This press release outlines a high profile case where the previous SHG procurement process failed, resulting in a ‘write off’ of the acquired asset. The procurement in question relates to the Asphalt Plant which has been the subject of much concern in the recent past. Losing money through mistakes is painful but in the round, lessons have been learnt and SHG’s approach to procurement has improved.
New Procurement Regulations developed with the help of TC funding have been approved by the Governor and came into effect on 12 July 2013. These will ensure appropriate measures to mitigate the risks associated with procurement, thus minimising any such waste of resources in the future. The Plant arrived on Island in April 2011 at a total landed cost of £116,119 and in June 2011, engineers from the manufacturer arrived to assemble the Plant and make it ready for use. However, due to vital missing parts, and serious safety issues associated with the different component parts, the engineers were unable to commission the Plant. These issues were raised with the supplier and some of the costs were recovered (around £11,000), with SHG retaining ownership of the Plant. In a report to the Public Accounts Committee in January 2012, the then Director of Infrastructure and Utilities stated that: “the risk of danger to operatives still remains.” And that “concerns about the safe operation of the plant still remain and any sale of the whole plant would have to be to someone who had the knowledge and capability to make it safe before operating the plant.”
Regrettably therefore, SHG has concluded that the Asphalt Plant is not fit for purpose or safe and that it will not be cost effective to take any remedial action when there is no guarantee that the Plant can be made operable or safe. Whilst suggestions have been made as to possible sale of the Plant, it would be irresponsible of SHG to pass on any liability to a third party. Clearly all of this results in a significant loss of public funds emanating from inefficient procurement procedures and poor judgement on the part of officers (no longer with SHG) who failed to undertake the necessary checks before procuring the Plant. However, with the introduction of new Procurement Regulations, SHG now have more robust processes and procedures for officers to follow which should prevent future occurrences of this nature.
The main features of the new procurement system are:
A major shift in focus from the value of the procurement to the risk associated with that procurement
Credit checking facilities which must be used for all international suppliers
More scrutiny of the upfront procurement processes where medium and high risk procurements must be authorised by the new Procurement Board The Procurement Board will oversee contract specifications to ensure fitness for purpose
No payment can be made up front, unless specifically authorised by the Financial Secretary
Clear guidance on the advertising and tender processes, ensuring fair and transparent procurement
Medium to high risk procurements will be carried out by procurement services, who have the professional expertise and who will exercise due diligence
Prior to delivery to St Helena, there will be scrutiny by a relevant qualified professional to ensure goods and services for delivery are in accordance with the agreed specification and are fit for purpose
More focus on these controls prior to the commencement of the procurement process. Compliance with these new Procurement Regulations is compulsory, regardless of the size or timing of a project. If steps are waived or modified, supporting evidence must be provided to the Procurement Board.
SHG will now publish all waivers from the new Regulations. SHG apologises to the public for this failed procurement and significant loss of public funds, and in so doing, assures the public that systems and processes are now in place to prevent this happening again.
20 September 2013