The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government can slash its procurement costs by up to 10 percent through meeting global standards, it was revealed yesterday, as a further $52.362m in contract awards were disclosed.

The Inter-American Development Bank (IDB), in a document unveiled yesterday, warned that The Bahamas has much work left to fully reap the Public Procurement Act’s potential benefit of greater taxpayer “value for money” from the Government’s annual purchases of goods and services.

With public procurement costs estimated at equal to 8 percent of The Bahamas’ economic output (GDP), the savings range identified by the IDB would exceed more than $100m annually if the Government’s processes and practices were raised in line with global best practices.

The multilateral lender said attaining this benchmark would “conservatively” cut the Government’s yearly goods and services costs by between 5-10 percent. Based on the $13.247bn GDP estimate for the 2024-2025 fiscal year, the IDB’s 8 percent public procurement percentage would amount to a total $1.059bn. A 10 percent cut to that latter figure would translate into a near-$106m saving for Bahamian taxpayers.

The IDB’s projections coincided with yesterday’s release by the Ministry of Finance of a further 277 contract awards, totalling a combined $52.362m, that were made through the Government’s Go Bonfire electronic procurement portal over the six-month period between December 2023 and May 2024.

While highly unlikely to have captured all government contracts issued, given that few of those listed were for multi-million dollar sums, the release of May 2024 data especially brings the Government closer to hitting the 60-day post-contract award deadline for releasing information on the bid winners as legally mandated by the Public Procurement Act 2023. 

However, full compliance with the revised legislation enacted by the Davis administration itself remains a work in progress. The Government has seemingly not met the Act’s stipulation to publish an annual report on all procurement awards for the 12 months prior to April 1, and lay it in the House of Assembly during “the first sitting.... after the laying of the Budget in the month of July”.

The IDB report yesterday acknowledged that much remains to be to done to build the necessary capacity within government ministries, agencies, state-owned enterprises (SOEs) and other institutions to give full effect and implementation to the Public Procurement Act.

“The Government of The Bahamas has embarked on a major public procurement reform programme, which includes the development of a new Procurement Act. This Act is important as it will help ensure that the Government will obtain goods and services at the best value for taxpayer money, promote competition and result in higher transparency and accountability,” the IDB reiterated. 

“However, the Act being passed does not guarantee its success, and is only one step in the modernisation and reform process. In order to successfully implement this Act, the Government will need to develop procurement regulations, manuals and standard bidding documents to accompany the law. These tools will help the procuring units to adhere to the new legal and regulatory environment correctly and effectively.”

While the public sector’s consumption of goods and services, together with public works activities, typically averages around 4.7 percent of GDP in the Latin American and Caribbean region, the IDB said this percentage is near double for The Bahamas at around 8 percent. This highlights the relative importance of the role the Government plays in the economy, with this reliance higher in The Bahamas.

“Public procurement is a major area where governments in the region are striving to improve effectiveness in the delivery of public services and, at the same time, to serve them efficiently according to their national budgets,” the IDB said.

“In the case of The Bahamas, public procurement accounts for approximately 8 percent of GDP. Despite this importance in the economy, and recent advances in the legal and regulatory environment, there are still areas which need to be addressed, including gaps in the organisational structure of the procurement unit and processes for warehouse management as well as manuals to support staff in the implementation of the new legislation.”

As a result, the IDB is initiating a $100,000 ‘technical co-operation’ initiative to tackle these issues at the Government’s request. “This will help address the above-mentioned gaps by supporting the country with the tools and capacity needed to be in line with a modern and sustainable procurement system,” it added.

“Bringing the country up to international standards should result in short and longer-term benefits including costs savings in purchases - both purchase price and transaction costs - that could conservatively reach 5-10 percent of spending. In addition, it will strengthen national capacity for leveraging the purchasing power of the Government to drive positive social and environmental impacts.”

The Government has already touted the savings generated by the Go Bonfire electronic procurement portal, which was facilitating competitive bidding processes that keep vendor costs/pricing keen and ensure the most qualified wins.

Leon Lundy, minister of state in the Prime Minister’s Office, said data provided by the Go Bonfire platform showed that it was delivering “tangible benefits” including savings of $16.5m to Bahamian taxpayers on contract awards through May 2024. Some 6,377 vendors were registered with the portal through which some 4,177 bids, tenders and procurement opportunities have been offered.

The IDB’s assistance was requested and approved by the Government more than 12 months ago. Simon Wilson, the Ministry of Finance’s financial secretary, in a May 31, 2023, letter to Daniela Carrera-Marquis, the bank’s Bahamas country representative, set out what was needed.

“The bank’s assistance is requested to develop a public procurement certification/diploma programme that will provide the capacity needed to bring the country in line with international best practices and ensure that the Public Procurement Department can effectively manage the changes associated with the new Act,” Mr Wilson wrote.

“In addition, the technical assistance would include support for the legal and regulatory framework - any updating of regulations, manuals and standard bidding documents needed for the new law - and awareness and dissemination to build support for the reforms.”

Yesterday’s contracts data release almost certainly did not include every award made between December 2023 and May 2024, as the highest individual sum noted was $2.82m granted to Knowles Construction and Development Company by the Department of Public Works.

Among awards that caught the eye were two at the top of the list for the December 2023 to February 2024 period. Naming the Attorney General’s Office as the “procuring entity”, the entries showed that some $7,006.25 was spent with Baha Mar’s Grand Hyatt resort for an “end of the year staff party”. The next entry then said $19,519 was spent with SuperClubs Breezes for an “OAG New Year party”.

Indications that not all contract awards were captured, with only those awarded via the Go Bonfire e-procurement portal released, come from the fact that over the half-year period the highest monthly combined issuance by the Department of Public Works was $6.658m even though the Ministry of Works’ capital spending budget was set at $104.495m.

Tribune Business previously reported that the total value of contracts awarded for the 13 months from September 1, 2022, to end-September 2023, was $158.477m, but not all agencies, ministries and departments were included in the list or that figure. Yesterday’s figure takes the total value of contract awards disclosed to more than $210m, but none appear to have been released for October and November 2023.

The original Public Procurement Act, which came into effect on September 1, 2021, but was since repealed and replaced, required from that moment on that all government contracts be disclosed within 60 days of their issuance. The Government was supposed to disclose the name and address of winning bidders, the procuring entity, the procurement selection method and the value of the contract.

The revised Public Procurement Act took effect on July 1 last year. The Government’s release of contracts awarded via the Go Bonfire portal provides the value of the awards, identifies the procuring entity and procurement method, plus the winning bidder. It initially provided no address for the latter, but yesterday’s disclosures now do so.

The Government has frequently come under attack from Michael Pintard, leader of the Opposition, and other members of the Free National Movement (FNM) who have accused it of deliberately failing to comply with the Public Procurement Act and especially its provisions demanding greater disclosures, openness and transparency around the awarding of government contracts.

But Michael Halkitis, minister of economic affairs, late last year asserted there was “never any sort of desire or intention to circumvent” the Public Procurement Act’s requirements as he blamed any non-compliance on the need to put in place supporting infrastructure.

He added that the Davis administration has had to ensure public officials are fully trained and equipped to implement the Act’s legally-mandated requirements. It has also had to appoint a chief procurement officer, and implement the necessary software.