e-Passport contract awarded without competitive bidding

In a surprising move, the Cabinet has approved a proposal submitted by Hon. Harin Fernando in his capacity as the Minister of Telecommunication and Digital Infrastructure to award the contract to supply an end to end e-Passports Solution through an unsolicited bid to M/s De La Rue Lanka Currency and Security Print Ltd., a company with a majority British stake, without competitive bidding and transparency. 

This mega award include data capture, personalization and issuance of ePassports with an implementation of infrastructure connecting over 50 Sri Lankan overseas diplomatic missions and at 05 local offices of the Department of Immigration and Emigration (DIE), virtually the entire Passport and Travel Document issuance operation of the Department of Immigration & Emigration. The new system is to be operated and managed under the De La Rue Lanka’s facility. De La Rue Lanka also has proposed to invest Rs. 1.2 Billion in this project with the Government of Sri Lanka through a shared participation model. 

However, in a recent proposal by the Department of Government Printing it was estimated that only Rs. 600 Million is required to set up a new ePassport Printing Facility at the Government Printing Press. Sources from the Immigration Department state that the cost to upgrade the existing infrastructure at the DIE to issue ePassports would be less than Rs. 50 Million. This raises question as to why such an exorbitant amount has been budgeted to implement the new system under De La Rue Lanka.

After implementing the proposed new system, the existing infrastructure at the DIE, which has been established with an investment exceeding Rs. 1 Billion by the Government of Sri Lanka together with more than 400 officers of DIE who are engaged in the existing Passport issuance system will have to be made prematurely obsolete. Stern trade union action is inevitable crippling the issuing of Passports to citizens if the decision to handover DIE’s Passport Operation to De La Rue Lanka is operationalized.

During the tenure of the sacked Managing Director, ICTA with the direction of then Finance Minister Hon. Ravi Karunanayake, took control of the implementation of e-Passport project from its due entity – the Department of Immigration and Emigration (DIE) that comes under the Ministry of Internal Affairs, Wayamba Development and Cultural Affairs. Subsequently, ICTA, using misleading information, sorted recommendations from the Cabinet Committee on Economic Management (CCEM) to sign an MOU and to award the e-Passport contract to De La Rue Lanka as a single source. ICTA also formulated a new technical committee, with the approval of the CCEM, to study on the e-Passport design. Thereafter, a Cabinet Memorandum (reference: 17/1093/702/002-XI) was submitted by Hon. Prime Minister seeking approval to forward the ICTA’s technical committee report to De La Rue Lanka for its observations and to sign and MOU with De La Rue Lanka to implement the e-Passport System at DIE. 

Questions were raised how could the report on the e-Passport design prepared by a government appointed technical committee be sent to a private entity such as De La Rue Lanka for its observations. Did this mean that the Hon. Prime Minister has already decided to award the e-Passport contract to De La Rue even before the cabinet approval is given? Was this a secret move to award a national contract to a British Company without competitive bidding? Is there a big ‘santhosham’ involved behind this award to support the party’s political campaign? Questions are being raised.

However, H.E. The President issued his observations on the above cabinet memorandum advising to call competitive bidding without awarding the contract to a single company. As a result, Prime Minister’s cabinet memorandum dated 25th May 2017 has been deferred by the cabinet at the cabinet meeting held on the 13th June 2017. Despite the fact, grossly ignoring the observations made by H.E. the President and the decision of the Cabinet, ICTA moved to sign an MOU with De La Rue Lanka on the 27th June 2017 to conduct a technical requirement study and to implement the project overriding President’s advice. 

A few weeks later, considering a subsequent joint cabinet memorandum No. CP/17/1576/722/017 submitted by Hon. Harin Fernando and Hon. S. B. Nawinna, the Cabinet approval was granted to proceed with the e-Passport Project under ‘Swiss Challenge’ method, instead of single source bidding.

It was learnt that De La Rue has vehemently rejected H.E. the President’s decision to call competitive proposals and demanded that the contract should be given to them without any competitive bidding. It was also learned that the British High Commissioner too has leveled pressure on the Hon Prime Minister that the ePassport contract should be given to this British Company. 

In a surprising move, Hon. Harin Fernando moved another Cabinet Paper No. 17/2522/749/022 dated 02nd November, 2017 requesting approval to modify the previous cabinet approval No. CP/17/1576/722/017 dated 09th August 2017, and to award the contact to De La Rue Lanka under direct contracting method without following Swiss Challenge process or any competitive bidding process, for which Cabinet Approval had been granted. Minister of Telecommunication and Digital Infrastructure in his Cabinet Paper, has stressed that applying Swiss Challenge Process is disadvantageous to De La Rue Lanka, raising concerns if there is unusual relationship maintained between the Minister concerned and De La Rue. This all happened amidst the objections and displeasure of Hon. S. B. Nawinna, who is the line Minister responsible for the Department of Immigration and Emigration. The Immigration Department officials question as to why the Minister of Telecommunications take such an unusual interest in the ePassport project when it does not come under his ministerial preview at all.  

It is surprising to note that, in approving the award of contracts to De La Rue under direct contracting method, the Cabinet has ignored and violated its own policy established earlier not to entertain direct awarding of contracts under the preview of good governance and transparency. One of the major allegations leveled by the UNP Government against Rajapaksha regime was awarding government contracts to Rajapaksha confidants without following proper tender procedures. It seems that the current Government too has got the taste of the same malpractices, thus openly violating its own rules and awarding mega contracts to their favorites. 
Sri Lanka’s Corruption Rank has worsened from 83 (in 2015) to 95 (in 2016) over the past 02 years as per Transparency International Ranking.  

In order to introduce an e-Passport to Sri Lanka, DIE launched a systematic approach in 2015 to introduce an e-Passport to Sri Lanka through a transparent process. Consequently, cabinet approved consultants from the Moratuwa University conducted a lengthy study on the matter and submitted a comprehensive report on the technical framework to implement the e-Passport project. However, it is alleged that the Ministry of Finance under the guidance of former Finance Minister instructed

The incumbent supplier of Passports and the Printing system, when asked, confirmed that DIE has spent approximately Rs. 100 Million over the past three years to upgrade the current Passport Printing System, thus it possess e-Passport personalization capability. Therefore the existing printing and personalization system at the DIE can be easily used to personalize and issue e-Passports without wasting colossal amount of public funds to procure a new system. It was also learned that the incumbent Passport supplier too has submitted a proposal to supply ePassports at a very minimal cost and to upgrade the current system at no cost to the Government. However, no consideration has been given to that proposal in the light of Telecommunication Minister’s thrust in awarding the contract to De La Rue Lanka at an exorbitant price without competitive bidding.
Available market information shows that De La Rue, the British Printer has not been successful in winning any competitive tenders for Passports over the past 20 years proving its high costs of products and ineligibilities in handling national projects. The few contracts they have won in the past had been only through non-transparent deals with governments through political influence.

Hon. Harin Fernando, in his Cabinet Paper submits that the Ministry of Finance owns 40% of De La Rue Lanka, thus no competitive bidding is necessary to award the contract to De la Rue Lanka. Unfortunately, he has forgotten to highlight the fact that the Tender published by the Ministry of Finance a few months back to procure Excise Tax Stickers for Liquor Products has been awarded to M/s Madras Security Printing, a printer from India, disqualifying the Bid submitted by De La Rue Lanka. It is leant that De La Rue Lanka’s price submitted for the Excise Tax Stickers Tender was almost 300% more than the winning bid. The TEC that evaluated the above tender has observed that De La Rue Lanka is not financially stable, thus ineligible to undertake the contract. This shows that the Cabinet’s decision to award the ePassport Contract on the merit of Treasury having 40% shares in De La Rue Lanka is not consistent with its policies. 

Information revealed that De La Rue Lanka has offered preferential shares to the Finance Ministry in order to create a monopoly in printing Sri Lankan Banknotes (currency notes). 

Central Bank of Sri Lanka (CBSL) procures Sri Lankan Banknotes (currency noted) from De La Rue Lanka Ltd. as the single source of supply without comparing competitive pricing over the past 15 years. De La Rue Lanka solely decides and controls the price paid for Banknotes by CBSL. It is learnt that, due to single source procurement, the price paid by CBSL to M/s De La Rue Lanka is far above the comparative market price of similar products. 

Thereby, Sri Lankan Government looses colossal amount of money every year as CBSL is compelled to buy Banknotes from M/s De La Rue Lanka at the price dictated by De La Rue Lanka Ltd.

It is also leant that the ‘net effect’ of the banknote procurement transaction (which is… the difference between the amount of money lost by the CBSL due to paying higher price for Banknotes and the dividend earned by GoSL against the 40% preferential shares owned by Ministry of Finance is highly negative and disadvantageous to Sri Lankan Government. 

Below is the revenue (dividend) received by Ministry of Finance from the De La Rue – Min. of Finance JV (M/s De La Rue Currency Printing Lanka Ltd.)

dividend

Above statistics confirm that the return on investment for the GoSL on this JV is less than 1% per annum (The Treasury Bills (TB) interest rate today is over 11% per annum). It is surprising that the ROI from this De La Rue-GoSL JV is far below the TB interest earnings. Despite, ICTA is proposing GoSL to invest further Rs. 1.2 Billion on this JV.

Interested parties express its fears that Sri Lankans will have to pay exorbitant price for their Passports in the future due to this unwise move by the Government, while the revenue collected by the Government through issuing of Passports will be drastically reduced too. It is estimated that the Sri Lankan Government will lose revenue of approximately Rs. 1 Billion every year due to the decision to award the ePassport Contract to De La Rue Lanka through a direct contracting model.

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