August 20, 2019
Lubowa hospital: A case study in corruption risk – and how Open Contracting could have helped
By Josselin Canevet
On the 6th of August, health officials from the Ugandan government were denied access to the construction site of the International Specialised Hospital of Uganda, based in Lubowa. The purpose of the visit was to satisfy the Ugandan parliament’s oversight function and ensure public money is being spent as it should. The contractor explained security turned away the officials for their own safety and because they had not given prior warning. This is raises concern, as it could be seen as an attempt to prevent officials from carrying out their duty in seeing the successful implementation of a major contract.
These ongoing issues at the Lubowa hospital serve as a striking example of why Open Contracting, especially for health, can reduce corruption risks. The Speaker for parliament Rebecca Kadaga said that this cannot be ignored and the parliament will up as to why they were denied access.
Here are some important facts about the Lubowa hospital construction contract:
- The government issued a promissory note, (a document promising to pay a certain amount to an entity/individual) for US$397 million was given to the Italian firm Finasi.
- No procurement process was done for the construction of the hospital; it was awarded to Roko construction (a local firm).
- Another organisation, Power Guizhou Engineering Co. Ltd has recently joined the project to conduct construction works, essentially kicking Roko out of the project, causing Roko to take Finasi, the Ugandan Government and Power Guizhou Engeering to court on the grounds of anomalies.
- A Finasi/Roko Special Purpose Vehicle was created, with Finasi owning 95% of the shares and Roko owning 5%.
- The hospital will cost $397 million, making it the most expensive hospital built in Uganda. Despite this, members of parliament are unsure on the purpose of financing the hospital. Although it was endorsed by the review committee to see whether it was achieving value for money. For comparison, a local hospital built on similar terms cost $25 million.
- The Lubowa hospital is costing approximately 16 times more than the other hospital. And with the likely upcoming issues, it is highly likely that the project will cost sustainably more.
There are five stages in the procurement process; Planning, Planning initiation, Award, the Contract and implementation. Had the Lubowa project gone through Open contracting processes, the planning stage may have raised the issue of whether the hospital was needed, or that it was value for money.
Secondly, if there had be a contracting process, other firms, international and local, may have submitted a better bid, providing more competition and better value for money. Remember, the promissory note was given to Finasi without any competition – no other companies had the opportunity to submit a bid. Within the awarding process there would have been an opportunity for an open evaluation of the bids.
Finally, the contracting stage. With the monitoring stage the government could hold the company to account regarding whether funds are being appropriately spent and the timeline for the works. Currently a legal case in underway which is likely to prolong and draw out the construction even further and multiplying the final bill to the tax payer.
Had Open Contracting been implemented, this case could have been avoided and the risks to corruption would have been reduced. This is evident from the success Open Contracting has had in Ukraine, especially in the health sector. The aim of the Open Contracting is to make the process more transparent and to ensure tax payers get value for money. Unfortunately for taxpayers in countries around the world, stories like this continue to reinforce the need for greater transparency in procurement.