ANALYSIS OF THE PRICEWATERHOUSECOOPERS PROCUREMENT AUDIT REPORT BY PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS AUTHORITY (PPDA) April

2004 INTRODUCTION The Public Procurement and Disposal of Public Assets Authority (PPDA) analysed the procurement audit report by PriceWaterHouseCoopers.The report covered the Ministry of Water, Lands and Environment and Ministry of Education and Sports. The tables/ charts below are summary matrices of the cases handled. The findings were categorised according to the degree of significance as: High risk, Medium risk and low risk. This analysis has covered all the high-risk cases. According to the Consultants, the high-risk cases are the procurements with serious weaknesses, which could cause material, financial, regulatory or reputational risks to the Ministries warranting immediate attention by Senior Management. All procurements (20) without any documents were considered high-risk cases. Medium risk cases are procurements with weaknesses which, although less likely to lead to material, financial, regulatory or reputational risk, warrant timely management action using the existing management framework to ensure a formal and effective system of management control exists in the Ministry. The absence of key controls in an area of the Ministry would normally be graded medium provided there is sufficient evidence of hands on management control and oversight at an appropriate level of seniority. Low risk cases are procurements with weaknesses where resolution within the normal management framework is considered desirable to improve efficiency or ensure that the business matches current market best practice. Deviations from laid down detailed procedures would normally be graded low provided there is sufficient evidence of management action to put in place and monitor compliance with detailed procedures. The audit report covered 60 procurements in the Ministry of Water, Lands and Environment. Ten (10) contracts were covered in the Ministry of Education and Sports. This was 20% value of the total procurements. MINISTRY OF WATER, LANDS AND ENVIRONMENT MWLE CATEGORY OF CASESHIGH RISKMEDIUM RISKLOW RISK CATEGORY OF CONTRACT NUMBER OF CONTRACTS PERCENTAGE HIGH RISK 31 51.7 MEDIUM RISK 7 11.7 LOW RISK 22 36.6 TOTAL 60 100. MINISTRY OF EDUCATION AND SPORTS The sample selected under MoES covered 10 contracts These were categorised as: CATEGORY OF CONTRACT NUMBER OF CONTRACTS PERCENTAGE MoES CATEGORY OF CASESHIGH RISKMEDIUM RISKLOW RISK HIGH RISK 8 80 1 10 MEDIUM RISK

1 10 LOW RISK 10 100 TOTAL 2 3 GENERAL OBSERVATION The audit report revealed the following weaknesses in both Ministries: Lack of procurement plans Lack of documentation - Record of Service Providers. - Request For Proposals submitted to bidders. - Evaluation Reports. - Minutes of bid opening. Lack of special attention to procurement related complaints from Providers. There are very many retrospective approvals for contracts in both Ministries. There is a lot of interference from the Senior Ministry Officials who are not related to the procurement process. There are many cases of cost overruns especially in consultancy and works contracts. There is limited participation of the Procurement Units in big contracts and instead the Contracts Committees and User Departments handle the procurement and disposal process. MINISTRY OF WATER, LANDS AND ENVIRONMENT CONTRACT: 2.4.1 Water Supply for Livestock (Karamoja) awarded to MEC International Ltd (MIL) at US$ 247,435.79 dated 2nd May 2001 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The contract had been awarded to Globe Consortium International Ltd. (GCIL). The Permanent Secretary complained that the evaluation was unfair. After that, the award of the contract was made to MIL, a company that was not originally on the listing of pre-qualified Service Providers nor had it submitted a proposal, leaving out all the other bidders that had submitted proposals. Permanent Secretary. (High Risk) - The procurement took place at the time of transition between the termination of CTB & the creation of the Contracts Committees in line Ministries. This procurement was initiated under the CTB. - All documents relating to RFP, minutes of CTB approval, minutes of bid opening & records of Service Providers who purchased the bidding document are with the CTB. -However the Ministrys Contracts Committee has retrieved documents for the remaining procurement process, which they handled, and these were presented for audit review. While it is true that the CTB used to carry out the functions of the Contracts Committee, it is important to note that the bidders were required to submit three copies of the proposal. The old CTB only used to retain one proposal. The Ministry procuring the goods /services always did the evaluation of proposals therefore should have the evaluation report For the Ministry to carry out the evaluations it must have had the copies of the proposals submitted for considerations. How could the Ministry source a Contractor who had not originally submitted a proposal? How did the Contracts Committee award the contract to a firm that was never pre-qualified nor evaluated? Why didnt the Contracts Committee consider the other pre qualified and evaluated firms even if

the procurement was an emergency? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT This procurement did not originate from the Ministry of Water, Lands and Environment but from Ministry of Agriculture, Animal Industry and Fisheries. It was transferred to the Ministry of Water, Lands and Environment under an emergency of Livestock re-stocking exercise. The Ministry, on the advice of the Consultant from Crown Agents, used direct sourcing for this contract. The Ministry therefore did not have all the relevant documents for this contract because the Central Tender Board did the evaluation. However, the Under Secretary Finance and Administration agreed that there was a mistake in the procurement because the Ministry was going through restructuring, and this was a procurement from the Ministry of Agriculture, Animal Industry and Fisheries. PPDA RECOMMENDATION/S The Permanent Secretary should comply fully in future. 4 5 CONTRACT: 2.4.2 Consultancy services for the detailed surveying and design and construction services Kyenjojo Town Water supply system by Associated Consulting Engineers (ACE) at Ushs.173,550,000 dated 3rd August 2001 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The Contracts Committee authorised DWD to negotiate with Multiplan Consulting Engineers (MCE) .A month after the Contracts Committee requested SWIPCO to review the procurement process. SWIPCOs review revealed that the evaluation of the Consultants was not adequate and proposed Associated Consulting Engineers (ACE) as the most responsive bidders. Consequently, the Contracts Committee re-authorised DWD to enter negotiations with ACE and the negotiations with MCE rescinded. Chairperson Contracts Committee (High Risk) This contract is still on going. The appointment of SWIPCO was for quality assurance and the decision of the Contracts Committees is not bound by a third party evaluation report. Letters of notification of Award and Solicitor Generals approval of the contract are with in the signed contract Auditors still maintain the position that they did not receive all the necessary documents for this contract. While the Ministry states that it appointed SWIPCO for the purposes of quality assurance, we would like to point out that it was a statutory instrument that all the cases in excess of us$ 50,000 had to be subjected to the third party procurement auditing services. Approving the recommendation for award to Multiplan Consulting Engineers prior to third party auditing was in violation of the statutory instrument by the Contracts Committee. Secondly the opinion of the third party was not binding, why did the Ministry instruct the User Department to abandon negotiations with Multiplan and consequently engage Associated Consulting Engineers. How were the Consultants determined for the Short listing? Why did the Contracts Committee request SWIPCO to review the procurement process after instructing DWD to negotiate with Multiplan Consulting Engineers (MCE)? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministrys Contracts Committee (MCC) requested M/S SWIPCO to review the procurement process after discovering that M/S Multiplan Consulting Engineers (MCE) had not quantified some aspects of the Contract. This was because the Contracts Committee had not discussed thoroughly, the recommendations of the evaluation team. After the review by M/S SWIPCO,

Associated Consulting Engineers (ACE) was found to be more responsive. However, MCE appealed to the Inspector General of Government, who undertook a review into the exercise and found the MCC right in their decision. PPDA RECOMMENDATION/S Negotiations should never be held before the procurement process is completed and that all procurement documents should be kept for a period of 7 years in accordance with the law. 6 CONTRACT: 2.4.3 Procurement of goods and services for the Metrology Department Project at US$300,000, January 2002 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The amount that was approved by the Contracts Committee for the purchase of goods and services was US$300,000 which was above the approved budget amount of Shs.200 million. After the RFQ was approved for these goods, there is no further information available regarding this procurement. We therefore could not establish the total procurement or how these goods and services were procured. Director DWD (High Risk) As you may be aware, some project cycles cut across financial years. The budget in question relates only to the financial year 2001/2002. However, Contracts Committee authorised the entire procurement amounting to US $ 300,000. As regards the procurement method, the value of the contract is well above the threshold for open tendering. Besides, the Committee can opt for open tendering if it feels it will get better value for money by doing so. The value of the procurement was above the threshold for open tendering. The impression that the Contracts Committee had the option for open tendering is inconsistent with the provisions of SI 2000 No. 64 Regulation 20. Several issues of concern arise here: How did the Contracts Committee approve a procurement of $300,000 yet the User Departments budget was Shs 200 million only? What method of procurement was used in this particular contract? Non-existence of documents MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The User Department wanted to procure specialised equipments worth US$ 300,000, which the Contracts Committee approved to be procured across financial years, but the approved annual budget was Ug.Shs.200million only. A clarification was made that due to inadequate technical capacity of the User Departments, they did not have a clear understanding of different procurement methods especially RFP and Selective Tendering. However, Selective Tendering was used in this particular case. The Ministry Officials promised to send supporting documents for this procurements. 7 PPDA RECOMMENDATION/S The Authority should make a follow-up on this procurement and retrieve the necessary documents for analysis. CONTRACT: 2.4.4 Detailed Design and Construction Supervision of the Rehabilitation and expansion of Water supplies and Sanitation facilities in the Towns of Hoima, Masindi, and Mubende awarded to Geoprogetti S.R.I Consulting Engineers at Ush. 1,046,500,000 dated 15th October 2001 Case Person/Officer Responsible Comments by

Entity to the draft report Counter Response by the Auditor PPDA Concerns The only documents provided to Auditors in this regard were two letters. Also the listing of the procurements undertaken by the MWLE provided to Audit Team for the audit comprised a tender awarded to M/s Dorsh Consult for a contract sum of Shs.1, 300,095,330. On requesting documents relating to this procurement, we were informed that this was an error and that this procurement was the same as the one awarded to M/s Geoprogett S.R.L Consulting Engineers. Given the lack of documents, we could not establish whether M/s Dorsh Consult participated in the procurement process and how the Contracts Committee with the input of the Procurement Unit eventually awarded the contract. The Chairperson of the Contracts Committee (High Risk) The contract documents and the evaluation report for this procurement have been obtained and forwarded to the Audit Team for review. This is a European Union funded and paid for project. It involves Ministry of Finance, Planning and Economic Development where the National Authorising Officer is the main Coordinator of the procurement. EDF procurement regulations conform to the procurement process. The National Authorising Officer in the Ministry of Finance plays the role in the procurement, and the Contracts Committee only comes in when requested. The tender was originally awarded to Ms Geoprogett S.R.L Consulting Engineers but declined and later on awarded to the second compliant firm M/s Dorsh Consult at Ush. 1,300,095,330 Relevant documents were presented to the Audit Team for review No further information was received by the Auditor regarding this procurement. The Chairperson of the Contracts Committee could give more clarifications. Availing documents for this procurement. 8 MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT This is a European Funded Project following EU procurement guidelines. They are coordinated by the National Authorizing Officer under the Ministry of Finance, Planning & Economic Development. Relevant documents and evaluation are handled by the Ministry of Finance and the line Ministry has very little to do with such Contracts. PPDA RECCOMMENDATION The Ministry should provide all available information and documentation on the above procurements. This would enable the Authority to carry out further review of the above procurements. The relevant documents should be submitted not later than the 15th July 2004. CONTRACT: 2.4.5 Retrospective authority to pay for rehabilitation of Ngora Water Supply by Christian Engineers in Development (CED) at Shs15,255,400 dated 2nd Oct 1999 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns CED used its own money to rebuild a pump house that was destroyed during the El Nino rains. They completed the work in 1999. Two years later, a request was submitted to the Committee for the retrospective authority to pay CED. There was no documentary evidence to support the costs incurred by CED nor did the District Staff authorize this payment before it was presented. The procurement listing also contained another similar authority to pay for the same services except that the amount was different. We did not obtain information relating to this second contract. Director DWD (High Risk) The contract documents, and evaluation report for this procurement have been obtained and

forwarded to the Audit Team for review No contract documents and evaluations report were received relating to this procurement as stated in the Ministrys comments . This tender should be investigated and the truth established for the following reasons: The Contracts Committee approved payments retrospectively without a formal contract agreement. It is not clear as who got paid for this contract, Is it CED through the CAO or DWD? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT It is true that the Contracts Committee gave retrospective approval to pay without a formal agreement. This was on ground that Central Government had a policy of re-funding local NGOs activities done for communities. CED through the Local Authority wrote to DWD for the reimbursement of the funds used, which the Contracts Committee approved retrospectively. 9 PPDA RECOMMENDATION/S It was recommended that the Ministry should provide all the necessary documents confirming reimbursement of Ushs 15,255,400 to Christian Engineers in Development (CED). This information should be provided to the Authority not later than the 15th July 2004. CONTRACT: 2.4.6 Bugiri Water Supply System by China Geo-Engineering Corporation (U) Ltd at Ushs 1,422,390,515 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns During the execution of the project, the Consultant with the assistance of the Contractor established that the volume of rock indicated in the Bills of Quantities was less than what was to be actually excavated. In addition to that variation in the quantities, the Ministry of Lands also changed the design of the system. This resulted in the additional works for the Contractor hence the cost overruns amounting to Shs 1.4 billion. The change in user specifications resulted into a cost overrun, which had to be approved by the Contracts Committee. M/s Associated Engineers (High Risk) Central Tender Board handled post-contracting activities. The Contracts Committee only came to handle the addendum in cost overruns and documents availed to the Contracts Committee only indicated the contract agreement and cost overrun schedule. The contract documents and the valuation schedule, which were availed to the Contracts Committee, were made available to the Audit Team for review. While it is true that the old CTB used to carry out the functions of the Contracts Committee, it is important to note that bidders were always required to submit three copies of the proposal. The old CTB used to retain only one copy of each proposal. Secondly the responsibility of getting copies of the minutes of bid opening was with the Ministry. The Ministry procuring the goods/services always did the evaluation of the proposals. Unless the Ministry is implying that for this particular procurement the CTB retained all the three copies of the proposal and also carried out the evaluation. The Ministry should have copies of the proposal and the evaluation report. Our review of correspondences between the CTB and the Ministry revealed that the Ministry submitted the evaluation report to the CTB. And for the Ministry to carry out the evaluation it must have had in its possession copies of the proposals that were submitted for consideration. We therefore find the Ministrys response to lack of documentation on the procurement process not appropriate. Was the Consultant paid for the work done? What were the expected outputs in the Terms of Reference? The excuse of lack of documents is a scapegoat since evaluation of proposals was a

responsibility of the Ministry. 10 MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministry maintained its position, that CTB used to keep all the documents and did the evaluation of bids. CTB would only communicate a notice of award of tenders to the Ministry. Therefore all the relevant documents were with CTB. PPDA RECOMMENDATION/S The Ministry should submit the original contract of this project to enable further review on the cost over runs. This information should be provided to the Authority not later than the 15th July 2004. CONTRACT: 2.4.7 Project to scan and digitise land title records at US$1,500,000. Initiated in April 2003 and the contract not yet awarded. Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The method of procurement under this procurement should have been open tendering. However, the User Department as well as the Minister are advocating for the use of the request for proposal method, which is contrary to the regulations. Under this contract, there has been a high involvement of Senior Ministry staff that are otherwise not part of the Contracts Committee nor the procurement process. We noted that the Contracts Committee has so far resisted the interference and insisted on open bidding. Minister of Water Lands and Environment (High Risk) This procurement is in its initial stages and no contract has been awarded. It should therefore, not form parts of the audit. While the Ministry considers that this procurement should not have been included in the procurements to be reviewed under our assignment, we are of the opinion that it was correctly included and it is the only procurement in the Ministry that shows that the systems put in place by the PPDA Act 2003 are actually working and are not subject to political interference within the Ministry. In this contract there has been over involvement of Senior Ministry Staff that are not part of the procurement process especially the Minister and the Permanent Secretary. The Permanent Secretarys advocacy for the use of selective bidding method instead of open tendering means that he over looked procurement guidelines. 11 MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministrys Contracts Committee rejected the methods of procurement as advocated by the User Department and the Minister. The Minister however has sought for a waiver from the Solicitor General to use Selective Bidding as the procurement method in sourcing for firms to undertake the project. The Minister has also directed the Permanent Secretary to form a Task Force of which the Under Secretary, Finance and Administration, the Head of the Procurement Unit should be members, to implement the project. The Contracts Committee requested PPDA to intervene in this particular procurement to eliminate political interference in the procurement process. PPDA RECOMMENDATION/S The Ministry should handle this procurement through open international bidding given the amount of money involved. CONTRACT: 2.4.8 Construction supervision for Bombo Town water system by Engiplan at Shs 110,214,000 retrospective approval of payment dated 22nd Oct 2001 by the Contracts Committee. Case

Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns 12 There is contradictory information relating to the procurement listing provided to Auditors and the minutes of the Contracts Committee regarding the amount approved for services and for what services the contract is being drawn up. The Auditors were also not availed information on how Engiplan was selected to provide the services. The Contracts Committee was not consulted before contracting Engiplan. This implies that procedures and guidelines were not complied with. Director DWD (High Risk) There is a mix up of facts as follows: Ug. Shs. 34,354,128/= was for the design of Bombo Town Water system which was a Saving from Nakansongola Town Water System where there is a proper contract, which came through open tendering. Engiplan was also an extension from Nakasongola Town Water System. Although the Directorate of Water Development submitted a request for sole sourcing which would have given Engiplan at Ug. Shs. 110,214,000/=, this was rejected. All relevant documents, and evaluation report for this procurement have been obtained and forwarded to the Audit Team for review. Our findings are based on the documents we reviewed including the minutes of the Contracts Committee. The mix up referred to in the Ministrys comments is not in line with the documents we reviewed. No additional documentation was received relating to this Procurement as stated in the Ministrys comments. This particular tender should be investigated further as it is not clear in the following ways: Who awarded the tender and on whose approval? How was Engiplan selected for this Particular consultancy? The circumstances under which the Director DWD sought approval from the Contracts Committee to retrospectively pay Shs. 34.354.128 for the Consultancy services. Who got paid the contract sum of Shs 110,214,000 for the consultancy services? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Contracts Committee justified its retrospective approval for payment to Engiplan. Engiplan was competitively selected for the contract of Nakasongola Town Water system. Its successful performance resulted into extending the contract to Bombo Town Water system on the advice of the Director of Water Development. This resulted into savings on the contract for the consultancy and the Contracts Committee approved payment with the above justification. PPDA RECOMMENDATION/S The Director, Directorate of Water Development should be warned against making contract extensions without the Contracts Committees approval. CONTRACT: 2.4.9 Consultancy services for detailed design and construction supervision of Mukono-Seeta water and sanitation system by M & E Associates at Shs 561,464,000 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns 13 The Request for Proposal method that was used is contrary to the guidelines that would in this case require that the open tendering method be used based on the amounts involved. We noted that the bidding period was 8 days contrary to the required 30 days stipulated in the

guidelines. This implies that consultants were not given adequate time to prepare proposals. We also noted that although the Contracts Committee, forwarded the tender documents to SWIPCO for review, by the time SWIPCO completed the review, Consultants had already submitted bids and opened. The Chairperson Contracts Committee (High Risk) This is a unique procurement and the Directorate of Water for Development requested for prequalification basing on past experiences. It is not true as indicated that the bidding period was 8 days but 30 days as required by the regulations The contract documents, and evaluation report for this procurement have been obtained and forwarded to the Audit team for review. This is not a unique procurement. It is very similar to the Masindi Water Supply system, which was subjected to open tendering. The argument that the Ministry selected the firms based on past experience is not satisfactory because it evaluated the experience of the bidders during the preliminary evaluation. If indeed the firms were selected based on past experience why were they evaluated on experience after submission of proposals? This also reinforces our recommendation that the Ministry needs to pre-qualify both Consultants and Contractors for services that it regularly procures. The Project Leader should explain the anomalies of negotiating the contract price before the Contracts Committee gave approval. How were the invited service providers selected in the absence of the list of pre-qualified service providers? Were the tender documents submitted to the bidders approved by the Contracts Committee? Why did the User Department negotiate with the winning bidder before approval by the Contracts Committee?. PPDA RECOMMENDATION/S The Ministry should submit the signed contract and the Solicitor Generals approval to PPDA for further review. This information should be provided to the Authority not later than the 15th July 2004. 14 CONTRACT: 2.4.10 Retrospective Authority to pay M/s Norconsult for additional works and cost over-runs on the urban water sub sector reform study at $ 180,367.2 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns DWD wrote to the Contracts Committee seeking approval to pay retrospectively US$ 180,367.2 for additional works and cost overruns. The additional costs related to: Increased number of staff on the study tour from 10 to 15; Visits to additional towns i.e. 26 instead of 21; Additional consultations and workshops; and Additional report production and additional office costs. We were, however, not availed the relevant supporting documents for the cost overruns. Director DWD (High Risk) This procurement was done under CTB therefore; all the documentation required by the Audit Team is not available within the Ministry. Our comment on storage of information for procurements handled during the era of the old CTB holds in this case. Refer to our response to the Ministry comment on the water for Karamoja project 2.4.1 (a). This contract requires further scrutiny. What was the initial contract sum? The cost overrun of $180.367.2 is very high, What percentage does it constitute of the original

contract sum. Did the consultant first seek approval from DWD to incur the cost overruns and was the Contracts Committee consulted? The responsible project leader should be established and if no justification is made, should be punished. PPDA RECOMMENDATION/S The Ministry should submit the original contract to PPDA for further review. This information should be provided to the Authority not later than the 15th July 2004. CONTRACT: 2.4.11 Addendum to the contract for the construction of Nakasongola Town Water System awarded to M/S Dott Service Limited at Ush 397,938,739 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The project was divided into different phases due to the limited funds available in the budget. Because of the phasing of the project, the cost escalated due to unforeseen works involving rock excavation where the quantities were greatly underestimated in the contract. The contractor pointed out that the poor estimation of requirements of the contract was because the consultant did no prior ground work research. This resulted in the additional works for the contractor hence the cost. Engiplan Consultants. (High Risk) The observation made by the Audit Team was not correct since the Consultant for Nakasongola Town Water system was not appointed for construction supervision for Bombo Town Water Supply System. The Consultant (Engiplan) whose performance was put to question was not awarded the contract for construction supervision of Bombo Town Water Supply System. No Counter response by PriceWaterHouseHouse on this case. Why does the Contracts Committee give retrospective approvals for payments of cost overruns when they were not consulted before incurring them. PPDA RECOMMENDATION/S It was recommended that the Contracts Committee should be warned against making retrospective approvals. CONTRACT: 2.4.13 Construction of Kalangala Town Water Supply System at Ush.796,291,391 contract award period Jan 2002 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The Contracts Committee approved the award in its meeting held on 1 Feb 2002 yet Spencon had already been notified of the award on 31 Jan 2002. The letter of 29th Jan 2002 to DWD was pre-empting the role of the contracts committee and this was a major divergence from the procurement procedures. This may cause financial loss to the Ministry in case the Contracts Committee does not award the tender to the Contractor who was recommended by the Evaluation Committee. Director DWD (Medium case) There was a misrepresentation of the dates regarding this procurement. The authority to negotiate was given by the Contracts Committee at their 31st meeting held on 29th Jan 2002 and the negotiations commenced on the 7th Feb 2002. However the minutes of the Contracts Committee erroneously indicates that the meeting was held on 1st Feb 2002.

Although the Ministrys acknowledgements that it erroneously indicated the wrong dates in the minutes of the Contracts Committee. We can not change the content of the report regarding this procurement which is consistent with the documents maintained by the Ministry as reviewed by us Why did the User Department enter into negotiations with the Contractor before the Contracts Committee had awarded the tender? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministry explained that members of the Evaluation team are drawn from User Departments as away of creating variety of technical skills to the team. This is the main reason why tender awards leak to Contractors before official award of contracts as User Departments get to know the evaluation results. Secondly, the Audit Team misinterpreted the 31st Contracts Committee meeting as being 31/01/2002, which was held to award the Contract of M/S Spencon on the 29th January 2002 PPDA RECOMMENDATION/S The User Department should be warned against notifying contract award decisions before the Contracts Committees approval. 16 MINISTRY OF EDUCATION AND SPORTS CONTRACT: 3.4.1 Purchase of assorted stationery during the financial year 2002/2003 from M/S Gulf Africa Limited at Shs. 131,016,767 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns During the year the Ministry purchased stationery amounting to Shs 131,016,767 from Gulf Africa. LPOs were issued to M/S Gulf Africa and we noted that in some cases, the duration between the issuing of successive Local Purchase Orders (LPOs) was less than five days. Gulf Africa Ltd seems to have been the preferred supplier compared to other suppliers. For LPO 0180233, the Contracts Committee disqualified M/S Makula Printers and Stationers who had been recommended by the Evaluation Committee and re-evaluated the tender. The Contracts Committee then awarded the tender to M/S Gulf Africa. We noted that Gulf Africa also did not meet the specifications stipulated in the RFQ, which was the basis of disqualifying M/S Makula. The contract sum was also reduced from Shs 25,018,250 to Shs 11,378,055 due to lack of funds. The Chairman Contracts Committee (High Risk) Specifically the report has alleged that the Ministry is favouring M/s Gulf Africa without taking into consideration or illustrating the total annual expenditure on stationary by the Ministry. Secondary this firm underwent the same pre qualification exercise together with other firms and all the transactions indicated in the report were done using competitive method RFP M/s Gulf Africa appears to be favoured based on the sample of the procurements taken. In addition there appears to be a problem of segregation of procurements. Further more, it is the provision in the Regulations that the same company should not be invited every time there is a tender it can execute. The principal behind this provision is to allow other firms to participate in the procurement process and provide competition which would subsequently lead to fair prices at which services are contracted out If all the firms were pre qualified, Why didnt the Ministry rotate contracts to the pre-qualified firms according to Regulation 142(b) of the PPDA Regulations 2003. Were the specifications clear in the bid document? Then why didnt the Contracts Committee refer the issue to the Procurement Unit but instead did the evaluation themselves M/s Mukula Printing and Publishing was disqualified despite the lower quotation, were the reasons for their disqualification clearly given to the bidder? .

MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT That this particular tender was competitive and M/s Gulf Africa won the tender because they offer the best and most genuine stationery and toners That M/s Mukula was disqualified because they had misrepresented information in their quotations and therefore their quotation had arithmetic errors. 17 PPDA RECOMMENDATION/S The Contracts Committee and the Procurement and Disposal Unit should be warned against splitting procurements and awarding tenders to only one firm without rotation to other prequalified providers. CONTRACT: 3.4.2 Provision of Janitorial services for the Financial Year 2001/2002 and 2002/2003 awarded to M/S Wazzico Limited at Ushs 73,286,475 Case Person/Officer Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The Head of the Procurement Unit dictated the evaluation criteria to be used to the Evaluation Committee. This implies that the criteria may not have been well elaborated in the ITT. The duration allowed for the bidders to prepare and submit proposals was 15 days as opposed to the 30 days bidding period prescribed by the guidelines. The Principal Procurement Officer(High Risk) No comments received from the Ministry Since there were no comments from the Ministry, there is no counter response Why did the PPO Joseph Mutumba dictate the evaluation criteria to the Evaluation Team when there was a bid document with clearly stated procedures of evaluation . MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministry clarified that invitation to tender went out and called upon PPDA to look at the bid documents according to the Public Finance (Procurement) Regulations 2000. PPDA will look at the bid document for this procurement and follow up this issue whether the evaluation criteria given by the Procurement Officer was the same as one in the bid document. PPDA RECOMMENDATION/S The Ag. Procurement Officer Mr Joseph Mutumba should be warned against interfering with the evaluation committees mandate. The evaluation criteria communicated to the evaluation team was different from that in the tender document. This was a contravention with the SI 2000 No. 64 Regulation 33(8). 18 CONTRACT: 3.4.3 Proposed construction of a school at Mubende Tiger Army Barracks by Ms Prime Contractors at Ushs 341.543.160 Case Person Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns The Contracts Committee meeting held on 18 March 2002 rescinded the earlier decision of 5 February 2002 by the Procurement Unit to use selective tendering and adopted the use of open tendering. We further noted that among the documents availed to us for this procurement was two addenda to six contractors dated 14 and 30 January 2002. We note that these dates are before the Committees approval of 5 February to use selective tendering. This implies that the addenda were in addition to the tender documents issued earlier than 5 February 2002. It is apparent that the procurement process for the construction of the Mubende Tiger Army

Barracks School had started way back but we were not availed documents relating to the earlier period. The Procurement Unit conducted its duties with disregard to the functions of the Contracts Committee as stipulated in the procurement regulations. The criteria used during the first evaluation by SWIPCO recommended the award to M/S Zzimwe Enterprises. The Committees re-evaluation rejected M/S Zzimwe Enterprises and recommended M/s Prime Contractors. Because we were not availed a copy of the tender document issued to bidders, we could not verify whether the correct criteria was used. However from the evaluation report we noted that the Contractor awarded the contract did not submit a copy of Certificate of Incorporation as required by the instruction to bidders and should therefore have been disqualified. The Chairman Contracts Committee MoES (High Risk) Re evaluation by SWIPCO: It is true when SWIPCO presented its first report, the Contracts Committee rejected it and asked them to re- evaluate. The reasons for this must have been clearly stated in the minutes of the Contracts Committee. What however can be recalled was that there were some arithmetic errors in bids of some bidder, which had been disregarded by SWIPCO. Secondary, SWIPCO in their first report did not apply conditions consistently to all bidders. The procurement is characterised as high-risk based on the events that transpired in the procurement process. As indicated in our report, addenda were issued to the Contractors on 14th, and 30th, Jan. 2002 prior to approval of the procurement system. The Contracts Committee approved selective competitive bidding on 5th, Feb 2002 after the tender document had been issued to the bidders. On 18th March 2002, the Contracts Committee also approved the use of open competitive bidding. According to the above information which was made available to us, it could get construed that; the procurement process seems to have started before 14th Jan 2002 or the User Departments had gone ahead and initiated a procurement process without the authority of the Contracts Committee. This implies that the Ministry is not in control of its departments as they can opt to start a procurement process without following applicable procurement procedures. The user departments and the Contracts Committee were not sure of the method of procurement to employ hence change from one method to another. When M/s Honesty was dropped even when it had the same number of passes and fails, was an explanation given? Why did SWIPCO drop very important aspects in the second evaluation like Articles of Association Trading License, and Annual tax Clearance certificate that also led to dropping of Zzimwe Construction Ltd. Was it a fair evaluation to all the bidders? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT (i) That there was discrepancy in the way of bid evaluation results; (ii) The Ministry noted SWIPCOs unfairness during evaluation; (iii) They had nothing to comment on M/s Primes passing and M/s Honestys failure at the preliminary stage yet they had the same number of fails and passes; (iii) That the Ministry queried the procurement but did not have powers to stop it. PPDA RECOMMENDATION/S The Ministry of Education and Sports should submit additional documents relating to this procurement to PPDA for further review. CONTRACT: 3.4.4 Printing of 100,000 copies of Primary Curriculum Volume II awarded to M/s Uganda Printing and Publishing 19 Corporation at Ush. 694,278,000 Case Person/Officer Responsible Comments by Entity to the draft report

Counter Response by the Auditor PPDA Concerns Except for the minutes of the Contracts Committee, there were no documents availed to us regarding this procurement. Our findings were therefore based on the information of the minutes of the Contracts Committee. The Permanent Secretarys office used sole sourcing and then requested the Contracts Committee to approve the method of procurement retrospectively in its meeting held on 28 October 2002. The Permanent Secretary MoES (High Risk) It is the Education Sector Consultative Committee (ESCC) not the Ministry Contracts Committee that asked the Permanent Secretary as to why the 100.000 copies of the primary curriculum Teachers Guide Volume II delivered by the Government Printers had not been distributed. The Permanent Secretary was asked to make sure he gets corresponding copies of the Curriculum Volume II immediately. The MCC approved the transactions retrospectively after they had perused through all the necessary documentation and got an explanation why the Ministry had used Uganda Printing and Publishing Corporation, a Government parastatal. Was the Ministry not aware that it needed the corresponding curriculum Volume II at the time of the initiation of the procurement? Despite the fact that Uganda Printing and Publishing Co. is a government parastatal, the Ministry might still have realised some savings if it had combined the printing of both copies. Secondary there was no need to approve the method of procurement. All the Contracts Committee had to do was to retrospectively award the contract. How could the Contracts Committee award the contract to Uganda Printing and Publishing Corporation retrospectively when they had already started printing? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT That volume I of the curriculum was competitive but in volume II the Contracts committee used direct procurement because of the following reasons: a. The volume and complexity of work required a big printer hence, resorted to government printery; b. National curriculum lacked funds to print curricula; d. The emergency of the procurement and; e. Insufficient planning by the Ministry. PPDA RECOMMENDATION/S The Permanent Secretary was advised not to interfere with the work of the Contracts Committee at any procurement stage. 20 CONTRACT: 3.4.5 Printing of HIV/ IEC material awarded to M/s Fountain Publishers at Ushs. 570,000,000 Case Person Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns There were no documents availed to us for review. We, however, noted in the Committees minutes that this procurement was a Presidential directive. The Chairperson of the Contracts Committee. This procurement was handled using direct procurement. The rush to have this procurement was to enable the Ministry avail to schools urgently PIASCY and HIV/IEC reading materials quickly to implement his Excellency the Presidents directive that schools disseminate HIV/IEC messages at school assemblies with effect from first term of 2003 and before the second National UPE Advocacy campaign. Where was the RISK in this case? Was it to the PPDA or Management of the Ministry? There is a provision in the Guidelines on how to go about emergencies and hence the reason why the transaction was forwarded to the MCC.

The risk in this case, is the fact that the only information related to this procurement is minutes of the Contracts Committee meeting. No other information was available for review. It is therefore assigned high risk in light of the fact that the Procurement Unit has no record at all contrary to the requirements of the procurement Regulations. No documents were established for this procurement at all. MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministry clarified that the procurement was direct due to the following reasons: (i) The Contract was a Presidential directive through the Minister, hence it was treated as an emergency; (ii) The Procurement Unit did not take any part in the sourcing. (ii) M/s Fountain Publishers was preferred because they had previously printed excellent work. PPDA RECOMMENDATION/S The Permanent Secretary should always follow procurement procedures and documents relating to this procurement should be submitted to PPDA for further review. CONTRACT: 3.4.6 Proposed construction of a library at Ntare School Mbarara awarded to M/S Excel Construction Limited Ushs.428.808.867 Case Person Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns 21 The procurement was a result of a Presidential pledge to Ntare High School. The Undersecretary Finance and Administration who is also the Chairman of the Contracts Committee submitted to SWIPCO a shortlist of the contractors thus preventing the use of open tendering. The reason given was time constraint. The procurement process was initiated in January 2001 and the Invitation To Tender was issued on 26 September 2001 thus nullifying the reason given for the use of selective tendering. The procurement method that should have been used was open tendering as stipulated in Statutory Instrument (SI) 2000, No 64 (20). There was conflict of interest in the use of SWIPCOs services since the third party who was responsible for reviewing the designs/specifications and the tender document evaluator was also allowed to source and appoint a consultant for this assignment. Chairman Contracts Committee As a general procedure the Construction Management Unit has developed monitoring guidelines for all construction projects. The guidelines are normally issued to all stakeholders at the site handover ceremonies. Monthly site meetings are normally conducted and attended by all stakeholder who include; Ministry of Education and Sports Representatives, District Representatives and the beneficiary institutions. There are clerks of Works who are resident at each site and responsible for supervising the project on a daily basis. We did not state in our report that the Ministry does not monitor the progress of its procurements. What we stated in out report is that there is no feedback to the Procurement Unit related to the progress of the procurements. The Ministry in its comment 9(iii) also confirms our findings, where it says that monthly reports are issued to the Ministries, the Permanent Secretary, and the relevant commissioners but not the Procurement Unit. There is likely to be bad intensions behind this procurement. The Permanent Secretary needs to explain why he preferred selective tendering when there was no urgency? How much was paid for the procurement, was it Ushs. 300,000,000 or 428,808,867? Was the evaluation criteria communicated in the bid document on which M/s Excel was selected? Why did the Chairman Contracts Committee have interest in this particular contract? MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The Ministry made the following clarifications:

(i) That invitation to tender was sent out and M/s Excel Construction Ltd won the tender. (ii) That the Under Secretary/Finance and Administration was the same person chairing the Contracts Committee and could sometimes act as the Permanent Secretary of the Ministry therefore when the Under Secretary wrote, he was writing as the acting Accounting Officer not the Chairman of the Contracts Committee and therefore there was no conflict of interest. (iii) That Ushs. 428,808,867/= was paid for the contract. This was because M/s Excel Construction Limited supplied furniture to the School in addition to construction of a library hence altering the original Ushs. 300,000,000/= PPDA RECOMMENDATION/S The Permanent Secretary should always follow the procurement procedures. CONTRACT: 3.4.8 Bishop Stuart, Kibingo Mbarara Case Person Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns 22 We were not availed documents for this procurement. This procurement was not included in procurement reports submitted to us. It was identified from the review of the minuets of the Contracts Committee. The chairperson of the Contracts committee It is quite unfortunate to assume that a contract that has never been awarded is high risk. The MCC had recommended Bukinda Core Primary Teachers College, Kabale to be awarded to M/s Dott Services Limited but funds were unavailable to execute the project for many and varied reasons. The award was therefore not communicated. How does this become a RISK? To who? Under what law? In the MCC minutes files, all the Phase V Colleges Bid Opening and Invitation for Bids (Advertisement) were well minuted and discussed at the 11th and 12th of the Ministry Contracts Committee meeting. The Auditors perused the MCC minutes file and therefore it is not correct to say that no information was received for the above-mentioned Colleges. According to the procurement guidelines, the user department is required to complete PPDA form 20. The purpose of the form is to confirm availability of funds for executing the procurement. The Contracts Committee is required to use it as a basis for among others allowing the user department to proceed with the procurement. The procurement is therefore rated high risk because of failure of the Contracts Committee to comply with the guidelines and also the impact it has on the confidence of providers (those that submitted proposals for consideration) in the management of the Ministry and government as a whole. According to the list of procurements made available by the Ministry, these particular procurements were not mentioned therein. It was through the review of minutes of the Contracts Committee that we became aware that such procurements occurred. Secondly the information that we need in order to review a procurement process was not limited to minutes of the Contracts Committee. Furthermore, the regulations and the guidelines specify what information must be kept as far as a procurement process is concerned. This case requires clarifications. Why does the Ministry start a contract when the funds are not available to the budget? The Permanent Secretary needs to explain this issue more as the Accounting Officer MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT (i) The Ministry clarified that SWIPCO did the evaluation; (ii) The Contracts Committee recommended four colleges but the available funds could only work on three colleges; (iii) That the procurement was handed over to the donors; (iii) The contract has not ended. Three Colleges (Bishop Stuart - Kibingo, Bishop Willis - Iganga and Nyondo College) were completed but Bukinda College has not been completed; yet the funding of the project is winding up soon. PPDA RECOMMENDATION/S

23 CONTRACT: 3.4.8 Bukinda Core PTC Kabale Case Person Responsible Comments by Entity to the draft report Counter Response by the Auditor PPDA Concerns We were not availed documents for this procurement. This procurement was not included in procurement reports submitted to us. It was identified from the review of the minutes of the Contracts Committee. Permanent Secretary It is also important to note that some tender document for Bukinda Core Primary Teachers Colleges, Kabale were presented to PriceWaterHouseCoopers but were rejected especially since this project has never been executed. We still maintain that we did not receive any documentation such as tender documents, evaluation reports, copies of contracts etc related to the procurement in question. There is contradictory information here. Why did the Ministry send documents very late to the auditors? The Permanent Secretary did not comply with Section 41 of the PPDA Act 2003. MINISTRYS CLARIFICATIONS TO THE FINAL AUDIT REPORT The contract has not ended. Three Colleges (Bishop Stuart - Kibingo, Bishop Willis - Iganga and Nyondo College) were completed but Bukinda College has not been completed; yet the funding of the project is winding up soon. This was one contract for the four colleges. . PPDA RECOMMENDATION/S Documents relating to these procurements should be submitted to PPDA for further review and PPDA should conduct a full inspection of these procurements.