President Mahinda Rajapakse, (inset) V. K. Samaranayake, P. B. Jayasundera, Bid evaluation criteria where Samsung obtained marks for local partner, Samsung’s clarifications and P. B. Jayasundera’s circular No. 352/10
|By Dilrukshi Handunnetti
Overt manipulation and awarding of a tender to a Korean company with the Procurement Board of the Information and Communication Technology Agency (ICTA) choosing the highest bidder and paying Rs.
80 million extra for an e development programme has come to light.
The story dates back to year 2003 when Minister Milinda Moragoda wished to undertake a massive e-Sri Lanka drive. The Korean government also wished to make a contribution towards the initiative but with the change of governments, the process hibernated for a while.
Loan from Korea
However, invitation for bids (IFB) was called when the government of Sri Lanka received a loan from the Export-Import Bank of Korea from the resources available at the Economic Development Co-operation (EDCF) of Korea.
The specific amount received for this purpose was US$15 million (approx. Rs. 1,500,000,000) to finance Lanka Government Network (LGN) project of the e-Sri Lanka Development programme. At this point, the ICTA was selected as the implementing agency and the Cabinet Appointed Tender Board (CATB) on November 1, 2005 called for bids for the design, supply, installation and operation of Lanka Government Network (LGN).
It was stated that LGN was a highly available, secure and reliable underlying information infrastructure backbone that would connect all the government organisations of the GOSL in a cost effective and secure manner. Initially, 350 locations were identified for connectivity in three phases.
It was next announced that bidding would be according to International Competitive Bidding (ICB) procedures specified in the "Guidelines for Procurement Under the EDCF Loan, March 2005" and Government Procurement Guidelines. It was open to all bidders from the Republic of Korea.
It was announced that bidders should fulfil the minimum qualification criteria. This meant, the Management Service Provider (MSP) having a minimum of five years experience in the implementation and management of large-scale Wide Area Network (WAN) projects.
Further, the MSP was to have experience in successful implementation of large scale managed network infrastructure projects with a project value exceeding US$ 10 million, experience in managing and co-originating various stakeholders and enjoying a total annual revenue of minimum US$60 million to establish financial credibility.
A significant stipulation was the fact that the foreign MSP should have a local alliance/partnership so that the MSP will have legal liabilities for the project.
Also, it was specified that the MSP should have a registered Sri Lankan business presence or have partners or consortium, operational with adequate staff for a minimum period of five years or more with a proven track record of providing respective managed services.
For the two stage bidding process, a pre bid meeting was called on November 16, 2005 at the ICTA itself. Bids closed on November 30.
At this point, a full-fledged consortium, Korean Telecom Network (KTN) submitted its bid for US$ 13.93 million, Samsung Networks Inc. for US 14. 82 million. The other bidder was Korea Exchange Banking Technologies (KEBT).
According to ICTA sources, it was KTN that submitted a technically convenient bid complete with customers’ sites and survey preparations to the ICTA.
Then Request For Proposal (RFP) was made and KTN submitted a comprehensive proposal with experts being flown in to the island to assist in mastering the technical aspects of the same.
Inside sources say that it was at this level, when evaluation of proposals commenced that serious manipulation began within the ICTA in stark violation of the tender procedures.
In February last year, when a procurement clarification was sought from the ICTA, Procurement Advisor Christy Perera sent an e-mail response to Samsung titled "Inquiry about the second stage technical proposal format."
Samsung had first questioned whether a partnership and a joint venture would be considered one and the same, and next the difference between partners and sub contractors. "Are they the same or do they have different function/relationship?" the company queried, and Perera replied, "No, they are not the same."
Further, the clarifying mail sent by ICTA’s Procurement Advisor Perera stated that sub contractors were not involved in signing the contract but should be declared when the proposal is submitted.
It has now transpired that despite the strong backing received, Samsung Networks did not even fulfil the minimum eligibility criteria specified by ICTA.
According to the invitation for bids (IFB) of the e-Sri Lanka Development Project (IFBA; ICTA/GOODS/18) it was mandatory for the foreign Manage Service Provider (MSP) to have a local alliance or partnership to ensure that such MSP will have legal liabilities for the project.
Similarly, the said MSP according to stipulated criteria should have a registered Sri Lankan business presence, or have partners or consortium operational with adequate staff for a minimum period of five years or more with a proven track record of providing respective managed services. Samsung did not possess the above two pre-qualifications, though they were able to go to the next level without being disqualified at the very
Other bidders now claim that the technical evaluations on both bidding stages were inaccurate and were full of malpractices which were geared towards granting the contract to an already selected company.
It has now transpired that as per the technical evaluation criteria listed in the tender document, 12 marks were given to experience and expertise of ‘the local partner of the bidder’ whereas Samsung did not actually have a local partner.
The Sunday Leader has reliably learned that in the case of Samsung Networks bid, the 12 marks have been given to subcontractors and not the local partners. (See document)
Not only that, there were other misrepresentations at the technical evaluation. The ineligible company had also received two marks given to the bidders’ experience in implementing Economic Development and Co-operation Fund of Korea (EDCF) projects though Samsung Networks has not implemented any EDCF funded projects. Nevertheless Samsung managed to secure full marks.
There were other issues clouding technical evaluation.
Our investigations have revealed that KTN had initially objected to the appointment and formation of a technical evaluation committee (TEC) in violation of government stipulated tender guidelines which fell on deaf ears. KTN had objected on the basis of a public finance circular issued by Treasury Secretary P. B. Jayasundera.
The objection was that according to clause 33.1 of the Procurement Guidelines (as amended by the Public Finance Circular No. 352/10), there was a defect in appointing Chairman, ICTA Prof. V. K. Samaranayake to participate/represent technical evaluation committee of the ICTA itself.
Jayasundera’s public finance circular issued to all secretaries of ministries, heads of government departments, corporations and statutory boards cautioned them against the inclusion of chief executive officers of such organisations in TEC, as it would undermine the role of other TEC members.
Referring o Chapter 111 of the Guidelines of Government Tender Procedures (revised edition August 197) regarding the appointment of TEC members, Jayasundera instructed that, "the members of the TEC should feel free to express their independent views and make recommendations to the Tender Board. In this context, the inclusion of chief executive officers (managing director, general manager, chairman etc.) of organisations in
TEC tend to undermine the role of other members of TEC drawn from the same organisation. Therefore, you are kindly requested to refrain from nominating or appointing such officers to TEC." (See document )
Samsung secures bid
What is more, it has now transpired that Samsung has managed to secure the bid despite furnishing misleading information for technical evaluation purposes. This despite tender documents specifying ‘misrepresentation of information’ being a fraudulent practice which could disqualify a bidder.
According to instructions issued to bidders, what is termed a ‘fraudulent practice’ is "a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of the borrower and includes collusive practices among bidders (prior to or after submission of bids) designed to establish bid prices at artificial, noncompetitive levels and to deprive the borrower of the benefits
of free and open competition."
Under this stipulation however, it is possible to reject a proposal or to declare ineligibility, either indefinitely or for a stated period of time. However, none of the above occurred in respect of Samsung Networks despite the gross misrepresentations.
Accordingly, Samsung Networks in their answers to clarifications raised by the ICTA at the first stage of LGN bid evaluation, brazenly declared Sri Lanka Telecom (SLT) as their ‘local partner.’ Interestingly enough, the TEC had given full marks for the local partner acting on the basis that SLT was indeed a local partner of Samsung whereas it was only a subcontractor.
When questioned on the nature of the local presence of Samsung Networks, the company response was in fact a laugh. In a written clarification Samsung said, "once we are awarded this project, we will set up our office and our staff from Korea will be based in Colombo office. Our office in Colombo, local partners and sub contractors will collaborate for the successful implementation and operation of LGN."
Having stated that, Samsung added, "our principle partner is Sri Lanka Telecom. MIT, Metropolitan, Softlogic and Advantage Technology will be involved in implementation and operation in some degree."
When the bidding process reached second stage whereupon bidders are required to produce their partnership agreements and financial reports, Samsung Networks also managed to alter their original position and declared that they in fact do not have any local partner fearing disqualification at this stage.
What baffles ICTA insiders themselves is as to why the TEC chose to ignore all the gross misrepresentations, misleading statements and tender procedure violations in this manner. While bidders may try, as they often do, all the tricks in their books, ICTA officials themselves are baffled by the fact that the TEC did not outrightly reject the Samsung bid, but instead lent every possible support for the company to secure the bid.
When subsequent objections were raised against SLT being principal local partner of Samsung and a subcontractor with another, SLT quickly disassociated itself from the Samsung partnership claim. Instead, it wrote to Chairman, CATB, stating its position.
In a letter dated November 28, 2005, Chief Marketing Officer, Sri Lanka Telecom, Kapila Chandrasena announced a partnership with Enterprise Technology (Pvt) Ltd.
The Samsung bid however encountered more problems than the above. The two stage procurement guidelines were not properly implemented and followed by the ICTA itself. Other competitors allege that if the bidders were acting according to the tender guidelines of the government, the price bid should have been opened only after the completion of the technical evaluations.
At this point, ICTA, it is learned had requested the bidders to include the total price in their technical proposals for Stage 2 bidding purposes.
However, such treatment was not meted out to other competitors. When KTN made representations seeking clarifications from ICTA, not even minutes of the meeting were released to KTN. What is more, the company was also requested to alter their technical solution at this point, according to ICTA insiders.
Naturally, when the matter reached the next stage — it led to the more technically advanced and superior solutions proposed by KT Networks to be rejected without any valid reasons being provided.
KTN’s proposal was a state of the art satellite solution to connect all the 350 government-building locations. Considering the fact that most of the locations happened to be in remote areas, the company’s belief was that satellite communication facility was the most viable and suitable method for deploying high bandwidth connections.
What was more, ICTA was to gain the additional benefit of coming to own the equipment. However, for no apparent reason, the solution was rejected and was told to work out a ‘land line’ solution. ICTA inside sources associated with the process confirmed that Samsung Networks Inc. had proposed only a landline solution.
When the final marks were announced, KTN objected and sought a revision in the marks. The grouse the company has is that if the revision was done according to the stipulated marking system, KTN should have secured the highest marks and naturally become the more eligible bidder to win the contract for the project. What is more, marks were verbally announced and were not in writing.
In this highly questionable backdrop, CATB approved Samsung’s proposal and rejected the other two. Following representations made to higher authorities, on May 17, 2006, President’s Secretary Lalith Weeratunga wrote to KT Networks announcing the disqualification of the company to secure the tender. However, it allowed an opening for the company to make representations to the Procurement Appeal Board (PAB).
On May 20 this year, Manager, NI Business Marketing Division, Overseas Business Development Department, KT Networks, Yong Jin Kim formally submitting an appeal drew the PAB’s attention to the irregularities in the tender evaluations and even the fraudulent practices.
Kim whilst highlighting several major irregularities also questioned the eligibility of Samsung Networks, alleging that if the evaluation was just and impartial, KT Networks was of firm belief that the contract should have been awarded to them.
"If the evaluation had been just and impartial, we believe that we should have obtained the highest marks for the technical evaluation. Further, our price bid was substantially less than that of Samsung Networks. If the evaluation has been accurate and impartial, we would have got the recommendation which eventually would save a significant amount of money for the Government of Sri Lanka.
We earnestly request your fair and just evaluation of the representations we are making against the award and recommend our bid which we believe is the technically most compliant and lowest in price."
Having charged processing fee of Rs. 50,000, PAB did not offer a valid explanation for such rejection, according to angry ICTA insiders.
After such a fiasco of manipulating marks and violating tender procedures to ensure success for one bidder, to this date, the tender remains un-awarded, a fact a source from the CATB confirmed. What is more, the ICTA also agrees that though Samsung secured the bid, contract is yet to be granted and says no more.
The loss to the state is in the range of Rs. 80 million with the selection made, but no matter. KTN and KETB have been unfairly evaluated only to award the tender to the highest bidder. It really must be a sign of a wealthy state, albeit the expenses of war.
Then again, here is a topic that comes directly under President Mahinda Rajapakse himself.
Speaking to The Sunday Leader, a top ICTA official said that the contract was not awarded to any company yet.
He said that there were no irregularities in deciding to issue the contract and admitted that the tender process had ended.
"The cabinet has decided to give the contract to Samsung Networks, but it has not been awarded yet. Some parties allege that there are irregularities in deciding as to whom the contract should have been awarded to. But the procedure adopted was perfectly fine and there was no irregularity as alleged," he said.
He said that Samsung Networks had in fact quoted a lesser price than the other company, Korean Telecom Networks (KTN).
"The amount quoted by the company is not known at the moment, but the amount was certainly less than the amount bid by Korean Telecom Network," he added.