Reserve Bank of Malawi loses ICT procurement case, Court orders re-tender

Judge Kenyatta Nyirenda has ordered the Central Bank in Malawi to nullify the award for the supply and delivery of ICT hardware for Flexcube Upgrade and ICT hardware for Automated Transfer System which was awarded to Market Insights Tracking (Mitra) Systems Limited on 16 November, 2020.

The Central Bank is known as known as Reserve Bank of Malawi (RBM) resisted the cancellation wasting taxpayers billions, a matter which was also reported to Anti-Corruption Bureau (ACB) to identify the officials behind the mis-procurement that has corruption fingerprints all over.

In his ruling made on 23rd August 2021 under civil case 13 of 2021, Judge Nyirenda has also ordered RBM to pay costs for the case which started when it challenged the decision by Public Procurement and Disposal of Assets Authority (PPDA) to have the bids retendered after finding irregularities in the procurement process.

This follows a Court Ruling on 19th July, 2021 which ordered RBM to produce and disclose a Forensic Audit Report which was prepared for the claimant by Deloitte, an Audit and Advisory Firm, after 1st Interested Party, Sparc Systems requested for its disclosure in their supplementary sworn statement to the court.

According to Judge Nyirenda, the report faulted the Claimant, RBM on how it handled the Procurement process, which was deliberately done to favour Mitra Systems Limited.

“The said Report, which examined several transactions involving the Claimant, severely faulted the Claimant in the manner in which it handled the procurement proceedings under challenge. There is now produced to me and exhibited hereto marked C-WP5 a copy of the forensic audit Report as disclosed by the Defendant.”

“It is clear from the findings of the forensic audit Report related to the procurement proceedings under challenge, which appears on pages 20 – 29, that the procurement proceedings in issue were marred by serious irregularities which were deliberately calculated to favour the 2nd Interested Party and to penalize the 1st Interested Party.”

“It is also clear that in these proceedings, the Claimant has had no credible or legitimate basis to contest the Decision of the Defendant.”

“I invite the Court to take into account the unreasonable conduct of the Claimant in defending what is clearly indefensible and in seeking to uphold that which is clearly irregular in considering the question of costs of these proceedings.”

“I pray, therefore, that not only should the application be dismissed but that the dismissal should be with costs on an indemnity basis,” reads part of the sworn statement by Sparc Systems Limited Managing Director, Wisely Phiri.

And after reading sworn statements from the interested parties, Judge Nyirenda has upheld the decision by PPDA to have the bids retendered. The Court has also nullified the award of the 3rd lot to Mitra, a decision which will now see all the lots being retendered.

“The Claimant must re-tender both contracts, that is, the contract for the supply and delivery of Lot 1, Lot 2 and Lot 3 of the ICT Equipment for ATS (Procurement reference number RBM/ICT/008/20) and the contract for the supply and delivery of ICT Equipment for Flexicube Upgrade (Procurement reference number RBM/ICT/007/20),” reads part of Judge Nyirenda’ ruling.

Judge Nyirenda was also amused with how RBM awarded Mitra Systems Limited the contracts when it was agreed that one of the requirements was to operate for more than five years.

“By way of illustration, in the present case the Claimant had stated that the bidder should have at least 5 years’ experience. As such, the purpose or goal of preliminary screening exercise would have been to confirm if the bidders met this requirement.”

“A bidder having less than the stipulated experience had to be disqualified at this stage. This is clear from regulation 132 of the Regulations as read with Desk Instruction 13: General Evaluation Procedures For Goods, Works And Routine Services.

“The upshot of this is that the 2nd Interested Party should have been disqualified at the preliminary screening stage because it did not have the requisite experience, that is, 5 years in supplying office machines.”

“There should have been no need therefore, to engage in a detailed evaluation of its bids. The Defendant ignored its own qualification requirements and allowed an ineligible bidder to continue to participate in the procurement proceedings. This was not only grossly irregular but also a violation of the principles of fairness set out in the Act,” continued the ruling.

The ruling then turned down RBM’s request to award Mitra Systems the contracts, saying the decision cannot stand.

“Based on paragraph 57, the order by the Defendant that the Claimant should proceed with the recommendation to award to the 2nd Interested Party the contract relating to the supply and delivery of ATS Procurement reference number RBM/ICT/008/20 Lot 3 cannot stand.

“The award is, accordingly annulled. This means that all the Lots have to be re-tendered. I so order. On the authority of the decision of the Supreme Court of Appeal in Mutharika and another v. Chilima and another, Constitutional Appeal No. 1 of 2020, the re-tendering will only be open to the qualifying bidders which participated in the previous procurement proceedings. It is so ordered,” added Judge Nyirenda.

Furthermore, the Court has ordered RBM to involve independent evaluators for the retender and that all the future tenders should include electronic copies (CDs) in the submission to avoid any suspicion of tampering with documents.

Judge Nyirenda has also ruled that the bidding process in this case will only involve those that bid last time, adding that all bidders will cover their own costs.

“Bidding for the contracts to be re-tendered will only be open to the qualifying bidders which participated in the previous procurement proceedings.”

“Each party to the administrative review proceedings that took place before the Defendant will bear its own costs and there will be no refunds for the cancelled procurement process to any of the bidders,” reads the ruling.

The whole legal battle started when RBM awarded the controversial contracts to Mitra Systems Limited despite not meeting bidding requirements, which one of them being operating for a minimum of five years.

The decision forced Sparc Systems Limited to lodge a complaint to the PPDA which then ordered the Central Bank to re-tender the bids which was awarded to Mitra Systems Limited.

This did not go well with the Central Bank which took the issue to the High Court suing Sparc Systems Limited in a bid to convince the Court to still go ahead to award the said ICT company the controversial contracts.

But this was rejected by Judge Nyirenda who faulted RBM for wrongly naming Sparc Systems Limited as defendant instead of PPDA which had ordered it to re-tender, saying Sparcs Systems Limited was an interested party in the whole saga.

Sparcs Systems Limited had faulted RBM for flouting its own set of rules, which among others, included a requirement of a 5-year experience in supply of ICT equipment.

The company which was awarded the contracts had a two-year experience, contrary to the set of rules that were placed in the bidding process. The Central Bank had defended the decision by claiming that they have known individuals behind Mitra and that these had Mitra met the 5 years requirements.

RBM also argued that Sparcs Systems Limited failed to submit Manufacturer Authorization from Dell, an accusation which was turned down by the company which went ahead to show the review committee that it had matched the requirements to all the criteria including the Manufacturer Authorizations and technical details as requested in the bidding process.

Sparc also refuted RBM claim that the company had only one traceable reference in the bidding document which the Bank showed as a basis of disqualification. The company said it has more experience and references not only in Malawi but across Africa as shown in its bidding document and company profile submitted to RBM.

The Malawian ICT service providers then went ahead to accuse the Bank of not following the procedure at bid opening by failing to go through the bid opening checklist to verify if the requested information was available in the bids, a normal trend that ensured the availability of Manufacturer’ Authorization, bid security and bid validity period are checked and verified in the presence of representatives.

And when Sparc Systems Limited brought these accusations against RBM to the PPDA review committee which then ordered the Central Bank to render, the Bank rushed to the Court to obtain a stay of the enforcement of the decision by PPDA, questioning the committee’s legal powers and also accusing the committee of not providing enough reasons for its decision and also adding that the equipment was needed urgently for the running of critical systems for the Bank.

The ruling means its back to square one for RBM will start all over again.

This is a milestone for Sparc Systems Limited which suspected a foul play in the whole process of awarding the contracts to Mitra Systems Limited.

Its also a milestone to procurement laws as most of the cases are not brought to the logical conclusions and are often sorted out of court.

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