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Mobile app deal not signed off by Cabinet: Auditor-General report

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The cover of the Auditor-General's report - Government of Bermuda's Response to Covid-19: Travel Authorisation

A report by the Auditor-General said money was paid by the Government for a mobile app that is not yet in use, under a contract apparently signed without Cabinet approval.

Heather Thomas’s findings noted that a service agreement with BPMS Ltd was first signed by the Government, represented by the Premier, and was updated later, when the deal was sealed by the Cabinet Office Permanent Secretary.

The contract was included in a report released by the Auditor-General on Friday, which was about the Travel Authorisation portal and other systems used at the height of the Covid-19 crisis.

BPMS said last night it was surprised to be included in the document, given the origins of its agreement with the Government came before the coronavirus pandemic.

David Burt, the Premier and the Minister of Finance, said last week that his initial review of the report revealed “factual errors and incorrect inferences”.

Ms Thomas’s findings – Government of Bermuda’s Response to Covid-19: Travel Authorisation – highlighted “multiple violations of the law and the Code of Practice for Project Management and Procurement in the awarding, development, implementation and operation of the Electronic Travel Authorisation Portal and the processing and collection of revenues generated by the use of this facility”

The travel authorisation portal was one of three contracts – also for testing and a Covid-19 “pandemic solution” – that the report said were awarded to resPartner, which trades as resQwest.

Heather Thomas, the Auditor General (File photograph)

The document added: “Other agreements reviewed that were of concern during an audit revealed that the Government, represented by the Premier, signed a service agreement with vendor/supplier, BPMS Limited, a local company that was registered on February 16, 2021.

“However, the service agreement under the contract is effective from August 24, 2020 (commencement date of September 1, 2020 with a contract completion date of August 31, 2025).

“The service agreement was later updated and signed by the Permanent Secretary, Cabinet Office, effective from April 12, 2021 (commencement date of March 8, 2021 and completion date of February 21, 2026).

“There was no evidence of any tendering or request for proposals process and there was no evidence of Cabinet approval.”

Code of Practice for Project Management and Procurement

The code said: “All contracts for purchase of goods or services that have a total value of at least $100,000 will be subject to a competitive procurement process, unless a waiver of the relevant requirements of this Code has been granted in accordance with section 6.

“All high value procurements must be approved by Cabinet before the contract is executed.”

Section 6 allowed certain requirements of the code to be waived in “exceptional circumstances”.

The names of Mr Burt and Lieutenant-Colonel Edward Lamb, the Cabinet Office Permanent Secretary, were not used in Ms Thomas’s report, although they are the holders of those positions.

Her findings said the service to be provided under the contract was "a mobile portal application being an interactive tool that allows persons to remotely access and pay for public and private goods and services“.

Examples included port of entry paperwork, paperless permits or licences, parking, health tracking and the payment of taxes, tickets and fees.

The report said: “Based on information reviewed, it appears as if the vendor was to be compensated by a user fee charged to the public.

“The user fee involves a shared revenue arrangement with the Government, involving a pledge of debt guarantee for the benefit of vendor’s parent company of $2.5 million.

“After the initial guarantee is absolved, the Government will receive a 10 per cent share of revenue generated by the public’s use of the application.

“An additional 10 per cent revenue share (total of 20 per cent) if the debt guarantee is extended to $10 million and a specified user fee is charged to the public for use of the application.

“This application per the signed contract is to provide a convenient tool by which the public can access a number of government services.”

The report explained: “Cabinet approves procurement projects over a certain threshold, accounting officers have the role/responsibility to authorise ministry/portfolio expenditures and the awarding of contracts (per the Code of Practice).

“It should be noted that although the application has not yet been put into operation, the Government has been making payments to the vendor ($1.7 million so far, in July 2022).

“The Code of Practice for Project Management and Procurement, and Financial Instructions were not complied with in relation to this project and as such, public funds have not been utilised with due care.”

A spokesman for BPMS, which is disputing the amount paid, said last night: “BPMS was surprised to be included in a report about the Travel Authorisation process given that the genesis of the BPMS agreement predated the pandemic and the software platform and related projects are far more reaching than this single government initiative.

He explained that founders of the company, as well as a related business – InnoFund – and the Government first met in January 2020 “to agree to the elements of the public-private partnership that were captured in the agreements and MOUs that followed”.

“BPMS demonstrated the platform to various government officials prior to entering into the final agreement and did its best to confirm that all procurement practices were followed by insisting that the relevant language confirming as much was included in the service agreement.”

The spokesman said: “The pandemic delayed the project start. However, due diligence continued throughout 2020 as companies were formed, agreements established and funding committed.”

He added: “The BPMS platform and portal has been available for use since the agreement dated April 12, 2021.

“The agreements provided that the revenue generated by BPMS was to serve as the funding mechanism for the technology incubator, innovation fund, and related programmes of the public-private-partnership, designed to attract tech business and investment to Bermuda, create jobs and stimulate economic growth and development.

“Payments to BPMS would also be used by InnoFund to pay off the government guaranteed loan that was provided to initiate the programmes.”

In a statement on Friday, Mr Burt said his initial review of the Auditor-General’s report showed “a number of factual errors and incorrect inferences, which could have easily been clarified if the Office of the Auditor-General would have reached out for clarification in advance of publication”.

He spoke to some elements of the report in the House of Assembly later that night.

Mr Burt added in his statement that the Government took actions in the face of a "once-in-a-century pandemic“ to protect residents’ health and try to address severe economic and financial challenges.

He said: “It is recognised, accepted and has been stated by Cabinet that in some cases, given the urgent need to address critical matters on an often expedited basis, not all of the standard steps were followed.

“These matters were subject to review and appropriate corrective action taken.”

Asked specifically about reference in the report to the BPMS agreement, the Premier added: “As has been stated, the Government is currently in the courts on matters related to the contracts referred to in this section and therefore, no further information can be provided at this time.”

BPMS is one of three linked organisations that launched legal action against the Government last year.

The company was listed as a plaintiff, along with InnoFund and the InnoFund Innovation Incubator, in a writ that claimed for loss and damage.

It was alleged that the Government failed to pay for services and products provided after agreements were made.

Operations at the incubator were suspended last December amid the dispute.

It is understood the row related to a number of invoices resulting from work done by BPMS that were allegedly unpaid.

Premier addresses Auditor-General report in House of Assembly

The Auditor-General’s report contained “inferences” regarding an IT contract being awarded, MPs hear during Friday’s motion to adjourn at the House of Assembly.

David Burt, the Premier, quoted from the special interest report, and then shared e-mails from the outbreak of the pandemic in March 2020, in which a Ministry of Health official contacted him saying a new system for booking Covid-19 tests was “urgently” required.

It came at 2.36pm on March 24 when Mr Burt’s responsibilities included information technology – and Denis Pitcher, then a full-time consultant on fintech, and who had offered to assist in the pandemic, was copied in, along with two other officials.

Mr Burt said he responded the next day saying: “Denis, can you assist – I am guessing something like Calendly”. This was in reference to a free online booking programme.

He added that he failed to understand how he could be “accused of recommending something with inferences of conflicts of interest when that information would have been readily available and shared if asked for”.

The Premier said he would write to the Speaker as well as the chairman of the audit committee, adding that the Auditor-General would hear from him as well.

“I hope that corrects the record,” Mr Burt said.

Senators heard recently that the $2.5 million government guarantee – for a loan made available to InnoFund to support technology start-ups – was paid.

A spokesman for InnoFund said later: “InnoFund has had no direct contact with the Government in respect of the guarantee but it appears from our banking records that the Government has paid the guarantee in full and the legal costs associated with that process.”

The BPMS spokesman added last night: “BPMS, InnoFund, and the InnoFund Innovation Incubator – i3 – continue to stand by their commitments and agreements and remain open to resolving the current dispute with the Government.”