Failure of Luganville Municipality to Comply with Tender Requirements [2003] VUOM 3; 2003.03 (12 March 2003)

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FAILURE OF LUGANVILLE
MUNICIPALITY TO COMPLY WITH
TENDER REQUIREMENTS

In March 1999, Luganville Municipality contracted with Northern Islands Stevedoring Company Limited (NISCOL) to carry out road works for the Municipality without putting the work to tender, as required by law.

Mr Kalmer Vocor, who was both a councillor and the general manager of NISCOL, did not absent himself from the discussion, but played a major part in the decision. Although invoices were sent by NISCOL to the Municipality, they remained unpaid as at the date when the Ombudsman completed this investigation.

∑ There is evidence that councillors ignored basic legal requirements to put all contracts to tender and instead contracted with NISCOL, breaching both the Municipalities Act and Leadership Code Act. Excuses advanced by some of the councillors are neither convincing nor effective as legal defences.

∑ There is strong evidence that Mr Kalmer Vocor placed himself in a position where his interests as a councillor conflicted with his interests as general manager of NISCOL, further breaching the Leadership Code Act.

∑ There were serious record-keeping deficiencies in the accounting system of Luganville Municipality early in 1999 that the current, newly appointed, accountant is trying to remedy.

∑ The Minister for Internal Affairs audit Luganville Municipality for compliance with the legislative tender requirements and remind both Luganville and Port Vila Municipalities of the requirements to put contract to tender when required by law.

∑ The Public Prosecutor consider taking action against the councillors who were involved in the decision to enter into the contract with NISCOL for breaches of the Municipalities Act and Leadership Code Act.

∑ The Public Prosecutor consider additional charges against
Mr Kalmer Vocor in relation to conflict of interest.

∑ The Minister of Internal Affairs investigate the accounting system in place within Luganville Municipality and ensure that it is adequate and complete.

1.1 The Constitution and the Ombudsman Act allow the Ombudsman to investigate the conduct of government, and government agencies, including Luganville Municipal Council and NISCOL.

1.2 The Leadership Code Act allows the Ombudsman to look into the conduct of Leaders, including the councillors of Luganville Municipality and the general manager of NISCOL.

2.1 The purpose of this paper is to present the Ombudsman’s findings as required by the Constitution, Ombudsman Act and Leadership Code Act..

2.2 The scope of this investigation is to establish the facts about the decision by Luganville Municipal Council ("LMC") to engage Northern Islands Stevedoring Company Limited ("NISCIL") to undertake road works for the Municipality during early 1999 without putting the works to tender, to determine whether there is evidence that the councillors breached provisions of the Leadership Code Act in doing so and to examine the role of Mr Kalmer Vocor, who held positions both as LMC councillor and general manager of NISCOL.

2.3 This Office collects information and documents by informal request, summons, letters, interviews and research.

4.1 On 18 and 19 March 1999, the Finance Committee of LMC met and discussed the condition of roads within the municipal boundaries. According to the minutes (Appendix A) a decision was made to engage NISCOL to carry out road works for the Municipality during a one-week period and then put further road works out to public tender.

4.2 Subsequently, NISCOL carried out various road works and issued invoices no. 23448 in relation to "Road maintenance - Sarakata" for Vt195,244 (Appendix B) and no. 23449 for "Road Maintenance - Sea Wall" for Vt300,206 (Appendix C), a total of Vt495,450. Both invoices stated the client to be "Luganville Municipal Santo" and were dated 13 April 1999.

4.3 On 13 August 1999, the then Town Clerk, Mr Karl Batick, wrote to the Ombudsman in response to an enquiry made as part of this investigation (Appendix D). He stated that LMC had not paid NISCOL for the work at that time.

4.4 On 17 August 1999 the then Lord Mayor, Mr Roy Bongelan, wrote to the Ombudsman in response to an enquiry made as part of this investigation (Appendix E). In his letter he acknowledged that the Council had decided to engage NISCOL to carry out road works for one week without tender.

4.5 ON 19 August 1999 the then deputy Lord Mayor and General Manager of NISCOL,
Mr Kalmer Vocor wrote to the Ombudsman in response to an enquiry made as part of this investigation (Appendix F). Among other comments, he also stated that NISCOL had not been paid by LMC for the road works.

4.6 On the copy of invoice 23448 held by LMC (Appendix B), the following handwritten inscription appears:

4.7 This suggests that a payment or "contra" entry of some description for Vt367,240 was netted off by LMC to reduce the amount outstanding under the invoices from Vt495,450 to Vt128,210. The LMC accountant, Ms Marina Moli, has only held the position since mid-2002 and informed this office that she had been unable to locate any explanation for the apparent contra in the municipal files for the period which, she indicated, were incomplete and poorly organised.

4.8 The Ombudsman has been unable to contact the former LMC treasurer,
Mr Oscar Buleuru whom, it was hoped, would have been able to explain the handwritten notation.

4.9 Ms Moli advised that she could find no evidence of the NISCOL invoices having paid as at 7 October 2002. The General Manager of NISCOL also stated in a letter dated 7 November 2002 that no payment had been received from LMC (see Appendix G).

5.1 Before starting this enquiry, the Ombudsman notified all people or bodies complained of and gave them the right to reply. Also, a working paper was provided prior to preparation of this public report to give the individuals mentioned in this report another opportunity to respond.

6.1 Finding 1: The Ombudsman finds evidence that LMC breached the law when it contracted with NISCOL to carry out road repairs without putting the work out to public tender.

6.1.1 Section 27(2) of the Municipalities Act [CAP 126] prevents a council from entering into any contract for execution of work except after publicly calling for tenders.[i]

6.1.2 The fact alleged by Mr Kalmer Vocor in his letter dated 19 August 1999 (Appendix F) that not other tenders were received when later road works were put to tender is irrelevant and provides no excuse for breaking the law.

6.1.3 Nor is the urgency alleged by Mr Vocor, and also by Mr Roy Bongelan in his letter (Appendix E), an excuse to proceed other than in accordance with the law. In any event, the councillors had had approximately six months since their election to take action and to suggest that, after six months, the roads suddenly had to be repaired "immediately", rather than comply with the law by putting the work to tender is evidence of a lack of planning and mis-management by the councillors.

6.1.4 Equally, the fact that the contract was only going to cover a one-week period does not prevent the actions of LMC from being a breach of the law. Its only relevance may be to mitigate any sentence handed down by the Court on conviction.

6.1.5 The minutes of the meeting (Appendix A) suggest a disturbing ignorance by the councillors of the most fundamental legal requirements of their office - the need for public tenders.

6.2 Finding 2: The evidence unearthed by the Ombudsman during this investigation justifies charges being laid against the councillors who were present at the committee meeting where the decision to contract with NISCOL was taken for breaches of the Leadership Code Act.

6.2.1 The following is a list of the breaches of the Leadership Code Act (and, where applicable, the Constitution) by the councillors for which the Ombudsman had found evidence:

Section	Provision	Penalty on conviction
Article 66(a)(d)	A leader must not endanger or diminish respect for and confidence in the integrity of the Government of Vanuatu	Fine not exceeding VT5 million or imprisonment not exceeding 10 years
Section 3	A leader must avoid behaviour likely to bring his or her office into disrepute	Fine not exceeding VT2 million
Section 3	A leader must ensure that he or she is familiar with and understands the laws that affect the area or role of his or her leadership	Fine not exceeding VT2 million
Section 13(1)(a)	A leader must comply with and observe the law.	Fine not exceeding Vt5 million or imprisonment not exceeding 10 years.
Sections 28, 29	Failing to comply with another enactment is a breach of the Code	Fine not exceeding VT2 million

6.2.2 The Court, on conviction, may also impose additional penalties such as dismissal, disqualification and loss of employment benefits.

6.3 Finding 3: There is strong evidence that Mr Kalmer Vocor placed himself in a position where his interests as a councillor and his interests as general manager of NISCOL were in conflict.

6.3.1 The fact that NISCOL has not recovered its outstanding debt of Vt495,450 from LMC after over three years is strong evidence that Mr Vocor has improperly allowed the interests of LMC to come in front of the interests of NISCOL and its shareholders.

6.4 Finding 4: There were serious record-keeping deficiencies within the accounting section of LMC early n 1999.

6.4.1 The current municipal accountant (who was not employed by LMC at the time in question) has been unable to locate records that a properly maintained system would show.

6.4.2 The Ombudsman understands that the current accountant is improving the situation.

6.5 Finding 5: The Ombudsman has found no explanation for the apparent "contra" noted on invoice no.23448.

6.5.1 Having no evidence of the meaning of this notation or how it was put into effect, the Ombudsman cannot say whether it shows any improper dealings between LMC and NISCOL.

6.5.2 However, it represents an irregular accounting practice and emphasises the poor record-keeping practices mentioned above.

7.1 The Minster for Internal Affairs audit Luganville Municipality for compliance with the legislative tender requirements and remind both Luganville and Port Vila municipalities of the requirement to put contracts to tender when required by law.

7.2 The Public Prosecutor consider taking action against the Councillors who were involved in the decision to enter into the contract with NISCOL for breaches of the Municipalities Act and Leadership Code Act.

7.3 The Public Prosecutor consider additional charges against Mr Kalmer Vocor in relation to conflict of interest.

7.4 The Minister for Internal Affairs investigate the accounting system in place within Luganville Municipality and ensure that it is adequate and complete.

66(1) Any person defined as a leader in Article 67 has a duty to conduct himself in such a way, both in his public and private life so as not to -

(a) place himself in a position in which he has or could have a conflict of interests or in which the fair exercise of his public or official duties might be compromised;

(d) endanger or diminish respect for and confidence in the integrity of the Government of the Republic of Vanuatu.

66(2) In particular, a leader shall not use his office for personal gain or enter into any transaction or engage in any enterprise or activity that might be expected to give rise to doubt in the public mind as to whether he is carrying out or has carried out the duty imposed by sub article (1).

67 For the purposes of this Chapter, a leader means the President of the Republic, the Prime Minister and other Ministers, members of Parliament, and such public servants, officers of Government agencies and other officers as may be prescribed by law.

3. A leader holds a position of influence and authority in the community. A leader must behave fairly and honestly in all his or her official dealings with colleagues and other people, avoid personal gain, and avoid behaviour that is likely to bring his or her office into disrepute. A leader must ensure that he or she is familiar with and understands the laws that affect the area or role of his or her leadership.

5. In addition to the leaders referred to in Article 67 of the Constitution, the following are declared to be leaders:

(b) comply with and observe the fundamental principles of leadership contained in Article 66 of the Constitution;

(c) comply with and observe the duties obligations and responsibilities established by this Code or any other enactment that affects the leaders; and

(d) not influence or attempt to influence or exert pressure on or threaten or abuse persons carrying out their lawful duty.

19. A person who does not comply with Part 2, 3 or 4 is guilty of a breach of this Code and is liable to punishment in accordance with Part 6.

28. A leader acting in his or her capacity as a leader who fails to abide by an enactment that imposes on the leader a duty, obligation, or responsibility is in breach of this Code.

29. Without limiting the generality of section 28 a leader who fails to abide by the provisions of an Act that provides for:

40(1) A leader who is convicted of a breach of section 19, 20, or 21, or 22, or 23, or 24 or 26 or 27 is liable to -

(b) if the offence is a continuing one to a fine not exceeding VT20,000 a day for each day or part day the leader remains in breach.

(3) A leader who is convicted of a breach of this code for which no specific penalty is provided is liable to a fine not exceeding VT2,000,000.

27(2) Except as may be permitted by its standing orders a council shall not enter into any contract -

(b) for the execution of any works or provisions [sic] of any service, other than professional services, to or for the council, except after publicly calling for tenders for the same.

^[i] The exception contemplated I section 27(2) "Except as may be permitted by its standing orders" does not apply in this case.

Vanuatu Ombudsman's Reports

Failure of Luganville Municipality to Comply with Tender Requirements [2003] VUOM 3; 2003.03 (12 March 2003)