May 6, 2016 Source
The National Insurance Scheme (NIS) office at Corriverton which was built in 2011 for $69.9m was later valued at $37.9m and the construction was rife with problems and saw direct intervention by the Office of the President.
A forensic audit report by Ramesh Seebaran released by the Ministry of Finance on Wednesday highlighted a series of problems around the building.
The report said that the Lot 8 Springlands, Corriverton, Berbice building was reconstructed in 2010/2011 and commissioned in 2011 at cost of $69,923,940.
The report found that the NIS’s Board of Directors (BODs) had appointed a Sub-committee called the Tender Evaluation Committee headed by a director and included three independent parties including Samuel Goolsarran from CAGI. This sub-committee then appointed a Consulting Engineer who provided an estimate of $50,667,948 to construct the building. An advertisement was then published in the press in April 2010. Two bids were received and the evaluation was done by the Tender Evaluation Committee, since according to the Board, the National Procurement and Tender Administration Board “was likely to have delays”. This was stated in the 421st board meeting dated April 26, 2010.
There were two bidders: Fyffe Building and Contracting Works which bid $52.5m, 3.7% above estimate and G Bovell Construction Service which bid $112.8m or 222.6% over estimate.
According to the Sub-committee, Fyffe Building & Contracting Works had the track record and experience to properly execute the project and on that basis was awarded the contract. The project was overseen by the Consulting Engineer and Building Maintenance Officer of NIS who played an integral part throughout the construction. This, the report said, was evident by the many reports he had submitted.
At a Sub-committee meeting held on November 22, 2010, the report said that the Chairman of the Board, Dr Roger Luncheon was informed that a variation of $8,102,688 was required for electrical works and a generator. This took the total cost to $60,672,248.
There were several issues during the construction because the Contractor had difficulties meeting the deadline. At a Sub-committee meeting held on March 18, 2011, the report said that the Assistant General Manager informed the BODs that a financial arrangement was worked out to have the Scheme procure various items on behalf of the Contractor.
The matter had escalated to the extent that during another Committee meeting held on May 20, 2011, the Chairman took several decisions including terminating the Contractor’s services. The report said that based on BODs minutes of a meeting held on May 30, 2011, the Chairman back-pedalled on his previous decisions and stated several other decisions agreed upon at the Office of the President as extracted below:
“The chairman said this project presented a desperate situation and was at its final stage. He said the project was fairly well designed.
Following a meeting at the office of the president the following recommendations were made:
– An additional expenditure estimated at $10M be incurred.
– The services of the contractor be retained.
– A clerk-of-works be hired.
– Procurement of goods be done by the scheme.
– The scheme would be responsible for fulfilling employment contracts of contractors on the project.
– A programme for relocation be prepared.
The NIS Directors supported the recommendations.
Valuation
A valuation was later done by Compton P. Outar, MSST. DIP., (Lon) Chief Valuation Officer (Ag) and a report tendered on October 3, 2013 which showed that the value of the Corriverton property was appraised at $37.9M compared to the cost of $69.9M, an impairment of $32M.
The report said that the following was extracted from the 464th minutes of meeting
“The Chairman of the Board submitted that the issue for Directors was the premature adoption of the revaluation provided by the Chief Valuation Officer allowing its inclusion in the 2012 Audited Financial Statements without Directors being privy to what was submitted. As a result, Directors had requested that information be provided.
The Meeting was informed by the Finance Controller that she had stopped External Auditors form working on the 2012 Audited Financial Statements.
From a Brief assessment made of the revaluation submission, it was found that there were reductions and increase in the value of some properties that would aggregately impact on the Scheme’s reserves.
A query was raised about the yardstick that was used to complete the revaluation and request made for the explanation to be given.
The Assistant General Manager, Administration in response to a question stated that the earlier valuations were provided to the Chief Valuation Officer for guidance.
“The Finance Controller pointed out that Corriverton Local Office building constructed at a cost at $69M in 2012 was revalued at $37.9M.
Directors questioned the significant decline in the value of the building.
Directors supported the Finance Controller’s suggestion to tactically use the Revaluation of properties figures in the 2012 Audited Financial Statements and that the submission be corrected in preparation for the 2013 Audited Accounts.”
Extracted from the 475th minutes of meeting
“The Secretary to the Board reported that he was in contact with one Mr. Green in relation to the Board’s dissatisfaction with the valuation for the Corriverton Local Office building. He said he was advised that the value of the property was accurate.”
The report said that the BODs then decided to finalise the audited financial statements for 2012 and 2013 without the new valuation, as they were in the processing of communicating with the Chief Valuation Officer.
The audit report concluded that that the construction of this office was riddled with problems from the beginning.
“It appears that the Engineer’s estimate did not include major cost components like the generator and additional electrical works to facilitate the generator. In addition, it seems that the construction was poorly supervised and had to be extended way beyond the estimated deadline to allow for the finish of construction. The BODs took a decision to terminate the contractor’s services as explained in their minutes but subsequently changed their decision because of the Office of the President interference.
“Subsequently, the Chief Valuation Officer issued an appraisal of the building and reported that its value had been impaired by $32M as stated above a decrease of 46%. This is a clear indication of the level of competence displayed by the BODs and supported by Office of the President by their involvement”, the auditor stated.
