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Op-Ed: We’re withdrawing from the Arms Procurement Commission, and here’s why


Daily Maverick

By A FEINSTEIN, P HOLDEN AND H VAN VUUREN

August 29, 2014

The Arms Deal was a uniquely damaging moment in our young democratic history. It was concluded after decades of uncontrolled spending on foreign and internal wars by the apartheid regime. From the signing of the contracts in 1999 up to R70 billion of public money continues to be spent on weapons of questionable utility. The country was not and is not facing any meaningful military threat. But rather the most pressing problems that faced us then as they do now are inequality, poverty and unemployment

Since its inception the Arms Deal has been dogged by well supported allegations of corruption. We together with many other activists have consistently challenged the State to fully investigate and prosecute these allegations. Four previous investigations have failed to fully probe the Arms Deal.

We have engaged with these matters in different capacities over many years and we have done this out of the commitment to the primacy of the Constitution and the rule of law in our democracy. Given this commitment we believe that all allegations of corruption must be investigated and prosecuted without fear and favour.

After careful consideration, with great disappointment we have decided to withdraw all participation in the Seriti Commission of Inquiry into the R70 billion Arms Deal.

The appointment of the Commission raised great expectations that the truth would finally be established, and that this would challenge the interests of politicians, middlemen and large corporations in one of the most corrupt industries in the world. The Commission had the prospect of serving not only South Africans but all people across the globe campaigning against the devastating impact of corruption in the arms trade.

The Commission has failed on both accounts. It has missed a historic opportunity to support the struggle for transparency and accountability of the powerful.

We have not made our decision lightly. It follows nearly two years of actively trying to support the work of the Commission, assisted by an exceptional pro bono legal team led by Lawyers for Human Rights.

We have taken our decision due to serious and fatal concerns we have regarding the manner in which the Commission has conducted itself. There are four key reasons why we have decided to withdraw:

  1. The Chairman, Judge Willie Seriti, indicated that he was not interested in hearing evidence from witnesses about documents that they had not themselves written. Judge Seriti made this ruling during the testimony of Member of Parliament Mr David Maynier. This prevented Mr Maynier from giving any substantive evidence, as he was not the author of documents that emanated from investigations or government departments. This is particularly disturbing as this limitation was not applied to previous witnesses who were supportive of the Arms Deal. The implication of this ruling is that only those who have been involved in the Arms Deal can introduce evidence. How the Commission intends to discover the truth by only hearing from participants in the Deal is a mystery.

The Chair has also ruled that witnesses should only speak to corruption allegations of which they have personal knowledge. The logical conclusion of this ruling is that only those who have been corrupted, who have corrupted others, or who were intermediaries in such corruption, can give evidence of it. It is obvious that all of these parties have an interest in hiding the truth. Why would the Chair choose to rely solely on their opinions?

We have conducted extensive research into the Arms Deal. We have analysed thousands of documents, and interviewed people who are able to point to where evidence of corruption is likely to be found. We were not direct participants in the Arms Deal. If we are not allowed to talk to documents that we have not written, nor speak to corruption allegations based on documentary evidence, there is no point in our appearing as witnesses. This process will serve to undermine the critics without addressing the evidence they have accumulated. This can only serve to protect the corrupt and compromised.

In response to our attempt to resolve this issue, the Commission has informed us in their correspondence of 27 August 2014 that “The decision [to admit evidence of which a witness not the author, nor facts within a witness’ personal knowledge] will be influenced by the circumstances of each case, including the document’s relevance to the terms of reference and the purpose for which it is sought to be used.” There is no basis on which we can have any expectation that we will be permitted to give evidence on matters not within our personal knowledge, and rely on documents we are not the authors of. The Commission’s rulings to date in respect of other ‘critic’ witnesses, and the Commission’s rulings to date in respect of our cross-examination of other witnesses, clearly indicate the contrary. The Commission has not undertaken that it will now reverse its previous approach. (If it did so, procedural fairness would require the recall of a number of witnesses). Read more here.

Uganda overhauls procurement rules to ‘eliminate influence peddling’


SupplyManagement

8 April 2014 | Will Green

Government procurement regulations in Uganda have been revamped to support local businesses, speed up processes and “eliminate influence peddling”.

Under the changes bid evaluation teams will have to work to fixed time frames, and officials and ministers will not be allowed to bid for contracts with the government institution they are employed by or responsible for. A tribunal will also be established to handle complaints about the work of the Public Procurement and Disposal of Public Assets Authority (PPDA).

The new regulations include preference schemes that give advantages to local suppliers when procuring goods, services and works. Some contracts will also be set aside for young people, women and people with disabilities.

Meanwhile, officials “shall not sign a contract whose contract price is above the market price of the product being procured” to “eliminate cases of the government paying ridiculously high prices for procurements”.

Government bodies will be required to publish procurement plans, firms will be able to request information on unsuccessful bids, and in certain situations bidders will be allowed to submit a non-monetary “bid securing declaration” instead of using a costly bid security.

A PPDA spokesman said: “With 60 per cent to 70 per cent of the government budget being spent on public procurement and the public outcry against corruption and influence peddling, the law has been strengthened to limit who can provide services to government.”

The changes, which came into force in March, also include special provisions to enable faster and more efficient procurement of medicines and supplies for medical facilities.

The spokesman said: “The amendments will significantly change the way public procurement is managed in Uganda. Some of the immediate benefits are promotion of local businesses under the preference and reservation schemes, and efficiency in public procurement. The new law also demands great accountability from both public and private officials involved in procurement.”

Swaziland finance minister announces procurement reform


Supply Management

29 February 2012 | Angeline Albert

This year, the Swaziland government plans to introduce a public procurement agency to oversee the purchasing carried out by public bodies.

In this national budget speech, finance minister Majozi Sithole said that the Swaziland Public Procurement Regulatory Agency will be created in the 2012/13 financial year.

As well as overseeing public purchasing, the agency will provide an independent forum to assess suppliers’ complaints. In addition, a code of conduct for public sector procurement officials will also be adopted.

The changes come as a result of the country’s Procurement Act of 2010, which gained assent from His Majesty King Mswati III last year. The act also disqualifies public sector workers and politicians from supplying government with goods and services.

In his budget speech, Sithole said: “Government understands that improving public procurement can generate savings without compromising services to the public. It is also an area prone to corruption. That is why we have a new procurement act. In 2012, the government will apply the changes required.”

The minister emphasized the need for stronger fiscal discipline in government by investing in cost-saving policies, improving procurement and public finance management and fighting corruption.

Guinea: Steinmetz $9 Billion Fortune at Risk in Soros-Backed Probe


Bloomberg.com

By Matthew Campbell, Jesse Riseborough & Franz Wild – May 9, 2013

Lansana Conte, the former dictator of Guinea, once held sway over an asset that mining companies craved: the world’s largest undeveloped iron ore deposit, valued today at as much as $50 billion.

BSG Resources Ltd., the diamond producer controlled by Israeli billionaire Beny Steinmetz, was among those firms that came calling starting in 2005. The perks allegedly offered: A gift of a $60,000 diamond-studded gold watch and the promise of a $2.5 million commission to Conte’s wife if BSGR got the mining license. In 2008, BSGR was awarded the license.

Today Conte is dead, three people are under arrest and Steinmetz’s $8.9 billion fortune is threatened. U.S. prosecutors are probing whether a man linked to BSGR paid Guinean officials as much as $12 million in bribes for obtaining mining rights to a portion of the site. Citing similar suspicions, the new Guinean government has said it might strip Steinmetz’s company of the license — putting at risk a $2 billion payment he’s due and the reputation of a key figure in the global trade in high-end diamonds.

“As a scion from a notable traditional diamond family, he grew up knowing that what makes a man is his reputation,” said Chaim Even-Zohar, the author of “The Steinmetz Diamond Story,” a book on the billionaire’s business. “My guess would be that he is deeply hurt.”

Payoff Report

The allegations of payoffs are detailed in a 28-page report, obtained by Bloomberg, prepared by U.S. law firm DLA Piper. The firm was hired by Guinea at the recommendation of hedge fund billionaire George Soros, 82, who’s advising the government through his foundations. Soros, who regularly backs young democratic governments in eastern Europe and Africa, funded the initial DLA Piper investigation, said a person familiar with the matter who asked not to be identified discussing a private issue. His aim was to provide legal counsel to the government that could match the resources of big mining companies, the person said.

Steinmetz and BSGR, based in Guernsey, deny wrongdoing in Guinea and describe themselves as victims of a conspiracy by current Guinea President Alpha Conde and Soros to revoke the firm’s mining license.

BSGR “became the victim of numerous extortion attempts by individuals who were seeking economic gains,” it said today in an e-mailed statement. “The modus operandi of these attempts involved at times the use of forged documentation, blackmail and harassment. BSGR is confident that its activities and position in Guinea will be fully vindicated.”

Better Terms

The 57-year-old Steinmetz’s troubles show the high stakes for resource firms as increasingly assertive African countries, backed by Western donors and governments, re-open mining contracts to hunt for past impropriety and win better terms for citizens. The probes have slowed development of the Guinea site, known as Simandou, whose mining rights are also held by companies including Rio Tinto Group (RIO) and Vale SA. The mountain-top site contains an estimated 26.5 billion metric tons of iron ore resources, said Paul Gait, a mining analyst at Sanford C. Bernstein Ltd. in London.

“This is the most prospective, highest-grade deposit of as yet undeveloped iron ore in the world,” Gait said.

Born in Israel, Steinmetz grew up in the family diamond business, Steinmetz Diamond Group, founded by his father in 1940. The closely held company specializes in the largest and most valuable stones, among them the 203-carat Millennium Star Diamond unveiled by De Beers SA to mark the year 2000. New York-based Tiffany & Co. (TIF) loaned BSGR $50 million in 2011 to expand a mine in Sierra Leone. Steinmetz also supplies diamonds to New York-based Sotheby’s Holdings Inc. for the auction house’s product line.

‘Hard-Nosed’

The diamond group is valued at about $3 billion, accounting for the biggest portion of Steinmetz’s wealth, according to the Bloomberg Billionaires Index. The family’s other interests include mining, oil, gas and real estate.

“In business he is very hard-nosed, maybe bordering on the ruthless — but always legitimate and fair,” said Even-Zohar of Steinmetz, whom he counts as a “good friend.”

The Simandou controversy traces back to 1997, when London-based Rio Tinto was granted a government license to explore the iron ore mine. In 2008, a few months before he died, Conte stripped Rio of half its license, claiming that it wasn’t developing the site quickly enough. The government then awarded it to BSGR for free, which is typical in the industry. The company began spending $160 million preparing the remote site for mining.

Vale Stake

After 18 months, in 2010, BSGR agreed to sell 51 percent of the stake to Brazil’s Vale for $2.5 billion. Vale paid $500 million upfront and the two firms set up a joint venture to develop the site. The remaining $2 billion has not been paid.

“It was an extraordinary deal given its scale,” said John Meyer, an analyst with London-based SP Angel Corporate Finance LLP.

Vale has said it’s not implicated in the investigations.

New York grand jury started its probe earlier this year into whether BSGR violated the Foreign Corrupt Practices Act by delivering bribes, according to prosecutors. The law bars companies with American links from engaging in bribery abroad. A portion of the alleged payments were sent to the U.S., prosecutors said.

On April 25 the grand jury indicted Frederic Cilins, a French citizen, on charges of witness tampering and obstructing the Guinea investigation. Cilins was described by Guinean Justice Minister Christian Sow as an “agent” of BSGR.

Widow Informant

In March he had met in Jacksonville, Florida, with a woman who was wearing a wire, and offered her more than $1 million in exchange for help burning documents related to the BSGR deal, according to the federal complaint.

The woman was Mamadie Toure, a widow of former president Conte who turned FBI informant in the hopes of reducing her own charges, according to a person familiar with the investigation.

The DLA Piper report described Cilins as an intermediary for payments from BSGR to Conte’s wives and for “gifts” to members of the president’s family and government officials. Cilins denies wrongdoing. BSGR today said it sought to work with Cilins and two other men, through a company called Pentler Holdings, from 2006 because BSGR lacked a “permanent presence in Guinea.”

Pentler took a 17.7 percent stake in BSGR’s Guinea unit in March 2006 before it was bought out by BSGR two years later, which is when the arrangement with Cilins ended.

In U.S. federal prosecutions, lower-ranking defendants are often offered lighter sentences in exchange for agreeing to testify against figures more central to alleged crimes.

License Review

The Guinean government began reviewing the Simandou license soon after Alpha Conde took office in 2010 as the country’s first freely elected president. Based on the DLA Piper report and its own investigation, the government last month arrested two BSGR employees in connection with the probe: Ibrahima Sory Toure, Mamadie Toure’s brother who was director of external relations, and Issaga Bangoura, a security official. Both men have denied wrongdoing.

BSGR has fought back vigorously. It’s taken aim at Soros, Conde and Rio Tinto, which it says established a “covert special project group dedicated to committing espionage” and harassed its workers by buzzing them with low-flying helicopters.

Public Relations

BSGR has also sued its former public relations adviser, FTI Consulting, accusing it of abetting a “smear campaign” directed by Soros. Soros is “determined to ensure” that the mining license “was withdrawn/canceled” by the government of Guinea, according to the lawsuit. It cited alleged comments by FTI executives that Soros had a “personal obsession” about BSGR.

Soros rejects the claim that he engaged in a smear campaign and that he conspired to strip Steinmetz’s license, a spokesman for Soros Fund Management LLC said in an e-mailed statement.

FTI and Mark Malloch-Brown, its chairman for Europe, the Middle East and Africa, deny working against BSGR and said they will contest the claim. Rio Tinto declined to comment.

Conde, who took office promising to root out corruption, has attracted significant foreign backers. Soros’s Revenue Watch Institute, an offshoot of his Open Society Foundations, advised Conde on a new mining code and anti-corruption measures, the person familiar with his activities said. Global Witness, an anti-corruption group whose advisory board includes Soros’s son Alexander and which he funds, chronicles alleged wrongdoing in Guinea.

‘Personal Relationship’

And former British Prime Minister Tony Blair established a relationship with Conde through his African Governance Initiative, which set up an office in Conakry, Guinea’s capital, to assist his presidency. Conde last year secured $2.1 billion in debt relief from the International Monetary Fund and World Bank, a recognition of his move to civilian rule.

“The personal relationship between Mr. Soros, Mr. Blair, and Mr. Conde is really important, and has an impact in terms of reassuring leaders that we are going in the right direction,” Guinean Finance Minister Kerfalla Yansane said by phone. “At this juncture we need big support to challenge these companies, who can hire lawyers and PR firms and have resources we don’t.”

Guinea isn’t the only African state where deals with middlemen have led to controversy for international mining groups. Eurasian Natural Resources Corp., a London-based, Kazakh-backed mining firm, is being probed by U.K. prosecutors into allegations it paid bribes to win business in Kazakhstan and Africa. The company said on April 25 that it is cooperating with authorities. And countries including Ghana and Zambia are driving a harder bargain with mining firms, reviewing taxation and state-ownership clauses.

High Stakes

The stakes for getting Simandou mined are high for Guinea, whose population is about 11 million. It ranks 178th out of 187 nations on the UN Human Development Index, which measures indicators of poverty and health.

“The economic growth profile of the country is expected to completely be changed” by the mine, Yansane said.

Rio Tinto CEO Sam Walsh has said the company, which says it has spent $2.3 billion at the site, is committed to developing its portion of Simandou. It predicted production would start in 2015.

BSGR has also said it’s committed to developing Simandou, and remaining in Guinea despite the corruption allegations.

The government realizes the Steinmetz controversy may spook the investors it needs to raiseliving standards, Yansane said. For that reason, “We want this problem resolved as quickly as possible,” he said. “We don’t want the name of the country to be on the front page of newspapers all the time.”

To contact the reporters on this story: Matthew Campbell in London atmcampbell39@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editors responsible for this story: Jacqueline Simmons atjackiem@bloomberg.net; John Viljoen at jviljoen@bloomberg.net

All South Africa construction majors ‘involved’ in collusion, price-fixing – Patel


Engineering News

By: Natalie Greve

11th April 2013

Economic Development Minister Ebrahim Patel has said that all the major South African civil engineering and construction companies currently active in the sector have been involved in infrastructure-related collusion and price-fixing.

“This problem is huge and pervasive in the infrastructure space,” he said at the inaugural Project and Construction Management Professions Conference on Thursday.

The State reportedly lost billions of rands through large-scale collusion and price-fixing by private sector companies during several past infrastructure projects, which instigated investigations by the Competition Commission into several completed public build projects.

These enquiries, which included investigations into the Gautrain project and several stadium developments, uncovered substantial evidence of collusion and price fixing by private sector participants, the Minister noted.

In cases involving critical projects, a number of companies came forward to acknowledge their involvement in the unlawful practises, Patel added.

“We have received about 400 admissions of incidents of collusion by companies in the sector,” he commented.

South African Council for the Project and Construction Management Professions (SACPCMP) president Professor Raymond Nkado said he was “shocked” that registered members of the SACPCMP had been found to have been involved.

“As a council, we have decided that we might take additional disciplinary action against these [companies],” he said.

Fast-Track Process
Based on the evidence gleaned from the commission’s investigations, which indicated the pervasiveness of the involvement by private companies, it was decided to introduce a “fast-track settlement process”, which would avoid lengthy legal processes that could persist for up to eight years, and which Patel said could potentially distract the project management process.

“We approached the industry and said we were prepared to put a voluntary disclosure process on the table, which would bring this to a conclusion expeditiously. In return, what is required is full disclosure, a commitment to end the cartels and an acceptance that the law must take its course,” he explained.

Once the disclosure process had been completed and admission of guilt received, the commission would then determine appropriate fines or penalties related to the value of the project.

Several such processes between the Competition Commission and private companies were currently under way, with most in the final stages, where the extent of the penalty was being determined in cases where organisations were “improperly enriched”.

Patel added that the first company to come forward and admit collusion would receive preferential treatment in terms of the penalty levied.

“We also take into account the extent of cooperation, so that there is an incentive to come clean. However, these companies will still have to pay substantial penalties as prescribed by the Competition Act,” he cautioned.

In cases where investigations implicated public servants, this information would be referred to law enforcement agencies.

There would be public disclosure once settlements had been reached.

Incentivisation

Public Works Minister Thulas Nxesi added that the findings of the investigation challenged the common perception that corruption and malgovernance was only pervasive in the public sector.

“The opinion that only government has such problems has been proved incorrect. There are huge problems in the private sector and we must expose them,” he said, encouraging the private sector to engage in “self reflection”.

Nxesi noted that key to the prevention of corruption in infrastructure projects was the establishment of a strong financial system, transparent procurement processes and incentivisation.

Moreover, Patel advised that the competition authorities had used the findings of the investigations to identify networks and channels used by companies in collusive practises and had identified the lead players and managers.

This would be used to develop internal preventive controls to reduce the opportunity for future collusion.

In addition, Patel said the CEO of any company awarded an infrastructure tender would be required to sign an “integrity pact” that committed them to competitive and noncorrupt practises and to create a culture in their organisation in which anticompetitive behaviour was discouraged.

“This will require executives to commit personal responsibility and liability,” he said.

The integrity pact was currently being piloted in a number of infrastructure tenders and would be fully implemented throughout the course of this year.

Patel said it was critical that the new phase of national infrastructure development not be characterised by similar high levels of collusion and price-fixing.

“Companies will have to make an important calculation. In the past, they thought collusion was a no-brainer; that they would secure the contract and walk away with the money. Now they see that we have developed the investigatory capacity to track the evidence down and to bring companies to book. That is the most important breakthough for us,” he said.

Edited by: Chanel de Bruyn

Margaret Thatcher, public procurement pioneer and advocate?


Spend Matters

By Peter Smith

April 8, 2013

Margaret Thatcher, who died today, was the United Kingdom’s most important politician of the last 50 years. She will be remembered for both her domestic leadership, as she turned round what seemed like a country in inexorable decline through the 1970s, and her role in foreign policy, from the Falklands to supporting Reagan in the “defeat” of the USSR.

But she can also take some credit as one of the key founding fathers (mothers?) of professional public sector procurement. Under her period of office as Prime Minister, 1979 – 90, we saw major advances in procurement throughout the public sector.  As David Smith, Commercial Director at the Department of Work and Pensions, CIPS President last year and someone who was one of the pioneers of public procurement himself, said to us today:

“She was really the first Prime Minister in the UK to take seriously the whole concept that government spending needed to be efficient and effective. She instigated the first government procurement review in 1984, which really led to the Treasury Central Unit on Procurement being formed, more senior procurement staff in departments, and eventually OGC, ERG and all the focus we’ve seen since on public sector procurement”.

She also led the drive to involve the private sector more in the delivery of government services. Now, just like the more divisive side of her achievements on the economic front (miners’ strike et al), you might look either positively or negatively at “compulsory competitive tendering” and “market testing” as the beginning of the whole outsourcing boom and greater private sector involvement in public services.

But if you remember the days of the local authority works’ departments, and their total lack of any customer or VFM focus (and often a dollop of corruption to go alongside that), then it’s hard to argue against her view that competition and procurement had to be taken more seriously if the taxpayer was to receive value for money for an ever-increasing investment.

And as well as being arguably the inventor of public sector outsourcing, it was under her leadership that the first serious Procurement Directors started appearing in government departments. I did my stint as a government CPO not long after she’d moved on, but her influence was still clear in the approach of Ministers like  Peter Lilley and Michael Heseltine, with their support for further innovative procurement initiatives around outsourcing and PFI for instance.

As David Smith said today,

“Whatever you think of her politics, she was a friend of the profession, and a genuine pioneer in understanding the importance of the role in the public sector. Many of the things we take for granted now in public procurement started because of her”.

RIP Baroness Thatcher.

CORRUPTION WATCH:Procurement law must be simplified


Mar 31, 2013 | Corruption Watch

Is our government just really bad at procurement, or is there a deeper problem with the law that applies to tendering?

IT SEEMS that every other week there is a different scandal involving procurement. Most tenders seem to land up in court, with service providers squabbling over the spoils of government spending. Is our government just really bad at procurement, or is there a deeper problem with the law that applies to tendering? Perplexed

Dear Perplexed

We believe that it is a bit of both. While there is no denying that some of the bureaucrats responsible for procurement are corrupt (as are some of the private companies that bid for contracts), the law governing public procurement has become increasingly complicated.

In our view, procurement law has now become so complicated that it may be undermining service delivery. For example, many organs of state are unable to spend their budgets and infrastructure grants. The complexity of procurement law contributes to this problem by paralysing civil servants who become hyper-cautious in their desire to avoid infringing the law.

Part of the problem is that there are so many different levels of procurement law.

A well-intentioned and honest administrator will find that the following layers of law govern procurement:

Section 217 of the constitution expressly deals with government procurement. It provides that when an organ of state contracts for goods or services, it must do so “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.

The award of a tender constitutes administrative action in terms of the constitution. As such, the award of tenders is subject to review under the Promotion of Administrative Justice Act.

Various pieces of legislation govern the budgeting process, internal controls and the requirement that people historically disadvantaged by unfair discrimination be favoured.

Each organ of state has its own supply chain management policy, which must be followed by its bureaucrats when engaging in procurement.

Any information held by an organ of state relating to the tender process is potentially affected by the Promotion of Access to Information Act, and may be the subject of requests for information by other affected parties.

The contract between the relevant organ of state and the service provider is governed by the common law of contract.

As a result, innumerable pitfalls await even the most well-intentioned administrator.

The competitive nature of tender processes and the enormous financial benefits to be gained from contracts for government procurement are a powerful incentive for unsuccessful parties to litigate, which they often do.

Their lawyers scrutinise every step in the process for compliance with the various laws and procedures, and pounce on every real or perceived irregularity. Very few administrative processes are entirely free from any misstep, and when one is found, litigation soon follows.

In addition, bureaucrats are required to account to government oversight bodies in respect of expenditure, including internal accounting officers and the Treasury. The procurement process may also be subjected to scrutiny by the auditor-general and the public protector.

Even where litigation by disgruntled parties fails, or investigations by other organs of state result in a clean bill of health, the effect of such litigation and investigation is to delay the provision of the service in question.

Procurement processes are often suspended while disputes are resolved, which can mean delays of years in service delivery.

We are therefore of the view that legal reforms to simplify and speed up procurement are justified. Any reform would have to ensure that accountability mechanisms remain in place, and that the law retains proper safeguards for detecting corruption and maladministration.

That would require careful balancing between swift, effective service provision and a functioning oversight mechanism.

* This article was first published in Sunday Times: Business Times

 

Kenya: Minutes reveal how IEBC bought pollbooks


Standard Digital

By Moses Michira and Paul Wafula

March 26, 2013

NAIROBI, KENYAThe electoral commission, which conducted the March 4 General Election, bought voter identification gadgets without testing their technical capability.

Face Technology, the South African firm that supplied the equipment also known as poll books, won the tender before a technical evaluation was conducted among the five prequalified bidders.

A review of the tendering procedure by the public procurement regulator found out the tender to supply poll books was awarded to the South African firm, which participated in the Anglo Leasing scandal, on September 29 last year, three weeks before the technical evaluation among the shortlisted bidders.

This major procurement breach ensured firms that were to later demonstrate their capabilities for the task, like America’s Avante and France’s Safran Morpho were left out.

The public procurement regulator, however, found out IEBC had actually made its decision to award the tender to Face Technology more than three weeks before the October 22 demonstration of technical capabilities.

Minutes from the Independent Electoral and Boundaries Commission (IEBC and presented by Avante to the regulator indicated that the tender was actually awarded on September 29.

“…bidder number 3 M/S Face Technology be considered for the award of the contract at a total cost of Sh1.397724925 ($16651139.13),” reads part of the official information from IEBC’s September 29 meeting.

The regulator says since a decision had been made, the exercise of proof of concept was meaningless becauseFace Technology, whose devise had failed, had been shockingly declared the winner. The revelation now provides the critical answers to the billion-dollar question, what exactly went wrong in the voter identification during the last General Election conducted by IEBC?

The public procurement regulator fell short of cancelling IEBC’s tender, only allowing it to proceed in the greater public interest considering the time left, on its December 3, last year, terse ruling. IEBC’s defence was that Face Technology had the lowest quote at Sh1.39 billion disregarding its inability to produce the required equipment, compared to Safran Morpho’s Sh1.6 billion and Avante’s Sh2.1 billion.

Questionable tendering

IEBC’s motivation in awarding the tender to Face Technology was questioned by the regulator who established an uneven playing ground in the procurement process. Face Technology had presented a prototype that never worked at the tendering stage, but the IEBC inexplicably offered the firm another chance to demonstrate its technical capability.

A meeting between IEBC and the three prequalified bidders held on October 10, last year indicated Safran Morpho declined to parade its prototype, while Face Technology’s equipment fell short of the requirements in the tender document.

“(Avante’s prototype) can satisfactorily meet the specifications provided in the tender document for voter identification device,” further reads the report. “( Face Technology) did not demonstrate a prototype that met the proof of concept requirements as stipulated in the tender document.”

IEBC invited Face Technology and Safran Morpho in a subsequent demonstration, leaving out Avante, which had demonstrated its technical capacity, in a meeting held on October 22. Minutes of the meeting show Face Technology presented a different device from that submitted during the close of the tender, a major procurement breach, which the IEBC turned a blind eye to.

During the evaluation,Face Technologyprovided a prototype device, which lacked a spare power back-up of 12 hours that was marked as critical. It also did not have an original battery attached to the laptops that would last for 12 hours.

The device it supplied at this stage did not meet the requirement that its start-up and recovery time would last less than 30 seconds. This means the prototype ofFace Technology was taking longer to start than required. None of the companies that qualified for the second round of evaluation also provided gadgets that had unique identification numbers assigned by the manufacturers. Lack of this detail exposes the gadgets to difficulties in tracing the user and location in case they are used to hack into the system. The Board accuses the IEBC of being cosy with Face Technologyand finding small excuses with the other companies to disqualify them.

“It (IEBC) appears to have adopted in the processing of this tender, a scheme of nit-picking, when it came to the tenders of the bidders it did not favour, and one of cosiness when it came with the successful bidder (Face Technologies),” a report, critical of the process, reads in part.

The revelations come at a time when it emerged the electronic voting and transmission system could have been attacked at least twice before it finally crashed at 8pm on Election Day.

World Bank Advised Ethiopia to Audit Large Telecom Agreements


Business Ethiopia

Reporter

January 11, 2013

The World Bank (WB) in its report on the status of corruption in Ethiopia advised the government to audit Ethio Telecom’s large agreements. 

According to the report launched this morning at the Hilton Addis, focusing on the level of corruption in the country in different sector sectors, the government needs to apply standards to Ethio Telecom that are in line with Ethiopia’s Public Procurement Proclamation.

The report, “Diagnosing Corruption in Ethiopia”, in its subtopic that assessed the level of corruption in the telecom sector also stated that absence of uniform procurement standards is one of the major causes of corruption, among others.

The report highlighted that the vendor financing contract entered into by the then ETC (Ethiopian Telecommunications Corporation now named Ethio Telecom) in 2006 appears to be highly unusual. “…This brief study should not be seen as an investigation or interpreted as alleging in itself that corruption has necessarily occurred. However, the circumstances as perceived both by stakeholders and by independent observers do raise serious questions about the control of risks in this sector.”

The stakeholders of the then 1.5 billion US dollars vendor financing argue that ETC’s financial requirements were not provided in detail to those suppliers (other than possibly the winning supplier –China’s ZTE) that had been approached to consider providing such financing. The report also stated that there is no evidence of a formal tender procedure for the finance package.

“The supplier selected by the ETC to supply the finance package that suited the ETC’s purposes. The equipment supply element of the vendor financing contract was not put out to competitive tender.”
The report stated that generally the contract was not in accordance with the ETC’s procurement procedure and no competitive tender for the contract and subcontracts.

“Difficulty in measuring technical compliance: By appointing one supplier without competitive tender, the ETC has no opportunity to assess the degree of technical compliance of the supplier’s equipment. The contract was also inappropriate and went through unclear procedures for ensuring technical quality and competitive pricing,” according to the report.

In addition, the report further mentioned that Ethio Telecom is vulnerable to corruption because it is under government monopoly.

Health, education, water, justice, construction, land and mining are also the sectors surveyed by the report sponsored by the World Bank, Canada International Development Agency, UK Aid and the government of the Netherlands.

“Some of the recommendations of the report are under implementation,” said Ali Suleman, Commissioner of the Federal Ethics and Anti-Corruption Commission (FEACC).  While the report also recalled that in January 2008, the FEACC 2008 brought charges against a former ETC CEO and 26 former ETC executives for allegedly “procuring low-quality equipment from companies that were supposed to be rejected on the basis of procurement regulations.”

World Bank country Director, Guang Zhe Chen, on his part stressed that the purpose of the study is conducted to support evidence-based policy formation.

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