- Cut corners to buy unbudgeted for equipment
Energy sector regulator Malawi Energy Regulatory Authority (Mera) is in a tangled web again following a flawed multimillion kwacha procurement transaction involving some senior managers, The Nation can reveal.
Mera purchased an interactive display system (IDS) and overhead projector amounting to K7 968 600 (US$15 594) without seeking consent from the Office of the Director of Public Procurement (ODPP) early this year.
The Public Procurement Act requires that public sector entities seek ‘No Objections’ from ODPP when the value of goods or services surpasses a set threshold, which is subject to revision. ODPP’s current threshold is K5 million.
Documents seen by The Nation show that four managers were actively involved in the procurement transaction that ODPP has described as irregular.
Even Mera management confessed in an interview with The Nation last week and in an earlier report to the board that procurement rules were deliberately flouted and that the issue is under investigation.
The managers involved in the deal include Eunice Potani, then acting chief executive officer (CEO), Elias Hausi, director of finance and administration (DFA) now acting CEO, Yamikani Malenga, senior information communications technology officer (SICTO) and Saukile Chanza, procurement officer (PO).
According to an originating document seen by The Nation, on January 20 2014, Malenga sent a specifications document to Hausi on which he inscribed “herewith are the specs for interactive system. Please advise if we also need a projector.”
On the same day, Hausi approved the request and further advised Malenga to buy a complete set as requested.
The following day, Hausi advised Malenga (through the specifications document) to liaise with Chanza to start the procurement procedure. Malenga later instructed Chanza to “please process ASAP [as soon as possible].”
On January 22 2014, Malenga further wrote an e-mail to Chanza and copied it to Hausi with subject line ‘Procurement of Projector and Interactive Screen’ in which he advised him to “expedite the process” and “source quotations from reputable ICT vendors, including IT Centre and Business Machines.”
Documents show that quotations were sourced from three companies—IT Centre, Business Machines and Parad while Technoworld and Xerographics did not respond to the request for quotations.
However, Business Machines and Parad managed to provide prices for both the overhead projector and the IDS.
Business Machines quoted the projector at K340 000 and K6.5 million for IDS while Parad quoted K450 000 and K7.45 million for the projector and IDS respectively. IT Centre just issued a K404 325 quote for the projector.
In his analysis and recommendation, Chanza wrote in his memo: “Based on least cost offer, Business Machines is recommended to supply the equipment at a total cost of K7 968 600 [plus 16 percent VAT].”
All this happened before Mera’s internal procurement committee (IPC) convened to review and authorise purchasing of the gadgets, according to information we have.
Besides, the DFA allegedly approved the purchase when, in actual fact, the IDS had no budget line in the authority’s 2013/2014 financial year, as indicated in his response to an audit query dated November 18 2014, which The Nation has seen, in which he wrote: “…There was issue of budget, as K900 000 only was provided for a projector. It was noted that there would be a saving on Management Information System, as it was unlikely that it would be procured in 2013/2014 financial year.”
The authority proceeded to procure the equipment, which was delivered on February 20 2014, according to Business Machines’ delivery note and invoice both bearing numbers 21270. The gadgets were received, on behalf of Mera, by Malenga.
However, in their findings, internal auditors uncovered some questionable transactions and reported the matter to finance and audit committee of the board for action after management reportedly failed to explain its stand.
This was after the auditors analysed the procurement process, the importance of equipment against the cost and the budget line and functions of the system.
ODPP and Hausi confirmed in separate interviews last week about the irregularity in procuring the IDS.
ODPP chief professional development officer Peter Makanga explained in an interview: “I have checked our records and I have not found any submission from Mera in connection with the said procurement. It is clear that they never got approval from this office to go ahead with the procurement.
“I also cross-checked with the procuring entity and they confirmed that they indeed procured equipment and the value was higher than K5 million. So, as far as the ODPP is concerned, there was an irregularity in the transaction.”
On his part, Hausi, in response to The Nation questionnaire, insisted that no short cuts were made in the procurement as due process was taken through Mera’s IPC.
On whether it was budgeted for, Hausi said: “Budgeting in the public service is subjected to mid-year review. Where revisions are necessary, they are effected. There was a revised budget.”
Hausi also said the issue of bypassing ODPP threshold for open request for quotations versus open tendering was being internally investigated.
“Procurement above the threshold has to be tendered, that’s why the use of ‘request for quotations’ is being internally investigated. Reasons will be established after this exercise is concluded,” he explained.
But when contacted for her comment, Potani, who signed the contract agreement between Mera and Business Machines, referred the issue to Hausi.
She said: “I would like to indicate that Mera has defined procedures and protocols for handling communication to stakeholders. Therefore, I have forwarded your request to the appropriate office of the CEO for the necessary attention.”
Potani signed the procurement contract under subject: ICT Equipment with procurement Ref. No. MERA2/9/01/2014/3 on February 12 2014 while Mahesh Pati signed on behalf of Business Machines as its Lilongwe branch manager.
The procurement contract, which The Nation has seen, was signed without witnesses from both parties as is usually the case with sale agreements.
Chairperson of IPC, Ishmail Chioko, also referred The Nation to the acting CEO when contacted for comment on Wednesday.
On January 18 2014, a few days before expiry of its term of office, the finance and audit committee of the Mera board reportedly grilled Hausi at its extraordinary meeting where it also observed that the equipment was immaterial to a public organisation like Mera, according to a well-placed source.
And speaking on condition of anonymity in an interview last Wednesday, one former board member explained: “It was clear that procurement of the equipment had no value for money and was not meant for public organisations like Mera. And the board’s position was that the gadget was procured not for Mera’s interests, but to siphon money for the benefit of few selfish individuals.”
And in his written report to the Mera board’s audit committee, Hausi confirmed that since all Mera employees underwent a training in public procurement, which was conducted by the ODPP last year, it was believed that “deliberate failure to observe the procurement rules by using a wrong procurement method is a pointer that some procurement fraud or corruption is taking place.”
This is the second time in two years that Mera has been in the limelight for procurement flaws.
In 2012, police arrested Hausi and director of technical regulation Welton Saiwa in connection with a K16 million deal Mera transacted without following procurement procedures.
The arrest came after The Nation revealed how the authority paid K16 million in a flawed procurement transaction which management also ignored its internal and public procurement processes and the ODPP.
Mera paid the said amount for a six-paragraph write-up and advertisement, which were part of a 12-page supplement on Malawi by London-based advertising agency, Upper Reach Limited.
We could not immediately establish with the police over the past two weeks the outcome of those criminal cases.