as well as multiple extensions of bid submission deadlines. Incorrect Contract Awards: According to Substantial Findings 4, 5 and 8, serious weaknesses have been identified within the selection and evaluation processes. In fact, certain bids should have been rejected due to non-compliance or nonresponsiveness. In some cases, the evaluation criteria and/or the qualification requirements were applied incorrectly. In another case, explained in Substantial Finding 7, some bidders may have been incorrectly rejected if the finding is confirmed. Unavailability of Procurement Documentation: As mentioned earlier, the impact of the 2014 earthquake on the unavailability of procurement documentation and thus on the results of this procurement audit is probably large. Several findings were affected by this, particularly those connected with the absence of updated Procurement Plans (Substantial Finding 1), and the lack of documents supporting the various procurement processes (Substantial Finding 10), such as bidding documents, evaluation reports, no-objections to procurement processes, letters of communication with bidders invitations, clarifications, notifications, handling of complaints, evaluation reports, signed contracts, contract amendments, supervision reports, etc. Also, non-substantial findings 2, 3, and 4, might have been affected by the 3

4 earthquake s impact on documentation. These relate to the lack of evidence concerning the publication of Specific Procurement Notices and the issuance of Award Notifications to bidders. Project Operating Manual without Procurement or Internal Control Procedures or Guidance: Another factor contributing to weak procurement was the lack of guidance, procedures, and internal control practices relating to procurement in the Project s Operating Manual (See Substantial Finding 6). Poor Procurement Planning: Due to the fact that most of the Procurement Plans were missing we could not verify that all procurement processes related to goods, works and consulting services conducted by the Executing Agency in the period under review were reflected in the approved Procurement Plan. For that reason, based on the available information, it is not possible to determine whether controls were in place in order to monitor the Procurement Plans, their changes and updates. (See Substantial Finding 1) Inappropriate Evaluation Criteria: The qualification criteria used for the construction works contracts allowed for weak bidders to qualify, facilitating the possibility that awarded firms would fall into financial or operational difficulties (cashflow, access to credit, availability of personnel, etc). (See Substantial Finding 8). Weaknesses in Supervision: It seems to us that from the outset, the supervision function was not given sufficient importance, particularly, in this environment of low technical capacity. Weak Contract Management Capacity: Several construction contracts have been affected by what seems to be a lack of contract management capacity at the Executing Agency level (see Substantial Finding 13). The absence of basic contract management practices and tools, shows that no real control was exercised on the contracts, to manage the physical and financial progress. 4

5 The Executing Agency did not make use of contract clauses pertaining to the application of liquidated damages for major delays incurred in the construction of some of the buildings (Substantial Finding 12). Also, management of performance securities on some of the construction contracts has not always been consistent. In several of these contracts, securities have expired, representing a substantial risk for the Executing Agency (Substantial Finding 11). Recommendations Summary Based on the summary of findings above, please draw-up a summary of activities/actions you think should be recommended to improve procurement planning, management and execution under this project. 5