OIOS UNMIT Procurement 2009

8/8/2019 OIOS UNMIT Procurement 2009

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Inlt r r: t l

DIT( ) l i ceo I

AU

AUDIT REPORTAudit of procurement management inUNMIT

Further improvements to the procurementprocess needed to ensure compliance with theProcurement Manual

7 August 2OO9Assignment No. AP2OO8/682/07


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Unitedations rurtionsniesI N T E R O F F I C E M E M O R A N D I J M M E M O R A N O U M I N T E R I E U R

O F F I C E O F I N T E R N A L O V E R S I G H T S E R V I C E S B U R E A U D E S S E R V I C E S O E C O N T R O L E I N T E R N EI N T E R N A L A U D I T O I V I S I O N D I V I S I O N D E L ' A U D I T I N T E R N E

o Mr. Atul Khare" SpecialRepresentativef the Secretary-GeneralUNMIT

oe.re 7 August2009

RETERENcEoo, os-O *7 3Dnr.ov Fatoumata diaye,Acting Directoros lntemalAuditDivision,OIOS

suorecr Assignmento.AP2008/682/07Audit of procurement anagementn UNMITO B J E T T

L I am pleasedo present he reporton the above-mentioned udit.2. Based on your comments, we are pleased o inform you that we will closerecommendations -4, 6 and 7 in the OIOS recommendationsdatabaseas indicated inAnnex l. In order or us to close he remaining ecommendations,e requestha tyouprovide us with the additional nformationas discussedn the text of the report and alsosummarizedn Annex l.3. Your response ndicated hat you did not acceptrecommendation8. In OIOS'opinion however, his recommendation eeks o addressa significant risk area. We arethereforereiterating t and requesting hat you reconsideryour initial responsebasedonthe additional nformation provided n the report.4. Pleasenote that OIOS will report on the progressmade o implement tsrecommendations,articularlyhose esignatedshigh isk i.e., ecommendationsand5), in its annual eport o theGeneral ssembly ndsemi-annualeport o the Secretary-General.

Mr. Hubert . Price, hiefof Mission upport, NMITMr. Jonathan hilderley, hiefAdministrative ervices,-TNMITMs. DebbieBolipata,ChiefProcurementfficer,UNMITMr. Swatantra oolsarran, xecutive ecretary, N Boardof AuditorsMr. Jesus araAlonso,Officer-in-Charge,oint nspection nit SecretariatMr. SethAzda,Chief,AuditResponseeam,Departmentf FietdSupportMr. MosesBamuwamye, hief,OversightSupport nit, Departmentf ManagementMr. Byung-KunMin, Programme fficer,OIOSMs.Eleanor . Burns, hiefPeacekeepinguditService,nternal uditDivision, IOS

Fom ALrD-l 3 (2 rr.uary 2009)


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FUNcTIoN

GoNTAcrINFoRMATToN

INTERNALAUDIT DIVISION

"The Oljice shall, in accordancewith the relevantprovisionso/ theFinancial Regulationsand Rulesof the UnitedNations examine,review and appraise the use offnancial resources of the UnitedNations in order to guarantee lhe inplementation of programmes andlegislative mandates,ascertain compliance of programme managerswith the nancial and adminislrative regulations and rules, aswell as with the approved ecommendalions f externaloversightbodies,undertakemanagement udits, eviewsand surveys oimprove the structure of the Organization and ils responsivenessto lhe requirementsofprogrammesand [egislativemandotes, ndmonitor the e;ffectirenessf the systems / inlernal control oJIhe Organization" (GeneralAssemhlyResolution48/218B).

ACTINC DIRf,CTOR:Fatoumatadiaye: el:+1 212.963.5648,ax :+1.212.961.33E8,e-mail: [email protected]

CHTEF, EACEKBEPTNcUDIT ERvlcf,Eleanorums: el:++1.212.917792. ax: + 212.963.33EE,e-mail; [email protected]


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EXEGUTIVESUMMARYProcurement management in UNMIT

OIOS conducted n audit of procurementmanagementn the UnitedNations ntegratedMission n Timor-LesteGTNMIT). The overallobjectiveofthe audit was o assesshe adequacy ndeffectivenessf intemalcontrolsovertheprocurementrocessn UNMIT.Theauditwasconductedn accordanceiththe ntemational tandardsor the Professionalractice f IntemalAuditing.

OIOS found hatprocurementractices ave mproved inceMission'sinception.However, urthereffortswere equiredo mitigate isksof fraudanduneconomicalrocurement.hemainaudit indingsncluded:r The vendor registration rocess eeded o be enhanced. endorswere registeredwithout obtaining the required registrationdocuments,contracts ereawardedo vendors rior o completion f formirl egistration,and emporary egisteredendors emainedn the system eyondhe expirydate;r ln 3 out of 45 procurement ases eviewed, he requisitionersrecommendedendorsand contacted iddersduring he biddingexercise,contrary o theprovisions fthe Procurementanual;. An ovrpaymentf $16,225wasmade o a vendorofgenerator pareparts;and. Vendorswerenot allowedadequateime to submit heirproposals.This, to an extent, may have had an effect on the numberof vendorsrespondingo bid solicitations.

OIOS hasmade ecommendationso furtherstrengthenntemalcontrolsand improve he procurement rocess.OIOS was pleasedo note hat promptactions beins aken o addressherecommendationsade.


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GhapterTABLE OF CONTENTS

INTRODUCTIONAUDIT OBJECTTVESAUDIT SCOPEAND METHODOLOGYAUDIT FINDINGSAND RECOMMENDATIONSA. AcquisitionPlanning ndProcurementeadTimeB. VendorRegistrationC. RequisitioningD. BiddingE. PurchasingF. OrganizationndTrainingG. MercurySystemH. OtherMattersACKNOWLEDGEMENTANNEX I - Status f Audit Recommendations

Paragraphs

l-45

6-8IV.

9-lr2-18l9-3132-342 < n 143-4647-4950-52

53


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I . INTRODUGTIONl. The Officeof InternalOversightServicesOIOS)conductedn auditofprocurement anagernentn the United Nations ntegratedMission n Timor-Leste UNMIT). The auditwas conductedn accordanceith the IntemationalStandardsor the Professionalractice f InternalAuditing.2. Procurements oneof the mostcriticaladministrativeupport unctionsneededor the Mission o carryout tsmandatedasks ndoperations.he imelyprovision f the equired oods ndservices irectly mpactsheeffectivenessfthe Mission'soperations. he Procurement ectionn UNMIT is responsibleorthe localprocurementf goodsandservices. he Section s headed y a ChiefProcurement fficer,at the P-4 level,who reports o the Chief AdministrativeOfficer. At the time of the audit,the Sectionwas staffedwith 16 of its 17authorizedosts.3. Sincehe nception f the Mission n August2006, INMIT ProcurementSection asprocessed,126 urchaserders itha totalvalue f S75.2million.The ablebelowshows breakdown v financial ears.Table : Totalnumberandvalueof purchase rders

FiscalYearsNumber of

Durchase rdersValue ofpurchasorders ($)2006-2007 512 29.783,84E2007-2008 448 25.7 0.9732008-2009* 166 r9 ,687,291

Total tl26 75,212,112Note+Thtoueh l December 0084. Commentsmadeby UNMIT are shown n i/alics.

I I . AUDIT OBJECTIVES5. The main objectivesofthe audit were o:

(a) Assess he adequacyand effectivenessof intemal controls overtheprocurement rocess:(b) Assesswhether the procurementof goodsand services equiredby the Mission were performed in a cost effective and timely manner;and(c) Review compliance with the UN Financial Regulations andRules and the provisions of the Procurement Manual and relevantAdministrativenstructions.


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I I I . AUDIT SGOPEAND METHODOLOGY6. The audit coveredthe period from the inceptionof the Mission on 26August 2006 to 28 February2009, and focusedon key activitieswithin theprocurement ycle ncludingacquisition lanning, equisitioning, id solicitationand evaluation, ontractawardand administration,eceiving nd inspection ndvendor administration.7. OIOS judgmentally selected45 procurementcase tles againstwhich atotal amountof $ 7 million purchaseorderswete issued 22 per cent of the totalvalue of all purchaseorders ssuedsince2006), and performeddetailed estsofprocurementransactions. ue to several evisionsof the ProcurementManualduring the period under audit, procurementcases were reviewed against therelevantversion ofthe ProcurementManual.8. The audit included nterviewswith requisitioners nd staff members fthe Procurement ection, eviewofrelevantdocuments ndanalysis fdata.

IV. AUDIT FINDINGS ANDRECOMMENDATIONS

A. Acquisition planning an d procurement lead-time9. On a monthJybasis, he ProcurementSectionpresentsa status eport onthe Mission's acquisition lan to the variouscost centremanagers.Th e reportprovides each cost centre'sacquisitionplan togetherwith a detatl ed ist ofapproved equisitions nd herelated urchase rders ssued.Monthly monitoringhelpsensurehe imely rnplementationf the Mission'sacquisition lan.10. As at February 009, requisitions nd purchase rdershad been a isedfor approximatell'80 per cent and 57 per cent, respectively,of UNMIT's 2008-2009 acquisition lan.This is within reasongiven he financialyear end at 30June 2009. OIOS noted the coordinationbetween he cost centre managersandthe Procurement ection n ensuring he imel y implementation f the Mission'sacquisition lan: herefore oesno t ssue recotnmendation.I l. One effectivemeasure fefficiencyofthe operations fthe ProcurementSection s the lead im e between he requisition pprovaldateand the purchaseorder approval date. OIOS' analysis of the procurement lead time of 25procurementcases ound that the average ead time was 93 days and rangedbetween 53 and 266 days. Annex D-20 of the ProcurementManual providesexamples of standard timelines required to complete contractual instrumentsfollowing receiptof a requisition.While an average f 93 days s reasonable,therewere 9 cases nvolving Invitationsto Bid (lTB) with lead-times n excessof100 days. A periodic lead time analysispreparedby the ProcurementSectionwould be useful in monitoring and improvingthe efliciency of its operations.


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B, Vendor RegistrationIncompleteendoriles12. As stipulatedn Section7.10 of the Procurement anual,vendorapplicationand all supportingdocumentsmust be duly maintained n theappropriateendor egistrationile. Five out of 30 vendor iles (17 per cent)reviewed by OIOS contained ncomplete egistrationdocumentssuch ascertificate f incorporation,igned endor egistration pplication, nd inancialdocuments. herefore,t wasnot clear f these endorsmet herequirementorregistration.The registrationof vendors that do not meet the relevantrequirements reatesnefficienciesn the procurement rocess s solicitationdocumentsaybemailedo unqualifiedendors.

Recommendation(1) The UNMIT Office of Mission Support shouldcomplete the registration of all qualilied vendors andmaintain supportingdocumentationn eachvendor's ile.

13. The UNMIT Ofice of MissionSupport cceptedecommendationandstated hat the backlogolregistralion of qualifiedvendorshas beencompleted sof 30June2009.OIOSwasprovidedwith evidencehatvendorswith incompleteregistrationiles wereremovedrom the activevendordatabase.asedon theaction akenby UNMIT, recommendationhasbeen losed.Awardofcontract o orovisionallyegisteredendors14. As permitted y the Procurement anual,vendors an beprovisionallyregistered ending eceiptand evaluation f vendorapplication ndsupportingdocuments. owever,Section .9.1 2) stipulateshatcontract wards hallnotbe made o vendorsuntil after completion f formal registration.n addition,provisionallyegisteredendors houldbe deleted rom the vendordatabasefformal registration s not completedwithin three months from the date ofprovisionalegistration.15. UNMIT's vendordaLabases beingmaintained n the Mercurysystem.As of28 February 009, herewerea totalof 1,885 endorsisted n the system;comprising f 1,480active,381 temporary,9 awaiting egistration, rejectedand4 suspendedendors.16. OIOS' review of the vendor files revealed hat contractshad beenawardedo 19 out of the 30vendors63 percent)beforecompletion f formalregistration.n addition o the abovesample,OIOS reviewed20 temporaryregistered endorsn the Mercurysystem ndnoted hatall 20vendors adbeenprovisionallyegisteredor over hreemonths.Cleaning p he Mercurydatabaseof old inactive endorswouldprovidea moreaccurateist of activevndorsowhomsolicitationocumentshould e ssued.


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2 a n d 3The UNMIT Office of Mission Support should:(2) Periodically review the Mercury database and deleteall vendors whose provisional registration has expired; and(3) Implernent appropriat procedures to ensure thatcontracts are awarded onlv to vendors who have beenformally registered.

17. The WMIT Ofice of Mission Support sccepted recommendation 2 andstated that the WMIT Procurement Section has instiluted a monlhly review of itsprovisionally registered vendors and ]qill eilher delete those who have notcomplied with the legislralion requirements after 90 days or legisler those whoare qualifed. The current cases for registration were being dealt wilh andmonilored within a reasonsble timeframe. OIOS has reviewed the Mercurydatabase nd confirmed that vendors whoseprovisionalregistrationhas expiredwere deleted, and basedon the action taken by UNMIT, recommendation2 hasbeen losed.l8. The WMIT Offce of Mission Support accepted recommendation 3 andstaled thst e;ffectiverom I July 2009, before technical evaluations are carriedout, all vendors who hove bid have to be ormally registered. As the backlog ofunregistered local vendors in the Mercury vendor roster have now beenregistered./re-registered,no sward could now be made to thesevendors who wereprovisionally registered or not regislered. OIOS has reviewed the Mercurydatabaseand confirmed that the backlog of unregistered ocal vendors in theMercury vendor roster have been registered,and basedon the action taken byUNMIT, recommendation hasbeenclosed.G. Requis i t ion ingVendors recommended y reouisitioners ontrarv o the ProcurementManual19 . Section7. 8 (l ) of the Procurement anual stipulateshat as a generalrule, requisitionersand substantiveoffices shall not recommendvendors to beincluded n the ist of invitees.20. For requisition SPIO-28, or the supply of electronicpartsand supplies,the requisitioner ecommended vendor to be included n the list of invitees andprovided the procurementassistantwith the contact details of the ManagingDirector of the vendor. The items requisitionedwere not of a specializedorunique nature that would have necessitated a recommendation by therequisitioner.The recommended endor was not awarded he contract.2l- ln another nstance,equisition GSS-17was raised or the provisionoftranslation services or the Mission. Prior to the issuanceof the requisition, theawardedvendor,had been recommended y the requisitioneron the basis hat amember of senior managementof the Mission had suggested he use of this


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vendor n th e previousyear. Upon receiptof the requisition, he ProcurementSection ssued8RFQ-9 solely to this vendor. On 24 July 2007, PO #8MIT-208023 n the amountof $20.000was awarded o the vendor on the basisofFinancialRule 105.16 a) regarding ervicesha tcannot e evaluated bjectively.Therewasno evidenceo supportwhy this servicewasprocured n a solesourcebasis.OIOS was informed that the Mission initially found it difficult to identifyavailableexpertise rom the local market. A bidding exercise or the said servicewas later conducted n November 2008 and another vendor was awarded thecontract.Non-generic pecifications22. As stipulated in Section 8.3. (4 ) of the ProcurementManual,requisitions should be preparedusing genericspecificationswithout reference obrandnames. In 2 out of45 procurement ases eviewed,he requisitionsmadereference o the namesof manufacturers.While thesecaseswere exceptional, twas noted hat both requisitionswere raisedby the same equisitioner, he Officeof Communication nd Public nfbrmation,or the supplyof workshop lectronicparts and the plrchase orders were awarded to the same vendor. The use ofspecificbrandnamesmay hindera competitive iddingexercise;herefore t isimportant that requisitions are preparedusing clear and generic specificationsthatwouldallowal l prospectiveendors o compete.

Recommendations and 5The IJNMIT OIfice of Mission Support should:(4) Ensure that except for special circumstancesapprovedby the Chief ProcurementOfficer' vendorsare notrecommended y requisitioners; nd(5 ) Brief requisitionersand procurement staff membersthat requisitions should be prepared using genericspecilicationswithout refernce o brand names.

23. 'lhe UNMIT Ofice of Mission Support accepled ecommendalion4 andstated tha! requisilioners recomt tending suppliers v)as not a practice at UNMITand that this v,as an isolated case in the past and an exception which isacceptable under Seclion 7.8 (2) of the Procuremenl Mcmual. Based on theexplanation rovidedby UNMIT, recommendationha sbeen losed.24. The UNMIT Office of Mission Support occepted recommendation 5 andstated thot a rentinder will be sent to all requisitioners oJ this requiremenl.Recommendation remains open pending OIOS' receipt of a copy of thereminder en t o requisitioners.Poor Statement f Works for ground uel requirements25. In November 006, UNMIT with the help of an expert romHeadquarters, repared ts Statementof Works (SOW) for ground UNfuel


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requirementsn the Mission.While UNMIT infbrmedOIOS that he SOW wasbased n what was known on the groundat that point n time, the SOW did notaccurately capture the actual requirements or the Mission, especially for thedistricts. Based on the SOW, after a competitive bidding exercise, a contractvaluedat $ 4. 8 mill ionwas awarded n l4 August2007.26 . Subsequento the award of the contract, PDL unilaterallymade adecision to revise the mobilization plan and made the following three majorchangescontrary to the agreed upon contract and without the approval of theProcurement ection:

o Secondary Bulk Storage and Distribution Centres in the districts ofAileu, Baucau,Malianaan dOecusse, erenot established;o Procurementof fuel distribution assets ontrary to what was specifiedin theirproposals; nd. Reductionn theproposed umber fexpatriates2l . [n a letter dated 20 November 2007 to the Chief ProcurementOfficer,PDL cited that the abovechangeswere madedue to withdrawal ofelectoral staffand a largenumberofthe UnitedNationsPolice orce rom the abovedistricts.As suc h, he establishmentf secondary istribution ointswas not needed. hiswa s laterconfirmedby the Fuel Unit afterreassessinghe needsof the Mission.As a result of the abovechanges,PDL reduced ts Operationaland Maintenance(O&M) andmobilization ostsby $854,100.However, hereasonablenessfthereduction s to be questioned ince the R equest or Proposal RFP) did notrequire the vendor to provide a breakdownof its O&M and mobilization costs. tis important o note hat despite he changesmadeby PDL, therewere no adverseeffectson the Mission's fuel supply.28. The SOW did not accurately eflect the requirements f the Mission andthis may have hindered competition as somevendorswere disqualified for theinability to meet the requirementsfor secondarydistribution centers in thedistricts, which wereactuallynot needed.High numberof cleaning ontracts ndchangesn the requencv f requiredservices29. At the time of the audit, there were l0 separate ctive contracts n placefor generalcleaning and waste disposal services.Four of these contracts wereestablished ue o additiona l ocations,which were not include d n the originaltenderingexercise, n addition o the number of locations, he frequencyofserviceswa s changed.For example,concerning bidding exerciseon liquidwaste disposal 7RFP/PM/0l^JNMIT), the initial frequencyof the solicitedserviceswas monthly. However,due to an increase n the number of locations obe served, once the new bidding exercise (8RFP/DM/105/UNMIT) wasconducted t changed he frequency of services rom "monthly" to "per servicebasis". A comparison of the price proposals or locationswhere frequency ofrequired services changed from monthly to as "per service basis" revealedsignificant differences n costs,as llustrated n table2 below.


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Table2: Comparison f vendorproposals liquidwaste isposal ervicesFirstBi d R.-bid

Proposa of second Proposal of lowest Proposal of second.Proposrl flowest lo*estbidder bidder Anterter) r"Jr""lltT::S:?bidder TIC)as (Anterter)s per ssperservice (monthly ost) $)l,ocation per monlhly b|sis monthly basis ($) basis (monthl!

($) cost) (S)MetinaroPoliceStationViquequePoliceStationManatutul>oliceStationLiquicaPoliceStationLos PalosPoliceStatronSamePoliceDistrictDrmcra PoliccDrskict

90 0 3.160

260 1,600140 1,200130 60 0130 40 0130 1.200130 925130 600

t .6002.4001.800

No bidNo bidNo bid

2.4002,4002,400

No bidNo b id4 , 160

30. The table shows that the Mission saved significant amounts afterchanging he requirementsor l iquid waste ollectionanddisposal ervicesrom"monthlybasis" o "per service asis".However, herewa sno evidence ho wingthe change n the frequency or similar servicessuch as generalcleaning,hazardous aste,pestcontrol,mosquito ogging,grass uttingetc.,which werealso e-tendered,ndwhich could esult n funhersavingso the Mission.3 . While it is noted hat the Mission was expanding n 2006 and 2007,OIOS is of the opinion that betterplanningand coordination mong variouscomponents f the Missio n could have reduced he need for re-biddingandchanges n the type/frequency f services equired.Considering he Mission'sinitiative to reduce the number of cleaning contracts through a new tendrexercisewhich was beingconducted t the ime ofthe audit,OIOS hasnot madea recommendation.D. BiddangContactwith bidderscontrary o the requirements f the ProcurementManual32. Section .1 . of the Procurement anualstipulatesha tprior to the bidclosure, all communicationsbetween he United Nations and the vendor shouldbe handled by the designatedProcurementOfficer. Furthermore,as stipulated nSection9.11.2, he same nformation onceming he solicitation ocumentmustbe simultaneouslyommunicatedo all invitedvendors.33. By meansof solicitation ocumentSITB-18on 5 October2007, or theprovisionof plumbingmaterials,he Procurement ection olicitedbids rom 21international vendors. Due to unclear specificationsof the requirements, he


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procurementassistanteceivedseveralemail communications rom three vendorsrequestingclarifications. On each occasion he procurementassistant nstructedthe requisitioner o respond o the vendors' queriesand on 9, 18,and 27 October2007, the requisitionerprovided information directly to the three vendors. Thesame information was not communicated to the other prospective vendors.Subsequently, n 24 October 2007, the bid closing date, bids were only receivedfrom the abovestated hreevendors and the purchaseorder valued at $222,858was awarded o one of them. While there is no clear evidence hat the vendorswho submitted bids had an advantageover the other vendors, there is theappearance f partialif which shouldhave beenavoided.

Recommendation 6(6) The UNMIT Oltrce of Mission Support should nsurethat communications from potential vendors are addressedto either the Chief Procurement Officer or a SeniorProcurement OfIicer.

31. The UNMIT Ofice of Mission Supporl accepted recommendalion 6 andstated hat as a matter of procedure, the guideline ciled in Section 9.1I oJ theProcurement Manual, with regard to contact wilh bidders, is arduouslyobserved. A reminder to all Procurementstaff to stlictly observe his issue wasmade on 25 June 2009. OIOS has reviewed a copy of the said reminder, andbasedon the action taken. ecommendation has beenclosed.E. PurchasingOverpavmentf $16.225or generatorpare arts35 . On27 February007,heEngineeringectionaisedequisitionsENG-82,SENG-83 nd8ENG-84or thesupplyof 125KVA generatorpare arts.Allthree requisitionswere combined y the Procurement ectionand included none solicitation exercise.The three requisitionsbeing combined nto onesolicitation ocument esultedn duplication f three temson the invitation obid (7lTB-47).After a competitiveiddingexercise, O #8MIT-208104 asawarded o a vendor. However, he vendor's proposal,which was bothtechnically ndcommerciallyccepted,ncluded ignificantly ifferentpricesorthe duplicatedtems,even hough heyconm;nedhe samepart numbers. hetablebelowshowshedifferencesn thevendor'sproposal.


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Table4:order Variation n vendor'sproposal or similar temsonthe samepurchase

PartNo. Description UnitDric$) Quantity ord.red TotalDriceT74l05Zl Oil Fil ter 9.45 400 3.780T',710521 Oi l F i lter 30.09 400 12,036

Differnc 8,256r74501024l t(rnctor2V /45H 130.37 5 652r74501024ltemator 165.86 5 829

Difference 11 1T?5004 251FuelFi lter 8 . 1 400 3,240T'/5004251 FuelFilter 27 58 400 I 1 ,032

Difference

36. The above able showsa possibleoverpayment f $16,255'The CPOinformed OIOS that on 4 July 2008, the vendor was informed about the abovepricesdifferences.However,no response vas eceived rom the vendorand herehadbeenno further oll ow-upby the Mission.Recommendation(7, The UNMIT Office of Mission Support should obtainjustification from the vendor awarded the Purchase Order# SMIT-208104 on the above price differences' pursuerecovery efforts of the $16'255 if warranted, and closelyreview future proposals from the vendor.

37. The UNMIT Offce of Mission Support accepted ecommendation7 andstated thal in the absenceof a reply from the vendor despite repeated ollow-ups,on l5 June 2009, WMIT initiated the deductionof $16,255 rom the vendor'soutstanding npaid invoices. OIOS has confirmed recoveryof$16,255 from thevendor,and basedon this action, recommendation has beenclosed.Unreasonable riceproposal ncreases38. OIOS noted inconsistent rice proposalsby some vendorsprovidinggrass cutting, mosquito fogging and pest control. A bidding exercise(7RFP/RM/I01) or the provisionof the mentioned erviceswas carriedout inDecember 006. In its deliberationsLCC1}1l15106'),CC recommended re -bid of the exercisedue to unclear specifications n the SOW as to the requiredchemicals to be used in mosquito fogging. Subsequently, new RFP(7RFP/ND/204) covering the additional specificationsand three more locationswas issued on 28 May 2007. The audit found that the price proposalsof somevendors were quite different from their initial proposal and somewhatunreasonable.t is comprehensiblehat the addition of three new locationsandminimum requirementsor mosquito ogging chemicalswould have ncreasedthe total cost of the services; however, such a significant increase in thecommercialproposalsof fwo vendorscan not be ustified, and should haveraisedsomeconcem by management.Table 3 below illustrates he bid abstracts fthevendors.


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Table 3: Abstract of bid proposals rom the vendors

CompanyInit ialbidding Re-bidding

Mosquito Mosquito Crrssfogging,Grass fogging $) cutt ing

cutt ing and Pest ($ )control($)I15,380 No quotc

183,144 121.716132,600 106.240448,000

pest Total ($)control $)

BCD

928,999 No quotc'72,960 47,960,165,600 99,200D - 369.000 128.832 596.000 l'093'832

39. While the lowest offer received was awarded the contract, OIOS'concerns elating o the significant increase f the other wo vendorswas broughtto the attentionof the Chief, ProcurementOfficer. Consequently,all solicitationdocumentsnow include a statement rohibiting collusive bidding and anti-competitive conduct. OIOS commends he immediateaction taken by theMission n addressinghis issue.However,management eeds o be vigilant oensureunreasonably riced proposals ubmittedby vendorsare closelyvetted,and aken nto account n considering hem for future bid solicitations.Inadequateubmissionime or vendors'proposals40. ProcurementManual provision9.9.7(3) provides hat he procurementofficers shall, to the extent possible,ensure hat prospectivevendors are givensufficient time to understandhe solicitationdocumentsand formulate theappropriateeply to said solicitation.Annex D-20 of the ProcurementManualprovides ypical timelines or submission ime for vendors: 10-25 days forRequest or Quotation;30days or Invitation o Bid (lTB); and 30-60days orRequestbr Proposal.4I- Twenty-fiveout of the 45 (56 per cent)procurement ase iles reviewedshowed hatvendorswere not allowedadequateime to submit heir ofTers. hetable below shows examplesof the submission ime allowed for varioussolicitation xercises.While it is not alwayspractical or the Mission o abidebythe imelines ecommendedn the Procurement anual , t is important o keep nmind that nadequateubmissionime couldresult n a low numberof responsesto solicitationdocuments.As reflected n the table,with the exceptionof the firsttwo solicitations, he vendorresponseate was less han 50 per cent.

924,999248,696871,040

l 0


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Table6: Examples f vendor submission ime

Recommendation(8) The UNMIT Office of Mission Support should ensurethat with the exception of exigeDcies,every effort must bemade to abide by the submission irnelines ecommended nthe ProcurementManual.

42- The UNMIT Offce of Mission Supportdid not accept ecommendationand stated hat the timelines ndicated n AnnexD-20 of the Procwemenl Manualare not absolule. They are guidelines which sre subject to determinqtion of lheoperational need, exigency, complexity or simply, reatlily available sources inlhe market and olher factors inherenl to the Mission operating environment.OIOS notes hat ypical imelinesprovided n the Procurement anualmay notalwaysbe observeddue to various factors,however, considering he low numberof vendor response ate(36 per cent for the sampledprocurementcases n Table6) , OIOS is of the opinion that the Mission should implement additionalmeasures ncluding better planning and coordinationbetween he requisitioningoffices and the ProaurementSection, o allow vendors ypical submission imesas provided in Annex D-20 of the ProcurementManual. OIOS is thereforereiterating recommendation 2 and requesting Management to reconsider itsDosition.F, Organizat ion and trainingA need or ethicsraining43. In an effort to promoteethics and integrity in the workplace,allprocurementtaffmembersre requiredo participaten trainingon "EthicsandIntegrity n Procurement". IOS ound hat our staff n theProcurementectiondid notparticipaten such raining.

l l

Solicitation No. Descript ion frcqurr_emenr Submissiontime(days)AllowedContr{ctvrlue S) Numberofinvitecs

NumbersofbidsreceivedPercentageot bidsreccived

7 Rlj P/RL4/ 0 |Gencral leaningscfvlces t 6 59t.360 7 6 E5 l%

TRFP/ND/204Provrsion fgrasscutung,mosqurtofoqsing ndDest ontrol I 6 497 92 1 I 51 140/0

E,RFP/AM/02 Installation f securitybarsanderills 941.800 l'7 1 41 8%TRFP]ND/205 FiresuDDressionvstem l 4 c , 5 L l t7 5 88%TITB-E2 l:ield defenscstores 8 116 . 435 1 l 3636%9ITB-IO Constructionervices l 6 250,300 l3 4 30779.SITB-3I X-RayequiDment l 3 I 18 . 745 3 I t 75908ITB.I8 Plumbingmaterials l 9 22 285 8 2 l 3 t4 299"Note: The first four solicitationsare RFPsand the last our rpresentTBs


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Recommendation 9(9) The UNMIT Office of Mission Support should ensurethat all procuremnt stalT members complet the course on"Ethics and Integrity in Procurement",

44. The UNMIT Office o;fMission Support accepled recommendation 9 andslated that they will explore cost-efrectivealternattues lor thefour procurementstaff teho have not taken the course to attend the training before the end of theyear. Recommendation9 remains open pending completion of Ethics andIntegrity trainingby all UNMIT Procurment taff.No rotation Dolicv or procurement taff members45. Best procurementpractices equireperiodic rotation of staff members nthe Procurement Section as a means of career development and preventingfraudulentacts.At the time of the audit, there was no rotationpolicy in place forprocurement staff members; buyers have been working with the samecommoditiesand vendors for the past two years. It is a recommendedpracticefor buyersnot to deal with the samevendors or an extendedperiodof time.

Recornmendation l0(10) The UNMIT Office of Mission Support should pu t inplace a rotation policy for procurement stalTmembers.

46. The UNMIT Office of Mission Support occepted ecommendalion 0 cmdstated th.1t WMITfully prescribes to theprinciple o.f ototion of itsprocurementstaff members. A policy will be put in place by 3I December 2009.Recommendation 0 remainsopen pending the implementation of the rotationpolicy by the UNMIT ProcurementSection.G. Mercury systemInadequateonitoringfaccessightsn Mercury vstems47. The MercurySystems usedextensivelyn theprocurementrocessorthe preparation,ecordingand approvalof requisitions nd purchase rders.Effective nformation echnology ontrols equireperiodicmonitoring f accessrights ssued o users.Users houldbeproperly rainedon the operations fthesystem riorto or immediately fterbeinggranted ccess.48. Usersweregranted ccesso the systemwithoutany prior raining.Thishascreatedrustration nd nefficienciesn processingrocurementransactions.Also, on reviewingaccess ontrols o the system,t was found hat here s noperiodic review of access ights in the Mercury Systemand severalstaffmembers ho had ong separatedrom theMissionwerestill reflected sactiveusers.

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Recommendation 1(11) The UNMIT Office of Mission Support should put inplace a priodic review of access rights in the Mercurysystern and provide adequate training to all system usensprior to or immediately after being granted access.

49- The UNMIT Offce of Mission Support accepred recommendation I I andstated that periodic reviews of Mercury system user access ighls hove been doneby CITS since mitl-2007. CITS has conducled Mercury user ttaining as requestedby IMTC and by users, both formal classroom naining and individual one-on-one training. On 4 kmuary 2009 o Golileo/Mercury user check system wasintroduced to ensure that theperiotlic review of accessrights was automated anclthat staf that had left UNMIT could be readily identified and their access rightsrevofred Recommendation1 remainsopenpendingOIOS' receiptofsupportingdocumentationevidencing hat Mercury training has been carriedout by CITS toall users.H. Other mattersPoor management f securitv servicescontracts50. There are currently two contractors providing security services toUNMIT. The first vendor provides security services o UNMIT offices andfacilities while UNMIT's headquartersn Dili and staff residences re servicedby the secondvendor. OIOS' review of the various contractswith thesevendorsrevealed contract violations by the Security Section and a lack of effectivemanagementof these contracts.For instance, he Security Section,without theinvolvementof the ProcurementSection,requestedLINDP to subsumeUNMITin their contract with the secondvendor.Despite he contract effectivedate of IJuly 2007 a verbalagreementwas reachedbetween he SecuritySectionand thevendor for the serviceprovision o commenceon I June 2007. In anotherinstance,a contract with the first vendor was terminatedby the Security Sectionwithout providing the vendor the 30-day advancenotice as stipulated in thecontract. Three instanceswere also noted where the number of locations o beserviced was increasedby the Security Section over and above the limitsstipulated n the contracts.51. The ProcurementSection becameaware ofthe above violations after thefact and has since regularized he respectivecontracts. n addition, the Missionhas appropriatelyaddressedhese ssueswith both the Procurement nd SecuritySections.At the time of the audit, as no further violations were noted,OIOS hasnot madea recommendation.52 . At the time of the audit, the Mission was conductinga new biddingexercise or securityservicesand proposalswere received rom new companies.Past experiences n other missionshas shown that security contractsshould behandled very professionallydue to the high risk nature of the service.A changein contractors misht create undesired actions and retaliationsagainst t-rNMlT,

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therefore,MissionManagementhouldbewell preparedo administerhe wholeprocess.' V. AGKNOWLEDGEMENT

53. We wish to express ur appreciationo the Management nd staff ofUNMIT for the assistancend cooperation xtendedo the auditors uring hisasslenment.

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OIOS UNMIT Procurement 2009

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