Friday, June 1, 2012

A Dilemma in Public Procurement Governance: The Case of Trinidad and Tobago


Over the last quarter century, a global revolution of sorts has taken place in the appreciation of the function of procurement within the public sector.  No longer viewed as a transactional, back office function, the highly strategic impact of procurement decision-making on the sustainable growth and development of countries and regional trading blocks is being increasingly recognized.  As well, given the specific vulnerability of the function to misuse, heightened public awareness has placed accountability in public sector procurement in focus in almost every jurisdiction worldwide.

The impetus for the advancement of public procurement reform initiatives in developing states is escalating as trade liberalisation is exhorted as a universal good.   In addition to the mounting external pressures from the globalised economic environment on developing states, the demands for more accountable governance from an expanding enlightened citizenry and strengthened civil society and media are causing an increasingly difficult to ignore internal pressure for public procurement reform.

Public Procurement reformative efforts within CARICOM member states are presently plagued by tensions between the varied and oft-times competing objectives of the political desire to retain “policy space” in order to pursue socio-economic development objectives and the demands of trade liberalization and accountable governance.  Further, the existence of deeply entrenched commercial, bureaucratic and political interests have perennially stymied the will of successive CARICOM regimes to grapple with the challenge of effective public procurement reform. 

The public procurement system in Trinidad and Tobago engages all of these pressures and is largely representative of the systems, existing in some CARICOM Member States also former British colonies, which have not yet undertaken comprehensive legislative reform.  The system characterized by the interaction of a multiplicity of disparate legal texts is in dire need of reform in the form of a modern, comprehensive statutory framework with clear hierarchical structures. The existing framework is out-dated and has not kept pace with the Government’s multi-billion dollar development agenda resulting in a systematic policy being undertaken to engage in public contracting outside of the existing framework through the State Owned Enterprise (SOE) sector.

This limited coverage is however not the only weakness in the existing framework. Other weaknesses include absence of a regulatory body having oversight over the procurement function; absence of a formal, independent complaints and/or dispute resolution mechanism; absence of a centralized electronic public procurement information system; inadequate procurement reporting and collection of statistics and data; absence of whistleblowing protection systems and forensic skills and ongoing training and capacity challenges. 

Over the last decade, the absence of a comprehensive regulatory framework in Trinidad and Tobago has resulted in extremely weak procurement governance, burgeoning allegations of political corruption in public expenditure and an erosion of public confidence in the state.  This is evidenced by the spate of general elections held between 2000-2010 arguably catalyzed by the heightened public concern and erosion of public confidence in public sector spending activities, as reported in the country’s media.  Attempts at reform have been reactionary and piecemeal at best and after two major public procurement enquiries (Piarco 2003-2004) and (Uff 2009-2010) to the chagrin of many citizens comprehensive reform is yet to materialize.

Background to the Current Public Procurement Governance Dilemma
During the early independence years an aggressive development agenda engendered an escalation in public sector construction activity placing strain on the existing public sector financial management systems.  A lack of uniformity in policy, standards and practices, and instances of insufficient security and poor management were identified. By 1961, rationalization was attempted through the passage of the Central Tenders Board Ordinance (CTBO).

The CTBO, established a centralized system and the Central Tenders Board (CTB) as “the sole and exclusive authority” for procuring public sector goods, works and services. The principles of transparency, accountability and efficiency underpinned the new regulatory framework through which articles, works and services were delivered to the public using public funds.

As the Government’s development agenda continued to expand, the need to participate more directly in the public procurement process was recognized and a policy decision was taken to amend the CTBO in 1979 to allow the Government to contract on its own behalf. Following up on this amendment, new statutory corporations were established with their own contracting capability outside the purview of the CTB and several pre-existing statutory bodies were removed from the purview as well.

Statutory erosion of the remit of the CTB persisted by amendments to the CTBO in 1987, 1991 and 1993 resulting in the vast majority of public procurement in through the SOE sector being administered outside of the statutory framework.

Additionally, over the last thirty years the practice of creating new hybrid bodies termed “Special Purpose Companies” (SPCs) developed.  These are wholly owned state companies incorporated as private limited liability companies under the Companies Act 1995 as amended in 1997.  The SPCs were supposed to provide expert personnel to speed up project implementation. Though the Ministry of Finance issued guidelines for the SOE sector (including the SPCs) to follow, evidence provided at the 2010 Uff Commission of Enquiry into the Construction Sector and UDeCOTT demonstrated substantial non-compliance on the part of these entities and limited enforcement by Central Government.

The political justification proffered for the exclusion of these bodies from the CTBO regime had primarily been that the bureaucratic CTBO procedures hampered commercial efficiency and the pace of the Government’s infrastructural development agenda.

The governance dilemma represented by the current state of affairs is that: while on the one hand SPCs are owned by the State, utilizing public funds and operating on behalf of the Government, they are not, at the same time, subject to the same regulatory and accountability frameworks as other public bodies. In decentralizing the public contracting function, there was no concomitant overarching regulatory interface established, governing the relationship between the State and these bodies, and in particular, their engagement with public contracting activities. 

CTBO Weaknesses
That is not to say that the centralized system under the CTBO provides an adequate regulatory framework to meet the requirements of modern public sector procurement realities.  The weaknesses of the CTBO system have been documented comprehensively in the White Paper on Reform of the Public Sector Procurement Regime 2005 and other papers and there is little need to repeat them in detail herein as they are non-controversial and are widely recognised.  

The weaknesses include, the lack of a formal complaints and/or dispute resolution mechanism for disgruntled bidders; the lack of a regulatory body with power to investigate and monitor independent of the CTB; the narrow legislative focus only on the tendering phase of the procurement cycle with little guidance on budgeting, feasibility and contract management; the lack of technical infrastructure and development of an electronic centralized public information system; lengthy and costly bureaucratic procedures which are unable to keep pace with the expanding needs of Government’s development agenda; the absence of provision for newer procurement methodologies including eAuctions and innovative project financing models such as Public Private Partnerships; poor data collection and reporting and; human resource limitations in the form of a dearth of trained staff at the CTB.

All of the above notwithstanding, it is notable that no significant allegation of corruption has been levied in relation to CTB awarded contracts from the date of its establishment to present. However, the inference to be drawn from this is unclear and may be reflective of the nature and scale of public contracts let under the auspices of the CTB, as compared with other public entities.

Weaknesses in the SOE Sector
Entities in the SOE sector procure utilizing their own tender rules and procedures.  It should be noted that there is no uniform or standard process or procedure for all such bodies and there are varying levels of oversight depending on whether the body was created by statute or incorporated as a limited liability company under the Companies Act.

The procurement governance risks in the SOE sector are significant and are facilitated by the lack of an overarching regulatory framework for all public bodies and special purpose companies; the lack of a formal complaints and/or dispute resolution system; the lack of uniformity of rules, procedures and documentation; poor management; and a lack of transparency.   Although the flexibility of the systems allows for the Government to escalate its infrastructural development programmes, the present perceived vulnerability to corruption and associated risks and the consequential strain on value for money objectives remain significant.

Reform Initiatives – The Last Decade 2002-2012
Despite several attempts by the State to rationalize procurement activities in the SOE sector including: the 2005 standard procurement guidelines issued by the Finance Ministry; the White Paper on Reform of the Public Sector Procurement Regime 2005 which proposed a principle model for procurement reform based on the principles of Transparency, Accountability and Value for Money, and a 2008 SOE Performance Monitoring Manual relating to governance, reporting lines and mechanisms, auditing and performance indicators, there has been limited success in stemming the perception of endemic corruption in the public sector.

Increasing public disquiet as a result of Government inaction in enacting the much touted public accountability statutory framework led to the establishment of the Uff Enquiry in 2009 which report was laid in Parliament in April 2010.  The report confirmed public concerns about the lack of oversight and transparency of the contracting practices and made 91 recommendations (inclusive of criminal investigations of some public officials) for reform.  After a snap election in May 2010 and a new Government coming into power championing the anti-corruption agenda, promised the implementation of the recommendations and comprehensive statutory procurement reform.

In fulfillment of this promise The Public Procurement and Disposal of Public Property Bill 2010 along with the National Tenders Board Bill 1997 was laid in parliament but since 2010 has been before a Joint Select Parliamentary Committee with no discernible output to date. 

A Way Forward: Beyond Statutory Regulation?
To date, despite the current well-publicised governance gaps and loss of public confidence in public sector procurement there is yet to be any change in the public procurement regulatory landscape.  This coupled with regional initiatives to harmonize public procurement laws and the signing of trade treaties like the CARIFORUM EC EPA impacting public procurement activities suggests a governance lacuna that must surely be filled.

This notwithstanding, in recent times, quite paradoxically and perhaps arguably as a result of the increasing disquiet and seeming lack of political will, some of the most innovative initiatives in public procurement reform in the region aimed at more efficient and accountable public sector procurement outside of a regulatory framework has found its genesis in Trinidad and Tobago including (i) the establishment of a regional procurement professional association and institution seeking to build professional capacity and ethical maturity in the implementation of the function of procurement (ii) the increase in specialised training, conferencing and capacity building interventions (iii) the adoption with Government support of emergent technological innovations in the form of reverse eAuctions and eBusiness applications (iv) the development of Corporate Ethics Codes and Practices in several public sector companies including the introduction of secure anonymous & confidential reporting hotlines for employees, suppliers, customers and other stakeholders to report ethical and other breaches. 

In particular, the adoption of whistleblowing systems in some state-owned bodies has been a welcome development as research demonstrates this as one of the most effective anti-corruption mechanisms developed to date.  

These initiatives are bottom up initiatives emanating from the citizens both individual and corporate seeking to tackle the challenge of more efficient and accountable procurement head on.  Despite the considerable perturbation at the persistent regulatory lacuna, the lack of statutory regulation has seemed to catalyze these organic initiatives aimed at transforming the professional and organizational cultures with some success. 

In 2012, the Petroleum Company of Trinidad and Tobago (PETROTRIN) won one of five prizes in the global Procurement Innovation Challenge hosted by the World Bank for using ICT to improve effectiveness, increase transparency, reduce costs and save trees.  In a groundbreaking initiative led by Chartered Accountant and Contracts Coordinator Mr. Steven Samlalsingh, instead of being placed on the map as a developing country with the characteristic weak procurement systems plagued by endemic corrupt activity, Trinidad and Tobago was placed on the map as a world leader in procurement innovation.

What this success demonstrates is that the need for a transformation in the ethical, professional and organizational cultures must be recognized and bottom up strategies aimed at this should be encouraged.  Further, the need to build critical enforcement capacity in respect of the laws already in our books through the development of more sophisticated forensic methodologies in the investigation of white-collar crime and in particular procurement fraud is also critical. 

Perhaps herein lies the key to elevating the public procurement governance debate in Trinidad and Tobago. Persistent focus on statutory reform only by leading procurement reform advocates and organisations has ignored two critical factors. In order to achieve effective and accountable procurement, a statutory framework alone will not provide the solution and neither must it necessarily lead the way.


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