Three contractors blacklisted by World Bank for fraud

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Mekong Delta Transport Infrastructure Development Project-MDTIDP (Project WB5) was executed with a total investment of $312.02 million.

Vietnam Inland Waterways Administration is the main investor represented by Project Management Unit of Southern Inland Waterways. The joint-venture of The Louis Berger Group Inc. (United States) and Royal Haskoning (Netherlands) was assigned to provide consultancy services for the development of the preliminary design.

BCEOM (France) was in charge of preparing the technical design and bidding documents for the project. DHV (Netherlands) was tasked with developing technical designs in the second phase and supervise construction works in the first and second phases.

The “Northern Delta Transport Development Project” (Project WB6) invested capital in the construction of inland waterway infrastructure in Northern Vietnam, covering 14 cities and provinces with a total investment of $200 million, of which the World Bank provided $170 million in a loan package and the counterpart fund financed by the Vietnamese government was $30 million.

Blatant fraud brought to light

The Ministry of Transport (MoT) recently sent a declaration to the State Bank of Vietnam to justify information provided by the World bank on fraudulent contractors that had been punished in WB6 and WB5.

MoT said, after the authorities finished examining original records and started working directly with the alleged offenders, the executives of Minh Anh JSC., An Hoa Co., Ltd., and Thang Loi Group Co., Ltd.—who were named by the World Bank’s Integrity Vice Presidency—admitted to committing fraud by submitting misrepresented documents, including company capacity profiles, when bidding for construction contracts under projects WB5 and WB6.

In particular, besides “intentionally mistyping” the date of establishment (from 2006 to 2002), in its bid documents, Minh Anh JSC had doubled the value of two contracts and misrepresented the value of one, augmenting it to VND183 billion ($8.06 million).

After resorting to these tricks to “upgrade” the company’s bidding profile, Minh Anh JSC successfully won one construction contract under the WB6 project and three contracts under the WB5 project with a total value of VND492 billion ($21.67 million).

At the same time, An Hoa Co., Ltd. overstated two contracts in the bid documents to be able to win a contract under the WB6 project. Thang Loi Group Co., Ltd. also falsified two contracts to win a contract under the WB6 project.

Nguyen Huy Thang, general director of the Project Management Unit of Waterways (the representative of the investor) said that during the evaluation of bids for the six contracts mentioned above, he and other officials did not detect any abnormalities in the bids of the three contractors due to their overly sophisticated and hazardous misconduct.

These contracts were later awarded to Minh Anh, An Hoa, and Thang Loi after the World Bank did not object to the results of the bid evaluation process.

Until now, it is still unclear how the World Bank exposed the frauds. However, the donor has already imposed sanctions to ban the above-mentioned companies and general director of An Hoa Co., Ltd. from participating in World Bank-financed projects.

The time period was specified as follows: four years for Thang Loi Group Co., Ltd. (from April 5, 2012), five years for An Hoa Co., Ltd. and its general director (from July 26, 2016), and 14 months for Minh Anh JSC (from October 12, 2016).

Additionally, in the Guidelines for Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers, Article 1(16) on Fraud and Corruption clearly defines fraudulent practice as “any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.”

The sanctions against these three contractors were published by the World Bank on the donor's website between April and December 2016.

It should be added that under the Cross Debarment Agreement between the World Bank and the Asian Development Bank (ADB), bidders barred by the World Bank will also be subject to similar bans from ADB.

During the ban period, bidders blacklisted by either the WB or ADB will not be eligible to participate in any bid or project funded by the two donors. Meanwhile, individuals sanctioned by the World Bank and ADB, during the ban period, are not allowed to engage in any service or job funded by these two financial institutions.

Strict punishments imposed

According to MoT, the selection of preferred bidders for the above six contracts was implemented in the 2012-2014 period.

Hence, pursuant to the Law on Tendering No.61/2005/QH11, the amended Law No.38/2009/QH12 dated June 29, 2009, and Decree No.85/2009/ND-CP dated October 15, 2009, these three contractors were in clear violation of Article 12(2) of the Law on Tendering, which defined fraud as “bidders intentionally providing dishonest information in bid dossiers, falsifying the results of the tender selection, the signing and performance of the contracts.”

Under the provisions of Decree No.85/2009/ND-CP dated October 15, 2009, in case of violations to the above provisions, the contractor shall be “banned from participation in bidding from one to three years.”

Thus, it can be seen that the time limits for debarred contractors to participate in bidding for World Bank-funded projects are longer than those stipulated in Decree No.85/2009/ND-CP (1-3 years). In addition, the World Bank has imposed the debarment from 2016.

Regarding the performance of the contracts, according to a report conducted by the Project Management Unit of Waterways, Minh Anh JSC, An Hoa Co., Ltd., and Thang Loi Group Co., Ltd., after receiving the contracts, had been trying to complete the works and meet schedule and quality requirements. The works constructed by these companies were accepted to be put into operation.

However, as stated by MoT, it is definitely necessary and appropriate to penalise such misconduct by prohibiting offenders from participating in bidding for a period of time, as it will ensure fairness and transparency in the bidding process.

As stated by Deputy Minister of Transport Nguyen Nhat, these were direct and deliberate violations of the law. Hence, they should be punished seriously to deter further violations and fulfil the commitments on transparency and anti-corruption towards the donors.

Therefore, “MoT agrees with the measures applied by the World Bank, and at the same time, will speed up the rearrangement of the selection of contractors which has been carried out by the main investors and the project management units. It also seeks to improve the monitoring and supervision of the implementation process in order to ensure fairness, transparency, and efficiency in the bidding process,” Nhat said.