Cabinet approved without tendering
April 19, 2016 By Editor
$420M fertiliser deal
… while other company offered cheaper price
One of the biggest criticisms facing the A Partnership for National Unity/Alliance For Change (APNU/AFC)
Nizam-Hassan
GRDB General Manager Nizam Hassan
Government is its lack of transparency as it pertains to the administration of State affairs. Against this backdrop, information has surfaced which suggests Cabinet disregarded the accountable process of tendering in awarding a $420 million fertiliser contract to HDM Labs, although another company was offering to provide the fertiliser at a cheaper price.
HDM Labs had highlighted, in its cease-and-desist letter to Guyana Times, that the company’s President, Hardat Singh, during one of his frequent trips to Guyana “became aware that urea fertiliser being used by rice farmers were being sold at exorbitant prices, at the approximate price of G$5600-$5800 per 50kg bag, and accordingly made contact with the Permanent Secretary of the Ministry of Agriculture to offer for sale fertiliser at prices significantly below the then locally available market price, at approximately G$4160 per 50 kg 3 bag (i.e. US$400 per metric tonne). Naturally, given the fact that this significant price disparity in favour of local farmers was overwhelming, being more than 25% cheaper than was currently being retailed on the local market, the Permanent Secretary referred the matter to the Guyana Rice Development Board (“GRDB”)”.
It was further stated in the letter that “the GRDB accepted HDM Labs’ offer and on January 14, 2016 executed a contract with it for the supply of 5000 metric tonnes of fertiliser (the “Contract”)”. The pertinent fact is that no one involved in the contract award can claim the requirement for an open bidding process was followed. The Procurement Act of 2003 (effected in 2004) in accordance with Section 16 (1) establishes the National Procurement and Tender Administration Board (NPTAB) which is the body that “facilitate[s] the establishment and implementation of regulatory environment conducive to transparency, economy, efficiency, openness, fairness and accountability in public sector procurement”. It is through this body that the $420 million fertiliser contract should have been awarded, to the lowest appropriate bidder, after open, competitive and transparent bidding from different companies.
Furthermore, when this news agency spoke to GRDB General Manager Nizam Hassan on the statements made by Singh, Hassan said: “The GRDB entered into a contract with HDM Labs based on a Cabinet decision. There was a Cabinet decision and based on that decision, the GRDB executed.”
One of the GRDB Directors, Jinnah Rahman, who in previous articles accused HDM Labs and its President, of being connected to the AFC, and being awarded the contract as a result, confirmed that the contract was not tendered for nor were the particulars released to the GRDB.
Rahman outlined that the Board had wanted to help the farmers by providing some form of concessions and it was decided that the farmers should get cheaper fertiliser. Recommendations were made to the Agriculture Ministry, but it was later discovered that a contract had been signed between HDM Labs and the GRDB to supply the fertiliser at the price outlined above. “I understand that the matter went to the Cabinet and the Cabinet approved of this person, so the Board didn’t know who this person was before, it came to us as a surprise.”
What is worthy to note at this juncture is that another company, Nova Scotia Manufacturing Company Limited (NSMCL) had expressed interest since December 30, 2015 in supplying the fertiliser at a cheaper cost.
The Director of NSMCL, in a letter to the GRDB General Manager, which was copied to Finance Minister Winston Jordan, Agriculture Minister Noel Holder and Minister of State Joseph Harmon, stated that the company was offering to supply “6000 m/tons of Urea Fertilizer ex United States of America as a cost of GUY$3600 per 50 kg bag delivered at Friendship Wharf”. The company outlined further that the “contract can be done and signed today for supply of same” and the fertiliser would be delivered 8-10 days after loading.
NSMCL again sent a letter to the GRDB on January 11, 2016, three days before the contract was executed with HDM Labs, expressing interest to supply the fertiliser, the only difference being that when it arrived at the wharf “before breaking bulk”, the price would be G$3700 per 50kg bag. It is not clear what HDM Labs price would have been when the fertiliser reached Guyana, but it would certainly not have been less than the G$4160 per 50kg bag.
What is clear, is that had the fertiliser contract been tendered and awarded to the lowest bidding competitive price, which in this case might have been NSMCL, the Government of Guyana could have saved G$470 on every 50kg bag of fertiliser (i.e. US$370 per metric tonne) or even more were other companies given the opportunity to bid.
HDM Labs has since said that its contract to supply the fertiliser is in “full force and effect”, although it is now four months after the signing and the company has missed the deadline to supply the fertiliser for the rice farmers to use, since their last crop.The company President had even said that “HDM Labs made the necessary arrangements for 5000 tonnes of urea to be available at port for transport to Guyana, that cargo [is] currently awaiting approval from the GRDB to be shipped”.
This approval would appear to be up in the air at this time since the GRDB GM highlighted that “while payment for the fertiliser was by Letter of Credit established through a local commercial bank, the supplier requested that the Letter of Credit be irrevocable and transferable”. And this last requirement cannot be complied with by local banks because of local anti-money laundering laws.
As such, Nizam said: “GRDB continued to monitor the supply and prices of urea on the local market and has been in constant communication with HDM Labs Inc, since the supply of this commodity can no longer be considered urgent and immediate.”
Rice Producers Association General Secretary Dharamkumar Seeraj had alleged in a press briefing months ago that Cabinet approved a contract for the procurement of $420 million in fertiliser from a “known campaign financier of the AFC/APNU coalition”. He also alleged that the contract was not tendered nor advertised and Government’s actions were “in direct contravention of the laws, norms and conventions applicable to the acquisition of farmers’ inputs”.
HDM Labs and its President have since denied all the accusations levied against them by different personalities, including GRDB Director Rahman. Singh had stated that he was not an “investor” nor “campaign financier” of the AFC or APNU, but a “philanthropist” and neither himself nor “HDM Labs have been subject to investigations, or involved with or accused of money laundering, fraud or otherwise since the formation of HDM Labs or at all”.
