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Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI

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Over-pricing

300MW solar tender cancelled in Zimbabwe


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Lloyd Gumbo Harare Bureau
THE State Procurement Board has cancelled the 300 Megawatts solar projects indefinitely after one winning bidder increased its price, while Zimbabwe Power Company (ZPC) failed to agree with two other firms that had been considered for the other solar plants.
This effectively leaves the government’s quest to find a quick solution to power crisis in the country in disarray as it had hoped that 300MW would be fed to the national grid by next year.

The SPB awarded a tender for a 100MW solar plant in Gwanda to China Jiangxi Corporation, which was the lowest bidder to specification at about $184 million.

However, they then made a U-turn by approving a request by ZPC to engage two other losing bidders — Intratrek Zimbabwe and ZTE Corporation — despite the fact that they had charged $248 million and $358,3 million respectively at the initial tender for 100MW project each.

The ZPC claimed the two firms had agreed to match the $184 million charged by China Jiangxi Corporation.

But correspondences seen by our Harare Bureau indicate that the SPB then cancelled all the three tenders.

SPB principal officer, Cledwyn Nyanhete, on July 31, 2014, wrote to China Jiangxi Corporation managing director cancelling the tender award after the firm requested to increase the price from $184 million to $207 million.

The firm argued that the new price included duties and taxes, a position the SPB dismissed, arguing that the costs were already catered for.

Nyanhete said the reasons for increased costs were not justifiable and in contravention of Section 39 (1) (b) of the Procurement  Act.

“Accordingly, through PBR 0001J of July 17, 2014, the State Procurement Board resolved that; PBR 0001 of January 16, 2014 in favour of China Jiangxi Corporation Ltd for funding, engineering, procurement and construction of 1x100MW solar power project at Gwanda/Plumtree be and is hereby cancelled for failure by the winning bidder to maintain their original tender price of $183,708,238.51 (inclusive of duties and taxes),” said Nyanhete.

“China Jiangxi Corporation for International Economic and Technical Cooperation Ltd should within 14 days of notification pay $900.00 administration fees in line with S.I 159 of October 12, 2012 for violation of Section 39 (1) (b) of the Procurement Act by misrepresenting a material fact in a tender process.

“The board further resolved that you be warned against violation of procurement procedures in future as this may result in sanction in terms of Section 32 of the Procurement Regulations being preferred against you.”

Nyanhete also wrote to Intratrek Zimbabwe P/L managing director on July 28, 2014, advising them that varying the technical partner for Intratrek Zimbabwe from Greenfield Solar Europa GmbH of Germany to Chint Electrical Ltd of China after the tender award was not consistent with primary conditions of mandated negotiations.

He wrote another letter to Intratrek Zimbabwe managing director and ZTE Corporation Ltd managing director on July 31, 2014, saying ZPC had advised the SPB that negotiations with the two firms had failed.

A procurement expert said the SPB should have opened the tender to other bidders soon after ZPC indicated that it wanted variation of the projects from the initial 100MW to 300MW.

“What has happened is that while the SPB may claim to be justified in making this decision, it should have never got to this situation because the tender should have been opened the moment ZPC said they wanted 300MW instead of 100MW,” said the expert.

“This has obviously resulted in almost a year being lost on something that should have been done properly from the word go.

“What is left now is for the SPB to open the tender to other people with a varied requirement of 300MW than the initial 100MW. They cannot award it to any of the three firms without opening it to public tender.”

Energy and Power Development Minister Dzikamai Mavhaire has been pinning hope on solar projects as quick solutions to the power deficit in Zimbabwe.

Zimbabwe’s power plants produce about 1,300MW against a peak demand of more than 2,400MW.

Procurement irregularities and over-pricing in Madagascar


www.aidspan.org

by David Garmaise

January 8, 2014

Suppliers alleged to have colluded on bids

An investigation by the Office of the Inspector General (OIG) into procurement contracts for five malaria grants to Madagascar has found evidence of non-compliant expenditures, over-priced goods and collusion among suppliers. A report on the investigation was released on 3 January.

Procurement activities from four Round 9 grants under investigation involved two government and two non-government bodies: the central support office for health sector projects (UGP: Unité de Gestion des Projets d’Appui au Secteur de Santé ) and the central governments health products procurement office (SALAMA: Centre d’Achats de Médicaments et de Matériel Médical); Pact and the Madagascar intercooperation association (AIM: Association Intercoopération Madagascar). Procurement activities under a Round 7 grant were also investigated, with UGP as the PR.

By April 2012, when the investigation was launched, some $70.8 million had been disbursed over the five grants; expenditures of $12.2 million were examined.

The investigation has implicated three of the four PRs in non-compliant expenditures worth some $1.1 million, including $462,670 in over-pricing; only AIM was exonerated for any suspect spending.

Table: Summary of non-compliant expenditures and amounts of over-pricing identified by the OIG

PR Grant

Disbursed as of 30 April 2012

Reviewed by the OIG

Amount of non-compliant expenditures

Of which, amount of over-pricing

UGP MDG-910-G17-M

$8,867,217

$6.0 m.

$843,600

$382,937

MDG-708-G09-M

$24,170,652

Pact MDG-910-G19-M

$13,741,533

$1.4 m.

$299,672

$74,464

SALAMA MDG-910-G16-M

$16,397,630

$ 2.3 m.

$17,068

$5,269

AIM MDG-910-G18-M

$7,652,053

$2.5 m.

NIL

NIL

Totals

$70,829,085

$12.2 m.

$1,160,340

$462,670

 

With respect to the grants administered by UGP, the OIG uncovered evidence that groups of vendors colluded and submitted bids for procurement contracts that had not been independently prepared. In a restricted national tender launched by UGP in 2010 for supplies and equipment for an indoor residual spraying campaign, the OIG found that contracts worth $640,146 were compromised; of this amount, slightly more than half was charged at above-market rates.

Such practices needed the collusion of a procurement unit official, according to the OIG.

The grant administered by Pact required the PR to use SALAMA as a procurement agent. During 2011–2012, Pact entered into three contracts with SALAMA. The OIG found that two of the contracts – $270,643 for laboratory equipment and $29,029 for rapid diagnostic tests – were overpriced by $74,464 in total. The OIG said that Pact exercised insufficient oversight of the contracting process with SALAMA. However, the OIG acknowledged that Pact undertook corrective measures shortly after the issue was raised, and managed to recover some of the excess.

With respect to the grant for which SALAMA was PR, the OIG said that in January 2011, a contract was awarded for $17,068 to IDA Foundation to supply an anti-malarial medicine manufactured by REMEDICA, a supplier approved by the World Health Organization.

However, the medicines actually delivered by IDA and distributed by SALAMA were produced by another manufacturer, Guilin Pharmaceuticals, which was not an approved supplier, resulting in an overcharge of roughly $5,000.  IDA has since committed to refund the excess charges.

The OIG found fault with SALAMA, IDA and the local fund agent (LFA) for the fact that the wrong drugs were distributed to patients.

An annex to the report included detailed comments from the UGP, Pact and SALAMA on an earlier draft of the report. These comments prompted changes to the final report.

In an attached letter, the Global Fund’s executive director, Mark Dybul, said that the Secretariat has moved to respond to the findings, including limiting the scope of the grants to essential malaria activities; suspending the signing of Phase 2 of the UGP NSA grant; moving to 100% verification by the LFA; and requiring pooled procurement for most commodities. SALAMA has also been removed as a PR, and its grant is in closure. A recovery plan should be in place by March 2014, Dybul added.

Separately, the OIG said it had been advised of the findings of a forensic audit commissioned by Pact and conducted on one of Pact’s sub-recipients. The OIG said that the audit identified procurement irregularities, which will be followed-up directly by the Global Fund Secretariat.

The report of the OIG investigation can be found on the Global Fund website here.

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