An important meeting between the Federal Board of Revenue (FBR) and M/s Agility would be convened at Dubai (today) to decide the fate of the Pakistan Automated Customs Computerised System (PaCCS).
Sources told Business Recorder here on Thursday that FBR Chairman Salman Siddiq along with two officials of the Ministry of Finance have left for Dubai to convene most crucial talks about the continuity of the PaCCS for clearance of consignments through automated system.
The officials of Agility have reportedly vacated their offices in Customs House, Karachi. Details revealed that the FBR and M/s Agility had been planning to organise a meeting since November 2010 but due to unavailability of key officials and representatives of M/s Agility on the proposed dates the meeting could not be arranged.
Recently, M/s Agility was informed that due to official exigencies the proposed meeting is not feasible outside Pakistan and that M/s Agility was invited for a meeting at Islamabad. However, M/s Agility vide e-mail dated February 21, 2011 informed that the proposed meeting should take place at a 'neutral venue'. M/s Agility also stressed that the core issues require presence of senior management of M/s Agility as well as the members of the committee constituted by the finance minister so that major decisions could be taken.
From the FBR perspective, the focus of the forthcoming negotiations would be on the issues including purchase of software along with source code (For use by GoP) and compensation to M/s Agility for purchase of software and modalities relating thereto. Both sides would also discuss the responsibility for maintenance of PaCCS and smooth and complete transition of system controls to Pakistan Customs; and payment of compensation for services rendered by M/s Agility Logistics.
On the other hand, though M/s Agility has formally, informed FBR that they are ready to sell the micro clear software for PaCCS operation with source code. The company is, however, seeking compensation for the purchase of micro clear software for PaCCS operation by GoP; running the system to date and cost of decryption of entire historical data and its interfacing with any other system, if required by FBR.
Thus, the main issues which need to be discussed and settled included purchase price of software (micro clear) along with source code and modalities relating thereto; payment of compensation for the services rendered by M/s Agility to date; responsibility for maintenance and further development of PaCCS software in the transition period and future requirements and maintenance of existing hardware for PaCCS project and future hardware requirements.
In 2009 the finance minister during the deliberations of the Revenue Advisory Council of the Federal Board of Revenue constituted a sub-committee comprising three members of the RAC for the review of PaCCS and to report as to whether PaCCS is beneficial and workable or otherwise. The sub committee concluded that the issue of ownership of the system should be addressed on priority. The decision for continuation of the system or otherwise was deferred till the receipt of the system audit report from M/s Sidat Hyder Morshed, the system auditors of PaCCS.
Sources said that M/s Sidat Hyder Morshed conducted system audit of PaCCS. The objectives of the PaCCS audit were to verify and test PaCCS with respect to Information Leakage (Confidentiality and integrity of processing &data); to determine if the system can be misused in its current implemented state; to determine if the system has been misused in the past; PaCCS Input, Processing and output controls; and to provide assessment on the current PaCCS Controls, weaknesses and effectiveness of implemented controls. However, M/s Agility did not provide the full detail of information required by system auditors for completing the said system audit. The system auditors concluded that system in its current state can be misused and unauthorised activities can be conducted; it could not be assessed if the system was misused in the past due to unavailability of access to live PaCCS system; audit trails could not be checked to establish any malicious activities.
Sharing the recent developments, sources said that on February 25, 2010, the Finance Minster decided to discontinue the services of M/s Agility due to the drawbacks/shortcoming including ownership of the software and tainted reputation of M/s Agility and directed FBR to make immediate standby arrangements to ensure smooth transition from PaCCS to 'One Customs'. Finance Minister desired that FBR should conduct a study of the alternative reputed Customs clearance systems including 'ASYCUDA' for use by Pakistan Customs. As a stop gap arrangement, it was decided that the PaCCS operation will be handed over to M/s Pakistan Revenue Automation Limited (Pral) which is an organisation wholly owned by GoP/FBR. However, the GoP's approval to launch Pral developed 'web based One Customs' (WeBOC) at QICT in pilot mode is still awaited.
Later, on the directive of the finance minister on May 29, 2010, M/s Agility was asked by FBR to continue PaCCS operations till September 30, 2010 on the consideration of their demand for payment/compensation for services rendered uptill now and reviewing the earlier decision to terminate the use of M/s Agility's system by FBR.
Recently, in November, 2010, the finance minister has constituted a committee headed by the Finance Secretary, comprising Chairman FBR, Member (Customs), Project Director (Customs Administrative Reforms (CARe)) and Additional Finance Secretary (Corporate Finance), Ministry of Finance, as members to start formal negotiations with M/s Agility to settle entire detail of the purchase of PaCCS software including the fee/cost of services provided till date.
M/s Agility has requested for a meeting with the above referred committee constituted by the finance minister to discuss the matters relating to PaCCS and payment for the rendered services. The fee for the pilot project amounting to US $ 199,786 has been paid already to M/s Agility as conveyed by TP&R wing FBR.
Background of the issue revealed that in May 2005 the Project of PaCCS was launched with (limited functionalities) at Karachi International Container Terminal (KICT) Karachi port for automated and paperless customs clearances. M/s PWC (Presently M/s Agility logistics) was selected for development of software. The funds were allocated under the TARP fund. The company had the mandate to review the business cycles, reengineer the business procedures and get it translated into software. The agreed service fee for the pilot project was US$ 199,786 which had been already paid to M/S Agility as conveyed by TP &R Wing, FBR. The duration of the contract was seven months. The PaCCS, in pilot mode, was later rolled out to two other terminals i.e. PICT and QICT at Karachi port without formal contractual arrangement, with M/s PWC (M/s Agility Logistics).
The system created as a Pilot had very limited functionalities. Even the essential functionalities such as risk management system, transit, post clearance audit, manifest clearance & auction, EDB monitoring of TBS, assessment of liquid cargo, & postal appraisement system, duty drawback on imported goods, temporary importation & re-importation of goods, passenger facilitation operation, were not operational in the system. Neither any satisfactory user test/Audit was conducted nor was any scalability of the system properly checked before its roll out. The pilot was not closed properly.
As reflected in World Bank Aid Memoires, the Tarp funds were only available for the PaCCS roll out plan, provided the roll out bid was transparent and according to international best practices. However, the FBR (the then CBR) decided to avail Public Private partnership (PPP) mode for financing the roll out of pilot project instead of international bidding for complete roll out and development of PaCCS. World Bank withdrew its support for such roll out citing the reasons that the intended arrangement was not through transparent bidding and amount of $ 27 million allocated for customs automation was withheld for re-appropriation, etc.
Sources said that the FBR decided to go for PPP model in 2007. Initially there was the thinking that assets of both the partners would be utilised for PPP. The FBR's Collectorates, hardware, expertise of officers, support staff and its out reach ability to its clients (i.e. importers, exporters and other users of system) would be assessed for determination of share of assets in the joint venture. However, later on it transpired from the financial model presented by M/S Agility that all above assets of FBR would have no value in PPP. M/S Agility would invest in software and personnel and would be entitled to all amount of fee collected from importers and exporters. As per proposal FBR would provide all its infrastructure and human resources and Collectorates/dry ports/airports/customs stations but would not be entitled to any part of the generated income. However, it would collect the entire fee as levied per GD and remit it to Agility. This arrangement would be for 15 years. RFP was floated accordingly which only allowed development of further functionalities already existing in PaCCS engine. The pre-bid qualification for all other bidders became impossible and only one company qualified which already had PaCCS engine and that was M/S Agility. The RSD was accordingly issued. The Agreement for the PPP was drafted by M/s Ferguson in collaboration with IPDF (Infrastructure Projects development facility) from Ministry of Finance.
Later, the FBR had been receiving complaints from the trade and from the PaCCS Collectorate about the infirmities of the system. The missing functionalities and system flaws coupled with non-compliance of change requests, a crippled system with the great potential loss of revenue emerged on the scene. The FBR could neither fix the system nor get rid of it. Agility had refused to fix it having no legal agreement for roll out to PICT and QICT.
The FBR deliberated on the draft PPP agreement and specially the financial model for levy of fee on "essential services" of Customs clearances. Initially it was conceived at US $ 32 per GD and later on reduced to US $ 18 and US $ 13 per GD for essential services. But what is non-essential today will be a compulsion in next 15 years. The escalation of $ vs PKR and 10 percent growth per year over it suggested a recipe which is bound to escalate the cost of doing business. Thus, both sides could not reach on a consensus agreement, sources added.
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