Sindh Irrigation Department leaves small contractors out to dry

Kamran Ali Jalbani is a small-scale government contractor. He has been carrying out civil works for the Sindh Irrigation Department for over a decade. The projects he usually works on are meant to strengthen river embankments, ensure the smooth flow of water from barrages to canals and keep canals and water courses in working condition.

Jalbani, in his forties, travels to Karachi once every week from Hyderabad, where he lives. The major objective of the visit is to get his bills cleared from the irrigation department’s head office at the Sindh Secretariat. The visits also help him collect information about any new projects in the offing that he can bid for.

In 2013, he discovered during one of his visits that the department had nearly stopped advertising smaller contracts worth 10 million to 12 million rupees. Instead of floating tenders for small projects separately, the department had started clubbing several such projects under one big package, inviting expressions of interest from pre-qualified contractors — those already eligible to offer bids, he says.

One of the allegations cited in the notices was that the two officialshad made payments to the contractors, without ensuring that the worksundertaken were completed.

The eligibility criteria goes like this: Government contractors obtain certifications from the Pakistan Engineering Council. Those certificates put them in different categories, in consonance with the cost of the contracts they are eligible to bid for. No cost limits apply to the contractors falling in category C-A, while contractors in category C-B can apply for contracts costing not more than three billion rupees. Those in the two lowest categories (C-5 and C-6) cannot bid for projects costing more than 50 million and 20 million rupees, respectively.

There are technological, financial and human resource requirements for contractors to get into a certain category: the lower the category, the lower the requirements. Since earth filling and stone pitching are low-cost, low-tech and labour-intensive projects, they are usually awarded to contractors falling in C-5 and C-6 categories. But when many of these projects are clubbed together in one contract, the estimated cost makes smaller contractors ineligible to take part in the bidding process.

For small contractors like Jalbani, it “was like becoming unemployed all of a sudden”. He is right to the extent that, according to his claim, his firm did not receive any government contract for the entire year of 2015.

On November 13, 2014, the superintendent engineer of Khairpur irrigation circle released a newspaper advertisement, inviting pre-qualified applications from interested contractors. (He was not qualified to do so under the government’s own rule that empower only the executive engineer of a division for the same.) The advertisement did not specify the sites and cost of the works to be done. It also did not explain the nature of the work to be contracted out.

These “flaws” prompted Jalbani and another petitioner to move the Sindh High Court against the inviting of applications. They asked the court to abolish the practice of inviting applications for works such as canal lining, earth filling, construction of retaining walls, stone pitching, etc. Instead, they pleaded, the irrigation department should directly invite contractors already pre-qualified through Pakistan Engineering Congress certification to bid for those works.

For small contractors like Jalbani, it “was like becoming unemployedall of a sudden”.

Jalbani and the other petitioner also alleged the department officials in Khairpur had kept the nature and the cost of the works unspecified, leaving many contractors wondering if they could take part in the bidding process at all. Clubbing together many small projects in a single contract bid also meant that contractors in lower categories were excluded from the process — the estimated cost of the whole contract having gone beyond the legal limits they operate within. The two factors together gave the officials the implicit discretion to pick and choose which contractor could participate in the bidding process and which ones could not.

Later developments confirmed their concerns. While the petitions were being heard in the court, the irrigation department formed a committee to probe the awarding of contracts under the Annual Development Programme 2014-2015 in Khairpur East and West irrigation divisions. The committee’s report shows that 10 out of 11 contracts in the Khairpur East division were awarded to two companies: M/S Hyder Ali Jarwar and M/S Ghulam Sarwar and Company. Seven out of 13 contracts in Khairpur West were also awarded to the same firms. The total cost of the contracts awarded to them stood at 1.5 billion rupees. The projects that went to other firms were worth only 0.64 billion rupees.

The committee also pointed out that the bidding documents did not abide by the Sindh Public Procurement Regulatory Authority (SPPRA) rules, as they should have. Clause 27 of the Sindh Public Procurement Rules (SPPRs), for instance, allows seeking pre-qualification of contractors for only expensive and complex works and services to ensure that the invitation to bids is extended to those who have the adequate technological, human and financial resources to carry out those works. The works done in Khairpur East and Khairpur West did not require the contractors to have sophisticated equipment, highly skilled human resources and extensive financial sources.

During one of the hearings of the case in January this year, the court was inclined to refer the matter to the National Accountability Bureau (NAB). The irrigation secretary, however, assured the court that an honest officer would investigate and personally scrutinise the process of awarding the disputed contracts. That officer would submit his report within seven days, the secretary further promised. The judge granted this request.

On January 20, 2016, the irrigation department placed some documents before the court. These included show-cause notices to be issued to the then executive engineer of the Khairpur West division, Khan Bahadur Ujjan, and the Executive Engineer Khairpur East division, Ayaz Ahmed, under Section three of the Removal From Services (Special Powers) Sindh Ordinance, 2000.

One of the allegations cited in the notices was that the two officials had made payments to the contractors, without ensuring that the works undertaken were completed. Taking note of the allegations, the Sindh High Court directed the NAB chairman to scrutinise all the irrigation department contracts under the Annual Development Programme 2014-2015 for the Khairpur East and Khairpur West divisions. That scrutiny is still under way and the officials concerned are facing various inquiries and other departmental actions.

Contractors such as Jalbani argue that the court should have extended the NAB scrutiny to all irrigation department projects across Sindh, since (in some instances) money at stake has been much more than that reportedly embezzled in the two divisions in Khairpur. They cite the example of the rehabilitation and lining of Jamrao Canal, in Mirpur Khas, that is to be done at a whopping 9.12 billion rupees.

“Works like rehabilitation and lining are difficult, even impossible, to verify,” says Jalbani. Water can be shown to have washed away stones and earth utilised in such works. Most of these projects are thus only done on paper and the money allocated for them finds its way into the pockets of officers of the concerned irrigation divisions, he alleges.

Even when the jury is out on all this, one thing is already quite wellknown: something is terribly rotten at the irrigation department.

The documents pertaining to the project show that the contract awarding process for the rehabilitation and lining of Jamrao Canal was flawed from the beginning. The SPPRs state that international competitive bidding should be the default method for all contracts with an estimated cost of 10 million dollars or more. In this case, the original cost of the project was 9.12 billion rupees or 90 million dollars — and, yet, no international bids were invited.

The SPPRs also state that the advertisement for such a project should be published in two widely circulated local English-language newspapers and an internationally known website or any widely-circulated international English-language newspaper. The advertisement, however, was only published in local newspapers.

Taking notice of these violations, the SPPRA wrote to Amjad Ahmed Memon, executive engineer at Mirpur Khas division, on May 5, 2015, advising him to invite open international competitive bidding. He, however, did not pay heed to the letter and continued with the bidding process.

In the meanwhile, other discrepancies were creeping into the process.

While the estimated cost of the project in the original advertisement was set at 9.12 billion rupees, the executive engineer changed it to 9.04 billion rupees in the second advertisement – published on June 17, 2015 – meant to invite pre-qualification applications. A corrigendum was published on July 22, 2015, and then a third advertisement was issued a month later — this time without mentioning the estimated cost, the amount for security deposit and the fee for participation in the bidding process.

Jalbani offered the lowest price to undertake all that work, but hestill could not get the contract.

The SPPRA reminded the executive engineer about the violation of procurement rules. This time, too, he ignored the authority’s advice and continued with the bidding process. The contract was finally awarded to M/S Sardar Ashraf D Baloch (Pvt) Ltd on October 10, 2015. Two months later, the firm was asked to start working on the project.

One Ghulam Hussain, in the meantime, moved the Sindh High Court against the contract. He pleaded the executive engineer had misguided SPPRA officials by writing a letter claiming that permission to limit the contract awarding process to Pakistan-only competitive bidding was accorded by the irrigation department’s secretary. “The then Director Nara Canal and Executive Engineer (Chairman Procurement Committee)/secretary/member have fully discussed the matter of approval with the worthy secretary irrigation department and it has been informed by [the] secretary that [the] signature of [the] section officer is valid and the same [was] issued after the approval of [the] competent authority as likewise the permission was also issued for the scheme of Rohri Canal,” read the heavily worded letter written by the executive engineer. The petitioner alleged the letter did not categorically state that the secretary had approved the limiting of the bidding process to national-level contractors only. The matter is pending trial.

During the hearing of Jalbani’s petition at the Sindh High Court last month, he informed the judges that the executive engineer of Saifullah Magsi irrigation division, Muhammad Bux Seeru, had invited bids for rehabilitation, de-silting and stone pitching work of the Saifullah Magsi Branch, an offshoot of the North Western Canal. Jalbani offered the lowest price to undertake all that work, but he still could not get the contract.

On June 16, 2016, Bhai Khan Lakho, superintending engineer of the Saifullah Magsi Branch, gave the court a lengthy explanation on why the contract had not gone to Jalbani. He, however, failed to explain how the contract was then awarded to a contractor who bid to do the same work for almost twice the money that Jalbani had offered in his bid.

Even when the jury is out on all this, one thing is already quite well known: something is terribly rotten at the irrigation department. A senior official of the department agrees the entire process of awarding contracts suffers from serious flaws. A “well-documented chronicle of irregularities and illegalities” is what he calls it.

This article was originally published in the Herald's September 2016 issue under the headline "In hot water". To read more subscribe to the Herald in print.