‘Procurement process for desalination rigged’

The Office of the Public Auditor has pinned down former Commonwealth Utilities Corp. chairman Herman P. Sablan as having rigged the procurement process for the 2003 seawater desalination project.

OPA analyst manager David J. Blake said in a special report that multiple and serious violations of CUC procurement regulations were committed in the bid for the desalination project.

ÅgSpecifically, CUC: (1) did not treat all proposers in a fair and equitable manner, (2) did not give adequate public notice of the project, (3) did not maintain the confidentiality of the individual proposals, and (4) the procurement selection process was flawed,Åh Blake said in a letter addressed to Gov. Benigno R. Fitial.

Blake wrote and signed the Jan. 13, 2006 letter on behalf of public auditor Michael S. Sablan, who had recused himself from the case due to conflict of interest.

According to OPA, the RFP was flawed from the issuance of the request for proposals to the selection process.

Saipan Taekwang Heavy Industries, which was selected the number one ranked proposer, knew of the project 11 months before the other proposers did. The firm had submitted an unsolicited proposal 11 months before the request for proposal was issued. This unsolicited proposal later took the form of a memorandum of understanding and the key elements of both the proposal and MOU were later incorporated into the RFP.

OPA also noted that the initial RFP gave proposers only 34 days to respond. Such action, according to OPA, gives the appearance that CUC was attempting to steer the proposal to the firm who had already received an 11-month head start.

In addition, CUC failed to keep the elements of the proposals confidential. ÅgVirtually all major components of the two competing proposals became general knowledge and were reported in various local newspaper articles,Åh OPA noted.

Furthermore, the source selection process appears to have been Ågtainted by what could be construed as the outside influence of the chairman of CUC and other faults,Åh OPA said.

Blake related that Sablan caused CUC’s internal selection committee to abandon a request for additional information from proposers, after insinuating that such action was ÅgunfairÅh because it would give other proposers additional time.

The request was meant to clarify data on cost of water, which the committee had considered incomplete or confusing.

Sablan’s intrusion also led the committee to immediately begin the ratings of the proposers, which ultimately showed that Taekwang scored 29 points higher than the leading proposer. The difference consisted primarily of a 24-point advantage in the cost of water category.

ÅgOPA finds it most disturbing that the chairman would interrupt the [Source Selection Committee] process and override the SSC’s request for additional information. In doing so, the chairman appears to have a bias in favor of an individual proposer. The argument, that giving the other proposers additional time is ‘unfair’ is ironic when the chairman already knew that the one proposer had a major head start over the competing proposers, as shown by his personal signature on the previously discussed MOU,Åh OPA said.

The majority of the CUC Board of Directors, specifically Sablan, also ignored numerous points where individual board members, outside parties, and members of the CUC management team offered prudent and responsible advice, OPA said.

ÅgIn summary, the majority of CUC’s Board of Directors, specifically its chairman, ignored the suggestions of its own board member to hire a consultant to aid in the procurement process; ignored the advice of their legal counsel to avoid solicitations from prospective vendors; ignored the results of a major, comprehensive U.S. Army Corps of Engineers report which stated the project was not a priority; ignored the advice of its legal counsel and comptroller to perform a financial feasibility study; ignored the advice of its procurement manager to cancel the RFP due to procurement improprieties; and finally ignored the recommendations of OPA and the Legislature to cancel the RFP. This is an example of imprudent, irresponsible management which resulted in a waste of both human and financial assets of CUC,Åh OPA said.

The Public Auditor’s Office recommended that:

– The CUC Board of Directors establish an acceptable, transparent policy for all future ÅgunsolicitedÅh proposals received by CUC or individual board members;

– The board stick to their mission of establishing policies and procedures, stay out of CUC’s daily operations, and refrain from overriding operational decisions made by their appointed managers;

– The board adopt a policy that individual board members, including chairpersons or committee chairpersons, are prohibited from signing, approving, or publicly endorsing any proposal, MOU, or contract unless or until it has been submitted to the entire board; and

– The governor give due consideration as to the effectiveness, ethics, and capability of key CUC officials, and take corrective action against those officials who committed ethical violations.