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Unsolicited Tenders (Procurements) for Mega Projects, Create ‘Mega’ Corruption

| by Upasiri de Silva

( November 4, 2014, Sydney, Sri Lanka Guardian) After reading a well written article by Namini Wijedasa on “Competitive bidding turned on Head” (due to unsolicited Tenders) appeared in the Sunday Times of March 9, 2014 with a very “provocative” statement issued by the Secretary to the Treasury, Dr. P.B.Jayasundera, forced me to write this article to explain why “Unsolicited Procurements (Tenders)” can harm the deflated economy of Mother Lanka and provide “Black Money” to make Rajapaksa family, the richest in Asia.

“Normal Tender Procedures NOT possible for Mega Projects” was the headline of the ‘provocative’ statement issued by PBJ to prove he has very little knowledge in Tender (or Procurement) procedures and he is very corrupt. This statement of PBJ, needs expert professional explanation to demolish the lies he uttered to gullible but innocent people of Sri Lanka by this responsible official, the Treasury Secretary. Before I go further I must mention here, how a former Senior Cabinet Minister of the former Prime Minister Sirimavo Bandaranayake and President Chandrika Kumaratunga’s government, describe PBJ: He said “ PBJ is a cunning and very crafty man without any knowledge about procurement of development projects and he ruined President Kumaratunga for good and now trying to do the same to President Rajapaksa”.

How qualified PBJ, to make this statement?

In 1999, while working on my research on the procurement practices where discounts were used by the Government of Sri Lanka for my PhD Thesis, I met the then Director of Planning and Plan Implementation of the Treasury, to get official permission to research Samanala Wewa Hydro Power Project and Upper Kothamale Hydro Power Projects. The Director, (lady who was very keen to know about the fit falls in the procurement practices used in SL), suggested to meet the TS/ PBJ as she was taken up with my knowledge in procurements of minor & major construction projects, and she took me to ST’s office, a familiar place for me as I used to meet two former ST in that room. But unfortunately, PBJ refused to meet me and discuss about my requirements as well about the current problems in procurement of ‘mega’ projects. This refusal proved that he was not interested to know about good practices to procure major projects.

If he was interested to know what I knew about procurements of mega projects or even to correct my opinion if he knew more than myself, he should have allowed at least few minutes of his time, but he failed to extend that curtsey to a Sri Lankan born foreigner, trying to help his motherland. This incident proves that PBJ has a very big ego with very little knowledge about procurement or procurement practices, and he is not concerned to safeguard the Economy in Sri Lanka.

As a professional with lot of experience in procurement of billion dollar contracts, I was taken back when I read this ‘provocative’ statement of PBJ and was contemplating for months to write a reply. It is my opinion that professionals who knew the truth failed to take any corrective action due to the present political situation in Sri Lanka. PBJ is misleading the Public as well as the President and the Cabinet of Ministers in Sri Lanka and helping large scale or mega corruption. He may be trying to create public apathy towards the government or to create his own wealth as did in few transactions. As most Sri Lankan has become lethargic as they can’t STOP this massive corrupt practices destroying the Sri Lankan society, may have refused to take serious concerns about PBJ’s misleading statement. My question is, was the President of the country and his Cabinet of Ministers knew that PBJ is/was misleading them and taking them for a ride or did they willing took part in this massive corrupt deals.

PBJ and his National Procurement Authority

Any professional having a bit of knowledge in procurement will be surprised to read this statement from PBJ, the Secretary of the Treasury. “that it is quick to get projects implemented using unsolicited proposals”, without following the accepted procurement (tender) procedures. PBJ, who
Was responsible in establishing the National Procurement Authority as instructed by Mrs. Chandrika Bandaranayake Kumaratunga as the President in 2004/5 with World Bank Aid and spoke very highly about the procurement (tender) procedures. But when I wrote to the “Sunday Times” about the defects and other critical failures to procure mega projects, in the NPA Guidelines, President Rajapaksa instructed to closed down the NPA, but unfortunately allowed to use the “defective” Guidelines which is still in use.

It is true that these defective Guidelines will hamper to procure any projects above Rs. 3 billion to meet the government targets, as the time period allowed in the Guidelines for the procurement process is around 225 weeks or approximately 4.35 years. What PBJ should do is to re-write these Guidelines to meet the government planning requirements (if any) keeping the system foolproof, but not to discard it completely as he thinks Tender process is hindering the completion of any project. The Tender or Procurement process “guarantee the Quality of the work while maintain the Construction time as well as the Cost of the proposed project”, the main ingredients to complete a project as planned.

Granted, it is futile to engage this government or the Treasury Secretary about the correct procedures in spending public funds (all borrowed funds become Public Funds, according to Treasury guidelines), when they used the defective NPA Guidelines to imprisoned former Army Commander, General Sarath Fonseka who spearheaded the annihilation of the LTTE war, after some one else, within the Rajapaksa regime, was responsible for allowing “Danuna Thilakarathne” son-in-law of GSF, to get the Hi-Corp tender, where a Major General was the Chairman of the Tender Board. I wonder why PBJ did not include in his statement that charging General Fonseka for violation of the NPA Guidelines was not within the Law, as the Laws are used only selectively, as the entire period of the post –war Rajapaksa era demonstrates.

It is true that PBJ used his powers to establish the National Procurement Authority and appointed Mr. Daya Liyanage former Ambassador and Head of the Procurement Division of the Treasury, to steer the Authority. But, Mr. Liyanage’s inadequacy or the lack of in-depth knowledge about Procurement process or methods was the subjects of a very critical revive by the World Bank when the Authority produced the first set of Guidelines. With my wide experience in engaging in multi-billion Dollar procurements, I felt the NPA Staffer lacked the required knowledge to write a set of good and applicable guidelines to steer the procurement system in Sri Lanka to eliminate the wide spread corruption..

Definition of the word procurement

It is my professional opinion PBJ, with a Masters Degree in Development Economics and PhD in Economics, is even aware of the correct “definition” and the real meaning of “procurement” and what evolves in the Procurement process of mega projects. When issuing this very critical statement, as the top official who controls the Treasury, he should have taken more precautions to avoid any criticism from professionals who engaged in procurement of mega projects, as professionals. This vey statement shows how PBJ lacks experience and an in-depth knowledge about real procurement activities of a mega projects, as he failed in his duties and destroyed the procurement system with a “defective” set of National Procurement Guidelines, prepared by people with little or no- knowledge in procurement practices, and created more problems than solutions, is now trying to blame the Procurement (Tender) procedures as a failure to Procure Mega Projects in time.

The Definition of Procurement is: Procurement is to obtain the best possible bid (cost) meeting the Cost, Quality and Time parameters using the most suitable Conditions of Contacts”.

What are Mega Projects?

Mega projects, as PBJ, describe in his statement ( I assumed) may be projects costing over US $ 100 million (approximately) and spread over 36 months or more to complete? If we assume a mega projects take 36 months or more to complete, (most projects undertaken by Chinese never completed in time) then how can PBJ argue that it is quick to construct infrastructure projects using unsolicited tenders and Chinese are quick? This was what PBJ stated in his controversial statement. ” Despite the flak, it has been attractive, the route of unsolicited proposals it is widely agree – is quick. The Chinese are also quick. And even the critics agree that, that notwithstanding quality concern, the Government is getting its infrastructure in place fast. This is beginning to look like a trade off.”

PBJ, is aware that the Unsolicited Tender, are treated as very dangerous development proposals, and these proposals are loaded with corrupt deals. If he is not aware of these dangers then his economic knowledge in development is questionable? Unsolicited tenders for projects are treated by honest Technical professionals dealing with major projects with suspicion than a quick fix solution for infrastructure development.

To obtain a corruption free development, professionals in the industry consider many factors. Three very important factors necessary to meet the cost effective development projects are: (a) Cost, (b) Time and (C) Quality. In a structured approach which identifies the following six (6) stages in the procurement process to meet the above criterions:

(a) Feasibility, (b) Conceptual design, (C) Detailed design, (D) Documentation, (E) Construction,(F) Post Construction.

In recent year’s due to very heavy toll in accidents in the construction (development) projects, and the delay cost due to these accidents to construction work and to human sufferings, professionals are now looking at “Safety” as another important factor, in addition to the above 3 factors.

Chinese Quick Fix Unsolicited Tender Procedures

Chinese quick fix unsolicited tenders, according to PBJ, may overcome the normal Tender procedures, but the maximum time this strategy can save for a project spanning over 36 months is not more than two(2) months, and it is a negligible cost to the final construction cost. But if the proper tender or procurement process is used to procure a contract it can save the lost time as well as all hidden cost in all these unsolicited tenders by the Chinese companies like CCCC Ltd. The time PBJ speaks for this quick fix method is less than 0.05% of the whole contract period and if the contract is properly administered then this small loss can be recovered and many other benefits in maintaining the required quality can be achieved.

Tender process will allow the client, Sri Lanka government o select the most suitable Tenderer meeting the tender guidelines to meet the expectations of the client from the funds borrowed from Chinese Banks at very exorbitant interest rates. But the quick fix method use by Chinese has removed all these safeguards from the client and the client Sri Lankan government becomes a slave of the Chinese company, as most these development projects come with massive or mega commissions.

In my professional opinion most these unsolicited tenders are, undertaken by the Chinese companies such as CCCC Ltd, famous for high scale corruption, on loans borrowed by the Sri Lankan Government at very high interest rates with very flimsy conditions. If the funds are not Direct Foreign Investment then the onus to apply “procurement procedures” is left with the Sri Lankan government, and these Guidelines now control by the Treasury where PBJ is responsible for applying such measures to save corruption and save the economy..

Quality of Quick Fix Unsolicited Tenders

PBJ is aware that qualities of these development projects are questioned by the people and they are worried about the transparency of these dealings.

When we consider the following quick fix mega development projects, and the lost incurred by the Sri Lankan government due to defective work or RE-WORK in construction carried out without any feasibility reports gives ample evidence that PBJ is wrong to advocate such quick fix solutions. The following projects and loans procured by President Rajapaksa with or without PBJ’s advice seem to prove that Chinese are developing their own projects by bribing the President Rajapaksa and other regime members. Patriotic professional tend to question these unsolicited tenders, as the cost are always questionable and over stretched above the agreed bid cost.

Compare the following Projects according to statistics according to the Ministry of Finance and Planning.

1. Extension to the Southern Expressway –Cost US $ 804 million,
2. Mattala Hambantota International Air Port –Cost US $ 190 million,
3. Extension of Southern Expressway from Beliatta to Wetiya –Cost US $ 429.8 million,
4. Construction of Expressway from Hambantota to Mattala Airport –Cost US $ 412 million,
5. Construction of selected Roads in Hambantota International Hub Development – Cost US $ 252.5 million,
6. Norocchole Coal Power Project – Cost US $ 915 million (pending) 26 breakdowns in 18 months, proves that PBJ is guilty of misleading the Sri Lankan public.

The quality of most these projects and the time duration which took to complete these projects proves that PBJ is telling lies. Most valid other reasons are, these Mega projects even get delayed will not create economic difficulties even if the project is delayed by even six months as the projects are not very essential to keep the economy running. But the two months he saved by overlooking the Tender procedures (even though the NPA Guidelines are defective) has not saved millions for the Sri Lankan government and the projects completed has become white elephants for the government and a burden on the public.

Public – Private Partnership Contracts

This system was developed by the USA military to stop corruption, in mega projects and it has become a success in most Western countries. In 2006/2007 while working for the Sri Lankan government I held two seminars for the Professionals –Architects, Engineers , Quantity Surveyors and the Construction personals at the BMICH, (sponsored by the RICS Sri Lankan Branch). These seminars were very well attended and over 700 professionals were present on both occasions, as the seminar was free to the participants.

BOI which comes under PBJ’s control is having a PPP Unit, and with these facilities PBJ is promoting Chinese quick fix solutions proves that he is corrupt and is under Chinese control as he get paid for his corrupt actions. Why he is not using the PPP system to procure Mega projects and advice President Rajapaksa that this PPP system can eradicate corruption in the construction industry, for this you need very good documentation to mee the special conditions, as every one becomes “partners of the project”. I have written much documentation on PPP Contracts and my service was obtained by many others to prepare documentation to use PPP methods in mega Construction projects to stop corrupt practices. PPP system of contracts procurement reduce delays, corruption and documentation can be prepared while the project is on the run as every one becomes a partner trying to get the maximum profit by completing the project within time, cost and quality, but not to cut corners to make big money.

I doubt, whether the Secretary to the Treasury Dr. PB Jayasundera is aware, what the construction industry professionals believe about the quality of infrastructure projects, constructed with public funds?

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