BK failed to construct all of Timehri Road but got full amount

BK International Inc. received an additional $195M despite failing to construct the full length of the new access road to the Cheddi Jagan International Airport (CJIA) , according to a performance audit conducted by the Auditor Office, which also found that the project was marred by millions of dollars in overpayments, numerous delays and unauthorized works.

Among the main findings contained in the audit report which was tabled in Parliament yesterday was that though only 1.7 km of the required 2.5 km roadway was constructed, there was no reduction in the $618.426M contract sum. The length of road constructed by BK International should have cost $420.529M based on rates quoted in the contract but the company received $615.647M; an extra amount of $195.118M.

The audit covered the period 1st January 2011 to 15th September, 2016.

According to the report the construction of the access road was in keeping with the four-lane expansion project and the expansion of the airport. It stated that the Ministry of Public Infrastructure (MPI) (formerly the Ministry of Public Works and Communications) awarded the contract for the contraction of 2.5 km of roadway from the Timehri Police Station to the Terminal Building at CJIA. The report stated that the contract was regarded at a major infrastructure project for the government. The works, it was stated were slated to be completed within one year from its commencement on 12th July, 2011. However the works were incomplete as at 15th September, 2016.

The report said that the objective of the performance audit was to determine whether MPI managed the project in an economic and efficient manner and ensured that the works were in compliance with international best practices and all relevant laws, regulations and authorities.

Aside from the works not being completed according to contract (the reduced length of the road and the additional monies paid), the report said that there was outstanding works left to be done. It was explained that at the completion of the fieldwork for the audit on 15th September, 2016, 0.30 km of roadway in front of the Timehri Police Station, Guyana Defence Force and Guyana Telephone and Telegraph (GTT) remained incomplete. The report added that placing of concrete barriers, erecting sign poles, road markings and signs were also still incomplete.

The audit found that the contractor received overpayments to the tune of $76.620M for material costs not covered, full retention fees not deducted and advance payments not fully recovered. This sum, it was stated is separate from the $195M overpayment resulting from the construction of 0.7 km of road out of 2.5km.

Giving a detailed breakdown of the overpayments to the contractor, the report stated that of the amounts totalling $72.133M for materials on site during the period 11th October 2011 to 6 June, 2013, only $19M was recovered. It was stated that the Ministry only retained the sum of $45.767M as retention fees. Retention fees were not deducted from four payments totalling $119.787M and this resulted in the contractor being overpaid the sum of $11.979M because of the Ministry’s failure to retain this amount as retention fees in keeping with the requirements of the contract.

The report stated that the contractors received two advance payments totalling $145.143M representing 23.5% of the contract sum although the contract agreement stipulated only a 20% mobilization advance. Additionally, the advance was required to be completely repaid prior to the time when 80% of the accepted contract sum less provisional sums, has been certified for payments. Included in the total amount on the contracted sum $615.647M was $20.563M which was paid to GTT for the removal of the junction box. According to the audit the full advance was not recovered even though $595.084M or 96% of the contract sum was paid to the contractor. The Ministry recovered only $133.635M leaving a balance of $11.508 M still to be recovered.

According to the main findings of the audit, the project timelines were not achieved. It was explained that the works were due to be completed on 11th July, 2012. “The contractor did not complete the construction of the road within the specified time allocated and five years after its commencement the construction works were still in progress. Approvals for the extension of time were not presented for audit verification even though the contractor sent letters to the Ministry in 2012 and 2013 seeking the Ministry’s approval for extensions of time for varying reasons”.

It stated too that there were no apparent attempts by the ministry to recover liquidated damages from the contractor even though the works were not completed within the specified time allocated. “While the contractor encountered obstructions in the path of the roadway and other difficulties, we conclude that the obstructions and other difficulties could not justify the more than four plus years of delay in completing the road and hence the contractor was liable for a portion of the delay”, the report stated.

An approved variation was not seen for three new items totally $31.545M that were added to the original bill of quantities, the report said while adding that it was noted that the contractor was given sums totalling $46.111M for new items. It was stated that it is unclear why there was a variation in the Engineer’s Estimate to include additional works or why an extra $14.566M had been paid.

The audit also found that no needs assessment and feasibility studies done.

Additionally, there was no evidence of proper monitoring and supervision by the Works Services Group (WSG) of the works carried out on the construction of the road as regular monthly reports from the Ministry and contractor were not present. Additionally it was found that there was “excessive delays” by the Ministry in addressing problems identified including the relocation of the GTT junction box which was an obstacle in the path of the roadway.

The audit also found that only one newspaper, the Guyana Chronicle, was used to advertise the invitation to tender which could have resulted in fully qualified contractors not being aware and hence not submitting bids. Additionally the time period given to submit tenders was considered very short.

The audit report was divided into three chapters. The first entitled `Pre-tendering stage’ focused on the absence of a needs assessment, feasibility studies not being done and the engineer’s estimate. The Auditor Office recommended that the Head of the Budget Agency conduct needs assessment for all capital works to understand the needs that are to be met and the issues facing the achievements of those needs.

MPI in response said that the head of the Budget Agency explained that a policy decision was taken with regards the construction of the access road as the long term vision was that the entire East Bank corridor from Georgetown to Timehri would be a four- lane road; at the time of conception the East Bank corridor was being widened from Providence to Diamond while the Inter-American Development Bank had allocated funds for the feasibility studies and design for the section between Grove and Timehri and the contract for the CJIA expansion was also being negotiated at the time, making it more prudent for this initiative.

Regarding the feasibility studies, the Audit Office recommended that these be done for all capital works to determine the feasibility of options and the cost of reach potential option.

The ministry in response said that the upgrading of the glass factory road, extending the existing road and widening along the existing road alignment were considered during the route selection. The latter was the preferred option as it attracted a lower cost.

With regards to the engineer’s estimate the Head of the Budget Agency agreed with the Auditor General that controls exercised over the preparation of this estimate must be reviewed so that corrective action can be taken to have the document dated and the necessary signatures appended to. The Head explained that the cost estimate was prepared by the Engineering Coordinator along with the Highway Engineer. The Engineer’s Estimate was approved and submitted to the NPTAB as required and subsequently read out at the tender opening.

Chapter 2, `Tendering stage’ focused on the tendering process and the awarding of the contract.

The Audit Office recommended that the Head of the Budget Agency consider publishing the invitation to tender in more than one newspaper of wide circulation to allow for wider circulation of the advertisement.

MPI in response said that the policy of the government is to submit the advertisement to the Guyana Information Agency who then decides “which print media it will be published”. MPI pointed out that Section 30 (2) of the Procurement Act of 2003 speaks to publication in at least one newspaper of wide circulation and it does not indicate the number of times a bid should be advertised.

The Audit Office recommended that the Head of the Budget Agency and the Procurement Officer review the time given for bidders to view bid documents, attend pre bid meetings and prepare their tenders to determine whether a one month period is adequate.

The Ministry responded saying that it considered the one month period adequate time for the submission of a bid.

The report stated the Audit Office has conclude that requirements were met for the opening of the tenders on 7th June, 2011 at NPTAB. It states that eight tenderers submitted tenders or bids for the works advertised. Based on the evaluation report prepared by the Evaluation Committee four of the eight tenders did not meet the required criteria and were eliminated from further consideration. Of the remaining four, BK International Inc. was ranked the lowest evaluated tender and the committee recommended that this company be awarded the contract. The Audit Office stated that it conclude that the Ministry complied with the requirement of the Procurement Act of 2003 for the evaluation of the tenders.

Chapter 3 `Contract administration and control’ focused on how the ministry managed project to ensure compliance and efficiency and whether it was done in compliance with the contract and all relevant laws , regulations and authorities.

The audit report pointed out that it would be expected that a reduced scope of works would have resulted in savings on the contracted sum. It was noted that the ministry had stated that the payment to the contractor were based on the quality of works executed, using the rates as quoted in the contract. “We therefore interpret this explanation to mean that there was a significant increase in the quantity of materials and labour used for works executed. We found no evidence that the Ministry took steps to determine the reasons for the variance between the quantities of materials and labour approved per contract and the actual quantity used by the contractor”, the report said adding that the audit office was not provide with any amendments to the contract for the increase.

The ministry in response to the audit office’s observations said that Sub Clause 12 of the General Conditions, Measurements and Evaluation clearly outlines the procedures for payments; that is there done based on the quantity of works executed, using rates quoted in the contract.

The Audit Office recommended that steps be taken to recover all other outstanding monies.

 

 

 

 

 

 

 

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