Colombo Telegraph

Investor Confidence At Risk: Ministers Ignore President’s Procurement Appeals Board Directives

Strong concern is being expressed by foreign missions, overseas investors, and local contractors over a clear breakdown of Sri Lanka’s Procurement Appeals Process for large scale, Cabinet level Procurements related to Standing Cabinet Appointed Procurement Committees, (SCAPC), Cabinet Appointed Procurement Committees (CAPC) and Cabinet Appointed Negotiating Committees (CANC).

Mahinda Samarasinghe

According to sources one of India’s largest port operations and marine services companies, Ocean Sparkle Ltd (OSL), had last week made representations to the government and to the Indian High Commission in Sri Lanka itself about their disappointment over the Appeals process and its outcomes.

OSL, backed by reputed equity investors like IFC Washington, Standard Chartered and Kaup Capital, owns and operates one of the largest fleets of harbour crafts in India and overseas — over 100, comprising mainly tug boats, PSVs, pilot boats, mooring boats, dredgers and barges.  It has operations in all 12 major ports in India (including JNPT, Mumbai Port, Tuticorin, Ennore, Chennai, Goa etc.) as well as commercial and private ports.  OSL provides comprehensive port Operations and Management Services in three of India’s four LNG terminals and is Petronet’s service provider in Kochi and Dahej.

OSL had provided specialised harbour towage services at Colombo Port between 2010 and 2016 and had recently taken part in a tender for charter hire of tug boats for another period of three years. “Their bid was the lowest cost, most responsive bid amongst the three bids that were received. OSL were also the only bidder to have firsthand knowledge and experience of operating at Colombo Port. However, their bid was rejected saying OSL had not met some procedural criteria and they appealed against that decision to the Procurement Appeals Board (PAB),” a source close to the PAB appeal process for OSL said.

OSL engaged President’s Counsel Sanjeeva Jayawardena, who filed a written submission with the PAB in support of OSL’s appeal. Through Mr. Jayawardena’s submissions and the subsequent PAB hearing, OSL strived to prove that they were the lowest evaluated substantially responsive bidder and that the procedural criteria that were given as the reasons for the bid being rejected, were not even requirements to be satisfied by any bidder at the time of bid submission. “Based on the documentation they provided and their own documentation, the Technical Evaluation Committee (TEC) and the CANC both agreed that OSL were the lowest cost bidder and the most responsive other than for the procedural issues that were then dealt with at the PAB hearing. They not only agreed once, but on three separate occasions as the record will show,” the source, who requested anonymity, said.

The PAB had decided the CANC erred in rejecting the OSL bid on the procedural matters that dealt with whether or not at the time of bid submission, a 100 percent, wholly owned subsidiary of OSL, registered in Sri Lanka to satisfy another criteria that said the tub boats must be Sri Lankan flagged, must undertake in a ‘letter of intent’ to enter into a joint venture agreement with the parent company OSL.


The PAB had conveyed their decision to the Secretary to the Ministry of Ports and Shipping, L.P. Jayampathy with a copy to the cabinet office as mandated by the Procurement Guidelines.

According to sources from the Ministry of Ports and Shipping, the PAB decision has been ignored by the Secretary and a cabinet memorandum was drafted to show that the PAB itself had erred in deciding which bid was the lowest bid.  “This was never in contention with both the TEC and CANC agreeing at the hearing that the bid submitted by OSL was the lowest. Therefore, PAB had no role in deciding which bid was the lowest. The PAB simply restated the amounts that were agreed to by both the TEC and the CANC at the hearing and gave their opinion that the procedural issues raised by the CANC as factors for disqualification were not applicable,” a ministry source indicated.

The draft cabinet memorandum alleging that the PAB had erred in their decision and standing by the original decision to award the bid to Sri Lanka Shipping Company, a subsidiary of Hayleys, whose majority shares are held by magnate Dhammika Perera, had been sent by Secretary, Jayampathy to the Ministry of Finance for observations.  However, Ministry of Finance officials had noted that the PAB decision was not attached to the memorandum and had requested Jayampathy to forward the same on Thursday, 26 July, before observations can be made before the memorandum being sent to the cabinet.

According to the National Procurement Commission’s most recent guidelines on the appeal process, the Procurement Appeals Board (PAB) appointed for Cabinet level procurement operations is an independent body directly reporting to the Cabinet of Ministers with their decisions and deliberations copied to the Secretary to the Line Ministry(SLM) in the event any cabinet level procurement is disputed or appealed against. The current PAB operates out of the Presidential Secretariat.

“In effect, the PAB is akin to the Appeals Court where there is no legal authority other than the Cabinet of Ministers who can change a decision made by the PAB. The cabinet is also supposed to challenge PAB decisions only on national interest issues and procedural grounds involving the decision itself,” a procurement specialist told. “A breakdown in this process where decisions made by the PAB are subverted without the cabinet being appraised of the true facts of the case is causing a huge loss of credibility to the governance processes of this beleaguered nation,” the specialist, who prefers anonymity, said.

This is not the only such case where PAB decisions had been ignored by line ministries. “Despite a presidential directive and a cabinet subcommittee directing the Petroleum ministry to take immediate action to repair and rehabilitate the dilapidated pipelines carrying petroleum products from the Colombo Port to the refinery and storage facilities in Kolonnawa, the Petroleum Ministry also ignored a PAB directive to award long extended tender to repair the pipeline to the lowest bidder or to cancel and recall a limited tender with only the technically qualified bidders from the previous tender allowed to participate. It has been more than four months now since the PAB decision was copied to the Secretary to the Ministry of Petroleum Resources, Upali Marasinghe, but there is a deafening silence from the Ministry,” the procurement specialist told. (for more on the pipeline tender click here)

Prior to his retirement earlier this month, former Secretary to the President, Austin Fernando, confirmed that the decision of the PAB regarding the pipeline tender had been conveyed to Secretary Marasinghe. “We have done our work and conveyed the decision. I believe the PAB requested the tender to be cancelled and recalled, but I don’t have full details on hand,” Fernando told. Fernando confirmed that the decision had been conveyed in April itself.

According to highly placed sources, Marasinghe is handicapped in carrying out the PAB decision as political interference in the tender process is strong. “It appears that political pressure is being applied now to provide housing for the people who are illegally occupying the land area through which this pipeline runs. The tender envisaged tunnelling underneath the land without disturbing the dwellings above, but now this has become a political project to provide housing and get votes,” a source indicated. ( By Gayatree Goonaratne) 

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