Overpricing comes about through sole sourcing – Minister Edghill tells IDB forum

Apr 27, 2014 News

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“What I have seen from my experience as Minister with some responsibility in this regard is that every time a dispute would arise the engineers and the technical people can always come with counter claims and the dispute continues.

“So I look forward for better contract management and better execution”
Those were the words of Junior Minister of Finance Juan Edghill at a certification seminar hosted by the International Development Bank (IDB) in collaboration with Government. Participants were local contractors, technicians and engineers on the management of claims and resolution of disputes under FIDIC (International Federation of Consulting Engineers) contracts and MDB’s (Multilateral Development Bank) Harmonized construction contract.
FIDIC is an international standards organization for the construction industry.
The training seminar was a module two from a previous seminar held for the review of the FIDIC multilateral development version contract for civil works.
The seminar was conducted by Robert Cochrane, a specialist who trains on the use of FIDIC contracts and funded by the IDB which was represented by Sophie Makonnen and other IDB representatives.
Some 40 persons participated in the two-day seminar on Friday at Cara Lodge. The Junior Minister of Finance said that the information that the participants would have learnt should be used locally to improve how contracts are written and managed.
Edghill said that disagreements are inevitable but can be reduced and avoided through good contract management.
“I think we would be able to develop a skill set that we would be better negotiators and be able to bring resolution. It is my hope that we would have learnt how to use the provisions in the contract to reduce the risks of conflicts in the contract.
“I think the most important thing is not just about your rights but about your interest we get lost when we focus on what are our rights and entitlements.”
“It is my hope that from the standpoint of even writing the contract we would be able to start eliminating the risk for conflict in the contract from the time of just writing the contract and I would want to see an improvement in that regard,” said Edghill.
Overpricing
Speaking to the issue of overpricing by contractors, one of the IDB representatives said that it is very difficult for contractors to overprice bids because most contracts are tendered publicly.
He explained that overpricing comes about where there is sole sourcing or procurement without competition.
The New Guyana Pharmaceutical Corporation, headed by Dr Ranjisinghi Bobby Ramroop, former President Bharrat Jagdeo’s best friend, enjoys sole sourcing. He supplies pharmaceutical to the Ministry of Health and Georgetown Public Hospital. This has been going on for almost 15 years.
One of the IDB representatives who explained why the training was done, highlighted that there are lots of issues with disputes, with claims and counter claims.
“The fact that FIDIC is the most internationally recognized form of contract I think speaks volumes to this type of training because it helps to make the relationships better between the contractors and the employer which is usually the arms of the government.”
The training he outlined was fully financed by the IDB.
He explained that IDB has always been deeply involved in the capacity in procurement and project management and many other areas that the Bank would assist in programmes and financing.
“Procurement is a major part of everything that we do and in this regard, the IDB has taken every single measure that we can to have these capacity building measures of the training and that’s basically what they did” said the representative.
Sophie Makonnen, the IDB Country representative to Guyana, outlined that “contractors under price to be able to win and then they ask for more and that’s not just Guyana it’s pretty much standard with any contractor so you need very good structure in your contract to cater for that and if you respond enough times and you have good contracts eventually contractors will not try to do it again but if you are laze fare and let them come back with claims and you cater to those then you may have an issue after a few years so it’s changing the culture of that.”
She continued that contracts may end up overpriced “maybe but when you have competitive open bidding, you usually have studies before where you have established where the price range is. If it goes over that then something is wrong, either with the market or the study,
There are usually ways to curb that overpricing, there are contracts that come overpriced but they don’t win.”
Speaking to the corrupt tendencies between contractors and the government which usually involves substandard and shoddy works by contractors to maximize their profit margins, Makonnen said that the supervisor which is responsible for the client in such cases should withhold payment for such works.
Another IDB representative said, however, that “we could only speak for our contracts of the Bank and we have a multilayered approach form an open tendering system, we also have supervisory consultants that supervise the construction this is done to ensure that quality is critical, we also have the executing agencies which also conduct supervision of contracts that the IDB finance we take as much measures as is possible to ensure that what is built is built to last. If there is problem in the other sectors we cannot speak to that.”

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