Saturday, July 5, 2014

Over half of education sector procurement 'corrupt'

Following on from previous articles on financial irregularities in a donor support health programme in Bangladesh, here is an article, published today in New Age, on corruption in procurements involving a donor supported education program.

The article is based on an Annual Fiduciary Review of the program - the relevant parts of which can be downloaded here

55pc of edn sector procurement ‘shady’

Donor commissioned probe finds

David Bergman
The extent of corrupt and collusive government-run procurements in Bangladesh has been laid bare in an independent scrutiny of tenders undertaken for a donor funded development programme, which was conducted in 15 different districts by an audit firm hired by a consortium of donors.
The procurements were investigated as part of an ‘annual fiduciary review’ of the $5.8 billion Third Primary Education Development Programme supported by the World Bank, the Asian Development Bank, the British government and the European Union along with other international donors.
The review, conducted by the chartered accountant firm A Qasem and Company, found that in 91 out of 163 procurement packages which it had investigated, there was ‘fraud and corruption, syndicated bidding, collusion, and malpractice.’  155 of the tenders had been conducted by the Local Government Engineering Department and 8 by the Department of Public Health Engineering
Assuming this level of corruption was reflected in all $1.6 billion worth of procurement, which the World Bank estimated would take place during the five years of the primary education programme, this would amount to about $880 million of corrupt tenders for goods and contracts.
Shyamal Kanti Ghosh, director general of the Directorate of Primary Education, told New Age that it was not true that there was corruption in the
procurement. ‘No procurement is going wrong. There is no corruption, as [donors] approved those before they could happen. So how can the [donors] now make such comments.’
On Sunday, New Age reported that corrupt or illegal procurement counted for nearly half of $70 million of the financial irregularities identified by the Comptroller and Auditor General in one year of a donor-supported health programme.
The chartered accountant’s ‘interim’ report, which has been obtained by New Age, was commissioned by a consortium of donors led by the Asian Development Bank. The report relates to the 2011-12 financial year, the first year of the primary education programme.
Dated May 2013, the 17-page report sets out nine ‘indications of syndicated bidding’ which it found within the 91 corrupt procurement packages.
These included the ‘same spelling mistake’ and ‘similar handwriting’ found in different documents submitted by different bidders; the ‘same format, wording and content found in different documents submitted by different bidders’; ‘identical unit cost rate in most cases, and unusually higher unit rate in a few cases quoted to avoid winning the contract’; ‘sequential tender securities’ submitted by different bidders; and ‘tender security’ withdrawn by ‘same person on behalf of different contractor.’
The report also listed 18 different kinds of irregularities and deficiencies in the bids which were not identified by those conducting the procurement. These included ‘fake documents’; ‘inauthentic’ accounts; missing details in documentation, including information on annual construction turnover, qualification certificates of employees, and equipment lists; and different tax identification numbers found in different documents of the same bidder.
According to the Asian Development Bank, the 163 contracts scrutinised by the chartered accountant’s firm were randomly chosen and were worth a total of $11.6 million.
In an appraisal document, written by the World Bank before it agreed to provide the government a loan of $300 million for this primary education programme, ‘fraud and corruption’ was considered to be one of three ‘key risks’.
The appraisal report stated that ‘certain systemic weaknesses in some aspects of the programme, such as delivery of stipends, contracts for books, hiring of teachers, and civil works expose the project to a risk of corruption and non-transparent or inefficient practices. Furthermore, enforcement of GOB‘s procurement regulatory system may not meet the needed level of governance and accountability.’
The report added that the Bangladesh government’s regulatory system would be ‘strengthened in line with internationally accepted procedures, and procurement capacity would be enhanced as needed, including through recruitment of procurement (and financial management) consultants.’
The programme is mainly funded by the government of Bangladesh, but the Asian Development Bank and the World Bank loaned the government $320 million and $300 million respectively, and the UK government gave $110 million, the European Union $55 million and the Canadian government $48 million, along with smaller amounts by other donors.
Rudi van Dael, senior social sector specialist, Bangladesh Resident Mission, Asian Development Bank, told New Age that it was currently discussing 15 of the contracts (valued at approximately $2.04 million) with the government. ‘As we are still in the midst of discussions, ADB is unable to provide any further details.’
He said, ‘ADB, World Bank and other development partners, in common with the ministry of primary and mass education, take a zero tolerance approach to fraud and corruption.’
The ADB does not explain why out of the report’s initial findings of 91 ‘corrupt’ procurement packages, it was only concerned with 15.
A spokesperson for the European Union Delegation told New Age, ‘We appreciate that several important initiatives have been taken by the government to strengthen and improve capacity in the area of procurement. We also appreciate that LGED analysed the findings from the reviews and took its own actions – firms involved in the collusive malpractice are blacklisted.’
The World Bank disputed that 91 contracts were ever in question, and told New Age that it had ‘zero tolerance’ to corruption. ‘The World Bank maintains due diligence to ensure that every dollar is spent for the purpose intended.
Donors point out that the education programme has ‘gone a long way to improving the quality and reach of primary education in Bangladesh, which will, in turn, support longer-term economic and social development.’

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