Hiring of auditors: OGDCL refuses to implement PPRA rules

Oil and Gas Development Company Limited (OGDCL) has reportedly refused to implement Public Procurement Rules Authority 2004 in hiring of auditors. "PPRA Rules 2004 however cannot in any manner override the provisions of the Companies Ordinance and attributing redundancy to the provisions of the Companies Ordinance by relying on some rules would in itself lead to illegality," the sources quoted Eram Ali Aziz, Company Secretary stating in a letter to Transparency International Pakistan.
Securities and Exchange Commission of Pakistan (SECP), Deputy Director (enforcement), however, maintains that sections 252 and 253 of the Companies Ordinance 1984 (Ordinance) deal specifically and specially with appointment of Auditors and ancillary matter relating to company''s auditors. Rule 21 of PPRA on the other hand is subsidiary legislation and is of general application on the subject matter and it cannot override the specific provisions of the Ordinance.
Transparency International Pakistan wrote a letter to SECP Chairman Muhammad Ali saying that SECP being a regulator itself should have read the establishment of M/s OGDCL being a public sector organisation set up by the Federal Government, under the OGDC Ordinance, September 20, 1966.
The questions to be considered is whether the OGDCL is under any obligation to adhere to the rules or whether it can continue under its own policy for procurement and section 252 and 253 of the Companies Ordinance 1984. In order for the Public Procurement Rules 2004 to be applicable to OGDCL it has to establish that: (i) OGDCL is either a corporation or body established by or under a federal law or it is owned or controlled by the Federal Government; and (ii) that the acquisition of goods and services by the OGDC are financed wholly and partly out of the public fund.
TI Pakistan has examined the sections of the OGDCL Ordinance at length and a perusal of the same indicates that the OGDC has been established under the OGDC Ordinance 1966, as a statutory body wherein a Central Board has been delegated all powers relating to general superintendence and direction of affairs and business of the OGDC. Thus, it is evident that the OGDC has been established under a Federal Law by the Federal Government.
The Chairman and Managing Director of the Board are appointed by the Federal Government and also members therein are approved by the Federal Government prior to their election by the share holders. It is evident from the OGDC Ordinance that the Federal Government controls the bank. Thus, not only is the OGDC established under a federal law it is also controlled by the Federal Government. The bank may therefore, be considered as a "procuring agency" within the meaning of that term under the Ordinance.
The question of whether the acquisition of goods and services by the bank is to be treated as a "Public Procurement" should be considered in the light of whether the OGDC utilises the Federal Consolidated Fund and the Public Account. However, we may add that funds of "enterprise owned and controlled by the Federal Government" are also treated as "Public Fund". Thus, it would appear that the OGDC is procuring agency and the acquisitions of goods by it are considered "Public Procurement" to which the rules apply.
Award of contracts without open competitive bidding to directors, auditors, commercial companies of directors has been allowed by SECP in case of public listed companies, but SECP is not entrusted the authority to overrule Laws of Pakistan.
PPRA Ordinance 2002, section 5 states: "Subject to other provisions of this Ordinance, the authority may take such measures and exercise such powers as may be necessary for improving governance, management, transparency, accountability and quality of public procurement of goods, services and works in the public sector and recommend to the Federal Government revisions in or formulation of new laws, rules and policies in respect of or related to public procurement".
And S.R.O. 432(I)/2004 states that in exercise of the powers conferred by section 26 of the Public Procurement Regulatory Authority Ordinance, 2002 (XXII of 2002), Public Procurement Rules, 2004 shall come into force at once. Also Public Procurement Rules 2004, Rule No 51 states that the provisions of these rules would have effect notwithstanding anything to the contrary contained in any other rules concerning public procurements. TI-Pakistan has requested Chairman to review the contents of Haris Bin Tipoo, Deputy Director (enforcement) on December 16, 2011, and respond to TI Pakistan complaint within a week.