ECD & EBD road projects…Govt. lost over $500M due to badly managed contracts

Feb 17, 2017 News

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Bad contract management of two projects – the East Bank Demerara four-lane extension programme and the East Coast of Demerara Highway improvement project – has cost government in excess of $543M. The contracts, which were awarded to Dipcon and Courtney Benn Contracting Services Limited, were subsequently terminated after the contractors alleged they were having cash flow problems.
The two projects were funded by the Inter-American Development Bank (IDB) and the Guyana Government and were budgeted to cost $5B. Works under both projects commenced on November 1, 2010 and were expected to be completed by the end of April 2013; both projects missed their deadline and works are still to be completed.
At the most recent Public Accounts Committee (PAC) meeting it was revealed that these contractors were allowed to continue works even after their performance bonds had expired.
In the case of the East Bank Demerara four-lane project, the contractor, Dipcon, was allowed to continue doing work although there was no performance bond to cover for potential liabilities.
The relationship between the government and Dipcon soured and that contract was terminated on November 23, 2015, on the grounds that the contractor was not capable of completing the works due to financial reasons. That decision cost the government in excess of $163M, because there wasn’t an active bond in place at that time and works were incomplete. The contract was being supervised by M&M in collaboration with CEMCO.
On this and a number of other issues, PAC Chairman Irfaan Ali sought answers on why such poor contract management prevailed, although these problems were flagged.
Chief Roads and Bridges Officer of the Ministry of Public Infrastructure, Ron Rahaman told the PAC Chairman that the termination was amicable and the remaining works are now being undertaken by two new contractors. Ali said that he was not interested in the amicability of the settlement but rather, the exorbitant cost the settlement incurred.
Strangely the two firms, M&M Consultancy and CEMCO, which supervised the East Bank project, are still being used by the ministry. This did not go down well with the Chairman. “Why would you give them other contracts when there were such blatant violations in contract management?” he asked. Ali then enquired about what actions were taken against the ministry’s employees who were overseeing the project, and learnt that nothing was done.
Permanent Secretary (PS) of the Ministry of Public Infrastructure, Emil McGarrel, at this juncture explained that because the project was funded by the IDB, there are no penalties for non performance, only termination can be enforced.
Ali said that although the performance bond for this project expired while the project was alive, nothing was done by the consultants or the Ministry of Public Infrastructure.
The PS explained that the contractor (Dipcon) was written to on numerous occasions and gave assurances that it would get its affairs in order. This did not happen, and the ministry took a decision to pull the contract. This then created a conundrum; in that because there was no performance bound in place at the time of the termination, there were very few options, if any, that could have been used to recover the $163M.
The Chairman then instructed McGarrel to provide copies of the letters that were written to Dipcon and to the Auditor General.
The Permanent Secretary said that his ministry has been clamoring for penalties to be included in IDB consultancy contracts, since this is a glaring omission that allows poor performing consultants to get a free pass. The PS noted that this then places the burden on the ministry to absorb that loss rather than the consultants.

EAST COAST
On the East Coast of Demerara Highway project works were done in seven lots; Lot one was contracted to Dipcon to the value of $468M. That lot is the stretch of road from Better Hope to Montrose, and this contract was terminated by the ministry citing a breach in contractual obligations.
The Auditor General found that at the time of termination, the contactor owed the government $81.570M, and that there was no evidence that this money was paid by Dipcon. The company in turn hauled the government before the High Court claiming that the termination of that contract was unfair.
On Lot 3, which was being done by Courtney Benn Contracting Services, and is the stretch of road from La Bonne Intention to Beterverwagting, the Auditor General found that the contractor had simply abandoned the site. There were no personnel or equipment present and the contractor had already collected 76 percent of the monetary value of that project, when it should have been 50 percent.
When a valuation was done on the works that were completed, it was found that the contractor was overpaid by some $120M; the government has only been repaid $10M to date. Then as if that was not enough, an advance payment to the same contractor who was responsible for lot four, a different stretch of road, and there was an overpayment of a whopping $132M. The government was only able to recoup $10M; things were no different with the lot 5 (Triumph to Mon Repos) the same contractor was over paid by $32.892M, none of which has been recovered.
And all this time the Contractors and the consultants were allowed to continue to provide unacceptable services and were even collecting excess monies for their efforts. Both the East Bank and East Coast road projects are still to be completed.

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