PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS AUTHORITY

PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS AUTHORITY APPLICATION FOR ADMINISTRATIVE REVIEW IN RESPECT TO THE TENDER FOR COMPREHENSIVE INSURANCE FOR VEHICLES ENTITY: UGANDA BUREAU OF STATISTICS COMPLAINANT: M/S GOLDSTAR INSURANCE CO. LIMITED July 2011 1 of 15

ACRONYMS AAR - Application for Administrative Review AO - Accounting Officer EC - Evaluation Committee ITB - Instructions to Bidders MAC - Management Advisory Committee PDE - Procuring and Disposing Entity PDU - Procurement and Disposal Unit PPDA - Public Procurement and Disposal of Public Assets Authority PPDA Act - Public Procurement and Disposal of Public Assets Act 2003 PPDA Regns. - Public Procurement and Disposal of Public Assets Regulations UBOS - Uganda Bureau of Statistics 2 of 15

ANEXES: Anex1: Best Evaluated Bidder Notice. Anex2: Application for Administrative Review to the Accounting Officer Anex3: Decision of the Accounting Officer dated 10 th June 2011 Anex4: Application for Administrative Review to the Authority dated 13 th June 2011 Anex5: PPDA s letter dated 16 th June 2011 to the Accounting Officer suspending procurement process. Anex6: Letter dated 10 th February 2010 from the Uganda Insurers Association to all Chief Executive Officers of member companies. Anex7: Letter dated 24 th June 2011 from the Uganda Insurance Commission to PPDA 3 of 15

BACKGROUND 1.1 Uganda Bureau of Statistics initiated the procurement for provision of Comprehensive Insurance for vehicles. The Contracts Committee on 13 th January 2011 approved the following: i. The invitation to bid document; and ii. The Evaluation Committee comprising of the following persons: Mr Muhwezi Bernard - Chairperson; Mr Ojok Victor Ogwal - Senior Supply and Logistics Officer; Mr Dhikusooka Henry - Senior Procurement Officer; Mr Tweisgye Byron - SFOO; Mr Benard Obel - Assistant Commissioner-Technical( Uganda Insurance Commission) 1.2 The procurement was advertised in the New Vision and Monitor newspapers of 23 rd February 2011. 1.3 According to PP Form 31, the following fifteen (15) firms were issued with the solicitation document: i. M/s Lion Assurance Co. Limited; ii. M/s Excel Insurance C. Limited; iii. M/s Leads Insurance Limited; iv. M/s Chartis Uganda Insurance Co. Limited; v. M/s AON Uganda Limited; vi. M/s Legacy Insurance Services Limited; vii. M/s Statewide Insurance Co. Limited; viii. M/s UAP Insurance Company Limited; ix. M/s National Insurance Corporation; x. M/s Eagle Africa Insurance Services Limited; xi. M/s Britam Insurance Co Limited; xii. M/s Goldstar Insurance Limited; xiii. M/s Padre Pio Insurance Brokers; and xiv. M/s NIKO Insurance Uganda Limited. 4 of 15

1.4 The deadline for submission of bids was 4 th April 2011 at 11:00am and the following firms submitted bids according to PP Form 34: i. M/s Insurance Co. of East Africa; ii. M/s Statewide Insurance Co. Limited; iii. M/s National Insurance Corporation; iv. M/s Excel Insurance Co. Limited; v. M/s Goldstar Insurance Limited; vi. M/s Leads Insurance Limited; vii. M/s NIKO Insurance Uganda Limited; viii. M/s Britam Insurance Co Limited; ix. M/s UAP Insurance Company Limited; and x. M/s Lion Assurance Co. Limited; 1.5 Bids were opened on the same day in the UBOS, PDU office at 11:30am 1.6 Bidders were required to accompany the bids with a bid security of Ushs. 2,000,000/=. 1.7 The evaluation methodology approved by the Contracts Committee for this procurement was Quality and Cost Based Selection (QCBS) which is the evaluation methodology that takes into account both the quality and the cost of the bids in a process under which technical bids are evaluated without access to the financial bids. 1.8 According to the evaluation report, the following seven (7) firms failed the preliminary evaluation due to the reasons stated below: i. M/sUAPInsuranceCompanyLimited Failure to submit a notarised Power of Attorney. Failure to submit evidence of purchasing the bid document. i. M/sBritamInsuranceCoLimited Failure to submit evidence of purchasing the bid document. Failure to submit evidence of similar contracts to show experience of the firm. i. M/sNational InsuranceCorporation Failure to submit a practising licence. 5 of 15

Failure to submit audited accounts for the past two financial years. iv. M/sLeadsInsuranceLimited Failure to submit a valid bid security. v. M/sStatewideInsuranceCo. Limited Failure to submit a valid bid security. Failure to submit a practising licence. Failure to submit evidence of being a member of the Uganda Insurers Association. vi. M/sExcel InsuranceCo. Limited Failure to submit an income tax clearance certificate. Failure to submit a notarised Power of Attorney. Failure to submit Articles and Memorandum of Association. vi. M/sInsuranceCo. ofeastafrica Failure to submit evidence of purchasing the bid document. Failure to submit a practising licence. Failure to submit Articles and Memorandum of Association. 1.9 The following three(3) firms passed the preliminary evaluation and were recommended for the detailed technical and commercial evaluation: i. M/s NIKO Insurance Uganda Limited; ii. M/s Goldstar Insurance Limited; and iii. M/s Lion Assurance Co. Limited. 1.10 According to the evaluation report, no bidder was eliminated at the commercial evaluation stage. 1.11 Technically, a minimum qualification score of 80% was set and the three firms scored as follows: Score i. M/s NIKO Insurance Uganda Limited 95% ii. M/s Goldstar Insurance Limited 95% iii. M/s Lion Assurance Co. Limited 92.5% 6 of 15

1.12 On 11 th April 2011, the Evaluation Committee recommended that the financial bids of the three (3) firms be opened. 1.13 According to PP Form 35, the following were the prices that were read out at the bid opening which was held on 4 th April 2011. No. Bider BidSecuritysubmited (UgShs/USD) BidPrice (UgShs/USD) 1. M/s Insurance Co. of Ushs 2,000,000/= Ushs 98,256,270/= East Africa 2. M/s Statewide Ushs 2,000,000/= Ushs 98,033,200/= Insurance Co. Limited ( taxes 53,000/=) 3. M/s National Ushs 2,000,000/= Ushs 103,003,684/= Insurance Corporation (taxes 125,000/=) 4. M/s Excel Insurance Ushs 2,000,000/= Ushs 102,865,685/= Co. Limited (taxes 217,000/=) 5. M/s Goldstar Ushs 2,000,000/= Ushs 103,128,683.98/= Insurance Limited ( taxes 263,000/=) 6. M/s Leads Insurance Limited Ushs 2,000,000/= Ushs 98,003,270/= ( taxes 115,000/=) 7. M/s NIKO Insurance Ushs 2,000,000/= Ush 98,003,270/= ( taxes Uganda Limited(BEB) free) 8. M/s Britam Insurance Ushs 2,000,000/= Ushs 103,198,684/= Co Limited 9. M/s UAP Insurance Company Limited Ushs 2,000,000/= Ushs 98,256,270/= ( taxes 253,000/=) 10. M/s Lion Assurance Co. Limited Ushs 2,000,000/= Ushs 98,003,270/= (153,000/= 1.14 On 11 th April 2011, the Evaluation Committee concluded its report where M/s NIKO Insurance Uganda Limited was recommended as the Best Evaluated Bidder at a bid price of Ushs 98,003,270/= inclusive of local taxes. 7 of 15

1.15 On 13 th April 2011, the Entity s Contracts Committee approved M/s NIKO Insurance Uganda Limited as the Best Evaluated Bidder for the provision of comprehensive insurance services at an estimated cost of Ushs 98,003,270/=. 1.16 The Notice of BEB was displayed on 20 th April 2011, indicating M/s NIKO Insurance Uganda Limited as the Best Evaluated Bidder for the provision of comprehensive insurance services at an estimated cost of Ushs 98,003,270/=. (Anex1).The removal date of the BEB Notice was 5 th May 2011. 1.17 On 9 th May 2011, the Entity forwarded the draft contract document to Solicitor General for approval. 1.18 On 16 th May 2011, M/s Goldstar Insurance Co Limited applied for Administrative Review to the Entity. The Accounting Officer, in a letter dated 27 th May 2011, advised M/s Goldstar Insurance on the necessary Administrative Review fees payable. 1.19 On 10 th June 2011, the Accounting Officer issued his decision, rejecting the Administrative Review and upheld the decision of the Contracts Committee to award the contract to M/s NIKO Insurance Uganda Limited. Anex2 1.20 On 13 th June 2011, M/s Goldstar Insurance Co. Limited applied for Administrative Review to the Authority.Anex3 1.21 On 16 th June 2011, in accordance with Regulation 347 (4) (a) and (b) of the PPDA Regulations 2003, PPDA informed the Accounting Officer of the Application for Administrative Review by M/s Goldstar Insurance Company Limited and directed the Entity to suspend the procurement process and submit the procurement action file to the Authority. Anex4 1.22 On 22 nd June 2011 in accordance with Regulation 347 (4) (c)of the PPDA Regulations 2003, PPDA communicated to all the bidders who participated in the above procurement process and invited them to submit relevant information. Anex5 8 of 15

1.23 On 28 th June, the Authority held a hearing where the complainant, the Best Evaluated Bidder, the Uganda Insurance Commission and the Entity were represented. 2.0 LEGALPROVISIONSAPLICABLE 2.1 The Public Procurement and Disposal of Public Assets Act No. 1 of 2003. 2.2 The Public Procurement and Disposal of Public Assets Regulations No. 70 of 2003. 2.3 The Public Procurement and Disposal of Public Assets Procurement Guidelines 2.4 The Solicitation document. 3.0 METHODOLOGY In investigating the Application for Administrative Review the Authority adopted the following methodology: 3.1 Analysis of the following documents: a. Bid Notice/Advert. b. Bidding document. c. Record of bid opening. d. Bid proposals submitted by all bidders. e. The evaluation report. f. Minutes of the Evaluation Committee. g. Minutes of the Contracts Committee. h. Notice of the Best Evaluated Bidder. i. Application for Administrative review by M/s Goldstar Insurance Company Limited to the Accounting Officer j. Decision of the Accounting Officer to M/s Goldstar Insurance Company Limited k. Submissions of M/s Goldstar Insurance Company Limited at the Administrative review hearing: l. Submissions from other bidders who participated in the above tender. 3.2 PPDA convened an Administrative Review hearing on Tuesday 28 th June 2011 in order for M/s Goldstar Insurance Company Limited to present its case and Uganda Bureau of 9 of 15

Statistics to defend their decision. The Administrative Review hearing was attended by an official from M/s Goldstar Insurance Company Limited, officials from the Uganda Bureau of Statistics, officials from M/s Niko Insurance Limited and officials from Uganda Insurance Commission. These included the following: NAME TITLE FIRM/ INSTITUTION 1 Solomon Rubondo Chief Operations Officer M/s Goldstar Insurance Co. Ltd. 2. Frances Mashate Deputy Executive Director. Uganda Bureau of Statistics 3. Henry Dhikusooka Head Procurement and Uganda Bureau of Dsiposal Unit Statistics 4. Ojok Victor Ogwal Senior Officer, Supplies Uganda Bureau of and Logistics Statistics 5. Bernanrd Justus PGIO Uganda Bureau of Muhwezi Statistics 6. Byron Twesigye Senior Officer, Surveys Uganda Bureau of Division Statistics 7. Obel Bernard D Assistant Commissioner Uganda Insurance Commission. 8. Racheal Kabala Senior Legal officer Uganda Insurance Commission. 9. Ronald Zake Managing Director M/s Niko Insurance Limited 10 Bashabe Simon Head of Marketing M/s Niko Insurance Limited 4.0 FINDINGSOFTHEAUTHORITY. M/s Goldstar Insurance Company Limited in its Application for Administrative Review to the Accounting Officer dated 16 th May 2011 raised the following grounds: 10 of 15

We note that this tender was awarded to M/s NIKO Insurance (U) Limited at Ushs 98.003.270/= as the best evaluated price and hereby raise our objection on the grounds that the premium for the Motor Commercial Bid forming part of this tender was derived from a rate of 4% which is below the minimum approved rate of 5% for pick ups. The Application for Administrative Review was rejected by the Accounting Officer and he upheld the decision of the Contracts Committee to award the contract to M/s NIKO Insurance Uganda Limited. M/s Goldstar Insurance Company Limited in the Application for Administrative Review to the Authority dated 11 th June 2011 applied for Administrative Review and requested for the Authority s intervention into the matter. 4.1 FindingsoftheAuthorityonthegroundraised The Accounting Officer in his decision to M/s Goldstar Insurance Co. Limited dated 10 th June 2011 stated as follows: In the process of evaluating for the pick ups, the rate of 4% was used as opposed to 5% that applies for commercial vehicles. You may note that our institution is not doing any commercial activity other than providing a social service as a government parastatal and as enshrined in the UBOS Act, 1998. All the above was done with the guidance from the Uganda Insurance Commission which had membership on the Evaluation committee M/s Goldstar Insurance Co. Limited, in a letter dated 11 th June 2011, addressed to the Accounting Officer stated that the Uganda Insurance Commission had misguided the Accounting Officer. Attached to their letter, was a letter dated 10 th February 2010, from the Uganda Insurers Association addressed to all Chief Executive Officers of member companies which laid down the approved minimum premium rates. Anex6. According to the letter from the Uganda Insurers Association, the following were the approved premium rates: 11 of 15

i. Motor Cycles 10%( single) 7.5% (fleet) ii. Private 4% iii. Commercial vehicles/goods-own carriage 5% iv. Commercial vehicles/goods-general carriage 6% v. School buses/pmo 6% vi. Buses/PSV-Commercial 7.5% vii. Oil tankers 7.5% The Authority, in a letter dated 22 nd June 2011, requested the Commissioner for Insurance, Uganda Insurance Commission, for technical guidance on the above rates. Anex7 On 24 th June 2011, the Authority received a response from Uganda Insurance Commission in respect to the minimum premium rates which, among others, stated as follows: i. We clarify that whilst considering insurance for pick ups and indeed other vehicles, the minimum premium chargeable is derived from the use of the vehicle; ii. If the pick up vehicles, are not used for commercial purposes( business of buying and selling goods and services with the aim of making profit), then they are used for private purposes and the minimum rate for the private vehicles of 4% should apply On 28 th June 2011, during the hearing, the Authority received a letter from the Uganda Insurance Commission dated the same day, in respect to the issue and clarity of the minimum premium rates which stated as follows: 1. We have reviewed the premium rates in respect of Motor Vehicles and based on our findings, we state as follows: i. The Uganda Insurers Association (Association) proposes the premium rates and after consultations submits them to the Commission for approval under section 15(d) of the Insurance Act Cap 213 Laws of Uganda, 2000. The parties to the dispute i.e. M/s Goldstar Insurance Company Limited and NIKO Insurance 12 of 15

Company (U) Ltd are both members of the Association and key stakeholders in the premium setting process. ii. On some occasions, similar controversies in the tender process have come up in respect of premium rates for Pick-Ups belonging to Statutory Authorities or quasigovernment organizations resulting in complaints being lodged to the Commissioner and the Public Procurement and disposal of Assets Authority (Authority). iii. Our Consultation on the issue with the other members, Insurance Practitioners and even members of the Insurers Association Technical Committee which is responsible for the setting of the said rates has yielded conflicting positions. iv. It is evident that the matter might not have been foreseen during the proposal stage and consensus was not reached thus resulting in the uncertainty and /or ambiguity in interpretation of the document detailing the premium rates concerning it. v. The problem is likely to re-occur unless it is definitively clarified at this instance and agreed upon by all the stakeholders. 2. In the premises, we propose that the matter be referred to the Association, for clarification with a view to coming up with a clear position which will guide the industry in the instant dispute and in the future. 3. Once the Association has reviewed and come up with the appropriate proposal, it will be forwarded to us for approval. We shall then advise you and, indeed, all the stakeholders on the applicable premium rates for organizations like Uganda Bureau of Statistics (UBOS). 4. We therefore propose that UBOS extends its Comprehensive Motor Vehicle Insurance Cover with the current provider for at least three months within which to we hope the process of clarifying on the rates issue will have been finalized and appropriate tendering done. 13 of 15

From the contents of the above letter, from Uganda Insurance Commission, which was the technical advisor for the Entity during the Evaluation process, it is clear that the entity was misguided on the issue of the interpretation of private and commercial vehicles vis a viz the premium rates. DecisionoftheAuthorityonthegroundraised The Authority, finds merit on the ground raised by M/s Goldstar Insurance Company Ltd since, by their letter, the Uganda Insurance Commission admitted that there was lack of proper interpretation of the private and commercial vehicles vis a viz the premium rates. The Entity could not proceed with the current procurement process since the standard rates to be used are not yet ascertained by the Uganda Insurance Commission as stated in the letter dated 28 th June 2011; It was not tenable to keep the current procurement process for another three (3) months or more without hurting the bidders. OBSERVATIONS 5.1 Methodofbidsubmision Under PPDA Regulation198(3), it is stated that the method of bid submission under the Quality and Cost Based selection shall be one stage two envelope method. The Entity, however, used the one stage envelope method where the financial bids were also opened and the prices of the respective bidders were read out at the bid opening. The Entity erred by opening the financial bids together with the technical bids contravening the principles of the QCBS evaluation methodology. 5.2 RequirementofPowerofAtorney The requirement in the Bid data sheet was for submission of a Power of Attorney. However, as noted above, M/s UAP Insurance Company limited and M/s Excel Insurance 14 of 15

Co. Limited were eliminated for failure to submit a notarised Power of Attorney which was never requested for by the Entity, and this was wrong. A notarized Power of Attorney is only required from foreign bidders and not locals. The two local firms (M/s UAP Insurance Company Limited and M/s Excel Insurance Co. Limited) were therefore wrongly eliminated from the procurement process. 5.3 BidValidity The PPDA User Guide, June 2005, states that the Bid validity period shall be inworking days. However, the Entity required the bid validity of 120 calendardays. 5.4 The Uganda Insurance Commission, which is a sector regulator, was involved on the evaluation of the bids and this created a conflict of interest. This was wrong. 6.0 DECISIONOFTHEAUTHORITY In accordance with Section91(4) of the PPDA Act and PPDA Regulation347(6) based on the findings and observations of the Authority during the Administrative Review process, the decision of the Authority is that the Application for Administrative Review by Ms Goldstar Insurance Uganda Limited Ltd is upheld. The Entity is directed to cancel the procurement process and refer the matter back to Uganda Insurance Commission for guidance. 15 of 15