The government’s decision to penalise the controversial Omni Business Corporate International for its failure to supply medical equipment to fight the coronavirus in time in April seems to be a confused one.

While the breach in supply contract could have allowed the government to blacklist the company for a period of three years, the Public Procurement Monitoring Office on Sunday decided to blacklist the company for only one year for its failure to supply the equipment in time.

“The company was blacklisted for a year, barring it from taking part in any government contract during the period,” said Sushil Dhakal, spokesperson for the procurement monitoring office.

However, according to an official at the procurement monitoring office, who spoke to the Post on condition of anonymity because he is not authorised to speak to the media, the government failed to produce any document that could prove that the goods the company supplied were of inferior quality even though questions had been raised about the quality of rapid test kits it supplied to the Ministry of Health and Population.

“The company could have been blacklisted for three years had the government provided any document that proved the supplied goods were of inferior quality,” said the official.

Instead, arguing that the company failed to fulfil the obligation of supplying medical goods to fight Covid-19 in time as per the contract, the procurement monitoring office on Sunday blacklisted it effective Monday and barred it from participating in any government bids for one year.

The Department of Health Services had terminated the contract with Omni on April 1 after it had brought the first shipment of medical equipment on March 29 but nothing after that as the contract had been terminated.The contract worth $10.39 million had been signed with the company on March 26.

But, according to the official at the procurement monitoring office, the department didn’t seek any clarification from the company as per the principle of natural justice.

The contract was also terminated just after it supplied the first instalment of goods although there was scope for it to supply all three batches, said the official. “So there is feeble ground to blacklist Omni even though we blacklisted it for one year.”

Omni, on the other hand, said the decision to blacklist it was to deny it additional government contracts.

“We were the lowest bidder in a bid to supply paper to the Janak Shiksha Samagri Kendra. The blacklisting decision has been taken to deny us that contract,” said Suman Singh, director of Omni.

She also said that the procurement monitoring office had no right to blacklist Omni as the case is sub judice in the Supreme Court.

Three weeks ago, the court had issued a show-cause notice to the government in response to a writ petition Omni filed but no interim order was issued.

The company claims in the writ that the contract was terminated and the bank guarantee seized when the first batch of goods had been supplied and the rest was in the process of being supplied.

As per the contract signed between the department and Omni, the latter was supposed to deliver all specified medical goods—protective gear, reagents, rapid test kits and other medical supplies—by April 5 in three instalments. But, citing that the company failed to supply the goods in required quantities in the first installment, the government had terminated the contract and confiscated the security deposit.

The awarding of the contract to Omni Business Corporate International had courted controversy as it had no prior experience in procuring medical equipment.

Media reports claim that Omni got the deal on the basis of a person connected to the company, Yubaraj Sharma, having close relations with Prime Minister KP Sharma Oli.

The parliamentary Public Accounts Committee had investigated the awarding of the contract to the company and reached the conclusion that Minister for Health Bhanubhakta Dhakal had decided to award a controversial medical equipment procurement contract to a private company upon the advice of his chief advisor Dr Khem Karki, who didn’t have the legal authority to recommend that Omni Group procure medical equipment from China.

The Department of Health Services was forced to terminate the contract with Omni after public uproar over the deal as the prices quoted by Omni appeared to be much higher than what the competing bidders had quoted.

The department itself admitted during a press briefing on April 1 that the rates of medical equipment supplied by Omni were 20 percent higher than the estimates.

But, different officials at the procurement monitoring office, on condition of anonymity, said there was scope for the government to blacklist the company for three years and also recover the liabilities owed to the government while starting a new procurement process after the contract was terminated with Omni.

A report of the Nepal Health Research Council had concluded that the rapid test kits supplied by Omni were of inferior quality. The 75,000 rapid diagnostic test kits procured by the government through Omni are only able to detect the presence of the coronavirus antibodies 50 percent of the time, the council’s report had said. Questions were also raised about the quality of the polymerase chain reaction (PCR) machines.

“After the Department of Health Services didn’t produce any materials about the quality of the goods, we later asked if there was any such proof that the quality of supplied goods was inferior,” said the official. “But no such document was produced.”

Instead, the department had notified the procurement monitoring office that all the goods supplied by the Omni were used in fighting Covid-19, the official said.

The government’s confused leniency towards Omni is also evident from its decision not to recover any liabilities due to the government in the whole process.

Officials at the procurement monitoring office said that the department decided against recovering any liabilities from the Omni. As per the section 59 (3B) of the Public Procurement Act-2007, the defaulting supplier, contractor and service provider need to bear the liability of increased cost incurred by a public entity for carrying out, or causing to be carried out, a new procurement process.

“The Department of Health Services has decided against recovering additional liabilities from the company although initially it was in favour of recovering them,” the official said.

“This has raised concern if the government was complicit in taking action against Omni because of its alleged close links with the prime minister and his close associates,” said Tulasi Sitaula, a former government secretary who is well informed on public procurement.

There is enough basis in the law for the government to be tough on defaulting contractors and suppliers, said Situala.

“But, I am not sure any government agency has ever recovered the increased liabilities incurred by the public entity for faults of the contractor and supplier,” he said.

While Omni’s contract was terminated abruptly in April before the deadline for supply of equipment had passed and without even asking for an explanation following a public uproar may seem to be too harsh on Omni, the government could also have blacklisted it for three years instead of only one and demanded liabilities due to it.

“I am not sure whether the department’s move is an exemption or a penalty as low as possible,” said the official of the Public Procurement Monitoring Office.