Audit blames poor planning, supervision for collapse of $7.9B E-Governance project

-says venture can still be salvaged

Poor planning and supervision were major contributory factors in the collapse of the PPP/C government’s multi-billion dollar E-Governance Project but with a detailed plan for completion, a new management team and the hiring of a technical expert it can still be salvaged, a forensic audit conducted by Chartered Accounting Firm Ram and McRae has concluded.

The audit discovered many shortfalls, including the fact that in some cases contracts were awarded without tender, excess monies were paid without Cabinet’s approval, cables were not laid at the required depth and no contract agreement could be found for some of the work completed and paid for. It highlighted the fact that contractors were made large sums of cash but in the end were unable to complete their assigned duties.

As at May 31, 2015, the total expenditure on the E‐Government project was $7,935,120,255, although the audit report said that meetings with the auditor and contractors from the E‐Government Project suggest that there may be outstanding payments of “unspecified sums” payable for work completed. The report said that it is estimated that exclusive of any payment to Dax Contracting Services, the outstanding amounts would range between $35 million and $50 million.

Ram and McRae was contracted by government to conduct special investigations into financial operations and functioning of the E‐Government Project. The report was submitted to the Minister of Finance in December last year. The full report was uploaded to the Ministry’s website on May 27.

Alexei Ramotar
Alexei Ramotar

The project was launched by the then PPP/C government in 2012, with the primary aim of laying fibre optic cables from Lethem, in Region Nine, to Providence, in Region Four. The project encountered numerous delays, most of which centered around failure to meet deadlines, and additional costs and works owing to damage to sections of laid cable, which was due in part to vandalism.

In the 47-page audit report, the firm stated that its review was limited by the “non‐availability of critical information and explanations, including documents which should have been available for a project of this nature, size and value.”

It was stated that the Project, which was administered by persons in and contracted by the Office of the President (now named Ministry of the Presidency) contained two distinct components—the E‐Government Dense Wavelength Division Multiplex (DWDM) Project, which involved the laying of a fibre optic cable from Lethem to Georgetown; and the E‐Government (LTE) Project,  a joint venture between the Government of Guyana and Huawei Technologies Co. Ltd (China) for the construction of LTE sites and laying of fibre optic cables along the coast.

According to the report, in discussions Project Manager Alexei Ramotar (son of the then president Donald Ramotar), prior to him being sent on leave, advised the audit firm that the DWDM Project was abandoned in 2013. “Mr. Ramotar made no reference to the March 2015 agreement between the Government of Guyana and Dax Contracting Services Limited for the rehabilitation of the “cable and related structures.” There was a press report that that agreement has been cancelled but in an interview with Ram & McRae, the contractor disputed this,” the audit report said.

The audit report said too that for the LTE Project, which was executed by Huawei under a contract with the Government of Guyana, funding was provided by the EXIM Bank of China and payments were made directly from the Bank to the contractor. As of May 25, 2015, Huawei had completed over 90% of the project, costing US$30.4 million of the total contract sum of US$32.0 million.

The project costs were estimated at US$5M and US$32M for the two components, respectively.

Immediate attention

The report noted that the project was executed without appropriate project management documentation, including a Project Initiation Document setting out the purpose, objectives, scope, deliverables, constraints and assumptions. It stated too that interim and final progress reports were also not available and that the subcontractor for the second component, Huawei, prepared a project document but its scope was limited in that it did not extend to the full project being undertaken by the government.

Ram and McRae said that other findings from its review include weak or inadequate systems and procedures to adequately govern the project, and account for its finances, significant non‐compliance with the Procurement Act and inadequate hiring practices.

It was stated that there is considerable uncertainty surrounding the state of the work done on the Fibre Optic Cable Project, the remedial work and issues arising out of a contract signed by the previous administration intended to fix the problems. “These matters require immediate and high level attention by the Cabinet under whom the Project falls,” the report concluded.

Walter Willis
Walter Willis

Ram & McRae said that the project was not governed by any specific legislation. It was explained that during the opening interview, held on July 13, 2015, Ramotar confirmed that there was no Project Document for the E Government DWDM Project. Nevertheless, he provided the Project Document prepared by Huawei International Ltd prior to its undertaking of the LTE component. The report also stated that the project, which did not have a mission statement, was executed under the Office of the President, creating the possibility of a conflict relationship between execution and direction.

With reference to the DWDM Project, the report said that Ramotar mentioned during an interview that the reason for ceasing operations was due to damage to fibre optic cables and equipment after they were installed. He also indicated that the damage was a result of vandalism and the East Bank road expansion project, which was executed by the then Ministry of Public Works.

On March 16, 2015, the report noted, the Government of Guyana and Dax Contracting Services Limited entered into an agreement for the rehabilitation of the “cable and related structures.” The agreement was put on hold after a meeting between Minister of State Joseph Harmon and the contractor, following adverse publicity of the terms of the Agreement. No public comment has been made as to the final status of the agreement, the report said. “In our view, the failure of the           E-Government DWDM Project was primarily due to the fact that no research and analysis was conducted prior to the implementation of the project. There was no project document detailing the technical specification with regard to the installation of the fibre optic cables. Also, based on reviews of the procurement documents provided, the contractors hired to execute the installation of fibre optic cables had no prior experience in this respect. Consequently, the fibre optic cables were not properly installed and were damaged as a result of the above stated,” the report said.

With respect to the LTE project, it was stated that this project was a joint venture which was defined by a contract signed on October 27, 2010 between the governments of Guyana and China. This part of the project included the installation of fibre optic cables and the construction of Long Term Evolution (LTE) sites from Corriverton to Charity. The project was planned and implemented by Huawei Technologies Co. Ltd. A total of 54 LTE sites were to be constructed between Lethem and Georgetown.

The report said that based on a progress report, dated May 25, 2015, Huawei had completed over 90% of the project. The outstanding works at the report date consisted mainly of testing three of the 54 sites and installation of a video conferencing facility at the University of Guyana.

The report added that power issues were experienced at various LTE sites, mainly due to Guyana Power and Light (GPL) being unable to supply reliable power at the rated voltage. These power issues affected the LTE sites across the grid of Linden, Essequibo, West Demerara and the Corentyne Coast. It was subsequently recommended by Huawei that Transient Voltage Surge Suppressors (TVSS) should be installed at the LTE sites. “We were not provided with estimated cost of the TVSS systems but that cost will be borne by the Project. Mr. Ramotar was unable to explain why TVSS technology was not considered or used at the beginning of the Project,” it said.

Continued to completion

Besides Ramotar, the management team for the project consisted of Anil Singh, the Deputy Project Manager and Walter Willis, the Technical Advisor. The audit report stated that Singh’s responsibility entailed assisting the Project Manager in the execution of his responsibilities in relation to the overall objective of the Project. He resigned in April, 2015.

Willis, it was stated, played a significant management role in procurement, approval of payments relating to civil engineering and monitoring the works linked to the installation of the able. The project only bore the employment costs for Ramotar and Singh and not for Willis.

Willis’ role involved advising the Project Manager on all civil engineering aspects of the Project. As a Technical Advisor, he was responsible for monitoring the work done by the contractors under the E-Government DWDM project. The report said that it is “therefore inescapable that Mr. Willis is partly responsible for the failure of the Project.”

The report said that during Huawei’s engagement on the much larger LTE component, the three played a less significant role but they continued to be remunerated in accordance with their initial agreements.

The audit ultimately recommended that government undertake a technical evaluation of the project and decide on the steps to complete it. “Ram & McRae considers that notwithstanding the principle that sunk costs are irrelevant, this Project should be continued to completion,” the report stated. With regards to the absence of documentation regarding the standard operating procedures (SOPs) and the fact that there were no formal accounting policies and procedures in place, it was recommended that the project employ the use of an appropriate accounting software to maintain records in relation to expenses, inventories, assets and banking.

Among the other recommendations are that an organisational chart and mission statement should be designed for design and implement and it should be ensured that the new Project Manager possesses strong managerial skills in addition to technical competence as Ramotar failed to properly manage the DWDM Project.

Ramotar advised Ram & McRae that the DWDM Project encountered a number of delays, which were attributed to the improper handling and installation of the fibre optic cables. “Responses to our enquiries indicated that additional delays resulted from road erosion, the building of the new 4-lane road on the East Bank of Demerara and vandalism. It seems that the only area where road works could have affected the Project was in the Diamond to Providence passageway and that the more fundamental reason for the substantial and costly failure was the inadequate planning, execution and supervision,” the report said.

Tender procedures not followed

Nine major suppliers/contractors were involved in this part of the project and the report noted that in several cases the appropriate tender procedures prescribed by the Procurement Act were not followed. They are: Corning Cable Systems LLC; Huawei; Fibre Optic Solutions; Ivor Allen Constructing; Cummings Electrical Company Limited; Mekdeci Machinery and Construction (MMC); Dynamic Engineering Company Installation; Dax Construction Services; and Bovell Construction Services. Their various roles and responsibilities were outlined in the report. The report provided information on each of the contractors, some of which showed they were unable to complete their work even though they would have collected huge sums of money and in some cases additional money had to be awarded.

With regards to Corning Cable, it was stated that the company signed an agreement with the Project on May 19, 2010 to supply fibre optic cables and accessories for the DWDM project for a contract sum of US$1,020,321. An approval letter was sent to Corning Cable from Ramotar on May 19, 2010 without Cabinet’s approval.

Payments from the company were approved by Ramotar and Dr. N. K. Gopaul, then Permanent Secretary at the Office of the President.

It was stated that on June 24, 2010,      E-Government DWDM contracted Huawei International PTE Ltd to provide equipment and spare parts, a Mini-Shelter and the iManager T2000 software. Huawei was also required to provide services relating to site survey and design and training for optical network system operation and maintenance. The contract price amounted to US$1,071,880.

Three payments, totalling US$970,892 or $199,074,225.59, were later paid over to the company, the report stated, while noting that no explanation was given for the difference in sums but later the company was given a  second contract for supervisory and consultancy services to the tune of US$54,720. It was stated that an amount of 70% or US$32,832 was remitted to this company but the balance was never disbursed. “Once again, the reason for this was not communicated to us by management,” the report said.

No documentation on the tendering process was available to show how this company was selected.

Fibre Optic Solutions was awarded a contract for the provision of supervisory services to the tune of US$61,168. The report stated that the contract appears to have been extended for a further sum of US$61,168 but no payments were made and the contract terminated. Only three reports from the company was received, it was stated.

Peter James, who conducted the supervisory role on behalf of the company, told the audit firm that he was responsible for ensuring that all fibre optic cables were installed by the contractors in accordance with specified depth and through the correct route. James, according to the report, said that the project encountered a number of hiccups owing to inadequate conceptualisation and planning and that as far as he knows, there were no drawings, blueprints or project plans explaining the installation requirements were given to the contractors. James opined that all the contractors did a fairly good job and he expressed belief that the project can be salvaged.

Ivor Allen, who was tasked with construction of repeater stations, was paid $30,708,837, including $880,312 for additional works. His work, the report said, was performed in accordance with the contractual agreement.

Cummings Electrical Company signed a $100,358,435 contract to execute the electrical works for the repeater stations at Lethem, Annai, Kurupukari, Mabura and Linden. The works were projected to be completed by July 10, 2012. The company was paid additional monies for additional work which was done.

Ramotar, the report said, later approved additional monies for the company to provide security services. This was apparently done outside of Ramotar’s authority, the report said, while adding that all payments to this company were approved by him and Willis.

Cannot be salvaged

The report said CEO of Cummings Electrical Michael Cummings, during an interview with Ram and McRae on October 6, 2015, admitted that there was neither tendering nor contractual agreement for the provision of security services. He said too that the payment of an additional $1,528,675 with regard to the construction of the solar panel bases was not approved by Willis.

Cummings, speaking to the failure of the project, indicated that the main reason for the damaged cables was due to the fact that the cables were not buried at 6 feet or 1.8 metres and they were not installed in conduits. His view was that the project cannot be salvaged based on the fact that there may be too many broken sections and that remedial work by joining will reduce signal strength.

With regards to the laying of the fibre optic cables, three companies were contracted; MMC was awarded three lots and Dynamic Engineering Company and Dax Constructions were awarded one lot each. The total price tag was $408,383,100 for 570km of cable.

Based on the report, MMC was unable to complete its work and later G. Bovell Construction Services was brought in to complete the work without any tendering procedure being followed. The report said that Project Supervisor James indicated that MMC encountered a number of difficulties during its work on the three lots. He stated that the company did not have the necessary equipment to install fibre optic cables in the areas, which consisted of a number of large rocks.

Dax Construction Services Installation, it was noted, had a contract sum of $61,828,000 to install 100 km of cable. $49,863,043 has so far been paid. Two extensions for laying an additional 39 Km were later given but at a cost of $2,000,000 per km compared with the original price of $618,280. The report said that penalties and retention for defective work were released following a letter to the Project Manager by his Deputy.

No cabinet decision was provided to verify the approval of additional work performed by this company.

Dynamic Engineering Company Limited’s contract for laying cable was terminated because the company did not finish on time. The report said that $95,290,753 out of $117,170,000 was paid over to the company.

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