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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

PNG Health Department Fined For Contract Breach
Private company’s successful service bid ignored by government

By Todagia Kelola

PORT MORESBY, Papua New Guinea (PNG Post-Courier, Dec. 19, 2012) – Papua New Guinea’s Department of Health and the State will be forking out a massive K30 million [US$14.3 million] to pay a company for breach of contract.

The National Court yesterday ordered that the Health Department put K15 million and the State put another K15 million [US$7.2 million], to be paid to Alpar Trading for breaching a contract that was awarded to the company earlier.

Alpar Trading, a PNG-owned company, was awarded a contract worth close to K10 million [US$4.8 million] by the National Government for procurement and supply of treated mosquito nets that met the requirements of World Health Organization standards to 22 districts in the country.

The project was in its third year running on the fight against malaria throughout the country. The program is funded by the Global Fund against AIDS, Tuberculosis and Malaria, an international financing organization.

The fund was managed by a committee set up under the auspices of the Department of Health and chaired by the then Secretary Dr. Nicholas Mann whose deputy was one Ron Seddon, a member of the Port Moresby Chapter of Rotary Club who was engaged in this program in the previous two years under an entity named RAM (Rotary Against Malaria). Alpar Trading and the Government contract comes into the picture in the third year of the program because the Government could not continue the program under the same arrangement with the use of a Certificate of Inexpediency (CoI) which enabled RAM to operate in the previous two years.

The National Government through the Central Supply and Tenders Board (CSTB) insisted that the requirements of the Public Finance Management Act must be adhered to by advertising the project and Alpar Trading became the successful applicant following that process.

After the contract was executed and the issue of discharge of the contract arose, the principal partner in the facilitation of the project, the Department of Health through then Secretary Dr. Mann resisted Alpar Trading’s participation in preference to RAM, its own preferred distributor, and ultimately repudiated the contract.

Alpar Trading, who had a perfectly binding contract with the National Government, was left behind with the paper containing the signatures of the parties of the contract but somebody else was paid with the Global Fund money to perform the services.

Justice Nicholas Kirriwom, who presided over the matter, said in his decision: "This is a case that really should not have gone to trial and take this long to finally come to end. This is a case that the State as a principal party in the contract had no defense against the plaintiff, the other party to the contract.

"It was the State by its public tender of this work that invited the plaintiff to bid and the plaintiff was the successful bidder.

"But when it came to implementing the contract after it was signed, the then Health Secretary put up the blocks that made it quite impossible for the contract to be performed, all because Dr. Mann’s choice of contractor was not awarded the contract.

"He pleaded with CSTB to review its decision awarding the contract to the plaintiff by repudiating it and giving it to his preferred contractor, RAM. But CSTB advised that only one company met all the requirements stipulated under the law and it was the plaintiff."

Justice Kirriwom ordered that Alpar Trading be paid damages in the sum of K30,351,788.50 [US$14.5 million] which shall be apportioned between the first and second defendants (the Department of Health and the State) on a 50-50 basis which amounts to K15,175,894.25 [US$7.2 million] each to pay the plaintiff.

PNG Post-Courier:
Copyright 2012 PNG Post-Courier. All Rights Reserved.

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