ANALYSIS OF THE PROCUREMENT LAW AND ITS APPLICATION TO THE CASE OF THE AWARD OF A CONTRACT TO MAC'S METALCRAFT PTY LTD

TEMPO SEMANAL -DILI,15/12/2012
On 27 November last the Dili newspaper Tempo Semanal published an article regarding the "Minister of Finance Emilia Pires Approves Funds for Her Husband" which enabled her husband to obtain a contract to supply medical equipment to the Ministry of Health.

In the time that has passed since the publication of the article there has been a lot of frantic activity, especially by our foreign friends seeking strongly defending the Minister Pires' position vis a vis the contract awarded to her husband's company.  Much has been said during this defence process that she has not broken any laws including affirming that the Minister had no involvement because "she did not know" or she "was not involved" in the procurement process.

Whether or not  Ms Pires had any knowledge, is a question for readers who have seen the documents that thankfully Tempo Semanal were able to publish online, and a matter for all of us who know how small and intimidate Timor-Leste is in terms of its public life. But also from the all round denials from senior civil servants and members of government published in the same article by Tempos Semanal that they had not knowledge of the procurement process in question.

There are a lot of people who should know but "have no knowledge", which seems fantastic in a small palace like Timor-Leste, where we all seem to be able to know a lot from daily life.  The real important question to many people is: who do we think knew but remained silent about the whole matter? And: was it right for those knowing to remain silent as they did?

However, for present purposes, it is equally important for readers to have some knowledge of the procurement law that is in the background to all of this, so that they can judge the statements in fence by some of our foreign friends that Ms Pis is totally innocent, in some saintly or angelic form.

The relevant law of which this article will try to provide an objective analysis is the Law on Procurement Number 10 of 2005, as amended by Law Number 24 of 2008 ("The Law").

Clause 1. of article 5 of The Law places an onerous obligation on all state agents involved in any part of the procurement process to ensure that the process "secures satisfaction of the collective need of the state" in exercising their duty.  This means that state agents (which includes members of government) must remain vigilant and aware of this their supreme duty to look after the interests of the state and people of Timor-Leste as their paramount task and objective.

Article 6 of The Law demands that state agents must perform their duties throughout the procurement process in "good faith" at all times so as to secure the benefit intended to te state of Tmor-Leste from the procurement process.

Article 7 demands that state agents exercise absolute transparency in the procurement process and that the determination to award a contract must be published to the world at large, and ensuring that all stages of the decision making must be available for public scrutiny.  The aim to secure the utmost transparent process possible.

Article 9 states that any parties involved in any breaches of the law, may be held responsible criminally, as well as civilly, financially and disciplined for breaching The Law.  This is not limited to those involved in the decision making process directly, but also those who have a duty to act at any phase of the procurement process.

Article 11 demands that state agents must obey the general principles and rules under all RDTL laws and regulations. According to this article, The Law applies as a basic rule and in addition to and extension of other laws applicable in Timor-Leste.

Article 16 is perhaps the most important article affecting the Minister of Finance's role and responsibilities during the procurement process.  The most important and pertinent of these are that:

1.        The Finance Minister is executes the government's procurement policy and pests proposals with respect thereto;

2.      The duty to call in and consult on any procurement process at any stage to ensure it is following the law, and ensure that it is in keeping with the government's procurement policy.

The effect f this article is that it places a responsibility on the Finance Minister to ensure she stays on top of the procurement processes in the government, and intervene to secure good procurement processes and outcomes for the people and state of Timor-Leste.

The Law permits the members of government principally responsible under The Law to delegate their powers over procurement to other agencies down the line (see article 10and 20 of The Law).  However, article 21, line 4. makes it clear that "the delegating entity retains responsibility to ensure that all procurement processes undertaken by other agencies pursuant to this delegation comply with the laws of Timor-Leste." 

This article reaffirms the primacy of responsibility of the Minister of Finance regarding all procurement, and demands that the Minister must keep watch over procurement by line agencies that may be delegated powers under The Law. 

This means that the Finance Minister cannot "close one eye" or "look away" with respect to any procurement undertaken in the government, nor can the Minister then simply avoid responsibility by denying involvement or knowledge of the procurement in question by doing so.

Article 31 of The Law affirms that state agents cannot make determinations or engage in acts or omissions that prefer one competitor for a state contract to provide goods and services' rights during the procurement process.  this means that they cannot assist in any aspect of the bidding process that preferentially advances one competitor's interests.  

Article 32 prescribes how state agents should avoid conflicts of interest.  A conflict of interest arises when a state agent is in a position where he or she can prefer their own interests or the interests of someone that is related to them during any given state procurement process in which they have a role to play.

Line 1. of the above article demands that all state agents comply with the Civil Service rules on conflict of interest whenever they are involved in any aspect of state procurement.

because of this line 2. of the same article stipulates: "during any procurement process a Public Servant cannot involve him or herself in advising anyone who is related to him or her" or who "is related to him or her by kinship to the second degree."

The Law extends this situation in line 3. of article 32, stating: "a public servant cannot adjudicate on contracts involving family members related to the second degree of kinship or a partner or consultant of the same person in the exercise of his or her function during a procurement process."  Though the term "civil servant" is used, it refers to all state agents.  This means that all state agents involved at any stage of the procurement process from beginning to end, that awards a state contract to a supplier, must not be related in the aforementioned fashion to the successful tenderer. 

Because article 16 of The Law demands that the Finance Minister has an overarching role in ensuring all state procurement proceeds lawfully and in accordance with the the government's approved procurement policy, and the stipulation in article 21. line 4. that a delegation to another line agency as part of procurement decentralization does not abrogate the ultimate responsibility for procurement by the finance Minister, there is a primacy of responsibility to not "turn away", or "not become involved" in state procurement processes. 

To use a common analogy for describing the primacy of responsibility, we can say: this is all happening on one communal block of land, not in separate blocks owned by a neighbor, as is the case of one line ministry acquiring goods and services because it is for and on behalf of the administration which the Finance Minister represents in legal and constitutional terms so far as state procurement is concerned.  The 'government" per se is responsible and not individuals for ensuring the law is complied with in all respects.

Line 1. of article 35. stipulated that if a state agent becomes aware (or detects) at any given stage of a procurement process of legally and or ethically incompatible conduct or conflict of interest, he or she must report the matter, nullify the whole process to date and cease any further advancement of the procurement in question.

Line 2. of article 35. stipulates moreover that an investigation must be initiated regarding such a process as detected per line 1. of article 35 above.

The conclusion from this above analysis, indicates clearly that the Law intends to:

1.  Ensure utmost transparency and equity for the whole procurement process of every state procurement, so that all can have confidence and feel they have had an equal opportunity in procurement, and the state's funds have been used for the intended purpose and that it has derived the full intended benefit from it;

2.  Ensure that state agents cannot easily or arbitrarily avoid being bound by these basic principles because the procurement process is inter-dependent on the conduct of line ministries and the Finance Ministry, because it is all in-house in one and not separate houses.;  

3.  The primacy of responsibility for ensuring procurement proceeds according to the law lies with the Finance Ministry, and thereby the Finance Minister who has overarching responsibility for ensuring all state procurement proceeds according to the law and principles and the government's procurement policy.

After examining these articles in The Law, we can conclude that our friends who have been defending the Finance Minister, before she has even pronounced herself publicly at all, do not understand or know the complex and integrated nature of our procurement laws.  because Timor-Leste law seeks to secure utmost transparency and ethical principles from all state agents involved at every stage of the procurement process, and not just for those adjudicating on contracts, but those state officials exercising deliberative functions that facilitate the ultimate awarding a contract to a supplier to the state.  

We have expectations that this will help our friends to better understand that it is not as simple as asserting: "she was not involved in the decision to award the contract to her husband", or "the PM was the one who approved the funds, she only signed a letter informing the Vice Minister of Health of the decision."  Because of this, the Anti Corruption Commission must investigate this issue, and as the deputy Commissioner himself stated during his interview with Tempo Semanal, it already is aware of these issues involved. 

But it is not only the members of government who should be investigated by a court.  There are indications of international advisors being involved in the procurement in question with knowledge of the family relationship with the contractor but failed to raise any questions.  The role of such advisors must be thoroughly investigated as well. 

Readers who have had the opportunity may have come across a number of reports by the auditing firm Deloitte, regarding procurement systems in the Timor-Leste government already know that Deloitte reports  a number of violations of The Law by the Ministries of Defence and Security and the Ministry of Agriculture and Fisheries during the period 1 January 2009 to the 30 June 2011.

The case involving Minister Emilia Pires that Tempo Semanal reported is one more such case, but where there are many substantive documents going to the issues identified by Delloite in their report, which in turn becomes a guidepost for future detailed investigations into state procurements by the government, because the documents in question clearly show failures in the procurement processes and systems that Deloiite was only able to briefly point to in their reports. 

We await an investigation in order for the truth to be uncovered as soon as possible, because the future of democracy, the rule of law and transparency are at risk in Timor-Leste whilst such allegations remain un-investigated and unresolved.