A matter of "competing" principles: Confidentiality and disclosure in PPP procurement
By Walter Amoko
Even though public-private partnership (PPP) projects are increasingly widespread across the world, it is only now that they are beginning to gain traction in Kenya. However, the efficacy of PPPs as a new investment phenomena in Kenya (like most developing countries) is virtually untested.
More importantly, despite the passage of relevant legislation to facilitate PPPs for public investment, the principles and practices that underpin the attitudes of PPPs’ implementation remain largely undeveloped. There is still a lot of ambiguity and weaknesses in the interpretation and implementation of key provisions of the law that are critical to the realisation of the true objectives of PPPs for achievement of the maximum public benefit from such projects.
This is particularly true in Kenya where the Public Private Partnerships Act, (PPP Act) was only enacted in 2013. Though prior to the enactment of the said Act, a number of national projects were developed using the PPP approach, such projects were under-regulated and provisions were largely tucked into the Public Procurement and Disposal Act (Cap.412C(as amended)). As such, some projects were successful while some failed for varied reasons, including the lack of proper controls and poor regulation of for instance, the tendering processes. Successes include the Mtwapa and Nyali Bridges Concessions, the 74 MW Tsavo/Kipevu IPP, 2000, Orpower-Olkaria III 2000/2008 (48 MW Geothermal Plant), Mumias (34 MW power plant) and the Port of Mombasa Grain Terminal – BOO, 1998. One notable failure is the Nairobi Urban Toll Road, 2009.
Kenya now has a substantive Act of Parliament that governs the entire PPP process from project conception to hand over and establishes the relevant institutions such as the PPP Committee, the PPP Unit and the PPP Petition Committee (the Petition Committee) to oversee PPP projects from conception to execution and finally completion. So far, a number of independent power production projects are ongoing under the new legislation and a number of projects have been identified and approved by the Cabinet to be implemented under the new PPP framework. The current list of pipeline projects includes fifty nine (59) projects from different sectors of the economy.
Nonetheless and perhaps owing to the nascent state of the PPP Act, the underlying principles and values that ought to govern the critical tendering processes of PPPs and to ensure competitive, fair and transparent private investment under the framework remain largely undeveloped. Key among them being the proper balance between the need for transparency and accountability vis-à-vis the protection of commercially sensitive information relating to the tendering process, all of which are aimed at protecting the integrity of the entire process.
Confidentiality is Essential
One of the fundamentals of any PPP process is confidentiality of information exchanged between the contracting authority and bidders. The underlying theory on the need for confidentiality is for the protection of commercially sensitive information which, if disclosed to the public, may harm the financial position of the Government or of a competitive bidder. Confidentiality is also required to ensure that none of the bidders abuse the system by knowing the contents of the bids submitted by the others and thus compromising the competitive process.
But so is Transparency
However, of equally fundamental importance to ensure integrity and competitiveness of the process is transparency, fairness and accountability through the entire process. The PPP Act and regulations plainly espouse these fundamentals both during and after tender evaluation and award. Notably, Regulation 40(5) of the Public Private Partnerships Regulations, 2014 requires that, “the proposal evaluation team shall preserve the confidentiality of a tender evaluation process and shall not be influenced or directed by any person regarding the evaluation of a proposal except in accordance with the Act and these Regulations.” Section 29 on the other hand, requires that, “unless otherwise provided under the Act, all projects shall be procured through acompetitive bidding process and that in procuring and awarding a contract to a private party under the Act, a contracting authority shall be guided by the principles of transparency, free and fair competition and equal opportunity in accordance with the guidelines made under this Act.”
A Balancing Act
These two fundamentals require careful balance as it is almost impossible to achieve transparency and accountability without information. Still, unless the flow of information is checked, particularly at the stage of pre-award and execution of the tender agreement, commercially sensitive information may be jeopardised both for the bidders and the Government. This may thereby put to question the competitiveness of the entire process with serious ramifications on value for public funds. In this regard, the Petition Committee, which was established to adjudicate challenges relating to a PPP process, plays a major role. Unfortunately, in the initial challenges brought before the Petition Committee in which the issue of disclosure arose, it adopted a very narrow understanding of its powers, rejecting applications by aggrieved parties to compel disclosure of relevant information relating to the evaluation process by contracting authorities. The Petition Committee held that it had no jurisdiction to do so, a holding that wholly undermined its ability to review impugned decisions of contracting authorities. This seemingly, elevated confidentiality over transparency and accountability with the resulting twin effects of considerably limiting the rights of parties challenging evaluation outcomes to fair hearing and compromising the competitiveness of PPP tender awards.
The APM Terminals Case
The above position has now been put right by the High Court in Republic vs. Public Private Partnerships Petition Committee & 3 Others ex Parte APM Terminals (2015) eKLR (the APM Terminals Case). As appreciated by the High Court (Korir J.) in that case, the Petition Committee’s jurisdiction was focused and specialised for the development of jurisprudence on PPP matters. It goes without saying therefore that its decisions, especially at the nascent stage of the PPP Act, are bound to play a crucial role in developing the PPP procurement regime in the country, in the same fashion as other monitoring mechanisms provided for in law. It is therefore crucial that it grasps these principles and develops the same to the highest standards possible.
Confidentiality of commercial information if over protected would obviously threaten the integrity of PPPs and foster a lack of trust, unfair competition and unaccountability. The need to strike a balance between the two is therefore critical and more so in circumstances where, as per the court in the APM Terminal case, ‘shenanigans’ in public procurement have been known to cost taxpayers value for money in public projects’. Therefore, confidentiality and/ or technical rules for the same should not be used by parties or condoned by the Petition Committee as a shield, when questions are raised on hideous decisions and/or actions of the contracting authority and/or any other person involved in the process. Transparency and accountability is nothing without information.
A matter of merits
- Yet disclosure cannot and should not be a remedy in all instances. Each situation must be considered on its own merits and disclosure ordered only in deserving circumstances and within regulated parameters, so as to assure protection of commercially sensitive data. Establishing a threshold for the same is therefore critical. The Court in the APM Terminals case has set the ball rolling in that regard and has established sound principles that can be built on, going forward. The said principles re-affirm the fundamentals of fairness, transparency and accountability in PPPs and shall hopefully assist the Petition Committee, private investors and the contracting authority in making decisions on disclosure rights and obligations while ensuring confidentiality and integrity of commercially sensitive information. The Court crystallised the principles to be considered in balancing the twin confidentiality and disclosure obligations in PPP Procurement thus;
- Where a losing bidder desires disclosure, the application should be made without delay at the time of filing the petition or complaint. The request should be accompanied by the reasons for the application for the disclosure and the specific information required to be disclosed
- A request for disclosure before the Petition Committee is not of the nature under Article 35 of the Constitution. It is for the protection of the right to fair administrative process and fair hearing as provided by Articles 47 and 50(1) of the Constitution
- Statutory administrative procedures such as those before the Petition Committee can be augmented with common law rules whenever it appears necessary to promote fair hearings. Where it would be in the interests of justice to allow discovery, an administrative tribunal should do so even where its rules do not expressly provide for discovery. The main point to consider is whether denial of discovery would result in denial of justice to a party
- In order for contracting authorities to embrace fairness, transparency, competitiveness, equity and cost-effectiveness in public procurement, the Petition Committee must stress this message by giving decisions that encourage and support these principles. A decision that goes against these principles is a decision against public policy
- The requirement for confidentiality is only found in the Public Private Partnerships Regulations, 2013 which limits confidentiality to the proposal evaluation team. That provision does not apply to the Petition Committee or mainstream courts and both are therefore not bound by the same. They have the power to order disclosure of information relating to PPP evaluations on application
- As is the case in the European Union, contracting authorities are under an obligation to disclose substantial information concerning other tenderers’ offers (notably, at least the winning tenderer) to all participating tenderers and/or disappointed bidders in order to allow them to effectively challenge award decisions. This obligation is sufficiently discharged only when the contracting authority provides very detailed information about the tender evaluation process and, in particular, gives information that enables the disappointed tenderer to perform a relative comparison of its offer vis-à-vis the tender of the winning bidder
- An unsuccessful tenderer who wishes to challenge the evaluation process is in a uniquely difficult position. He knows that he has lost, but the reasons for his failure are within the peculiar knowledge of the public authority. In general terms therefore and always subject to issues of proportionality and confidentiality, the challenger ought to be provided promptly with the essential information and documentation relating to the evaluation process actually carried out, so that an informed view can be taken of its fairness and legality
- Due to the short time limits imposed by the Regulations on those who wish to challenge the award of public contracts, the start of the relevant period is triggered by the knowledge which the claimant has (or should have) of the potential infringement However, the Court must always consider applications for specific disclosure in procurement cases on their individual merits. In particular, a clear distinction may often be made between those cases where a prima facie case has been made out by the claimant (but further information or documentation is required), and those cases where the unsuccessful tenderer is aggrieved at the result but appears to have little or no grounds for disputing it
- Any request for specific disclosure must be tightly drawn and properly focused. The information/documentation likely to be the subject of a successful application for early specific disclosure in procurement cases is that which demonstrates how the evaluation was actually performed, and therefore why the claiming party lost. Other material, even if caught by the test of standard disclosure, is unlikely to be so fundamental that it should form the subject of a separate and early disclosure exercise
- Ultimately, applications for disclosure must be decided by balancing, on the one hand, the claiming party’s lack of knowledge of what actually happened (and thus the importance of the prompt provision of all relevant information and documentation relating to that process) with, on the other, the need to guard against such an application being used simply as a fishing exercise, designed to shore up a weak claim, which will put the defendant to needless and unnecessary cost
- It is only such disclosure which will assure those who participate in public tenders that the tender process is above board
As aptly stated by the Court in the APM Terminals Case, there should be nothing to hide and nothing to be ashamed of, where goods and services of good quality are being procured at the best prices in the market. Indeed, the only way to assure that is by jealously guarding the transparency of the procuring process.