Rs 700 million busted on global Ceylon Tea promotion

Following the article published in the Daily Mirror newspaper on August 21, 2024, titled ‘Rs 860 million spent on global tea promotion campaign wasted! “Ceylon Tea Global Promotion Wasted Rs. 860 million,” a preliminary investigation was initiated based on the facts revealed in the article. The investigation was led by Independent Investigator Neil de Alwis. While handing over his findings to H. A. Nisansala of the Ministry of Public Administration, Provincial Councils, and Local Government, Neil de Alwis stated in his report: “With reference to your letter No. TB/AD/DIS/2024/In viii dated November 18, 2024, which was addressed to us...”

The purpose of the investigation was to conduct a preliminary review of the “Audit for Short-Term Ceylon Tea PR Campaign Globally” dated July 23, 2024, numbered 2024/2024/IAR/05 and issued by the Internal Auditor of Sri Lanka Tea Board. Based on this audit report, an article was published on August 15, 2024. As a result, it was decided to proceed with a preliminary investigation.

Sri Lanka Tea Board decided to establish a public relations agency to handle public relations to promote Sri Lankan tea internationally. Accordingly, a Technical Evaluation Committee (TEC) was formed to select a suitable institution for these public relations efforts. The committee consisted of the Director (Promotion) of the Sri Lanka Tea Board as the Chairman and two Assistant Directors as its members.

The next objective was to establish a fund to finance the marketing campaign. To achieve this, it was decided—with the consent of tea exporters—to collect a tax of Rs. 3.50 per kilogram of exported tea. To ensure the efficient use of the fund, the Tea Board’s methodology required that any submitted proposal be first reviewed by the Promotional Marketing Committee (PMC) for its opinion. 

After obtaining PMC approval, the proposal was then approved by the Board of Directors before being forwarded to the Technical Evaluation Committee (TEC). According to the 2011 Cabinet Memorandum, the Minister’s recommendations stated: “The Promotional Marketing Committee should be responsible for implementing this plan in a transparent, responsible, and efficient manner to ensure the proper disbursement of funds.” Additionally, the Head of the Promotion Division of the Sri Lanka Tea Board assured that all proposals must first go through the PMC and that no proposal would be submitted to the TEC without prior PMC approval. However, the preliminary investigation has revealed that proposals for the Public Relations Agency were submitted directly to the TEC, bypassing the PMC. This has been identified as a deviation from the established procedures.

The preliminary investigation has revealed irregularities in the implementation of the Ceylon Tea global promotion programme. The Director of Promotion at the Sri Lanka Tea Board has been identified as the primary party responsible for these irregularities

Accordingly, as stated in the Cabinet Memorandum, it is the responsibility of the PMC to propose the suitability of any proposal. However, the preliminary investigation report has revealed that by bypassing the PMC and submitting proposals directly to the TEC, the Director of Promotion has violated the instructions outlined in the Cabinet Memorandum. Furthermore, the Director of Promotion is the primary officer responsible for implementing both new and existing proposals.

Submitting proposals directly through the TEC, without prior PMC review, sets a wrong precedent. The Cabinet Memorandum submitted on December 30, 2020, states that digital media should be utilized for the Tea Board’s publicity. It also underscores the need for marketing strategies that address any shortcomings in the existing system and are suitable for the country, suggesting collaboration with appropriate institutions to implement effective solutions.

On February 21, 2022, the PMC decided that this promotional initiative should coincide with International Tea Day on May 21. Based on TEC recommendations issued on 18 March 2022, the Department Procurement Committee (DPC 4) approved calling for bids on April 18, 2022 to select a public relations agency for this purpose. A budget of US$ 200,000 was allocated for a five-month public relations programme in the procurement notices. The validity period for procurement was set from 08.05.2022 to 30.05.2022. Accordingly, procurement bids were invited at the Tea Board on 20 May 2022, and five public relations agencies submitted their proposals. Subsequently, the bid submission period was extended until June 29, 2022.

During the extended period, two institutions submitted bids, which were forwarded to the Technical Evaluation Committee (TEC) on June 29, 2022. A scoring system was used to evaluate the two public relations agencies that submitted bids, and plans were made to award US$ 198,200 to the agency that received the highest score. However, the advertising print media prices for the target countries were not specified in consultation with the selected agency. Instead, the agencies recommended media unit prices without including agency fees. This approach was subsequently approved by the Department Procurement Committee (DPC) on September 9, 2022.

Inappropriate action 

According to the procurement notice, the allocated budget for this process was US$ 200,000. However, the actual payment of US$ 260 violates the Procurement Guidelines. Additionally, both the evaluation and recommendations made by the TEC were found to be non-compliant with Procurement Guidelines. The preliminary investigation has revealed that when two institutions submitted bids, commenting on one institution requesting specific details while the other did not is an inappropriate action. 

Following the publication of the notice on May 28, 2022, all procurement activities were required to be completed by May 15, as per the procurement schedule. However, a 10-day extension was granted at the request of the bidders. A request from one bidder to extend the procurement deadline has been approved. The bid was opened on June 13, 2022, but no clear justification for this was provided in the TEC or DPC reports.

The Tea Board agreed to allocate additional funds for media purchases related to this campaign. Consequently, the Tea Board instructed the private company that won the tender to obtain and submit media pricing details from the United Arab Emirates, Saudi Arabia, Germany, the United States, and Japan. The company subsequently informed the Tea Board that it could provide the required media services within the originally allocated budget, without any additional cost. Funds were already allocated for media coverage in the United Arab Emirates. US$ 61,900 was allocated for media purchases in the remaining four countries. However, this amount was recorded as five magazines and approval was obtained for 5 countries.

 An audit was carried out to investigate the global promotion campaign carried out to promote Ceylon Tea. Here are some pages of the audit report

The Sri Lanka Tea Board forwarded the contract to the selected company on November 21, 2022. In response, the company confirmed its willingness to sign the agreement on November 23, 2022. It also inquired about any necessary actions on its part, including advance payment security and the performance guarantees. On November 25, 2022, the Director General of the Tea Board replied in writing, stating that the required details would be provided soon. However, the Tea Board only sent a copy of the agreement with the relevant explanations on  January 2, 2023— 42 days after the procurement process. If the TEC had formally awarded the US$ 198,200 contract to the selected company on time, the Tea Board could have finalized the agreement as scheduled. The preliminary investigation has shown that this delay resulted in a missed opportunity.

The approval of the DPC was not obtained when awarding this procurement. Had it been obtained, entering into a contract would have been possible. The failure to enter into an agreement to protect state assets, along with the delay of the TEC in seeking clarification from the supplier who was not included in the procurement, resulted in the inability to complete the initial procurement process. Accordingly, the TEC and the Director of Promotion have violated the Procurement Guidelines.

The company responsible for the promotion has been in discussions with the Tea Board Committee since December 2022. During these discussions, it was highlighted that the digital media plans needed to be revised, as the procurement process was over a year old and required adaptation to new technological methods. Accordingly, the company submitted two new proposals: either to specify the exact number of Key Performance Indicators (KPIs) determined in 2022 and estimate their cost or to determine the KPI count based on the revised pricing structure.

According to that proposal, based on the pricing in June 2022, US$ 120,000 could cover 69,100,124 KPIs under the 2023 pricing structure. The company indicated that maintaining the previous KPI count would require US$ 159,000, highlighting a shortfall of US$ 30,000. Meanwhile, the Director of Promotion at the Tea Board informed the Chairman to reappoint the previous TEC.

Accordingly, the TEC meeting was held on May 31, 2023, where plans were formulated to implement Digital Execution. It was designed to run the programme for three months across 21 countries instead of just five as a new programme. A procurement process was set up to allocate US$ 150,000 within seven days. Two private entities submitted bids for this procurement. However, the tender was ultimately awarded to the original procurement holder. This procurement was approved by the TEC. The initial investigation indicates that based on this approval, the DPC also granted its approval. However, the investigation further reveals that the TEC conducted the procurement process improperly, leading to an erroneous decision by the DPC as well.

The investigation has revealed a lack of scientific basis and transparency in the decision to allocate US$ 30,000 due to delays in the initial procurement process or in the determination of the required number of Key Performance Indicators (KPIs). The preliminary investigation has concluded that the Chairman of the TEC and its team engaged in misconduct throughout this process.

A procurement was conducted before the implementation of Media Execution for 21 countries. Since a company that participated in the procurement was not provided facilities in Russia, despite Russia being essential, the procurement was awarded for US$ 144,320. The initial investigation has revealed that the company was removed from the procurement and instead, the original tender of US$ 150,000 was awarded to the company that had previously received it. Another key issue is that while the programme was intended to cover 21 countries, the company that won the tender only operates in 18 countries. Like the previous company, this company does not operate in Russia either. The estimated budget for promotions in China, Russia, and Iran—where the awarded company does not conduct campaigns—is US$ 31,000. When subtracting this amount from the original US$ 150,000 allocated in the procurement, the remaining total is US$ 118,000. Despite receiving this amount, the company was expected to demonstrate promotional progress across 18 countries. However, the preliminary investigation has confirmed that only three countries have achieved even 25% progress.

Newspapers and magazines in Japan, Germany, the United Arab Emirates and Germany have expressed interest in promoting Ceylon Tea. The company has indicated that an additional fee of US$ 61,900 is expected for this promotion. The TEC has convened for this purpose and has decided that both US$ 198,200 and US$ 61,900 will be allocated to promote magazines in four countries. Preliminary investigations have revealed that the prices quoted in all four countries are the same.

The recommendations provided by the TEC for this procurement were approved by the DPC on November 15, 2022. The preliminary investigation has revealed that a procurement letter for US$ 260,100 was issued on November 21, 2021 to cover the cost of magazine advertisements in five countries and media coverage in four countries. However, despite the disbursement of funds, the investigation found insufficient progress in the promotional activities. The company responsible for the campaign claimed that 60% of one of the three promotional videos had been completed, yet no supporting details were provided. On June 14, 2024, the former Chairman of Sri Lanka Tea Board inquired about the progress of the work. On June 24, 2024, the company sent a reply stating that there were no formal reports available regarding the agreed-upon progress during the procurement. An email was sent on July 1, 2024 on its progress, but the investigation found that no downloadable content was attached. 

The company responsible for the Ceylon Tea promotion has requested a payment of Rs. 2.84 million from the Director General of the Sri Lanka Tea Board as a reward for the work completed. However, no invoice was initially submitted. Later, on September 11, 2024, an invoice was provided, along with a list of completed work and a covering letter. The total amount requested was Rs. 7,315,793.79 million.

The preliminary investigation has revealed irregularities in the implementation of the Ceylon Tea global promotion programme. The Director of Promotion at the Sri Lanka Tea Board has been identified as the primary party responsible for these irregularities. The findings also suggest that the Director of Promotion should be placed under interdiction and placed on compulsory leave. Furthermore, the investigation indicates that members of the relevant committee should be asked to provide explanations, as their actions contributed to the wrongdoing. 

Commenting on the next steps regarding the issues highlighted in this preliminary investigation report, the current Chairman of the Sri Lanka Tea Board, Raj Obeysekara, stated: “We have received the preliminary investigation report, which will be presented to the Board of Directors. The maximum possible penalties will be imposed on those found guilty of misconduct, and legal action will be pursued against the individuals, if any. The investigation has highlighted that the company awarded the tender for this project collected funds without demonstrating progress. As a result, the future course of action against the company will be reviewed by the Board of Directors, and an appropriate decision will be made.”

A spokesperson for the Sri Lanka Tea Board stated, “An audit report indicated that a financial fraud of Rs. 860 million had occurred during these promotional programmes. However, the preliminary investigation has only confirmed the misappropriation of Rs. 700 million, and there are no available records detailing how the remaining Rs. 160 million was spent.”