K27BN up in smoke

The Ministry of Health’s (MoH) decision to cancel procurement of ambulances in May 2019 will cost the taxpayer about K27 billion in damages to Savenda Management Services, a court has ordered.

Attorney General Chikosa Silungwe in a telephone interview yesterday indicated that government will contest the matter.

Savenda, one of the bidders in the ambulance deal, was awarded the damages after it dragged the ministry to court in January last year.

The Zambian firm argued in court that the cancellation was not done in the public interest and contravened Section 46 (b) of the country’s Public Procurement and Disposal of Public Assets Act

In her ruling on September 11 2020 Justice Anita Mtalimanja from High Court (Commercial Division) in Lilongwe agreed with Savenda that the government had created legitimate expectations to the claimant which caused the bidder to incur expenses to fulfil the requirements of the procurement proceedings.

Reads the ruling in part:”That the defendant do compensate the claimant for the loss suffered by the said illegal cancellation of the procurement proceedings by putting him in the same position he would have been had he been awarded the contract, the same to be assessed by the Assistant Registrar.” 

Among others, the court also ordered the defendant to compensate the claimant for the loss suffered by paying £320 000.00 (K360 million) the claimant spent on the ministry’s employees during a post-bid evaluation exercise; pay the claimant for expenses incurred in the preparation of the bid and pay for general damages for inconvenience, which are to be assessed by the assistant registrar. 

The judgement was made without hearing the submission by the defence as the lawyers from Attorney General (AG) office, who were representing the Health ministry, did not comply with directions of the court to file the submissions by September 2 2020, according to the judgement.

In the ruling on assessment of damages made on February 8 this year, the assistant registrar Annie Gumulira ordered the ministry to pay the claimant as follows:

l£12 038 000.00 (K13.5billion) as expenses incurred in order to fulfil requirements of the procurement proceedings;

l$15 018 020 (K11.7 billion) for loss suffered by the illegal cancellation of the procurement proceedings ;

l$1 000 000 (K780 million) as expenses incurred in preparation of the bid documents considering mainly the complexity of the process in the procurement proceedings.

l$1 000 000 (K780 million) general damages payable to the claimant for inconvenience.

The assistant registrar said it would be absurd to expect the cancellation of the procurement proceedings by the defendant had no financial constraints on the claimants.

“I have no doubt in my mind that the claimants spent a lot of time,  care, expense and money in the preparation of the bid documents herein considering the nature of the transactions involved in the procurement proceedings,” Gumulira said.

In an interview  Savenda lawyer, Wapona Kita confirmed that his client had indeed won the claim and was awarded the damages but refused to give further details.

Paper trail on the ambulances deal shows that in 2018, the then minister of Health Atupele Muluzi noting shortage of ambulances in his ministry asked for special funding from his Cabinet colleague Goodall Gondwe, who was minister of Finance.

Our sister paper Nation on Sunday reported that in a letter reference number DPPD/21 dated January 22 2018, Muluzi requested the Ministry of Finance to provide K4 billion outside the Ministry of Health’s allocation for the procurement of 66 ambulances.

Gondwe approved Muluzi’s request and further proposed that the number of ambulances be increased to 300.

Gondwe’s response letter dated February 2 2018 under reference number FIN/BD/2/2/9/310 reads in part: “Honourable minister, you may wish to note I totally agree with your suggestion that some resources should be set aside in the 2018/19 budget for procurement of ambulances for our health facilities.

“I am of the view that instead of planning for 66 ambulances, we could be planning for the procurement of 300 ambulances.”

It was established that after Gondwe’s communication, the ministries of Finance and Health received a proposal from a South African company identified as Vision International to supply 300 ambulances to Malawi.

The payment plan was staggered over a period of five years to give the Malawi Government some fiscal space.

Vision International was to supply the 300 basic life supporting ambulances at a cost of K32 billion and that government would be paying an average of K6.4 billion annually over five years.

In a memo to Secretary for Health reference number EAD 13/1/2/1 dated June 20 2018, Ben Botolo—who was then Secretary to the Treasury—described the deal as technically and financially viable but advised the ministry to procure the vehicles in line with the Procurement and Disposal of Assets Act.

The Ministry of Health then advertised for international competitive bidding for the supply of 300 ambulances and three companies emerged successful bidders. They were Vision International, Grand View International and Savenda.

The bidders, at their own cost, were asked to organise inspections of the ambulances.

Between November and December 2018, a team of 13 Malawi Government officials travelled to Zambia, the United Kingdom and Dubai to inspect ambulances under the sponsorship of bidders; an act former PPDA acting director Timothy Kalembo described as conflict of interest and promised to investigate.

“Interestingly, while there was so much interest to have Vision International given the contract, when the inspection team went to South Africa it could not locate the company’s office and did not inspect anything.

“We met at some lodge and a representative from the company gave an excuse that they were not ready for inspection,” confided one official, who was in the Malawi Government delegation.

Following the inspection of the other bidders, Ministry of Health settled for Grandview International and PPDA granted a no objection in a letter dated February 15 2019 for the supply of ambulances worth K4 billion, which was the sum set aside in the budget.

In the letter, PPDA clarified that it had withheld its approval for the supply of 300 ambulances because of limitation of funds.

Twice—within three months—the Ministry of Health cancelled procurement processes for the supply of basic life support ambulances.

These decisions—and the ministry officials’ pocketing of funding for inspections from bidding companies— attracted the wrath of some potential suppliers who were bitter that they spent on the officials, but had not been awarded the contract.

But the ministry defended the decision and said the advertisements it put in the media specified that bidders had to sponsor the travel of the inspection teams, although advertisements we have seen and the bid documents do not show any of the claim.