By Wondwossen Mezlekia
March 19, 2012
The
Ethiopian Federal Ethics and Anti-corruption Commission’s annual report presented
to the Parliament in May 2011 added Ethiopia Commodity Exchange (ECX) to the
list of institutions whose practices are open for corruption, without
disclosing what impelled the Commission to review ECX's working procedures and
practices. [1] Curiously, what the Commission avoided
mentioning is the purported scandal involving an international procurement
worth 4,855,800 USD or 84,102,456 Ethiopian Birr, which
led the World Bank to cancel the loan it had previously granted. In so doing,
the Commission is apparently giving ECX a slap on the wrist for a serious
allegation that warrants nothing short of a full and in depth investigation.
In 2009, the
International Development Association (IDA) approved the government's request
to funnel part of the money it borrowed for the purpose of financing the Rural
Capacity Building project to ECX, and the latter floated an international
Invitation for Bids (IFB) Number ECX/ICB/02/2009/01 for the supply, installation, and maintenance
of a commodity exchange software. After a lengthy and messy process, ECX
eventually awarded the contract to a Sri Lanka based company called Millennium IT.
Before the signing of the contract, however, the World Bank rejected the
contract award proposal and cancelled the loan due to alleged fraud and
corruption during the bidding process.
According to the World Bank's Guidelines, a proposal for award will be rejected when
the Bank determines that the recommended bidder
has "engaged in corrupt, fraudulent, collusive, coercive or
obstructive practices in competing for the contract in question". When the
Bank determines that the representatives of the Borrower of the loan were engaged in similar corrupt practices
during the procurement of the contract, however, the Bank will entirely cancel
the portion of the loan allocated to that contract. [2]
The Bank's
decision along
with other supporting documents pertaining to the allegation, a copy of which
has been examined for this report, were forwarded to the Prime Minister's
office in late December 2010, but there has been no formal investigation to
date.
The Anti-corruption Commission, which is accountable to Prime Minister Meles Zenawi, is
discernibly influenced by ruling party politics and mostly known for its
notorious travesty in applying the anti-corruption law to punish individuals
who are perceived as threats to the tightly knit group of trusted associates or
businesses of the ruling party and deride into submission others who are deemed
essential. If the government was really serious about fighting corruption, and
if the purpose of including ECX in the Commission's report was truly meant to
mitigate corruption, it would have investigated the allegedly fraudulent and
corrupt bidding process that led the WB to cancel the loan.
Alleged fraud and corruption at ECX
It may be difficult to know exactly
which bidder should have won the contract without a thorough and complete
investigation of the bid evaluation, but it is quite apparent from the dossier that
the proclaimed winner, Millennium IT,
could not have won the award had it not been for an act or omission “that
knowingly or recklessly misleads, or attempts to mislead, a party to obtain a
financial or other benefit or to avoid an obligation." [3]
The World Bank's Guidelines, which ECX
was supposed to observe throughout the tender, states that "the Borrower
shall award the contract, within the period of the validity of bids, to the
bidder who meets the appropriate standards of capability and resources and
whose bid has been determined (i) to be substantially responsive to the bidding
documents and (ii) to offer the lowest evaluated cost." [4]
By this standard, Millennium IT's bid was neither "substantially
responsive" nor did it "offer the lowest evaluated cost". First, Millennium IT's bid was not "substantially responsive"
as defined in the bid document in that the bid security expiry date was shorter
than required. According to sections ITB 17.1 and ITB 18.1 of the bid document,
bids need to be secured by a bid
security of ETB 400,000, or the equivalent in a freely convertible currency. The
document also stipulates that "a bid security that expires ahead of the
148 days after the date of bid opening shall be rejected as non-responsive."
In other words, since the bid opening date was July 12, 2010, the bid security guarantee
should be valid through December 7, 2010. Millennium IT's bid security was due
to expire a month earlier on October 9, 2010, but it somehow emerged out as the
declared winner any way. Second, Millennium IT's bid price was
the highest at USD 3,585,105 at opening. At the conclusion
of the evaluation, ECX further bumped
up the price to USD 4,855,800 – a
mysterious increase of USD 1,270,695.
Bidder
|
Price
at opening
|
Bid
Security
|
Validity
|
Decision/Evaluated
Price
|
CMA Small Business Systems
|
USD 2,451,712
|
EUR 24,000
|
As per requirement
|
Substantially non-responsive
|
Copycat Limited and Financial
Tech.
|
USD 11,326,498 (ETB 2,000,000)
|
USD 40,000
|
Dec 7, 2010
|
Substantially non-responsive [ECX
didn't seek clarification for price discrepancy]
|
FZCO
|
USD 1,997,300
|
USD 32,000
|
Oct 29, 2010
|
Substantially non-responsive
|
INFOTECH
|
USD 1,817,086
|
USD 30,000
|
Nov 30, 2010
|
Substantially non-responsive
|
Millennium IT
|
USD 3,585,105
|
ETB 400,000
|
Oct 9, 2010
|
Winner/ USD 4,855,800
|
Securities and Trading
Technologies (STT)
|
USD 2,000,000
|
USD 30,000
|
Jan 6, 2011
|
Substantially non-responsive
|
For a Commission that is guided by Article 403 of the
Criminal Code which presumes that "a crime of corruption to have been
committed with intent to obtain for oneself or to procure for another an undue
advantage or to injure the right or interest of a third person," based
solely on the act and until proven otherwise, ignoring the dossier which
contains the details of the transgression is negligent and highly suspicious.[5]
At the very least, the email exchanges – or lack thereof – between ECX and the bidders reveal a series of
blunders and cover up attempts that should alarm the authorities. For example, soon after the award notification awarding the contract
to Millennium IT was posted on dgMarket on November 21, 2010, Securities and
Trading Technologies (STT) sent the following complaint to Dr. Eleni Gabre-Madhin,
Chief Executive Officer, and Solomon Edossa, Chief Information Officer:
From: /////////
Sent: 22 November
2010 09:22 AM
To: 'Eleni
Gabre-Madhin'
Cc: 'Solomon Edossa'
Subject: COMPLAINT
Good
morning Eleni ,
I
have a complaint regarding your tender award, the first is the amount specified
in
the award under STT is incorrect, STT put in a bid of $ 2 million and not $ 20
million.
(see your sheet from tender opening )
Secondly
I would like to know how Millennium received the award when in fact
they
should have been disqualified on the fact that the guarantee validity did not
meet
the RFP requirement as set down by the World Bank. (see your sheet from
tender
opening )
I
look forward to your response.
Regards
////// //
ECX did not respond
or extend the courtesy of acknowledging receipt of the complaint. Instead, alerted
by STT's email of what appears to be an oversight, ECX removed the award
notification off dgMarket and sent out a new
email to all bidders requesting an extension of the guarantee validity date for a tender whose
winner was predetermined:
From: procurement [mailto:procurement@ecx.com.et]
Sent: 22 November
2010 03:23 PM
To: Undisclosed
recipients:
Subject: ECX
Commodity Exchange Software Bid (IFB No: ECX/ICB/02/2009) - Bid
Security Extension
request due on Nov 29, 2010
Greetings,
We
are in the process of finalizing the bid evaluation for an eventual award of
the
contract
to the lowest evaluated bidder. Therefore, we kindly request that you
extend
the bid validity date up to December 31, 2010. Please submit the original
copy
of the bid security document to the following address by November 29, 2010:
Ethiopia
Commodity Exchange
Attn:
Mr. Solomon Edossa
Office
of the Chief Information Officer
Alsam
Chelelek Tower 2, 3rd floor
Mexico
Square
Addis
Ababa, Ethiopia
Telephone
- +251 011/////////
Procurement@ecx.com.et
Please
acknowledge receipt of this email and your intent to comply with this
request.
Thank
you.
As remarkable as it is to ask bidders
to throw good money after sunk costs, it is apparent that the ultimate winner
would still be Millennium IT even if all the bidders had somehow agreed to
extend the bid validity date as requested. As can be expected, the email prompted a wave of inquiries from
bidders. For its part, STT inquired with astonishment:
From: /////////
Sent: 22 November
2010 03:37 PM
To: 'procurement'
Subject: RE: ECX
Commodity Exchange Software Bid (IFB No: ECX/ICB/02/2009) -
Bid Security
Extension request due on Nov 29, 2010
Greetings,
I'm
confused by your request, this has already been awarded:
http://www.dgmarket.com/tenders/np-notice.do~5776887
After this exchange, STT got a response
to its earlier complaint, not from Dr. Eleni or
Solomon whom STT's original email was addressed to, but from the "procurement"
mailbox:
From: procurement
Date: Mon, 22 Nov
2010 18:50:04
To: /////////
Cc: Eleni
Gabre-Madhin
Subject: RE:
COMPLAINT
Good
Afternoon,
The
referenced notice in your email has been withdrawn and an automatic
notification
email has been sent out to all subscribers of this information where this
notice
was posted. You should have received this cancellation notification if you
and/or
your staff subscribes to this service.
We
sincerely apologize for this premature action and error you rightfully pointed
out.
Thank
you.
What the perpetrator(s) did not know in
all this was that concerned individuals had already alerted the World Bank of
the suspicious activities at ECX. On December 10, 2010, the World Bank passed
its final decision to withdraw its no-objection to the award recommendation and
cancel the tender.
>>On Fri, Dec
10, 2010 at 1:37 PM, </////////@worldbank.org>
wrote:
Dear
/////////
First
of all, I would like to thank you for bringing to our attention the document
sent by ////// .
concerning complaints raised against the bidding process of Ethiopian Commodity
Exchange Software .
The
World Bank has now withdrawn its no‐objection to the award of the contract to Millennium
Information
Technology Software Limited . The Bank has thereby asked the Ethiopian
Commodities Exchange to cancel the tender and has removed the award
notification from the dgMarket.
The
World Bank takes allegations of fraud and corruption seriously. If anyone has
evidence of such cases, they are urged to present this to the Banks' vice
presidency for institutional integrity (INT). FYI, I have attached the contact
information for the Banks' Fraud and Corruption Hotline.
Please
don't hesitate to contact me if you have any further concerns or comments.
Regards,
//////
Communications
Officer
A few hours later,
ECX followed suit and issued a cancelation of the award in an email from, once again,
"procurement".
From:
procurement
Date:
Fri, 10 Dec 2010 17:52:47
To:
Subject:
Commodity Exchange Software Bid Cancellation
Greetings,
At the time of bid opening, the bid security of Millennium IT
Software LTD, the bidder recommended for the award of the contract, was not as
per the requirement stipulated in the bidding document. As a result, the award
of this bid to Millennium IT Software LTD has been withdrawn and the bid is now
cancelled.
Thank you for your participation.
Government's inaction
Given all these evidences
and more, it is curious why the Commission refrained from initiating an
investigation to hold the perpetrator(s) accountable if found guilty rather
than spending resources proving the obvious. After all, it is well known that
ECX's working procedures have long been open for corruption; this is not a new
phenomenon that the Commission could claim to have just discovered. In the
absence of segregation of duties and strong internal control systems, the concentration of decision making power
exclusively in the hands of a few individuals leads to corruption and opens the
institution for manipulation by unscrupulous individuals tending to their
personal advantages. For instance, it is inconceivable to expect unbiased and
sound bid evaluation processes where the product's end user is also responsible
for designing the technical requirements for a bid document, inspecting bid
submissions, participating at bid opening, conducting initial and technical bid
evaluations, and negotiating with bidders. This is exactly the state of affairs
that paved the way for the recently alleged fraud and corruption at ECX; therefore,
the flawed protocol needs to be corrected. But that is not enough. The
allegation needs to be fully investigated and accounted for as well. By turning
a blind eye to the allegations of substantial and consequential fraud, the
Commission will only be perpetuating the existing legacy of corruption, and in
fact, will itself be committing an act of corruption.
At best, the Commission's action is an
apparent mockery of the anti-corruption law, one that can only serve the
purposes of hoodwinking donors into believing that the government is fighting
corruption. Had this type of negligence truly been the government’s standard
for fighting corruption, thousands of current prisoners who have been
imprisoned for less significant allegations of corruption would still be free.
--------------------
[1] http://www.feac.gov.et/web_collection/Com_report_english.htm
[2] Section 1.14(b)-(c) of the International
Competitive Bidding (ICB) procedures in the World Bank’s Guidelines:
Procurement under IBRD Loans and IDA Credits, edition of May 2004 revised October
2006
[3] Ibid., Section 1.4(a)(ii) (Definition of “fraudulent practice”)
[4] Ibid.,
Section 2.59
[5] Proclamation No.414/2004, Article 403
----------------------
Ali
Sulaiman, Commissioner of the Federal Ethics and Anti-corruption Commission, Bereket
Simon, Minister of Government Communications,
and Laketch Mikael, Task Team Leader at the World Bank's Africa Region did not respond to repeated email requests for
comment.
Millennium
IT declined to comment. In an emailed statement, Shameema Akbarally, Corporate
Communications Head said: "We would not comment on any commercial
contracts that are not live."
Securities and Trading Technologies (STT) declined to
comment.
All
other sources requested to remain anonymous due to the sensitivity of the
matter.
-----------------------
Read more on ECX and the government
at: http://poorfarmer.blogspot.com/p/ecx-watch.html
For questions or comments: poorfarmer@gmail.com
---------------
·
Statement
by ECX in response to the article “The case of alleged fraud and corruption at
the Ethiopia Commodity Exchange”
---------------
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