GPL awarded contracts worth $$B in breach of Procurement Act

– 2011 to 2015 audit finds

For years the Guyana Power and Light (GPL) breached Section 24 of the Procurement Act 2003, awarding billions of dollars in contracts in direct contravention of the act, since it did so without the approval of the National Procurement and Tender Administration Board (NPTAB) and it had no written permission to do so by the NPTAB.

In so doing there has been “collusion and misfeasance” and this contributed to ensuring that preferred contractors were awarded contracts, according to an audit done of the company between the period November 2011 and May 2015 by Nigel Hinds Financial Services. In addition, the bidding process was afflicted with the same contractor bidding for the same contract using different business names.

The audit said that up to the time of auditing the power company’s breaching of the Procurement Act continued. When questioned as to if GPL had permission from NPTAB to use the procurement system that was being used Company Secretary of GPL, Laurian Bancroft advised that that she had written to NPTAB on October 1, 2012 but had not received the said permission.

It is not clear if that has been changed as a new board is now managing the company and there is also a new acting CEO.

“Contract expenditure for the period 2011 to 2015 exceeded $20 billion, with contract cost overruns exceeding $2.4 billion for the same period; the cost overruns require an improved system to monitor contracts, especially construction related contracts,” the report said.

The audit also found that based on contracts examined GPL’s internal procurement policy was not adhered to in a rigorous manner as there were too many instances where key documents were missing from contract files.

The contacts examined were those awarded to Linden Holdings Inc, BK International, Ash Civil Engineering and Industrial Safety Supplies. Upon examination it was found that none of the contracts had any purchase order from the user department and no documents related to the bids were in the contract files.

And as it relates to the contract awarded to Industrial Safety Supplies for the supply of safety belts the audit found that it was won by Power Lite Product Limited of Trinidad but management had requested that the tender board issue it to Industrial Safety Supplies. The reason given was that the latter company was providing $470,720 less than the company that won the bid and that it had become the authorized dealer for Klien—the type of belts requested in the contract— line of products in Guyana.

“Quite an irregular arrangement in several respects, first with the disenfranchising of the original contract awardee and then the discovery that the safety belt had to be Klein manufactured,” the audit concluded.

Weakness

According to the audit, one of the weaknesses of GPL’s procurement process was the absence of a pre-qualification system and it revealed that management alleged that it was difficult for some suppliers who manufacture specific parts to meet the company’s requirements.

However, the audit said, such pre-qualifications are important for safeguarding the integrity of the tender process in ensuring that suppliers/contractors meet basic requirements such as confirmation that they have the legal capacity to enter into the contract and audited financial statements for the most recent two years.

And of the multiple reports of electricity theft received, the audit team did a thorough examination of an allegation made against Fix It Depot which was that it was stealing electricity from a government account. An investigation was done and this led to the disconnection of electricity service from Fix It Depot.

Fix It Depot is currently in a court battle with GPL in which the power company and the government are being asked to defend their decision to award a $4.6 billion contract to a Chinese group for the rehabilitation of the power company’s low and medium voltage distribution network. Fix It Depot claims that the contract was “improperly” awarded.

The audit report said that following the disconnection, a meeting was held with Fix It Depot and it was agreed that the electricity would be reconnected only to the business’s pre-paid service. But it was later instructed that GPL’s personnel not visit the business’s premises.

Upon examining email correspondences from members of GPL’s management and executives on the issue it was found that the Loss Reduction Department had authorized that Fix It Depot be billed only eight days retroactively, instead of 24 months retroactively, in accordance with GPL’s policy for customers found to be stealing electricity.

It was also found that the charges for eight days retroactive billing totalled $157,680 while billing the company retroactively for 24 months would have amounted to charges in excess of $10 million.

“Our team found no evidence to suggest that Mr Paul James of Fix It Depot or any representatives of the said company has disagreed with GPL’s allegations,” the audit said.

The matter is currently unresolved and Fix It Depot remains an active GPL customer.

It was pointed out that the issue of electricity theft is widespread across Guyana and involves residential, commercial and industrial customers. The audit said the power company needs to have policies in place that are strictly adhered to when investigating, reporting and prosecuting such matters.

The audit also made mention of former CEO Bharat Dindyal’s use of a credit card to make purchases on behalf of the company or other expenditures and this being allowed without any documented corporate policy as it related to reconciliation, type of transaction allowed, reporting period or declaration by the user authorising GPL to recover unjustified expenditure from the user of the credit card. The credit card was destroyed when Dindyal was fired on August 14, 2015.

Meantime, the audit revealed that Berbice Loss Reduction Coordinator Phalyanjee Nandkumar was linked to operating a “mini-GPL business” and using the resources of the company for his personal profit.

“We obtained a GPL Investigative Report, which details widespread abuse of GPL’s resources for private gain by Mr Nandkumar and other GPL personnel,” the audit said. The audit recommended that the report and evidence should be used by the new board as a platform for further investigation by either the Internal Audit Unit or have the matter handed over to the police.