Gov’t seeks to cash in on performance bonds over contractor failures

-AG files claims for $186M

Government is seeking a total of $186M from performance guarantees issued for three projects, including a section of the Amaila Falls Access Road.

Attorney General Anil Nandlall last Wednesday filed actions against Citizens Bank Guyana, Caricom General Insur-ance Company Inc and North American Fire and General Insurance Inc, which put up the Per-formance Bond Guarantees and Advanced Reform Guarantees to assure and guarantee the performance of contractors. Govern-ment contends that the contractors failed to discharge their contractual obligations and as a result it is seeking to “cash in” the bonds and guarantees, a statement from Nandlall’s office said on Friday.

The three actions appear to be a shift in policy by the government which has not often enforced performance bond options. The opposition and other critics have harried the government over this. The quality of the work on the Skeldon Sugar Factory has led to critics saying that GuySuCo and the government should have moved to claw back monies for substandard work from the contractor.

According to the statement, Citizens Bank Guyana executed a Perfor-mance Bond/Guarantee in favour of the Government of Guyana at the request of Golden Star Contracting Services Company Ltd. on August 18th, 2005, as a result of a contract between the government and the company for the Rehabili-tation of the Access Road to Parika Stelling.

However, on January 11th, 2008, the government terminated the contract, owing to what it said was the company’s repeated failures to correct defects within the time frame specified by the engineer. As a result, in April, 2008, the Ministry of Public Works wrote to Citizens Bank making a first demand on the Performance Bond in the amount of $38,391,018, in accordance with the terms and conditions of the contract, but the bank has to date failed to pay over the sum.

The statement said the claim on Caricom General Insurance Company Inc. is based on a Performance Bond and Advance Guarantee in favour of the government at the request of Maurice Balgobin pursuant to a contract between them for the rehabilitation and reconstruction of the Kaburi Village Road, in Region Seven.

Just over a year after the execution of the bond and guarantee, the government terminated the contract, the statement noted, owing to the fact that the contractor failed to substantially complete the works even after an extension of 260 days was granted.

As a result, the Ministry of Public Works in December of 2012 wrote to Caricom General Insurance making a first demand on the Performance Bond and Advance Guarantee in the amount of $4,986,375, and $1,892,009. However, despite the claim, the company has to date failed to make the payment.

Meanwhile, North American Fire and General Insurance Company executed Performance Bonds in favour of the government at the request of Bovell Construction Ser-vices pursuant to a contract between the government and the firm for the Amaila Falls Road and Transmission Line Clearing Project Section Six (6) Issano Junction to Kuribong River.

On the 27th of December, 2012, the Attorney General’s statement said, government terminated the said contract owing to the fact that the contractor “removed equipment from the site,” which resulted in “a stoppage of work constituting a fundamental breach of contract in accordance with the general conditions of the contracts.”

The Ministry of Public Works subsequently wrote to North American Fire and General Insurance Co. Ltd, making a first demand     on the Performance Bonds in the amounts of $56,345,060, and $84,517,590, but the company failed to pay over the sums.

The actions were filed in the Commercial Division of the High Court and are set to be heard on June 18th, 2014, the statement added.

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