Govt’s US$1.5M claim to Fip’s performance bond in jeopardy

Jan 25, 2012 News

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A claim that has been laid by the Government of Guyana in relation to the US$1.5M Performance

Bond that had been issued to Makeshwar ‘Fip’ Motilall is now in jeopardy.
This money, which on the surface seems payable to the government, is not automatic upon claim.
This is according to a source close to the imbroglio. The source has confirmed that Motilall’s performance bond expired ever since July 2011.
That bond was negotiated and brought into force when the contract with Motilall was signed in January 2010, with a duration of eight months. This means that for the latter half of last year, Synergy Holdings Inc. was operating with an expired bond, pursuant to its stipulations.
The bond did carry a stipulation that claims could be made for six months following its expiration with that time line coming to an end last Wednesday.
Government did lay claims prior to this deadline, but according to a senior official close to the matter, “This doesn’t mean that the claim is automatically valid. All aspects of compliance have to be thoroughly checked.”
The source, knowledgable on the issue of insurance, explained that Hand-in-Hand will have to conduct investigations on every aspect of the claim before it is accepted or rejected completely.
Reports that the Government and Synergy Holdings Inc still have some balancing up to do to determine who owes whom, could also affect the outcome of the claim made by the Government on the performance bond.
Motilall, following the announcement of the termination of the contract with Government, had claimed that he was owed in excess of US$1M.
Subsequently, Head of State Donald Ramotar had said that he was yet to ascertain who owes who as it relates to the project, but suggested that Guyana had limited its exposure.
Winston Brassington, the Head of the National Industrial and Commercial Investments Limited (NICIL), who to date has played an integral role in the project, subsequently in a pronouncement to clear the air on the termination of the contract said, “One important consideration that determined the contract being awarded to Synergy was based on Synergy having the lowest evaluated price.”
He said, too, that given the checks and balances, Government “at this point of termination, has not paid more than the value of the works completed, as determined by the Supervision Firm…As such, Government has received value for money based on the work completed… Checks that helped to safeguard this include Government retention of 10% of all valuations.”

He said too that, “it would be noted, that the Agreement for Completion to the contract with Synergy, executed in December 2011, provided certain additional safeguards, including assigning the rights to the equipment to Government.”
Hand-in-Hand had also issued a mobilization bond to Synergy Holdings, but this too has also since expired.
Hand-in-Hand in its financial report for the company in 2010 had listed under Contingent Liability, the Amaila Falls Hydropower Road project.
In that report it was stated that the Government of Guyana had granted to contractor, Synergy Holdings Inc., the authority to construct the road to Amaila Falls and the Transmission Line Clearing Project.
It said that on March 31, 2010, Hand-in-Hand on behalf of Synergy Holdings Inc., issued advance Mobilisation and Performance Bonds totaling US$1,540,000 each.
“At the onset, these bonds were collaterized by a guarantee from Wm Fogarty’s Ltd to the extent of US$500,000 for the initial four-month period.”
The Financial Report for Hand-in-Hand also said that the, “Advance Mobilisation Bond which expired on November 18, 2010, has since been released by the Government of Guyana.”
It further states, “The Hand-in-Hand Mutual Fire Insurance Company Ltd remains responsible for the current performance bond, which is to be secured by counter guarantees in the form of: Escrow Account to the extent of US$500, 000; Debenture on the machinery/equipment for the difference.”
Hand-in-Hand in an official announcement following the termination of the contract had stated that “The position of an insurance company with regard to any insurance policy or claim is strictly confidential and would not be disclosed by the insurance company unless required by law or legal process.”
The insurance company had also stated that “If a claim is made under a performance bond, it goes through our claims verification and investigation process…This process is performed in respect of each and every claim regardless of size.”
Large claims are submitted to the Board of Directors of Hand-in Hand for its consideration.
“The Hand-in-Hand is very happy to settle any claim it is determined to be liable to pay.”
The formal announcement that Hand-in-Hand was issuing the bond came during intense scrutiny of Synergy Holdings and Motilall’s ability to complete the road, just one month after inking the contract.
It was at that time that Executive Director of NICIL Winston Brassington, along with his Deputy, Marcia Nadir-Sharma and Finance Minister Dr Ashni Singh, hosted a press briefing to quell the brouhaha that followed the announcement by Bharrat Jagdeo that Synergy Holdings Inc, headed by Makeshwar Motilall, had secured the contract.
Brassington at that time told media operatives that there need not be any worries given that there were safeguard measures in place to ensure that Govt. receives what it is being tendered for, hence the mobilization and performance bonds.
It took more than two years of intense media scrutiny and exposure coupled with the then imminent failure on the part of Motilall before the Government moved against him and terminated the contract.
When asked about due diligence at that time, the administration, in the person of Brassington, had told media operatives that this was left up to the institution that backed him with the bonds, namely Hand in Hand.

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