Infrastructure Ministry overpaid, now unable to recover hundreds of millions

The Public Infrastructure Ministry has been found to be in the habit of making multiple advance payments to contractors in breach of stipulated contractual obligations and has been unable to recover the hundreds of millions of dollars paid for works not completed or abandoned altogether.

These findings are outlined in the 2015 Auditor General’s report compiled under the hand of Auditor General Deodat Sharma and recently made public by Speaker of the National Assembly, Dr Barton Scotland.

Corrupt practices

Sharma, in his findings with regard to the Public Infrastructure Ministry, observed that a contract to the value of $468.2 million was awarded for preparatory road works to be undertaken between Better Hope and Montrose, East Coast Demerara (ECD).

The contract was terminated by the Ministry in July 2012, citing a breach in the contractual obligations with regard to “Corrupt or Fraudulent Practices” by the contractor, as recommended by the Attorney General, however, “at the time of this report in September 2016, there was no evidence to confirm that the Ministry was able to recover the sum of $81.5 million, which represents the contractor’s indebtedness.”

The contractor sued the Government for wrongful termination of contract, and that matter was before the High Court.

Multiple payments

Meanwhile, as it relates to the road works to be undertaken between La Bonne Intention (LBI) and Beterverwagting, East Coast Demerara (ECD), not only was the contractor overpaid and the Ministry still unable to recover its monies, but it was found that the contractor had, in fact, received three advance payments in contravention of the contract agreement.

Sharma also found that a physical verification check carried out on that project revealed that while there were variations made to the original scope of works, it appeared that the site was in fact abandoned, “with no equipment or personnel from the contractor on site”.

The three advance payments totalled $264.1 million, which represents 76 per cent of the contract sum.

The contract, however, “only allows for an advance payment of 50 per cent… This is a breach of contract where the contractor was paid advances greater than that which is allowed for under the contract.”

Compounding the situation further, Sharma found that at the time of reporting, a valuation of the works completed was $157.7 million; “however, the actual payments made to the contractor totalled $278.3 million.”

As such, the Auditor General concluded that the contractor received excess payments totalling $120.6 million.

Expired bonds

The Auditor General found too that while the contractor submitted bonds for the respective advance payments, “it was noted that all three advance bonds expired since 2014 and the advance payments were not recovered at the time of the reporting.”

According to Sharma, as a result of the expiration of the bond, the Ministry is solely dependent on the contractor to repay the outstanding amounts.

“This bond should have still been valid at the time of the physical verification; as a result of this expiration, the Ministry can no longer recover the amount of $35 million covered by this bond.”

The Ministry has since responded to the Auditor General, saying it “has written the contractor many times requesting that restitution be made for the outstanding sum of $120.6 million… To date the contractor has not repaid any of the amounts owed”.

Auditor General Sharma found too that with regard to road works to be undertaken between Beterverwagting and Triumph, ECD, at the time of reporting, the works were incomplete and the site appeared to be abandoned.

Sharma has since managed to deduce that the contractor, in this instance, also received three advance payments, this time totalling $209.6 million, representing 65 per cent of the contract sum.

This situation persisted, despite the fact that the contract only allowed for an advance payment of 50 per cent.

“This is a breach of contract where the contractor was paid advances greater than that which is allowed for under the contract,” Sharma stated.

He found too that the contractor submitted only one advance bond for the first advance payment of $174.5 million and this bond expired since 2014, while none was seen for the second advance payment issued to the contractor.

Sharma said too in his report that at the time of reporting, a valuation of the works completed put their value at $77 million.

As such, “the contractor received excess payments totalling $132.6 million at the time of the physical verification.”

Problematic

The Ministry has since confirmed knowledge of the expiration of the security bonds, in addition to the fact that it had substantially overpaid the contractor monies which it was still to recover.

“The agreed completed value of works was $77 million and the total payments made to the contractor were $209.6 million.”

The Ministry confirmed that the contractor has received excess payments totalling $132.6 million, and pointed out that it has since “written the contractor many times requesting that restitution be made for the outstanding sum of $132.6 million …To date, the contractor has not repaid any of the amounts owed.”

Another troubling section of the road project that has since proven to be problematic for the Ministry surrounds the stretch of road between Triumph and Mon Repos, ECD. According to the Auditor General, the contract expired on June 17, 2015 and at the time of reporting, the works were incomplete and the site appeared to have been abandoned. Sharma said no equipment or personnel from the contractor were on site and further, “the advance payment was not fully recovered at the time of reporting”. The advance payment bond had expired in December 2015 and as a result, the amount of $14.8 million was outstanding at the time of reporting in September 2016. Sharma pointed out too that the performance bond no longer provided the required period of coverage for the works, and “as a result of this expiration, the Ministry can no longer recover the amount of $32.9 million covered by this bond”.