Ministry advanced $156M for Abary sea defence, only $20.5M work done

- Auditor General report

The Ministry of Public Works made payments totalling $156.5 million for sea defences at Abary/Profitt but when a team from the Auditor General’s office visited the site only $20.6 million worth of work had been done.

This state of affairs prompted the 2010 Auditor General’s Report to recommend that the Head of Budget Agency conduct critical reviews of the ministry’s work supervision processes to ascertain “whyprogress payments of such magnitude could be made for so meagre works-in-progress”.

According to the report, which was tabled in the National Assembly earlier this month, a team of auditors on September 20, 2011 inspected work on the $550 million Rip Rap sea defences project at Abary/Profitt, West Coast Berbice only to find that the project was still at the mobilization stage and that some temporary works were being completed.

It said that based on documents seen the project had already exceeded its completion date by over two months and that liquidated damages could therefore be assessed if an approved extension was not granted.

It said that payments under the contract totalled $156.5 million but that a valuation of the related works amounted to $20.6 million.

“It was therefore clear that payments under the contract were not commensurate with actual valuations of the works, and could lead to significant overpayments,” the report said.

The payments up to that date included $53.7 million in a mobilization advance, additional payments of $100 million and $2.3 million for general items.

The report also commented adversely on two other sea defence projects under the ministry.

The Earthen Embankment at Good Hope, Essequibo had a start date of December 10, 2009 with a duration of nine months and a defects liability period of three months. The project was completed on April 10, 2011 – months after the deadline. The contract sum was $87.1 million and $86 million was paid.

In relation to the upgrading of 1100 metres of sea defences at Turkeyen/Ogle, its start date was January 2, 2008 with a duration of six months but it was completed on the January 26, 2009 and there was a defects liability period of 12 months. The contract sum was $176.9 million and the amount paid was $167.6 million.

The Audit Office report said that as could be noted there were time overruns in both cases but there was no evidence that the contractors had applied for extensions or there were related approvals.

“In the circumstances, liquidated damages were required under both contracts. From a review of the works it was clear that payments to the contractor had equated the actual project completion cost, thus suggesting that overpayments may have occurred,” the report said. It added that noteworthy was the fact that there was no recourse to performance bonds and/or insurances furnished by the contractor since these had expired long before the completion of the works.

Application of liquidated damages and the acquisition of performance/insurance bonds have been long-running issues for the government in relation to major contracts. There have many projects where liquidated damages have not been applied or performance bonds collected on.

Recently, the Amaila Falls access road contract awarded to Fip Motilall was cancelled by the Ministry of Public Works as the contractor was unable to secure a performance bond among other things. The audit office report, however, indicates that for the two sea defence contracts cited, the performance bond was not a major issue.

Sea defence work was prominently in the news in December last year after the European Union issued a statement calling for a speeding up of major sea defence works that it is financing here. It warned that unless this happened Guyana risks losing money.

It called on the major sea defence contractor here, BK International to accelerate the works. BK has secured a number of sea defence contracts.
EU Representative Robert Kopecky said that BK had experienced delays over the last two years caused mainly “by a certain lack of capacity in managing the large portfolio of the contract and to some extent inadequate provision of resources”.

The statement came after Kopecky, other EU officials and Government of Guyana officials visited the projects that the EU is funding.

The EU said that inspections of locations for provisional acceptance of work were carried out on December 13-14, 2011. Representatives of all parties involved visited work sites at Kitty, Coldin-gen, Melanie Damishana, Clonbrook, Springlands, Uit-vlugt, Orangestein, Aurora, Onderneeming, Lima, Walton Court, Johann Cecelia and Zeelandia.

“While the works at most locations were in acceptable state allowing for provisional acceptance, at some locations the works could not be taken over, which could result in enforcement of liquidated damages,” the EU statement said.

Urging BK to speed up, the Delegation of the European Union said it was encouraging its Guyanese partners “both from public and private sectors, to do the utmost to ensure (an) immediate acceleration of the works, otherwise there is a risk of loss of considerable amounts of funds”.