- without PPA approval; GH¢9 m & US$3m judgment debts flagged
The Bulk Oil Storage and Transportation Company Limited (BOST) extended its terminal management contract with TSL Logistics (Ghana) Limited at cost of US$1,800,000.00 for six months, without the approval of the Public Procurement Authority (PPA), the 2021 report of the Auditor-General, has revealed.
The report has noted that the management led by Edwin Provencal, Managing Director of BOST, has been involved in the payment of avoidable judgment debts to contractors – GH¢9,169,884.48 and US$3,057,096.00 669. This has particularly been blamed on one Harriet Amoah, General Manager Legal at BOST for her inability to mount strong defense for the institution. She constantly hires external lawyers, who are paid outrageous fees for their work. This defenses are nothing to write home about, according to insiders, hence the judgement debts.
Audit report confirms the extent of mismanagement going on at BOST which the Herald has in recent months highlighted, leading to court action by the Chief of Staff, Frema Opare.
Section 40 of the Public Procurement Act, 2003 (Act 663), as amended, provides that a procurement entity may engage in single-source procurement under Section 41, with the approval of the Board where the procurement entity has procured goods, equipment, technology or services from a supplier, contractor or consultant because of standardisation or compatibility with existing goods, equipment, technology or services taking into account (i) the effectiveness of the original procurement in meeting the needs of the procurement entity. (ii) the limited size of the proposed procurement in relation to the original procurement. (iii) the reasonableness of the price. (iv) the unsuitability of alternatives to the goods or services in question.
However, the audit team said: “We noted that BOST requested an extension of the Terminal Management Contract between BOST and TSL Logistics (Ghana) Limited in a letter referenced BOST/SCR.35/PPA/30171 and dated December 19, 2019, to which approval was granted by the Public Procurement Authority (PPA) with the reference PPA/CEO/01/57/20 and dated January 20, 2020, to cover a period between December 31, 2019, to March 31, 2020, at a cost not exceeding US$300,000.00”.
“However, upon expiration on March 31, 2020, the management did not obtain prior approval from PPA for the additional contract extension period of six (6) months at the cost of US$1,800,000.00 of which TSL was still engaged for their services”, the report said.
The audit team, said the management’s “disregard of the procurement law caused the anomaly”.
“The anomaly undermines the integrity of the contract between the parties, and this is a breach of the fundamental principles upon which single-source procurement is granted, as specified under Section 40 of the Act’, the report added.
“We recommended that the management provide the audit team with justifications, leading to the contravention and further write to PPA in accordance with Section 90 of Act 663, as amended failing which the offences relating to procurement under Section 92, shall be applied to the officers who authorised and sanctioned the transaction”.
The report added that, the management of BOST said: “Notice is taken of the recommendations and steps have been put in place to ratify this by 2022”.
The report, has noted that the management of the BOST, has been involved in the payment of avoidable judgment debts to contractors – GH¢9,169,884.48 and US$3,057,096.00 669.
“Section 52 of the Public Financial Management Act, 2016 (Act 921) requires a Principal Spending Officer of a covered entity to be responsible for the assets of the company under the care of the Principal Spending Officer and ensure that proper control systems exist for the custody and management of the assets. Such a control system should be capable of ensuring that preventive mechanisms are in place to eliminate theft, loss, wastage, and misuse of the assets.
“We noted that BOST continues to pay avoidable judgment debts in forms of cost and interest amounting to GH¢9,169,884.48 and US$3,057,096.00 to three contractors for breach of contract and undue delays in the payment of legitimate contract sums.
“The inability on the part of Management to make prompt payments of debts owed when are due and lack of effective dialogue and negotiations occasioned the avoidably interests and costs being paid by BOST. The payment of judgment debts is a gross drain and a financial loss on the limited resources of the company and could derail Management’s effort to attain the company’s strategic objectives.
“We recommended to Management to heed to all contract terms and indulge in negotiations rather than lawsuit in resolving disagreements.
Management Response Generation Investment Co. Ltd VRS BOST.
Observation noted. This could have been avoided if BOST was financially sound at the time. Sometime in 2014, BOST commenced negotiations in a bid to acquire 16 acres of land from Generation Investments Company Limited (GIC) for the development of Natural Gas Infrastructure at the cost of US$11,200,000.00. Negotiations between the parties stalled until June 2016 when a settlement payment plan was finally brokered. By a proforma invoice from GIC to BOST dated June 9, 2016, a three-tranche payment option was Observation noted.
This could have been avoided if BOST was financially sound at the time. Sometime in 2014, BOST commenced negotiations in a bid to acquire 16 acres of land from Generation Investments Company Limited (GIC) for the development of Natural Gas Infrastructure at the cost of US$11,200,000.00.
Negotiations between the parties stalled until June 2016 when a settlement payment plan was finally brokered. By a pro forma invoice from GIC to BOST dated June 9, 2016, a three-tranche payment option was proposed. No specific dates or deadlines for the instalment payments were indicated.
Total payments made in respect of the land stood at US$5,360,000.00 as at December 2016. Due to cash flow difficulties suffered by BOST, it could not meet its payment obligations in the manner in which it initially envisaged after making payment of almost fifty percent of the cost of the land.
On September 20, 2018, when a demand notice was received from GIC’s lawyers for payment of the outstanding balance of US$5,840,000.00, BOST subsequently met with the lawyers to negotiate payment terms after which it formally proposed to pay the balance in eleven equal monthly instalments of US$500,000.00 each from January 2019 with balance of US$340,000 to be paid in December 2019 in a letter dated December 21, 2018, due to its cash flow constraints.
Meanwhile, GIC had proceeded to file a writ for recovery of the sums on November 14, 2018. GIC, however, refused BOST’s payment proposal in a letter dated January 18, 2019, describing BOST’s proposal to be “low instalment amounts over a rather “long repayment period” and proposed terms which were onerous to BOST.
Attempts at settlement failed as BOST, could not meet the demands of GIC in the manner they were demanding.
Due to its cash flow situation, it was compelled to seek a declaration for title of the portion of land commensurate with the payments made so far at the time of the suit among others.
In the circumstances, the court was left to make a determination culminating in the judgment of November 6, 2020. The staff, who played the key roles leading to the situation are no more in the employment of BOST. As at January 1, 2022, BOST has made full payment of its obligation and we are in the process of getting the land transfer to BOST to use the land for the LPG project.
In the case of Hask Oil Company Vrs Bost, the report said that sometime in July 2013, Hask Oil delivered petroleum products in BOST’s storage tanks in its normal course of business as with other BDCs. To ascertain the actual quantities of plaintiff’s stocks as well as the balances of the other BDCs in storage, BOST engaged Ernst & Young as external auditors to investigate and validate all BDC claims. It duly informed the BDCs including Hask about the audit, at the end of which it was established that the stock balances in favour of plaintiff to which it agreed was 34,143 litres of gasoline and 1,341,571 litres of gasoil.
On May 4, 2016, BOST, released 74,824 litres of gas oil valued at GH¢109,886.15 as well as 2,350,225.42 litres of gasoline valued at GH¢3,755,648.47 to Hask at the prevailing value at the date of release. As far as BOST was concerned, the volumes of products were fully refunded to Hask Oil to cushion them against any shortfalls, and it owed it no further obligation.
BOST position was that it was never a party to the credit facility Agreement concluded between Hask Oil and the bank and ought not to be liable for any costs associated with same.
Indeed, by the findings of a Product Loss Claims Committee set up to investigate BDC claims of products loss in BOST’s system, Hask Oil ought to have refunded the entire volume of 74,824 litres to BOST as same had been made available for lifting as far back as April 2014. By a Judgement dated 21st October 2019 the High Court found in favour of Hask and granted it all the reliefs as endorsed on its writ.
Management has taken appropriate action by sanctioning the legal officer who was not present in court and had the appeal cancelled in favor of HASK Oil. The employee who was in charge of operation (B F Arthur) during the period was terminated.
West African Petroleum Company Ltd. (Wapco) Vrs BOST
On April 2, 2015, BOST, received a demand notice from WAPCO dated March 19, 2015, to the effect that it was owed an amount of US$300,000.00, for the rental of storage tanks made in November 2008.
Records available indicated that there had been a series of other transactions tied to the payment which suggested that WAPCO also owed BOST some amount of money. It was agreed between BOST and WAPCO in a meeting held on June 13, 2016, on the issue that the reconciled sum due WAPCO was US$255,423.92. BOST demonstrated good faith and paid this amount to WAPCO on July 12, 2016, which was duly acknowledged by them. At the meeting referred to above, the issue of waiver of interest by WAPCO was broached.
However, due to a delay in payment, a subsequent demand was received from WAPCO demanding a balance in interest. After negotiations BOST proposed to pay interest at the rate of 8% which was initially agreed to by WAPCO, which later changed its mind as a result of which Ecobank cheque numbered 0200461 in the sum of GH¢480,338.99 dated March 9, 2018, which was made out to them for collection had to be returned to chest.
Subsequent to the filing of a writ to recover their interest claim on March 29, 2018, both parties agreed to the payment of interest at the rate of 10percent, instead of the 12percent WAPCO had insisted on which was adopted by the Court as a consent judgement. As at Q2 2020, BOST had settled all obligation with WAPCO.