Despite an ignored tender requirement that bidders for the contract to remove scrap metal from the George Town Landfill provide proof of financial viability, the Central Tenders Committee still awarded the contract to Matrix International Inc.
The auditor general’s special report released Saturday on the matter reviewed the government’s processes relating to the tender preparation, evaluation of bid submissions and the award of the contract.
‘Our most serious concern related to the financial viability requirement of the invitation to tender,’ the auditor general’s report stated. ‘The invitation required that all submissions were to provide proof of financial viability.
‘During the evaluation process, the tendering committee decided that none of the bidders had met this criterion. We were of the opinion that when none of the bidders satisfied this mandatory requirement, the process should have stopped.’
Instead of stopping the process, the CTC awarded the contract to Matrix, subject to three new conditions being met, including the submission of audited financial statements, confirmation of a line of credit and a demonstration of the ability to secure insurance coverage, the report states.
‘Our review of subsequent events indicated that the contract was [signed] even though none of the three conditions were met.’
Matrix ultimately defaulted on the contract after removing only some of the scrap metal at the landfill and paying only $310,000 of the $1,250,000 it contractually agreed to pay. The scrap metal it didn’t remove remains at the landfill to this day.
Although a number of companies obtained information about the invitation to tender, only three tenders were submitted to the CTC. Those bids were evaluated by a Departmental Tender Committee appointed by the Ministry of Communications, Works and Infrastructure.
A DTC is provided for in the tender manual that came into effect in November 2007. However, the financial regulations – which remain in effect and were the only tender guidance in effect at the time the scrap metal tenders were considered – required all contracts valued at $250,000 or more be evaluated by the CTC.
‘Our concern lies with the fact that the regulations place the responsibility for evaluating tenders submitted for contract in excess of $250,000 on the Central Tenders Committee, not the [Departmental Tender Committee] as suggested in the tender manual,’ the auditor general’s report stated.
‘Our concern is twofold,’ the report continued. ‘The first is that the CTC is ultimately responsible for any decision concerning tenders submitted for contract in excess of $250,000. While they may delegate the work to be done to another party – in this case the DTC – they cannot delegate their responsibility.’
The second concern dealt with ensuring that any decision made by the CTC fulfilled its wishes.
‘If, for instance, when a tender is awarded with conditions, it must make reasonable attempts to ensure that the conditions have been met. This responsibility cannot be delegated.’
The DTC set six criteria for evaluating the tenders received.
The first criterion, which concerned the financial viability of the bidders, was a pass or fail criterion. The DTC concluded that all three of the bidders failed to meet the criterion.
Instead of stopping the process, the DTC continued evaluating the bids on the other five criteria, which were all point-based.
Eventually, the DTC issued a report to the CTC recommending the contract be awarded to Matrix.
‘Based on our review of the tender proposals, there is no question that Matrix International Inc. presented the best proposal,’ the auditor general’s report stated. ‘However, we are of the opinion that none of the proposals met the eligibility criterion and none of the proposals fulfilled all the mandatory requirements set out in the tender documents.’
In the auditor general’s opinion, when none of the tenders met the eligibility requirements, the process should have stopped and been re-tendered.
‘[Ministry] staff were of the opinion that two provisions in the tender documents enabled them to continue, in their words, to ‘pursue the bid that was most advantageous to the government.’ Ministry staff pointed to a provision that allowed them to request any information inadvertently omitted from a bidder’s qualification statement…’
The auditor general’s office disagreed with the interpretation of the ministry staff.
‘We are of the opinion that a bidder’s failure to substantiate financial viability is not an inadvertent omission,’ the reported stated. ‘In our view, it was a fundamental and essential requirement set out in the tender document.’
Lack of due diligence
The auditor general’s report pointed out that Matrix supplied no evidence that it had expertise relating to the transportation of materials overseas or experience in dealing with scrap metal processors in the United States.
‘Therefore, the [Audit] Office feels that there should have been more due diligence done on the principals of Matrix to determine their ability to fulfil the contract.’
The report pointed out that the assistant solicitor general shared the concerns about due diligence on Matrix and wrote a memo about those concerns.
‘I would suggest the [CTC] needs to do some due diligence on these people,’ the assistant solicitor general wrote. ‘The minister needs to be satisfied as to the financial viability of (1) the principals; and (2) the company that is actually entering into the contract… I don’t think the minister can yet say that he has reached the necessary level of assurance.’
Despite the solicitor general’s warning, the DTC did no due diligence on the Matrix principals, the auditor general’s report stated.
Matrix was informed in December 2006 that its bid was accepted, subject to meeting the three new conditions.
When none the conditions were met, the auditor general believes the process should have been terminated and the CTC so advised.
‘The only authority the Ministry of [Communications, Works and Infrastructure] had was to enter into a contract with Matrix International Inc., provided the conditions had been met.
Nonetheless, the contract was signed by the ministry on 19 March, 2007.
The report states that ministry staff rationalised the signing of the contract without the conditions being met by saying another hurricane season was only a few months away and there was an urgency to get a company engaged in removing the scrap metal. Ministry staff also stated the potential still existed Matrix could do the work and government would get paid.
In addition, the ministry staff said the Solicitor General’s Office had stated in writing the contract could be signed. However, the assistant solicitor general explained to the auditor general that the role of the Solicitor General’s Office was to provide advice to specific questions.
‘When we pointed out that the contract was signed without the three conditions being fulfilled, we were informed the details of the three conditions were never communicated to the Solicitor General’s Office and that they were never asked to give an opinion on this matter,’ the auditor general’s report stated.