$350M in public funds wasted on High St building – audit of NICIL finds

-Ashni Singh wanted to keep press in dark on expenditure

The money, hundreds of millions of it, was to be spent on an ill-fated High Street project in contravention of the law, and on August 16, 2007, then Minister of Finance Ashni Singh was determined to keep it from the press.

“There should be no press release as this might draw attention to NICIL’s spending when ideally (it) should have been the expense of central Government,” he said, according to the minutes of the meeting of NICIL’s Board of Directors of which he was the chairman. He was talking about the $680 million transferred to government’s holding company, National Industrial and Commercial Investments Limited (NICIL), to undertake construction works for government offices at 44 High Street.

NICIL’s Executive Director Winston Brassington had informed the Board that the handing over of the site, where the former Guyana Broadcasting Corporation once stood on Princes and High streets, took place earlier that day.

The contractor was Kishan Bacchus construction company. The company had been selected for the contract after the initial contractor backed out of the project.

Three years later, with the company owing government tens of millions, in spite of the substandard work done, Singh urged that $51 million of work be identified for the contractor to do rather than seeking to recoup the money owed.

It remains unclear whether the company or the supervising consultant was ever penalized for the substandard works done but it does not appear that they were.

The end result was a building on which hundreds of millions was expended and that is expected to be torn down because the defects are so great that it has been rendered unsafe and useless.

Anand Goolsarran, the former Auditor-General who conducted a forensic audit into NICIL at the behest of the APNU+AFC government has recommended criminal charges and/or disciplinary actions based on the decisions made by NICIL and government officials. However, despite the report being submitted to the David Granger administration since October, no action has been seen in this regard.

The report, obtained by Stabroek News, indicated that the Ministry of Labour had transferred $679 million to NICIL for construction works on the 44 High Street property.

It said that according to Cabinet decision CP(2007)3:2:F dated 13 March 2007, the contract for the construction of Government offices at 44 High Street for the Ministry of Labour and the Guyana Forestry Commission (GFC) was to be awarded to Kishan Bacchus General Contractors. Negotiations were to be concluded with the contractor to ensure that the price excluded the cost of electrical works and air-conditioning of $190 million to be procured separately; and the cost was to be reduced via a reduction of specifications to be jointly agreed to by the Ministry of Labour and the GFC so that the price of the main contract did not exceed $300 million.

According to the report, the GFC was to meet the cost of the construction while NICIL was to finance the rest of the cost. In addition, the Ministry of Labour was required to countersign all contracts relating to the works while NICIL was responsible for implementing the construction. At the same time, the land formerly held by the Guyana Broadcasting Corporation under a State lease was to be vested in NICIL.

Handing over

The High Street building (SN file photo)
The High Street building (SN file photo)

The report said that at NICIL’s board meeting of 16 August 2007, Brassington informed the Board that the handing over of the site took place earlier in the day. The minutes recorded Singh as having agreed that “there should be no press release as this might draw attention to NICIL’s spending when ideally (it) should have been the expense of central Government,” the report said.

“This is quite an extraordinary statement coming from the Minister and is a clear acknowledgement of the improper use of NICIL’s funds,” Goolsarran commented.

The report revealed that five years later, there was an amended Cabinet decision dated 6 July 2012 which approved of the transfer by sale of the 44 High Street property to the Guyana Geology and Mines Commission at a purchase price of $100 million. The Cabinet decision also stated that all moneys received by NICIL from Central Government less relevant expenses paid by NICIL up to 30 September 2012 were to be reimbursed to the Consolidated Fund. It also authorised NICIL to do all acts necessary to implement Cabinet’s decision.

The report said that according to the schedule of payments provided by NICIL, amounts totalling $346.017 million were expended, leaving a balance of $333.417 million still held in its accounts. Of the amount expended, $224.993 million relates to payments to the contractor while $27.781 million was paid for engineering supervision.

“The construction of the building has since been aborted, and the structure was expected to be torn down because the floors were not constructed to the required specifications,” the report said.

It revealed that the minutes of NICIL’s board meeting of 12 March 2010 recorded that “In the absence of bonds, KBC (Kishan Bacchus General Contractors) owes $51 million after the 9th valuation. It was set out by AS (Ashni Singh) that we should identify $51 million of work and have him complete those aspects…”

Valid performance bond

The report asserted that it is evident that the Ministry of Labour and NICIL failed to ensure that the contractor executed a valid performance bond against which recoveries could been made for any overpayment as well as defective and incomplete work performed.

“The Minister’s statement to allocate work to the value of the contractor’s indebtedness appears reckless, considering that the project was aborted because of defective work performed, and any additional work would be a further waste of taxpayers’ funds,” Goolsarran declared. He said that it is not clear whether such additional works were performed.

In response, NICIL commented that the contractor had presented a CLICO bond and on the appointment of a judicial manager during the CLICO collapse, all business and insurance coverage was terminated/suspended.

The Goolsarran report also said that the role of the engineering supervisor needs to be called into question. It did not identify the company.

However, it said, according to the minutes of NICIL’s board meeting of 26 April 2007, Brassington was requested to provide examples of work done by the consultant to which he responded that he knew that the consultant had done work before but could not specify. He then stated that the firm was doing some work for Oldendorff Carriers in New Amsterdam and that he had not heard of “any good or bad reviews.”

The report revealed that at the meeting, the then Head of the Presidential Secretariat Dr Roger Luncheon, who was a member of the Board, expressed doubts about the ability of the consultant to supervise the work of the contractor considering that “KBC needs strong supervision as even the Minister of Amerindian Affairs seems to have problems with works done.”

Luncheon indicated that he would discuss the matter with the President, the report said.

Undertook

It pointed out that at its meeting of 14 May 2007, the Board discussed the progress of the works at 44 High Street. “The minutes recorded that the HPS undertook to raise the issue with the President again following the President’s request to have the Tender Board issue an opinion on the “integrity” of hiring the consultant without tender,” the report said.

“It is not clear why the consultant was not selected on the basis of competitive tendering and who initiated arrangements for his hiring. Whatever the outcome of the meeting with the President, the consultant was retained to supervise the work of the contractor. The end result is that some $350 million of public resources has been wasted,” the report declared.

In response, NICIL commented that, given that time was of the essence and the consultant’s familiarity with the needs of the GFC, a policy decision was made to have the firm continue with the works.

The report pointed out that the contract was awarded in 2007 but at the time of reporting the building remained substantially incomplete. “The building was abandoned, and the structure was expected to be torn down because the floors were not constructed to the required specifications. As the “Project Executing Unit”, NICIL’s role was to ensure that the works were executed according to the agreed specifications and has again failed to discharge its responsibility for this project, resulting in some $350 million of taxpayers’ funds being wasted,” it said.

Stabroek News had reported previously that the complex, which stands at the site of the former Guyana Broadcasting Corporation, was built in 2008 and has since been the source of much controversy due to defects in construction. It was at one time billed to be the head office of the GGMC. The GGMC had invited and evaluated bids for completion of the building but contention over the award last year saw the project put on hold and garnering the attention of Cabinet.

Among the defects, it was reported that the building’s foundation contained sub-standard material and the contractor had carried out works on the foundation and on the interior of the building that were in excess of contractual specifications. It was also disclosed that the ceiling of the building was improperly designed and as a result the placement of air vents and roofing works would have resulted in limited vertical space and the situation would need to be rectified.

The Guyana Public Service Union was among several entities that had called for a probe into the awarding and execution of the project. The union had said that the deafening silence of the then PPP/C government speaks volumes about a project gone awry: “There have been allegations of possible corruption and collusion on this project, given the state of its incompletion, the moneys disbursed so far and the huge cost overrun,” the union had said.

 

 

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