Violation of public procurement rules: TIP asks minister to take action against PPIB, Pepco, RPP owners

Transparency International Pakistan (TIP) has demanded of the Minister for Water and Power Pervaiz Ashraf to take strict action against PPIB, Pepco and rental power plants (RPPs) owners who collectively violated public procurement rules.
In a letter to the Minister, TIP has contended that it had requested on July 24, 2009 for a review of the awards of RPPs, which according to the international body, did not comply with the PPRA procurement rules 2004, and to provide the evaluation reports and awarded contract agreements to TIP under Rule No 48.
The Public Procurement Regulatory Authority (PPRA) also asked Secretary Wapda in a letter on July30, 2009, to provide the information under Section 5.2(I) of PPRA Ordinance 2002. According to the letter, a copy of which is available with Business Recorder, no response to the Transparency International Pakistan (TIP) request was received from Wapda or PPIB or Pepco.
The clarifications of Iqbal Z Ahmed on the award of RPP were, however, received, which were countered by TIP and were reported in press in August 2009. On September 10, 2009 Business Recorder reported that the Economic Co-ordination Committee (ECC) of the Cabinet's decisions of February 15, 2008, on RPPs had not been implemented in letter and spirit. The Asian Development Bank (ADB), under the third-party validation mechanism, began evaluating rental plant contracts reportedly aimed at investigating allegations of kickbacks.
Official documents available with Business Recorder show that the ECC in its meeting on February 15, 2008 had directed the Ministry of Water and Power to negotiate tariff for RPPs lower than allowed to the independent power producers (IPPs), based on similar technology, for their first 10 years.
This direction has not been followed by the tariff negotiators ie the Private Power and Infrastructure Board (PPIB) and Pakistan Electric Power Company (Pepco) as, according to Minister for Water and Power Pervaiz Ashraf average RPP tariff would be 13.5 cents per kwh--one cent per kwh higher than IPPs.
The documents further show that the ECC had also directed that Secretaries of Finance and Water and Power along with Managing Director of Public Procurement Regulatory Authority (PPRA) should review the mechanism of procurement to ensure that further delay is avoided and PPRA Rules are strictly observed in letter and spirit. These instructions of the ECC were also violated by the Ministry of Water and Power which forced Public Procurement Regulatory Authority (PPRA) to seek details of the contract agreement signed between the GoP and RPP sponsors.
As a result of public criticism and also TI Pakistan monitoring, the GoP assigned Asian Development Bank (ADB) as third-party validator of the RPP. The ADB's much awaited report has been on-sent to the Ministry of Finance. However, details of the report have not yet been made public. According to sources, the report indicates violation of PPRA Rules as noted by Transparency International Pakistan.
According to the Public Procurement Rules 2004 every contract of over Rs 10 million must include no bribery 'Integrity Pact'. This pact makes it mandatory for the contractor to commit that in case any corruption is found in the award of contract or in future implementation of contract, the contractor will pay 10 times the amount of corruption. The actual commitment is as follows:
Notwithstanding any rights and remedies exercised by GoP in this regard, (name of supplier) agrees to indemnify GoP for any loss or damage incurred by it on account of its corrupt business practices and further pay compensation to GoP in an amount equivalent to ten times the sum of any commission, gratification, bribe, finder's fee or kickback given by [name of supplier] as aforesaid for the purpose of obtaining or inducting the procurement of any contract, right, interest, privilege or other obligation or benefit in whatsoever form from GoP.
Citing this the TIP notes that "TIP requests the Minister to take action under Public Procurement Regulatory Authority (PPRA) Rule No 2(f), 'corrupt and fraudulent practices' and recover 10 times the loss of GoP, (which is estimated to be in billions of rupees) under Rules No 7 'Integrity Pact', from the contractors found to be involved in the violation of Public procurement rules 2004.