Multi-billion-dollar drug purchases…Former auditor chief calls for hold on suppliers’ prequalification system

Feb 04, 2014 News

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A system that would have virtually shut out a number of local suppliers from being part of Government’s lucrative contract for purchases of drugs is continuing to raise unease.

This time, former Auditor General, Anand Goolsarran, has called on the Ministry to put a hold on the process, meet with suppliers in a bid to revisit the process.
“It is evident that the application of the evaluation criteria in the prequalification exercise for the supply of drugs and medical supplies are likely to result in manufacturers and distributors being unable to achieve prequalification status.
“They will therefore be excluded from supplying the Ministry with these essential items, or given orders for minimal quantities, with possible adverse effects on their operations,” Goolsarran wrote in his weekly column yesterday in Stabroek News.
The topic was “Revisiting the Purchases of Drugs and Medical Supplies”.
The issue is a sore one for lawmakers and drug suppliers who have claimed that they are being sidelined in favour on one company, New GPC.
That company is controlled is Dr. Ranjisinghi ‘Bobby’ Ramroop, a close friend of former President Bharrat Jagdeo. There have been burning questions over the costs of drugs and timely deliveries.
Last year, the Ministry of Health issued new instructions, based on a reworked points system, how it would shortlist the prequalified suppliers.
Goolsarran, too, believed the new guidelines will definitely give New GPC an unfair edge.

“This will leave the local organization in question, which did not have a good track record in meeting its contractual obligations, with a virtual monopoly over such supplies. It would be advisable for the Ministry of Health to revisit the evaluation criteria set out in the prequalification documents in consultation with all potential suppliers.”
The former Auditor General believed that while previous experience, ability to perform, infrastructure, storage and laboratory facilities are important considerations, “one hopes that the assignment of points to each criterion will be reworked to create as much of a level playing as possible to enable organizations interested in supplying the Ministry with drugs and medical supplies to be able to do so.”
It is not in the best public interest to have one supplier having a virtual monopoly in the supply of drugs and medical supplies to the government.
New GPC, Gooslarran found, had become the government’s main supplier since 2005, delivering over 75 per cent of the government’s requirements and virtually displacing specialized overseas agencies that had previously supplied over 90 per cent of the government’s requirements.

Monopoly
Between 2005 and 2012, the government’s expenditure on drugs and medical supplies more than tripled, increasing from $1.357 billion to $4.393 billion. In particular, 2007 and 2011 recorded increases of 50 per cent and 56 per cent respectively. No figures are available for 2008 because of the fire that destroyed the Ministry of Health building in July 2009.
“These are extraordinary increases considering that for the corresponding seven years earlier, i.e. from 1998 to 2004, procurement increased from $651 million to $1.165 billion or by 79 per cent. It is not clear what was the rationale for such increases in budgetary allocations and hence expenditure.
“Correspondingly, procurement from the local organization also tripled, increasing from $973 million to $3.033 billion.”
Goolsarran noted that since 1997, the Ministry undertook the procurement of drugs and medical supplies by selective tendering, as authorised by Cabinet.

Such authorisation continued until 2010 through two successive renewals in 2003 and 2008. “This is despite the fact that the Procurement Act 2003 restricted Cabinet’s role in the procurement process to one of offering “no objection” to contracts valued at $15 million or over.”
With the establishment of the Public Procurement Commission, Cabinet’s role was to have been progressively phased out or ceased altogether. Regrettably, the Commission is yet to be established, Goolsarran said.
Under the selective tendering arrangement, the Ministry would contact the pre-selected suppliers and request them to quote for the items to be supplied.
“On this basis, contracts were awarded. There was no independent review to ensure that the best prices were obtained for the various items supplied as the relevant tender boards, in particular, the National Procurement and Tender Administration Board (NPTAB), were not involved.”
For the period 2011-2013, prequalification proceedings were applied for the identification to suppliers.
“The same procedures as those of selective tendering were used, except that Cabinet was not involved.  However, the various tender boards, including the NPTAB, were again not involved in the prequalification exercise nor were they involved in the selection of suppliers based on their quotations.”

Scrapping
For the period 2014 -2016, the Ministry has advertised for interested suppliers to apply for prequalification. However, New GPC may likely not have to be a part of the process as it has already been previously granted prequalification status.
A review of the evaluation criteria to be used revealed that manufacturers are to be evaluated on a score of 190 while for distributors the score is 180. At least 80 per cent is required for prequalification in addition to meeting the criteria dealing with financial and infrastructure capacity as well as the ability to supply 75 per cent of GMA certified items.

Preference is given to pharmaceutical manufacturers in Guyana as certified by the Guyana Food and Drugs Analyst Department. They automatically qualify and are eligible for 10 per cent price advantage compared to imported items. Companies with appropriate warehousing facilities are also given preference.
“Manufacturers will therefore have to score at least 152 points. This is very unlikely, considering the above requirements. In addition, they must have facilities for laboratory testing and quality testing, including full-fledged quality control department with qualified, trained and experienced personnel, all of which carry a maximum of 50 points.”
Goolsarran pointed out that the Auditor General’s reports over the years, however, revealed a number of unsatisfactory features in respect of the performance of the main supplier of drugs and medical supplies. “For example, as at September 30, 2013, medical supplies valued at $58.583 million had not been delivered to the Georgetown Public Hospital and the related bank guarantee had expired in April 2013.
As regards the Ministry of Health, as at September 30, last, medical supplies valued at $164.603 million had not been delivered, and there were no bank guarantees in force to cover this amount.
There were also outstanding deliveries for 2011 totalling $59.835 million while for 2008 there was no evidence of the delivery of supplies valued at $79.262 million.  Despite these shortcomings, no action was taken against the organisation for non-compliance with its contractual obligations.”
As regards the government’s storage facilities, there was evidence of significant amounts of pilferage, damaged and expired drugs; poor recordkeeping in respect of receipts, issues and balances on hand; and high levels of discrepancies between physical balances and the recorded amounts.
“Given this situation, and the fact that manufacturers and distributors are required to have 30,000 square feet of storage with three separate temperature zones, would it not be more cost-effective to have an arrangement whereby deliveries are staggered, for example, every quarter, instead of bulk deliveries?
If this happens, the requirement the Government’s warehousing and storage facilities can be significantly reduced.”
According to industry experts, the cost savings are likely to be between 16 per cent and 20 per cent. Using the figure of $4.393 billion, representing the purchase of drugs and medical supplies in 2012, these savings could be at least $700 million annually.

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