By Yusef Taylor, @FlexDan_YT
The Gambia’s National Audit Office (NAO) has submitted their “Audit Report on the Government COVID-19 Response – Procurement and Distribution of Food and Medical Items” to the National Assembly revealing that the MoH could have saved D86,104,929 from Turkish Medical Supplies procured in April 2020.
The contract numbered “GM-PCU-DS-MED-EQUIP” to procure medical supplies including ten (10) Ambulances and other medical equipment from Turkey was signed on 8th April 2020 between the Ministry of Health (MoH) and TMS-Turkey supplies.
Unfortunately, Auditors report that “the contract negotiation was initiated after signing of a non-negotiable contract between TMS and Ministry of Health and after the payment of the first instalment (40%) to TMS”. This meant that the MoH placed the cart before the horse and failed to compare and interrogate the TMS medical equipment price list before signing the agreement.
The World Bank-funded project “through the Project Coordination Unit (PCU) amounting to US$3,946,637 equivalent to about GMD197,331,850” was done “without being negotiated contrary” to World Bank procurement regulations (Sections 6.8 and 6.9).
Sections 6.8 and 6.9 of the aforementioned regulations focus on Value for Money (VfM) considerations and where single-sourcing could be appropriate during emergencies.
Single-Sourcing in Emergency Situations
One of the repeating themes in the report was the use of single-sourcing procurements.
The audit reports highlight that the US$3.9 Million procurement contract was “conducted using World Bank procurement guidelines. However, only one supplier was invited to supply these items and it later became clear that other suppliers stated that they were able to satisfy the contract for between $1.2 million and $1.7 million less”.
According to Auditors, the “TMS quoted prices for certain key items are comparatively much higher” and “significant price differences have been observed for most items”. A comparison was conducted by the MoH, albeit after signing a non-negotiable contract with TMS. This means that “the Ministry could have potentially saved $1,255,071 equivalent to GMD 62,753,563 and $1,722,098 equivalent to GMD86,104,929 from suppliers ATC and AKKA respectively”.
Another concern raised by the Audit report claims that it’s “hard to justify this single-source arrangement due to an emergency as, while the contract was signed on 8th April 2020, the equipment only arrived in The Gambia on 20th July 2020”. This translates to a 3 months interval from signing the contract to receiving the goods.
Highlighting some of the cost savings if the medical supplies were sent via sea compared to via air, Auditors highlight that “the cost of transporting the equipment by air was over US$666,000 [D33.3 million]; if it was sent by sea, costs are estimated to be over US$500,000 [D25 million] less. If the items had been sent shortly after the contract had been signed, they would have arrived earlier than they did, even by sea”.
In response to these specific queries, the MoH explained that after they procured the Medical Supplies “the items were deposited at the warehouse awaiting the approval of the request for support to the Turkish Government to airfreight the items for us [for] free using a Military Cargo Plane”.
One of the biggest concerns is Auditors claims that the procurement of the Turkish Medical Supplies has breached World Bank Procurement regulations.
Auditors enthused that “there is a risk that value for money was not realised as management of the MoH failed to approach and negotiate with the supplier on the price of items”.
Such a failure “is indicative that the procurement processes were not properly reviewed by the procurement committee as such, resulted in huge loss to government and full value for money has not been achieved”.
Unfortunately, “there is a risk of loss to government as prices of the medical items may have been inflated” read the report which placed the concerns as a high priority. A comparison was done on the cost of the medical equipment from TMS and two other Companies A and B. The evidence is detailed in Appendix F of the Audit Report reproduced below.
Management Refutes Auditor’s Overpayment Claims
A detailed response was fired back at Auditors, refuting claims that the MoH overpaid by D86 Million in the TMS deal. According to the management’s response, it was after the medical supplies were procured and kept at a warehouse that two Turkish Companies ATC and AKKA contacted the Gambian Ambassador to Turkey.
“The proprietors claimed that they had seen the list of items procured from TMS and that they had for sale the same items at cheaper prices” noted management’s response.
In their response, the MoH confirmed that “the list from ATC and AKKA were compared with those of TMS” and that “TMS had higher prices for most of the items“, however, “there were largely no specifications from the other two companies for comparison”.
It was after the MoH received this information that they started looking for price discounts from TMS without much success having already signed a non-negotiable contract and paid 40% of the cost.
Unfortunately, their efforts were rebuffed by TMS. According to the management response from the MoH, a response from TMS indicated that “their prices were the best in the market” and “their products are some of the best in the market”. This claim was countered by Auditors who say that the MoH did not conduct a comparison to evidence this.
According to Auditors, “there was no evidence to suggest that TMS prices were at best market prices. These price evaluations as indicated in the response are just verbal expressions that are not substantiated with relevant documentation”.
One of the more salient points highlighted that that TMS “provided these items when there was [a] worldwide shortage and they themselves incurred heavy costs in getting some of the items”. Further to that TMS claims that “there was a ban on the export of medical items even out of Turkey at that time of the pandemic so they had to get a special permission for the export of those items to The Gambia”.
From MoH’s management response, it’s clear that they commenced price discount negotiations after signing the agreement with TMS in April 2020, however, details on when these negotiations took place was missing.
After the first attempt at getting a discount failed the MoH contacted the Turkish Ministry of Trade to encourage TMS for a discount. However, the Turkish Ministry of Trade’s statement went “further to support the points put forward by TMS”.
Management’s response notes that according to the Turkish Ministry of Trade both “ATC and AKKA presented their case after seeing the TMS prices” and both “presented their case many weeks later when the international supply system got better”.
More importantly, management notes that the Turkish Ministry of Trade highlighted that both “ATC and AKKA did not present specifications so their prices could not be compared with those of TMS”.
Therefore, in light of the aforementioned reasons the MoH decided that “the pre-procurement negotiations with TMS were sound and the procurement is thus, high value for money”.
In conclusion, the MoH disagrees “that US$1,255,071.26 equivalent to D62, 753,563 and $1,722,098.58 equivalent to D86, 104,929 from suppliers ATC and AKKA respectively could be potentially saved”. In their view, “there is no evidence of such”.
Auditors Highlight Late Price Negotiations
The marathon correspondence between the NAO and the MoH highlighted that “WB procurement guidelines section 6.10 clearly states that it is the responsibility of the buyer to ensure that the prices are reasonable and consistent with the market rates for items of a similar nature”. Auditors were adamant that “there was no evidence of price assessment conducted at the initial stage of the procurement”.
Auditors made reference to a “comparison of Company A and B to TMS prices as indicated in the letter referenced AD 524/103/01 (M.L.J) suggested that prices offered by TMS are considerably higher against the price of company A and B”.
Unfortunately, “the comparison and negotiation came at [the] wrong stage of the procurement process when the contract was already being partly executed. As a result, the price comparison and negotiations made after the contract being signed is futile,” read the Audit Report.
The aforementioned letter “dated 12 May 2020 suggests that the Ministry failed to evaluate prices provided by TMS-Turkey Supplies on time. As a result, the Ministry’s claim that TMS prices were at best market price is unproven”.
By that stage, the MoH was at the mercy of TMS because “the contract negotiation was initiated after signing of a non-negotiable contract between TMS and Ministry of Health and after the payment of the first instalment (40%) to TMS” read the Auditors comments.
Given the late negotiation request from the MoH, TMS duly responded to remind “the Ministry of signing a non-negotiable term. Therefore, the contract terms for the procurement of medical items were not negotiable”.
Below are pages 3 and 4 of Appendix F from the Audit Report which compares the Items Supplied by TMS and two other Companies A and B. It is left to be seen if any action will be taken to rectify this error and if any official will be held accountable for the lapse.
