In a report released by the Commission Against Corruption (CCAC) on Wednesday, the graft watchdog unveiled the systematic abuse of public contracts and fiscal mismanagement by senior Transport Bureau (DSAT) executives.
The report, which is titled “Investigation report on the granting of public car park management service by the Transport Bureau,” found the DSAT guilty of splitting management services so as to avoid the need for a public tender process.
In April 2015, the CCAC discovered that the chief of DSAT, as well as some of the senior leadership team from the Transportation Management Division of the Bureau, had colluded with management companies and abused their positions of power to influence the granting of service contracts for public car park management.
It is claimed that the Transport Bureau’s management division had illicitly profited an estimated MOP19 million from such deals, and thus a criminal investigation into the case was opened.
During the course of the investigation, the CCAC uncovered a host of bad practices at the organization, which have either violated the law or evaded provisions outlined in the law.
“In addition to the subjective criminal intent of the persons involved to achieve the purpose of the crime through various means, the DSAT had serious defects in the outsourcing process and internal supervision mechanism of public car park management services [… which] objectively served a pampering and facilitating effect on the occurrence of the case,” the CCAC noted in its report.
In terms of the case levied against the bureau, the CCAC has accused the DSAT of failing to abide by the provision for an open tender for an “operation contract”. Under such a contract, the management company that operates the car park should be “self-financing” and bear all the costs for running the premise, including the expenses of purchasing equipment.
The CCAC found that the DSAT had not adopted the “operation contract” model, instead opting for repeated “short-term management services contracts” with management companies, according to the regulations outlined in Decree Law no. 122/84/M.
The DSAT was found to have “constantly split the orders of the management services,” resulting in a total of 341 “short-term management services contracts” for 39 of the 46 public car parks since 2003.
This, according to an explanatory statement released by the corruption watchdog in conjunction with the report, indicates an intentional evasion of “operation contracts” and represents a violation of the provision that “open tendering shall be called for the contract involving more than MOP750,000 and that a notarial contract shall be signed for a service to be run for more than six months.”
By splitting the larger contracts which exceed that figure, DSAT was able to award contracts using “short-term management services contracts”, and avoid the legal necessity for an open public tender process.
In one instance provided as an example in the report, a company was granted contracts by the DSAT lasting three to five months in length and amounting to between MOP200,000 and MOP500,000 each. The contract was renewed a total of 14 times between 2010 and 2014 for a total worth exceeding MOP5 million.
Another area of concern highlighted in the report was the supervision of management companies awarded contracts. According to the CCAC, this was led by a failure of the Bureau to supervise management companies “caused by defects [in] the internal supervision mechanism.”
Such defects included a failure of the DSAT to verify the truthfulness and accuracy of claims made by concessionaires, as well as turning “a blind eye to some of the companies which delayed the payments [to the government] without any reason”. The CCAC claims that such practices are symptomatic of poor fiscal discipline and subsequently pose “a huge risk to public funds.”
“Such practice has violated the ‘principle of legality’ and impaired the dignity and authoritativeness of the law,” resolves the CCAC in its report. “Moreover, the existing statutory systems and procedures were totally ignored and finally they were [… used] as means of manipulating the grant of car park management service contracts for the purpose of gaining illicit advantages.”
Although criminal sanctions had been imposed on the chief of the DSAT management division following the commencement of the investigation last year, the purview to grant the contracts would not have been his alone, the CCAC commented in the accompanying statement.
“The chief of the Transportation Management Division only possessed the right of suggestion while the superiors and leaders of the Division had the responsibilities and competence to review and approve the work,” it reads.
This fact, according to the CCAC, necessitates a call for the DSAT and its supervisory bodies to “seriously study whether the case involved the default and defect of supervision of the concerned leaders and superiors.”
Despite all of these revelations – which are at best bad practice, and at worst an intentional violation of the law for personal gain – the CCAC warns that the uncovered practices are not necessarily illegal.
“A large part of the problems existing in the procedures of procurement or service outsourcing run by public departments do not constitute administrative illegality or misfeasance and even crimes such as corruption,” the report notes. “Therefore, it is difficult for the supervisory entities including the Commission of Audit and the CCAC to stage a direct intervention. However, if these issues are not redressed promptly, they will give rise to corruption crimes.”
The revelations lead the corruption watchdog to ultimately conclude that public departments in future should “neither directly violate the law nor evade the systems provided by the law,” even though such a proclamation seems obvious.
It also mandates that public departments will henceforth be required to justify in written form the use of “short-term management services contracts”, and that procurement staff should be “cautious” when utilizing this exemption in future.
The DSAT official who was investigated in April last year for illicitly profiting from outsourcing contracts has recently been sentenced to 12 and a half years in prison and was ordered to pay a fine of MOP36,000.
‘splitting’ of contracts common in gov’t
The provision that permits the “splitting” of contracts into smaller orders which do not require an open public tender has not just been abused by DSAT, the corruption watchdog’s report found. “Evasion of statutory systems or procedures with unreasonable excuse not only exists in the DSAT but also other public departments. In particular, the practice of ‘splitting’ an order or purchasing a complex or constant service into several contracts in order to evade […] open tendering or signing of notarial contracts is not rarely seen.” The danger is that it ‘increases the risk of occurrence of corruption and power abuse,” warned the CCAC in its concluding statements.
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