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, butthere has been no formal investigation to
date.
The Anti-corruption Commission,
which is accountable to Prime Minister MelesZenawi, 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’sbid 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
highestat 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.
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. EleniGabre-Madhin, Chief
Executive Officer, and Solomon Edossa, Chief
Information Officer:
From: /////////
Sent: 22 November
2010 09:22 AM
To: ‘EleniGabre-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 dgMarketand sent out
a new email to all bidders requesting an extension of the guarantee validity
date for a tender whose
winner was predetermined:
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
AlsamChelelek
Tower 2, 3rd floor
Mexico
Square
Addis
Ababa, Ethiopia
Telephone
– +251 011/////////
[email protected]<mailto:[email protected]>
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:
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: EleniGabre-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
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.
//////
A few hours later, ECX followed suit and issued a cancelation of the
award in an email from, once again, “procurement”.
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.
[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, ShameemaAkbarally,
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.
