Five-year review of IDB…Infrastructure projects faced procurement issues, delays, cost overruns

Oct 19, 2017 News, https://www.kaieteurnewsonline...elays-cost-overruns/

A key report of the Inter-American Development Bank (IDB) assessing the period 2012–2016, found major procurement practices and cost overruns in public infrastructural projects.

During the period in question, there was a change in Government, from the People’s Progressive Party/Civic to the A Partnership For National Unity+Alliance For Change (APNU+AFC) coalition in May 2015.

The report would highlight some of the major problems faced by IDB, a key financier for state projects, from roads and bridges, to power improvements initiatives.

According to the document, the ‘IDB Group Country Strategy with the Cooperative Republic of Guyana 2017–2021’, infrastructure projects—holdovers from the last Country Strategy (CS) period, of 2012-2016- there were mixed results in the water and sanitation projects.

During the review period, the main achievements include the construction of the Haags Bosch Sanitary Landfill (HBSL), at Eccles landfill, East Bank Demerara; the rehabilitation of Georgetown’s Sewerage System; and the construction of water treatment plants (WTPs), reservoirs, and storage tanks in Linden and Georgetown’s surrounding areas.

However, IDB’s report noted, the impact of financial and institutional strengthening activities was limited. There were reasons for this, IDB said.

“Poor procurement practices, lack of technical human resources, and weak institutional capacity in the executing agency resulted in programme delays, cost overruns, reformulation, and extensions. Financial, operational, and institutional factors threaten the long-term sustainability of the results.”

In the transport projects, design delays and procurement deficiencies thwarted projects to expand, upgrade, and maintain road networks.

“One bright spot was a housing project, which exceeded expectations and improved access to housing for 74 percent of the target population—surpassing the anticipated 70 percent. Even so, delays in procurement and contracting impeded programme implementation. The project had to be extended by two years.”

IDB said it consistently worked with the Government of Guyana to strengthen institutions.

“In the area of fiscal and financial reforms, tax policies and administration were updated and streamlined, public financial management systems modernised, and the capacity of the Audit Office was expanded.

National Assembly committees on economic services were also revamped to ensure adequate oversight of fiscal and fiduciary matters,” the report said.

In the realm of tax policy and administration, the system was simplified through the elimination of those taxes with high administrative costs, discretionary exemptions, and tax holidays.

“The introduction of a value-added tax contributed to deficit reduction, reduced tax distortions, and improved foreign trade. The enactment of a new Fiscal Management and Accountability Act bolstered public financial management, and extensive ICT upgrades and capacity building built sustainability and transparency into Guyana’s public institutions.

“In short, these activities enabled a great leap forward in a short period of time. However, there is much more work to be done,” IDB admitted.

The report by a critical financing institution like IDB would be a wakeup call to the administration, as there have been concerns with the bank.

It would follow a recent visit by high-ranking IDB official, Senior Vice President, Julie Katzman, to Guyana to review the bank’s work.

While the administration has labelled Katzman’s visit as a review, sources have said that there was deep worry over project implementations in Guyana.

Recently, Opposition Leader, Bharrat Jagdeo, even raised questions over IDB’s work here.

Over the last few months, there have been reports, including letters, about the performance of projects, including the electricity sector.

Even Finance Minister, Winston Jordan, was critical in one case of more than US$60M sitting doing nothing since 2012. The money was earmarked for the expansion of the Sheriff Street/Mandela Avenue.

Consecutive governments have been turning to the bank for financing on projects involving roads, water and other major infrastructure initiatives.

The report has also pointed to severe weaknesses in Guyana’s system to plan and implement projects.

According to the document, slow and often stalled disbursements were symptomatic of Guyana’s challenging institutional environment and the lack of strategic planning and vision at the highest level.

The document, prepared under the leadership of Country Manager, Sophie Makonnen, and other support staffers, noted that the problems resulted in inefficient planning across the project cycle, from design and financing to implementation and monitoring.

According to the document, during the previous period, 2012-2016, the bank’s activities focused on four priority areas- natural resource management, sustainable energy, private sector development, and public-sector management- across nine sectors, with “modest results”.

“By the end of last year, 54 percent of the portfolio was classified as “alert” or “problem,” while the disbursement rate for loans fell from an annual average of 8.6 percent in 2012 to 4.4 percent in 2016.”

IDB said that as a result, there was a significant decline in net cash flows to Guyana, with an all-time low in 2016.

With regards to some of the problems faced, the IDB document said that hindrance noted by the country team was the lack of sector specialists on the ground, which prevented real-time problem solving and necessary support for project design.

Among other things, some of IDB’s monies were used on the extension of the East Bank Demerara four-lane highway between Providence and Diamond.