Another Scam Unearthed

By Nirmala Kannangara

Following our exposé last week that the Department of Motor Traffic together with a powerful politician in the previous regime was involved in a number plate racket that cost the country a colossal amount of money, startling revelations have now come to the fore that the same department was involved in smart card driving licence scam to please a higher official attached to the Presidential Secretariat in the previous regime.

As in the case of number plate fraud, in the driving licence scam too, the contract has been awarded to a selected party in a haphazard manner.

Although the government auditors have unearthed the racket and have brought it to the notice of the then Transport Ministry Secretary, no action had been taken against the fraudsters, reliable officers at the Department of Motor Traffic (DMT) accused.

The sources who wished to remain anonymous said that the then Transport Ministry Secretary, the Finance Ministry and the DMT representatives who were the members of the Procurement Board must take the full responsibility for this high scale scam.

The sources further said that according to the Section 8.10.2 of the procurement guideline, if the tender is valued over Rs.250 million, it has to be announced in a widely circulating national newspaper, on National Procurement Institute website and in the government gazette. But the Procurement Board has not followed this procedure, sources affirmed.

“This alone shows that the tender procedure lacked the required transparency. It is the right of the general public and the companies who were rejected by the Tender Board to know that that the contract was awarded and for how much and while doing so whether the proper government tender rules and regulations have been followed. Since the tender was offered to an interested party for personal gains bypassing the government procedure, the tender committee withheld details from the media,” sources alleged.

Similar to the number plate scam, the smart card driving licence tender which too was valued over five million rupees had been awarded to a company that has not been registered with the Registrar of Public Contract.

“Under the Public Contract Act No: 37 of 1987, it is compulsory to offer tenders worth over five million rupees to the companies registered with the Registrar of Public Contract. Despite knowing this procedure enables relevant authorities to scrutinize tenderers in the event of any fraud is committed by them, the members of the Procurement and Technical Evaluation Boards did not consider this requirement and awarded the tender to a local company which is very costly,” the sources told The Sunday Leader.

According to provisions of the Public Contract Act No:37 of 1987, it is mandatory that any person who acts as an agent or a sub-agent, a representative or nominee on behalf of any tenderer to be registered with the Registrar of Companies before applying for a tender and the contract after the tender is awarded. Failure to do so is an offence. Even issuing tender documents to parties that do not have the registration is an offence.

Meanwhile the sources said that the cabinet appointed procurement and technical evaluation committees have not only favoured the contractor at the bidding by rejecting six other bid applications but also awarded the tender to a company that has not registered with the Registrar of Public Contract.

The selected company has not complied with any of the regulations of the ‘Clause 6 (1) (a) of the Public Contract Act. On whose instruction these committee members offered the contract to this company that has not followed government guidelines? Who authorised the Procurement and Technical Committee members to award the tender to a company that has not fulfilled the tender procedure? If the Procurement Board could reject other six bidding applications by claiming they have not followed the tender requirements, why couldn’t they reject the selected company for not having registration with the Registrar of Public Contract? This shows the duplicity of the Procurement Committee,” sources alleged.
According to the sources, although 27 companies have obtained tender application forms, only seven companies have bade for the tender.

“Technical bids of five of these companies have been opened and five were rejected for not having contract with smart card manufacturing companies. The tender application of the sixth company too was rejected since it has not compiled with tender requirements. Only one company remained and it was awarded the tender without considering its eligibility because of a powerful interference,” sources alleged.

It is learnt, although other six companies that were rejected have appealed to the Tender Board, it has not taken any action to address the issue.

According to the sources, the Cabinet has given its approval to award the contract to the selected company through a cabinet paper Ref. No: 06/ 1600/ 216/ 028/ TBR-01 dated September 6, 2006.

“The contract was awarded on November 27, 2007 to the selected company for a period of seven years and the cost of a driving licence is Rs.1340 including VAT.

Although this company has projected the cost taking into account the price hike in computer hardware in the years to come, the Procurement Board failed to notify the company that the prices of computer hardware does not go up but as everyone knows, fast declining. However without any clarification in this regard the award was offered. However, the first batch of smart card driving licences have been delivered to DMT only in 2009 – three years after the contract was signed,” sources said.

It is also learnt, although the Procurement and Technical Evaluation Committees have had to estimate the entire cost before the tender is awarded according to Section 12.1 of the Government Financial Regulation No: 350 of September 25, 1997, the tender has been offered to the selected company without following the proper procedure.

“Had the Procurement Board followed the Government Financial Regulation policies, this company would not have secured the contract since their prices were 300% more than the exact price.

If the selected company’s prices were higher, the Procurement Board should have cancelled the tender and called for fresh bidders since other companies would have agreed to supply a smart card driving licence for less than Rs.400. The reason a decision was taken to introduce smart card driving licences was to prevent forgery driving licences being made.

Up to 2009, the company that provided old driving licences issued one licence for Rs.110+VAT. Since the smart card had more features it could have cost more but not more than Rs.400. But the tender was offered for Rs.1,340+VAT which is nearly 300% increase from the previous cost,” sources alleged.

The sources further accused the DMT of footing the Nation Building Tax (NBT) although the contractor has to pay the NBT; DMT has failed to include this in the contract. “As a result, from 2009 to December 31, 2011, the DMT has footed the NBT – over Rs.44.538 million – which is a huge loss to the Department,” sources said.

Contractual Conditions Violated

It has come to light that the DMT has allowed the contractor to violate contractual conditions by refraining from taking any action against them. According to the contractual conditions, a 2.5% discount has been promised to every driving licence to the stock of cards (between 22,500 and 30,000, a 5% discount for each of 30, 001 to 40, 000 cards and 7.5% from each of 40,001 to 50, 000 cards).
“As a result of the DMT failure to recover the said discount and pay the balance to the service provider, from November 2009 to December 2011, the DMT has paid over Rs.37.303 million to the company,” sources said.
The sources further said, although the DMT had to take 5% procurement bond from the contractor according to Section 46.4 of the tender guidelines, only Rs 5 million has been obtained by the DMT, once again violating the tender regulations.
“This is a huge contract and a 5% procurement bond is obtained as a security bond. If the contractor fails to abide by the contractual condition, and if the contract is cancelled, the DMT can use this money to cover their loss,” sources added.
It has also revealed, although the Technical Evaluation Committee has to evaluate the condition of the driving licence once in every month to find out whether the standard of the card is the same, this has not followed and the DMT has received many complaints that these cards are not up to the standards and are easily breakable.
The sources further said that the DMT is losing revenue because of the smart card driving licence. “Although the DMT pay Rs.1, 340+VAT for the service provider which amounts to Rs.1, 530 per card, it is sold at Rs.1,700. Although the DMT say that they are earning revenue by selling the driving licences, the actual fact is it loses revenue because it has provided a building, some DMT staff and water and electricity for the contractor for free,” sources added.
The sources further said that the new card system was introduced to prevent frauds and to provide police station with reader machines. In this way the traffic police can swipe driving licences and see the history of the holders. However this method was not implemented. Werahera DMT stores have 25 of such reader machines in vain.
“What is the use of introducing smart card driving licences if it cannot fulfill its purpose? The DMT as well as the drivers incurred losses as they have had to bare a higher cost for the licence than they did earlier. The sources further said that even though the CID initiated an investigation a few years ago, due to political interference it stopped.
“Since this is a huge fraud, the CID initiated an investigation and one of the former Commissioner Generals was removed. However, this investigation came to a complete standstill. When we inquired about it from the CID, we were told that it stopped because of political interference,” sources said.
He further accused the members of the then Committee of Public Accounts (COPA) of not taking any action against the DMT although documents of these frauds have been sent to them for taking further action.
“The committee comprises parliamentarians and ministers. Generally they have to take up the issues of every ministry and department once a month or once in two months. Interestingly DMT cases have not been taken up for the past six to seven years, Customs issues for the past five years and Exercise Department issues for the past four years. The reason the COPA does not want to raise these issues is because they know influential parties and powerful politicians are behind these rackets. If the COPA or even COPE on Government Corporations, Boards and Universities won’t take up serious issues, then what is the use of having COPE and COPA via public funds,” sources claimed.
When contacted Registrar General of Public Contracts Mr. Siriwardena to know whether contracts worth over five million rupees could be awarded to a party that have not registered with his department, he said that there is no way to do so.
“Before awarding the contract the awarder has to be positive that the bidders have got our registration. The awarder has to reject unregistered companies,” Siriwardena added.