- Dubious procurement deals rock parastatal
- ODPP probe shows millions paid for goods no-one saw
In what may be described as a state of procurement emergency at Blantyre Water Board (BWB), the troubled water supplier’s executive management appear to have suspended Malawi’s public procurement laws as well as governance safety nets and replaced them with jungle rules.
BWB executive management—according to an investigation by the Office of the Director of Public Procurement (ODPP) into the firm’s procurement processes—has allegedly presided over illegal procurement that may have siphoned out hundreds of millions of kwacha at the public company that is failing to reliably supply water to Blantyre residents, some of whom go for weeks without the must-have liquid.
The September 2014 ODPP investigative report The Nation has seen alleges that top management at BWB likes to bypass the company’s Internal Procurement Committee (IPC) and—where the law dictates—even the ODPP itself, to literally handpick suppliers and contractors to carry out works or supply goods; sometimes at suspicious costs.
Where there was a tender, says the ODPP report, BWB executive management has, on several occasions, cancelled and proceeded to award jobs to firms that never submitted bids.
Some of the jobs—including those involving tens of millions of kwacha—were transacted without a contract or consummated with just memorandum of understanding (MoU).
The report—titled Investigation into Alleged Procurement Malpractices in the Procurement of Pre-paid Water Meters, Minor Works and Spare Parts for Motors by BWB—was instituted after ODPP “received a report from a concerned public official”.
A team of three ODPP officials—led by assistant director responsible for monitoring and enforcement Arnold Chirwa—conducted the investigation from September 8 to 9 2014.
The team reviewed the period from around September 2012 to around mid-2014 and generally concluded the following:
- That the BWB executive management deliberately flouted procedures in the procurement of pre-paid water meters, minor works and spare parts for motors at Chileka Pumping Station;
- That except for a few procurements, all other procurements under this investigation are hereby declared misprocurements.
- That Section 8 of the Public Procurement Act 2003 establishes and gives functions of public procurement to the IPC; therefore, taking over its roles and making unilateral approvals and contract award decisions is illegal.
ODPP found that over the reviewed period alone, executive management “deliberately” flouted procedures in its procurement transactions.
This, according to the report, resulted in dubiously awarding more than K500 million (US$984 252) worth of contracts to several companies, most of which did not go through procurement processes such as bid evaluation, IPC approvals and ODPP ‘No Objection’ where thresholds were higher than K5 million (US$9 843) or when the procurement method was single sourcing as most of them were.
Procurement of minor works
Annually, BWB carries out various building and civil works within its jurisdiction and these are either major or minor works depending on the requirements, notes the report.
For the 2013/14 financial year, the board planned to carry out several minor works covering property maintenance, pipe laying and other civil works.
However, according to the available information, BWB executed a number of contentious projects in the year it described as ‘minor works’ but cost millions, including the Zomba Road Pipe Re-routing that cost K128 million from a budget of around K50 million.
According to the report, although BWB management sought to show its adherence to the procurement legal framework, there was inherent dislike of the same.
For example, on August 4 2012, BWB’s director of technical services in his memorandum to the chief executive ref. No. 0602 questioned the involvement of the IPC in project procurement and related delays.
He then recommended that the system of allocating works by the IPC should be changed so that it is done by the projects section, not IPC—a proposal BWB chief executive duly endorsed.
However, the practice baffled the ODPP investigation team as it was “at pains to understand why the management of the board took the trouble to misusing public resources to advertise [initially] when it was aware that in the end the contracts would just be allocated.”
Thus, BWB went ahead to carry out various works on single-source basis and dubiously awarded 17 contracts worth K505 716 364.28 to seven companies.
The companies were Shireco, Gadaga Construction, Primo, KVN, IC Works, Zizipizga Construction and GMTECK.
Of these jobs, 11 went to Shireco—a dominance the ODPP report described as “unhealthy in procurement”, prompting it to recommend that “the relationship between Shireco as a private company and senior management at BWB must be toned down”.
As of June 2014, BWB had paid K201 639 983 to the companies for the alleged completed works.
However, out of the seven companies, it was revealed that Gadaga Construction, IC Works and Zizipizga Construction never participated in the 2013-2014 bidding for the minor works.
Consequently, their inclusion in the procurement of these works was not only misprocurement, but illegal, according to ODPP.
Further, contracts for renovation of internal audit manager’s office, construction of cubicles at BWB reception area and tiling and associated works at the clinic awarded to KVN Construction (for the first two) and Shireco, respectively, raised eyebrows because of the improbability that the estimated figures prepared by BWB were exactly as those charged by the contractors and duly paid for in three separate cases.
Procurement of pre-paid water meters
BWB has introduced pre-paid billing water meters on a pilot phase.
However, it was revealed that initially, procurement of the pre-paid meters took the right path in tendering the jobs, but management cancelled it without giving any reasons.
In September 2013, BWB started purchasing 200 pre-paid meters from Cindy Supplies on a single-source method without following procurement procedures, including bypassing the IPC and ODPP approval.
There was another procurement of a bulk pre-paid water meters from Suntront Tech Co. Ltd of China worth $39 040 (about K20 million), as per bank transfer instruction by BWB dated February 27 2014, which did not follow any procurement procedures, said the report.
Reads the investigative report in part: “These procurements for water meters are all declared misprocurements and illegal. Firstly, single source method was used without getting prior approval from ODPP. Secondly, IPC was deliberately and purposefully bypassed.”
The ODPP further says the basis for awarding a contract to Cindy Supplies needs further probe considering that there is no record to show that the sample that
Cindy Supplies provided was even tested and found to be working properly.
“Without such information, the grounds become suspicious [and] justify further investigation,” says ODPP.
It also says there is need for a more detailed review of the procurements of 200 meters in September 2013 and also the payment made to Suntront Tech Co. Ltd as there are no records to show that the meters were indeed delivered let alone received.
ODPP says besides not following procurement procedures, it needs to be established if BWB was indeed making a genuine payment for meters duly received.
“It is the view of the investigation team that the anomalies identified in the procurement of water meters could be a tip of the ice berg; hence, the recommendation for a fully fledged audit of BWB contracts.
“It is also the view of the investigation team that this flouting of procurement procedures by management was deliberate and not out of lack of knowledge,” says the ODPP in the report.
On procurement of spare parts for motors at Chileka Pumping Station, it was revealed that no formal contract was signed between BWB and the supplier, APE Pumps. In addition, the procurement did not have approval of the IPC.
APE Pumps issued an invoice of $218 448 (about K90 million) to BWB, but there were no records to show that the procured spare parts were indeed delivered.
Another anomaly was that ODPP approved procurement of the spare parts to PSV Services and not APE Pumps for items valued at not more than K7.5 million, but BWB “wrongly and illegally” paid out K90 million.
Reads the report: “The investigation team notes with great concern and concludes that the board’s management does not respect the applicable public procurement law. Simply put, this was a gross misprocurement.”
Angry employees vindicated?
ODPP’s findings coincide with BWB employees’ allegations that their chief executive Andrew Thawe was issuing contracts for personal benefits or interests and was single-handedly procuring prepaid water meters from China and South Africa.
The workers further claimed that Thawe, currently on forced leave, was also buying spares for motors that were not received by the stores and finance departments.
For more than two weeks, the disgruntled workers in August 2014 staged a sit-in and petitioned government, through the comptroller of statutory corporations, to force the removal of Thawe. He was eventually sent on forced leave on September 16 2014.
In an interview yesterday, ODPP chief professional development officer Peter Makanga confirmed that his office launched investigations into the alleged procurement malpractices and compiled a report, which has been shared with stakeholders.
“Yes, I can confirm about that investigation report. We have shared with all appropriate authorities to take necessary action,” said Makanga.
When pressed to disclose some of the appropriate authorities, Makanga said: “That is not for the public. I can’t mention them, but government has so many interested parties and we have shared with all of them”.
Last month, the Anti-Corruption Bureau (ACB) said it had launched investigations into the allegations of abuse of office levelled against Thawe.
There was no immediate reaction to the report from Thawe and the acting chief executive Henry Bakuwa, who is also the board’s director of finance and administration, as they did not pick up their phones after several attempts.
But when contacted yesterday, newly appointed BWB chairperson James Naphambo said he could not comment on the company’s affairs before he officially starts working.
Said Naphambo: “I have not yet received my appointment letter. So, for now, I would not want to commit myself to talking about Blantyre Water Board affairs. Let us wait until I get the offer letter.”