Rhino Engineering Works Limited v Otuke District Local Government (Application 24 of 2024) [2024] UGPPDPAAT 22 (30 May 2024)

## THE REPUBLIC OF UGANDA PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS APPEALS TRIBUNAL

### **APPLICATION NO. 24 OF 2024**

### **BETWEEN**

### RHINO ENGINEERING WORKS LIMITED ::::::::::::::::::APPLICANT

AND

OTUKE DISTRICT LOCAL GOVERNMENT:::::::::::::::::::::::::RESPONDENT

APPLICATION FOR REVIEW IN RESPECT OF THE PROCUREMENT FOR THE LOW-COST SEALING OF CHURCH ROAD AND CIVIC ROAD WITH OTUKE DISTRICT LOCAL GOVERNMENT UNDER PROCUREMENT REFERENCE NUMBER OTUK915/WRK/23-24/00004

BEFORE: NELSON NERIMA; ENG. THOMAS BROOKES ISANGA; GEOFFREY NUWAGIRA KAKIRA; PAUL KALUMBA; AND CHARITY KYARISIIMA, MEMBERS

Page 1 of 14 Decision for PPDA Appeals Tribunal Application No. 24 of 2024-Rhino Engineering Works Ltd v Otuke DLG

## DECISION OF THE TRIBUNAL

#### $\mathbf{A}$ . **BRIEF FACTS**

- Otuke District Local Government (the Respondent) initiated a $1.$ tender for the low-cost sealing of church road and civic road with Otuke District Local Government under Procurement Reference Number OTUK915/WRK/23-24/00004 under open domestic bidding method of procurement. - $2.$ Three (3) bidders namely, $M/s$ UNIFIED INVESTMENT COMPANY LTD, OTYEM CAN COMPANY LTD and M/s RHINO ENGINEERING WORKS LIMITED submitted bids. - 3. Upon the conclusion of the evaluation process, the Respondent issued a Notice of Best Evaluated Bidder on May 3, 2024, indicating that $M/s$ UNIFIED INVESTMENT COMPANY LTD was the best evaluated bidder at a contract price of UGX $302,405,425/=$ . - $4.$ The Applicant received the Notice of Best Evaluated Bidder by email on May 7, 2024. The Notice indicated that the Applicant's bid was disqualified because the Applicant "presented fraudulent claims and mis-information to the district in the previous contract". - 5. The Applicant contends that the reason $\overline{f}$ or the disqualification of its bid is unrelated to the financial evaluation criteria and amounts to an amendment of the financial evaluation criteria. - 6. The Applicant filed a direct application to the Tribunal on the ground that it believed that its complaint could not be impartially handled by Respondent's Accounting Officer. The Applicant contends that it executed previous works for the respondent which resulted in additional works that required extra funding and that the Respondent still bears a grudge due to the Applicant's honest demand for payment. That the

mere fact that the Respondent is unable to distinguish between the previous works and the current procurement means that the Accounting Officer cannot do justice to the Applicant.

$7.$ The Respondent filed a response in which it contended that a post qualification assessment and due diligence revealed that the Applicant had engaged in contractual dishonesty and is still a subject of investigations by the Inspector General of Government. That the Applicant had acted dishonestly and fraudulently in the last contract when it claimed money which was not due. That the Application is bad in law because the Applicant failed to apply for administrative review.

#### $B.$ **ORAL HEARING**

$1.$ The Tribunal held an oral hearing on May 22, 2024 via Zoom video conferencing. The appearances were as follows:

Mr. Odongo Jimmy, a Director at Rhino Engineering Works Ltd appeared for the Applicant.

Mr. Simon Akileng, the Chief Administrative Officer of the Respondent appeared for the Respondent together with Mrs. Juliet Ekut Achiro, the Senior Procurement Officer of the Respondent. Mr. Aneko's Blix the Managing Director of M/s UNIFIED INVESTMENT COMPANY LTD appeared for the Best Evaluated Bidder.

In attendance were:

Mr. Patrick Onyanga, the Senior Environment Officer of the Respondent and Mr. Denis Okuk, the Internal Auditor of the Respondent.

#### $\mathbf{C}$ . **RESOLUTION**

1. The Application raised two (2) issues i.e the materiality of the Applicant's history with the Respondent and the relevance of the investigation by the Inspector general of Government.

- $2.$ However, in view of the pleadings and submissions, the Tribunal has recast the issues as follows: - $i.$ Whether Applicant has *locus standi* before the Tribunal? - ii. Whether the evaluation of the bids in the impugned procurement was conducted lawfully? - iii. What remedies are available to the parties? - $3.$ The Tribunal has carefully considered the pleadings, the bids, the procurement action documents and the submissions.

# Issue No.1: **Whether Applicant has locus standi before the Tribunal?**

- 4. The five instances under which the Tribunal can exercise its jurisdiction are provided for under sections 89(8), 89(9) and 91(1) (a), (b) and (c) of the *Public Procurement and Disposal of* Public Assets Act. - $5.$ A direct application to the Tribunal for determination of the complaint, omission or breach under section 89(9) and 91(1)(c)of the *Public Procurement and Disposal of Public Assets* Act and regulation 9(5) of the Public Procurement and Disposal of Public Assets (Administrative Review) Regulations 2023 based on the ground that the bidder believes that the Accounting Officer has a conflict of interest in respect of the complaint, omission or breach or that the matter cannot be handled impartially by the procuring and disposing entity. - 6. Existence of a conflict of interest is a question of both law and fact. Conflict of Interest as a real or seeming incompatibility between one's private interest and one's public or fiduciary duties. It is both the actual and the perception that counts when tracing conflict of interest in a transaction. It is what a

reasonable person would conclude while viewing the transaction from a distance that counts. It is related to the rule against bias. See Application No. 22 Of 2024-Magombe Badiru Vs Sironko District Local Government and Application No. 18 Of 2024 Kacyber Security Technologies Ltd v Mbarara City Council.

- $7.$ The Applicant bears the burden to prove the conflict of interest it alleges. see Application No. 18 of 2021, Abasamia Hwolerane Association Ltd v Jinja City Council page 11, paras 9-10. - 8. The Applicant did particularize the incidences that constituted its belief that its complaint, omission or breach that would be made before the Accounting Officer cannot be handled impartially by the respondent. - 9. The gravamen of the Applicant's belief of partiality is premised on the belief that the Respondent is still indebted to the Applicant arising out of additional works on the low-cost sealing of Ogor and RDC Roads under Procurement Reference Number OTUK586/WRKs/2019-20/00006 in January 27, 2020 and that its demand for payment under the said additional works formed the basis of the disqualification of its bid and that the reason for disqualification was unrelated to the evaluation criteria in the impugned procurement. - $10.$ The Applicant has pleaded that Respondent bears a grudge due to the Applicant's honest demand for payment for additional works under a previous contract. That the mere fact that the Respondent is unable to distinguish between the previous works and the current procurement means that the Accounting Officer cannot do justice to the Applicant. - 11. We are satisfied that the Applicant has demonstrated the grounds of the belief that its complaint, if made to the Accounting Officer would be handled impartially by the

Respondent, necessitating a direct application to the Tribunal for determination of the complaint.

#### $12$ Issue no. 1 is resolved in the affirmative.

## Issue No.2: Whether the evaluation of the bids in the impugned procurement was conducted lawfully?

- The evaluation of the bids was conducted by an Evaluation $13$ Committee consisting of Otim Alex (Principal Assistant Secretary), Eng. Alany Jimmy Max (Ag. District Engineer), and Onyanga Patrick (Senior Environment Officer). - 14. At the hearing, the Senior Procurement Officer of the Respondent informed the Tribunal that there were 2 sets of Evaluation Committees and both did not have appointment letters. That she nominated the first set of the Evaluation Committee members but in her absence the Accounting Officer appointed the second Evaluation Committee members which was approved by the Contracts Committee of Alebtong District. - $15.$ The Senior Procurement Officer submitted to the Tribunal a letter dated April 17, 2024 whereby she handed over the bids to the impugned second Evaluation Committee upon the directive of the Accounting Officer but with a protest that both Evaluation Committees had no appointment letters. She disassociated herself from the impugned evaluation and further stated that her guidance was not sought. - 16. The Accounting Officer of the Respondent informed the Tribunal at the hearing that the he did not sign appointment letters for the Evaluation Committee nominated by the Senior Procurement Officer because the nomination was a "forgery". That the Respondent did not have a functioning contracts

committee and therefore used the contracts committee of Alebtong District.

- 17 The Senior Procurement Officer submitted to the Tribunal a nomination form dated March 21, 2024 for the Evaluation Committee signed by the acting Senior Procurement Officer. The nominated members were Eng. Alany Jimmy Max; Okello Jimmy; $\operatorname{Etil}$ Tom: and Ocen Sylvester. The Senior Procurement Officer also submitted to the Tribunal minutes of the Contracts Committee dated March 21, 2024 whereby the said evaluation committee was approved. - The Accounting Officer did not submit the nomination form 18. for the second Evaluation Committee which carried out the impugned evaluation. The Accounting Officer also did not, as ordered, submit to the Tribunal the appointment letters for the impugned Evaluation Committee, the minutes of approval of that evaluation committee by the Contracts Committee; and the agreement with Alebtong District for use of their Contracts Committee. - $19.$ Under sections 32 (a) and 37 (2) of the *Public Procurement and* Disposal of Public Assets Act, the members of the Evaluation Committee are recommended by Procurement and Disposal Unit, and approved by the Contracts Committee. The documentary evidence available indicates that the Acting Senior Procurement Officer nominated an Evaluation Committee on March 21, 2024. - 20. There is no evidence that the impugned second Evaluation Committee was ever recommended by the Procurement and Disposal Unit. The Accounting Officer did not submit to the Tribunal as ordered, the appointment letters for the impugned Evaluation Committee, the minutes of approval of that evaluation committee by the Contracts Committee of Alebtong District; and the agreement with Alebtong District for use of their Contracts Committee. - 21. Therefore, there is no evidence that the impugned second Evaluation Committee was nominated, approved and appointed in accordance with the above cited laws. - $22.$ There was illegal usurpation of the independence and powers of the Procurement and Disposal Unit by the Accounting Officer in regard to recommendations of the members of the Evaluation Committee, contrary to section 38 of the Public Procurement and Disposal of Public Assets Act. - 23. The use of the Contracts Committee of another procuring and disposing entity must be under a written agreement. See section 39 of the Public Procurement and Disposal of Public Assets Act and regulations 16 and 18 of the Public Procurement and Disposal of Public Assets (Procuring and Disposing Entities) Regulations 2023. There is no evidence that the impugned Contracts Committee of Alebtong District was used in accordance with the above cited laws. - $24.$ In the premises, the Tribunal has reached the conclusion that Evaluation the impugned Committee and Contracts Committee were used illegally. It therefore follows that the evaluation and the outcome were illegal, null and void. - 25. For completeness, we shall also consider the merits of the evaluation. - $26.$ The Applicant avers that the reason for the disqualification of its bid at the financial comparison stage of evaluation is alien to the evaluation criteria stated in the bidding document. - 27. The Respondent demurred and contended that the Applicant's bid was rejected at the post qualification stage and not financial stage of evaluation. Further that post qualification evaluation and due diligence conducted on the Applocant's bid revealed that the Applicant had engaged in contractual

dishonesty in its past contract with the Respondent by illicitly claiming for UGX $14,700,000/$ = as retention monies whereas not and that the matter was subject to investigation by the Inspectorate of Government.

- The Respondent avowed that the conduct of the Applicant in $28.$ the previous contract was very important in determining the ability of the Applicant to perform the contract that forms the basis of the impugned procurement. - 29. The Summary of Methodology of the evaluation criteria stated in the bidding document stated that the evaluation was to be conducted in four sequential stages namely preliminary *examination; detailed evaluation; financial comparison; and* Post qualification. See **Section 3: Evaluation Methodology** and Criteria, C- Summary of Methodology, page 34 of the Bidding Document. - 30. The Financial Comparison Criteria was to be conducted in accordance with ITB 37 if the cost of the total price given in the Activity Schedule/Bills of Quantities and day work were included in the bid price. See Section 3: Evaluation Methodology and Criteria, D- Financial Comparison **Criteria, (a) and (b)**, page 44 of the Bidding Document. - 31. However, the criteria for determination of Best Evaluated Bid stated that post qualification would not be applicable in the impugned procurement. Section **3: Evaluation** Methodology and Criteria, D- Financial Comparison Criteria, 9- Determination of Best Evaluated Bid or Bids, page 44-45 of the Bidding Document states as follows. 9.1. Post qualification evaluation will be carried out on the lowest evaluated bidder as specified below: -N/A Legal Requirements – Due diligence shall be done to verify ownership of the company and its registration with the appropriate body in the country of principal business *Technical Requirements–Due diligence shall be done to:* (i)

- *Verify and validate the bidder's performance on previous* $a)$ indicated private and public contracts in the bidder's *submission* - *Verify and validate current commitments and litigation* $b)$ record of the bidder - Financial Requirements Due diligence shall be done to (ii) verify and ascertain the bidder's financial contracting capacity and bank commitment to provide a credit line to the bidder - 9.2. A bidder not meeting any of the above criteria shall be rejected - 9.3. The bid with the lowest evaluated price, from among those which are eligible, compliant, and substantially responsive and have passed the post-qualification shall be the best-evaluated bid. If this Bidding Document includes more than one lot, the best-evaluated bid shall be determined separately for each lot eligible, *compliant.* and. substantially responsive and have passed the **postqualification** shall be the best-evaluated bid. If this Bidding Document includes more than one lot, the bestevaluated bid shall be determined separately for each lot - 9.4. Notwithstanding paragraph 9.1, if the Bidding Document allows bidders to quote different prices for single lots and the award to a single bidder of multiple lots, the PDE shall conduct a further financial comparison to apply any conditional discounts. The bid or bids offering the lowest priced combination of all the lots shall be the best*evaluated bid or bids.* - 32. The law requires the criteria used for post qualification evaluation to be in accordance with the criteria in the bidding document, to confirm whether the best evaluated bidder has the capacity and the resources to effectively execute the procurement. See regulations $11(1)$ , $(2)$ , $(3)$ and $(4)$ of the

*Public Procurement and Disposal of Public Assets (Evaluation)* Regulations, 2023. Post qualification on a best evaluated bidder is therefore mandatory. It was a misdirection for the bidding document to purport that post qualification was not applicable.

- 33. Our perusal of the Notice of Best Evaluated Bidder dated May 3, 2024, reveals that the Applicant was disqualified at the financial stage of evaluation. - 34. It is our finding that the Respondent's claim that the Applicant was disqualified at the post qualification stage of evaluation is an afterthought and untenable in law. This is because post qualification can only be conducted on the best evaluated bidder. The Applicant was clearly not best evaluated bidder at point and not eligible to or subject to post qualification. See regulation 11(1) of the Public Procurement and Disposal of Public Assets (Evaluation) Regulations, 2023, ITB Clauses 5.2, 31.1, 39.1 and 39.2 of the Bidding Document and Application No. 8 of 2021, Elite Chemicals Limited v Uganda Coffee Development Authority. - 35. Further, the bidding document itself does not contain any post qualification criteria but indicates that post qualification was not applicable. See section 71(3) of the *Public Procurement* and Disposal of Public Assets Act and regulation 5(2) of the *Public Procurement and Disposal of Public Assets (Evaluation)* Regulations, 2023. - 36. In any case, the reasons for disqualification of the Applicant's bid were extraneous to the evaluation criteria. The pendency of a disputed demand for payment under a previous contract was not a disqualifying factor under the evaluation criteria. There is no evidence that the demand itself is dishonest or fraudulent. To disqualify a bidder merely on account of a contractual dispute would violate the cardinal principles of

non-discrimination. transparency, fairness, and maximisation of competition.

- 37. The application of an extraneous criteria was also an illegal amendment of the evaluation criteria, contrary to section 71(3) of the *Public Procurement and Disposal of Public Assets* Act 2003 and regulation 5(2) of the Public Procurement and *Disposal of Public Assets (Evaluation) Regulations, 2023.* - 38. It is therefore our finding that the reasons advanced by the Respondent for the disqualification of the Applicant's bid at financial comparison stage was neither related to the **Financial Comparison Criteria** nor regulation $21(2)(a)$ -(h) of the *Public Procurement and Disposal of Public Assets* (Evaluation) Regulations, 2023. - 39. In any case, regulation 26 of the Public Procurement and *Disposal of Public Assets (Procuring and Disposing Entities) Regulations, 2023* allows the Respondent as a procuring and disposing entity to undertake due diligence on a bid, at any time, from the commencement of the evaluation process to before the signing of the contract and that this test covers any area of operation of a provider or any area of the bid that the disposing entity procuring and determines requires verification or checking, in exercising due care in a procurement or disposal process. - 40. However, there is no proof that a due diligence test was carried out and there is no indication of how the findings of the due diligence exercise allegedly conducted by the Respondent was factored into or considered before disqualification of the Applicant's bid. The reliance on disqualification of the Applicant's bid based on due diligence by the Respondent appears to be an afterthought and is untenable. - 41. The Respondent therefore erred in disqualifying the Applicant's Bid for reasons unrelated to at the financial

comparison stage of evaluation and for using a criteria other than the criteria specified in the bidding document.

$42$ The Tribunal also observed that in the bid of M/s UNIFIED INVESTMENT COMPANY LTD (the best evaluated bidder), the bidder indicated in Form 2 of their bid: CV of proposed personnel that ODONGO JIMMY (the Director/Manager of the Applicant) would be their site engineer. At the hearing, Odongo Jimmy denied ever authoring M/s UNIFIED INVESTMENT COMPANY LTD to use his CV. However, M/s UNIFIED INVESTMENT COMPANY LTD claims that it had a working relationship with Odongo Jimmy. The allegations and denials point to a potential conflict of interest contrary to ITB 4.4 (b),(d) and (e) of the Bidding Document. This observation was not considered by the impugned second evaluation committee.

## 43. Issue no. 2 is resolved in the negative. Issue No. 3: What remedies are available to the parties?

- 44 The Tribunal has determined that the present procurement is untenable. There were illegalities in the appointment of the Evaluation Committee and the use of the Contracts Committee of Alebtong District. The Senior Procurement Officer disowned the procurement yet the Procurement and Disposal Unit is responsible for managing the procurement and disposal process under section 31 of the *Public* Procurement and Disposal of Public Assets Act and regulation 13 of the *Public Procurement and Disposal of Public Assets* (*Procuring and Disposing Entities*) *Regulations, 2023.* There are also unresolved questions about conflict of interest. The bids are due to expire on May 31, 2024. - 45. In the circumstances, the Tribunal shall cancel the procurement.

## $D.$ **DISPOSITION**

- 1. The Application is allowed. - $2.$ The award of the Contract for the low-cost sealing of Church Road and Civic Road with Otuke District Local Government under Procurement Reference Number OTUK915/WRK/23-24/00004 to UNIFIED INVESTMENT COMPANY LTD is set aside. - 3. The procurement for the low-cost sealing of Church Road and Civic Road with Otuke District Local Government under Procurement Reference Number OTUK915/WRK/23-24/00004 is cancelled. - $4.$ The Respondent may re-tender the procurement if it so wishes. - $5.$ The Tribunal's suspension order dated May 13, 2024, is vacated. - 6. Each party to bear its own costs.

Dated at Kampala this 30<sup>th</sup> day of May 2024.

munico

ENG. THOMAS BROOKES ISANGA

**MEMBER**

**NELSON NERIMA MEMBER**

**GEOFFREY NUWAGIRA KAKIRA MEMBER**

PAUL KALUMBA **MEMBER**

**CHARITY KYARISIIMA MEMBER**

Page 14 of 14 Decision for PPDA Appeals Tribunal Application No. 24 of 2024-Rhino Engineering Works Ltd v Otuke DLG