Auditor General finds… HDM Labs takes six months to supply “emergency drugs” that was needed in two weeks – Charges over $100M more than other suppliers

Oct 23, 2018 News

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Despite the vehement defence that the Ministry of Public Health mounted about its arrangement with HDM Labs, the Audit Office of Guyana still investigated the arrangement and has vowed to “conduct further scrutiny of the awarding and execution of the contract.”
So far, the Audit Office has found that HDM Labs took six months to complete its supply of over $400M worth of “emergency drugs” that was needed within two weeks. Further, auditors compared the prices charged by HDM Labs to the prices charged by other suppliers.
A table presented in the 1027 audit report noted that the drugs could have been sourced for at least $100M less.
The Audit Office noted that on April 28, 2017, the Ministry wrote the NPTAB requesting approval for six suppliers to be invited to bid for varying quantities of 13 drugs through the restricted method of procurement.
The suppliers were International Pharmaceutical Agency, Caribbean Medical Supplies, Ansa McAl Trading Ltd, Global Healthcare Supplies Inc., Meditron Inc. and HDM Labs Inc.
NPTAB granted approval in May 2017 for the use of the requested method of procurement and tender documents were sold to all six suppliers. Only the first three suppliers, that is, the International Pharmaceutical Agency, Caribbean Medical Supplies and Ansa McAl Trading Limited, tendered for the supply of the items.
The tenders were opened on May 23, 2017 and were evaluated by the Evaluation Committee appointed by the NPTAB. The Committee on June 14, 2017 did not recommend an award since the members agreed that no tenderer met all the required evaluation criteria and they all failed to submit complete bids for all of the items.
The Ministry subsequently wrote the NPTAB on June 29, 2017 requesting approval to retender for the procurement of the items through the restricted method of procurement and from the same six suppliers.
The suppliers were requested to submit their tenders no later than July 18, 2017. On this date, only one tenderer, that is HDM Labs, submitted a tender for the supply of the items. The Evaluation Committee recommended that a contract be awarded to the lone tenderer for the supply of the items.
Audit Office said, “We compared the prices quoted for each item by the approved tenderer with that quoted by the initial three tenderers to determine whether there was due diligence with regard to economy in awarding the contract. It was determined in nine instances that the prices quoted by HDM Labs were significantly higher than that of the initial three suppliers.”
Audit Office said that the “contract which was awarded on August 31, 2017 by NPTAB in the sum of US$1,891,443 or Guyana dollar equivalent of $409.497M, was signed on 8 September 2017”. There were several “unsatisfactory features” noted during the examination of the documents.
Auditors noted that “the supplier was required to supply the drugs two weeks after signing of the contract; all items should have been delivered no later than 22 September 2017. At this date, no items were delivered. Delivery commenced in October 2017.
“As at 31 December 2017, items to the value of $141.892M or 35 percent of the contract price were delivered. The supplier fulfilled his obligations under the contract in March 2018, six months after the agreed delivery date.”
Further, five cheques in the sum of $283.811M and representing 69 percent of the contract sum were processed for the supplier, of which one payment for $17.194M was paid on 23 November 2017 and charged to Line Items 6221 – Drugs and Medical Supplies.
Three cheques for amounts totalling $223.710M were paid in 2018 and charged to the amounts received vide Inter-Department Warrants. Thus, the contractor was paid amounts totalling $240.904M of the contract sum.
Auditors said that at the time of reporting, “one cheque valued at $42.907M remained on hand; and as stated above, the supplier fully satisfied the requirements of the contract in March 2018 by delivering the agreed quantities as stipulated in the contract and received payments of only $240.904M or 59% of the contract sum.
There was no evidence at the time of reporting, that the Ministry took steps to settle its indebtedness of $168.593M, or 41 percent of the contract sum, to the contractor. In addition, no evidence was provided that after six months of delivering the items, the supplier demanded the remaining balance of $168.557M from the Ministry.
The Audit Office will conduct further scrutiny of the awarding and execution of the contract.”
The Ministry of Health responded to the Auditor Office’s findings. The Ministry said, “At the time of processing the transactions; two payments were merged in favor of a commercial bank to purchase drugs and medical supplies, thus resulting in one supplier delivered fully, while the other did not fulfill his contractual obligations. This has caused the cheque to be on hand.
The Audit Office recommended that the Ministry takes “appropriate action in ensuring that:
There is proper accountability for the amounts received by maintaining separate records to show the quantities of drugs and medical procured and supplied to each Region; financial returns sent to the Regions reflect the correct amounts expended to purchase of drugs and medical supplies; all warrants received must be accompanied with a schedule of the drugs to be procured in order for the Regions to receive their full supply of drugs; and price sheets used for valuing drugs and medical supplies issued by the MMU be presented for audit scrutiny.”

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