‘Irregular’

The Cabinet last year approved a $15-billion emergency contract to a Chinese firm for the Cornwall Regional Hospital (CRH) rehabilitation project despite Jamaica’s chief procurement agency saying the health ministry led an “irregular” process.

But the ministry has strongly rejected the Public Procurement Commission’s (PPC) assertion, insisting that the contract to ZDA Construction Limited was awarded in accordance with the country’s procurement laws and guidelines.

The concerns link the ministry allegedly bypassing the PPC to get Cabinet’s approval to enter into direct contracting. That method meant that the multibillion-dollar contract was not subject to a competitive process.

There are also questions of why the ministry later asked the PPC for its endorsement on a process already approved by the Cabinet, and why the Cabinet did not get the PPC’s position first, as it did in many previous cases.

It is the latest development in the saga of the restoration of the primary healthcare facility in western Jamaica. It started in 2016 with concerns about noxious fumes, followed by the relocation of services, shifting deadlines, ballooning budgets, and problems with contractors.

The PPC has declined to answer Sunday Gleaner questions on the matter and instead directed our news team to the health ministry, whose responses confirmed findings that there was a serious rift between the two entities over one of the largest public infrastructure contracts undertaken in years.

Pressed whether it was the best-placed institution to pronounce whether the procurement was in line with the law, the PPC insisted that: “The public entities who received our service would be better able to advise on that matter.”

The PPC angered ministry officials and ministers in the administration over its conclusion that the process was “irregular” in declining to give its endorsement, according to information obtained by The Sunday Gleaner.

Cabinet gave its authorisation on November 8, 2021 and the ministry made its first submission to the PPC on June 23, 2023.

On July 27, the PPC told the ministry that it was constrained from giving a ruling and referred the ministry back to Cabinet.

Four days later, the Cabinet reviewed the ministry’s submission, which included the PPC’s letter, and approved the award of the contract to ZDA for phase three of the project, according to a ministry chronology of the events.

One of the PPC’s problems was the ministry’s choice of emergency contracting and why the contract took more than two years to be awarded.

Under the Public Procurement Act (PPA), in instances such as this, procuring entities must go through various approval levels based on the monetary size of the contract.

The ZDA contract exceeds $60 million and falls under tier three, which, according to Section 43 of the PPA, the procuring entity “shall not award … without the prior approval of the head of the procuring entity, the commission, and the Cabinet”.

Section 25 of the PPA allows for direct contracting or single-source procurement, where an entity can shed competition and select a contractor for a variety of reasons. These include issues of national security and where the situation is an emergency and any other method “would be impractical because of the time involved … ”.

Volume two of the Government’s Handbook of Public Sector Procurement Procedures outlines further guidelines for contracting under emergency circumstances such as where “the national interest and/or national security considerations demand that the procurement be undertaken immediately”.

“The need for such procurement must be sudden, unexpected and a pressing necessity or exigency. … Where the contractor is based overseas or is not registered, the procuring entity shall refer the matter to the National Contracts’ Commission (NCC) for approval.” it added. The PPC replaced the NCC.

The handbook says the head of the procuring entity has the authority to award emergency contracts valued at up to $100 million. Any additional expenditure must be approved by the PPC and the Cabinet.

Emergency contracts above $5 million “shall be reported” to the PPC within the month the award was made, along with the justification, according to the rules.

The health ministry acknowledged that it did not consult the PPC before starting negotiations with ZDA, and pointed to Section 11 of the PPA when questioned.

That section deals with the functions of PPC, none of which includes entities being mandated to consult it before entering into negotiations.

The ministry rested its justification for the use of emergency contracting on the Cornwall Regional Hospital project being a “national interest investment whose delays have resulted in a significant impact to not only the health system but to the business interest in the western region”.

“The hospital serves and supports one of the major industries on the island, [that is] tourism. The continued lack of full capacity in the facility is negatively impacting the market value of the tourism product,” added the ministry in response to Sunday Gleaner questions on January 11.

It also argued that as one of three hospitals with the highest grade in Jamaica, its diminished capacity “compromises” the Sangster International Airport, whose status “could result in a downgrade of the facility that could impact international travel”. There were also concerns about hardships on staff and increasing costs.

Pre-qualified firms

In terms of the selection of ZDA, the ministry gave four reasons for recommending direct contracting.

It said the firm was one of three that pre-qualified and “had met the requirements of the selection process and that the Chinese government has mobilised for construction of the Western Children and Adolescents Hospital, which is on the same premises as the CRH.

“There are synergies that can be achieved with the operation of two Chinese-based firms on the same work site that could reduce costs and possibly the time efforts for operation,” the ministry explained.

The other two reasons were that of the three pre-qualified firms, ZDA “has the track record of completing projects on time and within budget which is a desired outcome at this point in the project implementation”.

It also said ZDA is a large international firm with significant projects in the region and “is the only firm that has conducted hospital building projects”, including the medical school at The University of the West Indies, Mona.

The head of the procuring entity in this case is the health ministry’s permanent secretary, Dunstan Bryan.

Although he has the authority to determine emergency procurement, the ministry said that based on the nature, complexity, and size of the contract, as well as the fact that the was of “national interest”, it was of the view that such a determination “necessitated the concurrence of Cabinet” to Bryan’s decision.

It also said the Cabinet’s decision pointed “to the need to adhere to the existing process in the specified sections of the handbook” and a directive for negotiations to be done before a “possible” award of contract.

“The ministry at no time interpreted our submission to Cabinet as a possible stricture on the due considerations of the PPC and we do not see the concurrence of the Cabinet on the determination of a policy conclusion such as “national interest’ as irregular,” the ministry said.

A crucial way in which Cabinet usually gives special policy consideration to projects of national interest is through a declaration that is affirmed in Parliament.

This happened in the case with the Montego Bay perimeter road project.

The designation means the aspects of the procurement can bypass the PPC and other normal legal requirements.

The Government did not make any such declaration in the case of the Cornwall Regional Hospital project, although Prime Minister Andrew Holness has spoken of the urgency of getting the hospital back into full operation.

As to why it sought the PPC’s opinion on the process long after getting Cabinet’s green light for negotiations, the ministry said: “One request was for the approval for use of direct contracting and emergency procurement. The second submission was for the approval of the award of the contract.”

Quizzed further on whether Cabinet queried the PPC’s opinion, the ministry said the PPC’s letter “was appended to the Cabinet submission and included in the body of the document as well”.

Questions submitted to Cabinet were not responded to up to press time.

Regarding doubts raised by the PPC about near two years it took for the contract to be awarded and whether emergency procurement was proper, the ministry said it did not agree with how the commission calculated the time.

The ministry said it started to count the time when the request for proposal (RFP) was issued to ZDA in August 2022 and not from when Cabinet gave its authorisation in November 2021.

The processing time, it said, for “this level of complex procurement action” within the ordinary competitive environment between the RFP launch and the award of the contract is 24 to 30 months.

“In this instance, however, between the RFP launch and the recommendation for award of contact, the process was 12 months. Comparatively, therefore, a time saving of 12-18 months has been realised by using the single source approach,” the ministry argued.

“This in our opinion represents real value in the existing instance of the emergency as it has been defined and validates the use of the method.”

In December 2020, Health and Wellness Minister Dr Christopher Tufton blamed the lack of local expertise for the missed deadlines to deliver the rehabilitated hospital. At the time, he signalled that his ministry would look overseas for help.

“Too many recalibrations and too many re-evaluations, too many variations, and I believe it is substantially a function of inexperience,” he said, although he sought to assure that he was not labelling Jamaican contractors and project managers as inefficient or incompetent.

“I am suggesting that they have had very little [experience], if any at all, in hospital buildout, and we have paid the price for that at Cornwall,” Tufton said at a Gleaner Editors’ Forum in St James, where the hospital is located.

‘Messy project’

However, the Jamaica Institution of Engineers and other construction stakeholders slammed the minister as misguided, with one expert deeming Cornwall Regional “a messy, messy project” that had all the hallmarks of bad planning and cavalier spending.

Cornwall Regional’s scope of work, initially centred on a heating, ventilation, and air-conditioning system on the first floor, but snowballed into a mass of mechanical, electrical, and plumbing renovations.

ZDA took over from M&M Jamaica engineering firm.

In 2018, the ministry had also hired APEC Consultants Limited to establish a programme management office for the project under a $147-million two-year contract.

Current PPC Chairman Raymond McIntyre is a director and shareholder of APEC.

The commission said Saturday that he recused himself from deliberations involving the ZDA contract issues.

“The Public Procurement Commission observes typical standards of governance concerning matters in which members of the PPC are interested. When such matters arise for consideration interested parties leave the room,” it added.

jovan.johnson@gleanerjm.com