Contractor paid $36M for $2.6M foundation works

Nov 21, 2017 News

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If one is to judge by the various findings of the Audit Office of Guyana, as reflected in its most recent report, the Ministry of Public Health is no prudent manager of the state’s financial resources.
The Ministry has been given just about the worst report on its use of billions allocated to it in the 2016 Budget.
For instance, the ministry has paid over $36M to a contractor who carried out foundation works for a building he was supposed to build.
The Auditor General, in his 2016 report, noted that approval was granted by the National Procurement and Tender Administration Board (NPTAB) for the award of the contract for the construction of Nurses Hostel, Port Kaituma Hospital Complex. The contract was awarded to the lowest evaluated bidder in the sum of $52.771M against the Engineer’s Estimate of $56.030M.
The contract was signed on August, 9, 2016 with duration of four months and defects liability period of six months. Works began 14 days after the signing of the contract. The contractor was granted an advance payment of $13.193M. This represented 25 percent of the contract sum. By the end of 2016, the contractor was paid $36.939M.
The Audit Office carried out a physical verification at the end of August this year and found that the works were incomplete and the contractor was not mobilised on site.
It was further noted that there were changes to the design and layout for the building and only preparatory works for the pouring of concrete for the foundation was completed at the time of the verification.
The steel reinforcement which was installed to the foundation was seen unprotected and exposed to the weather. So, while the contractor was paid $36.939M representing 70 percent of the contract sum, he did not even complete 50 percent of the work.
Based on the assessment made by auditors, the actual value of works completed at the time of the physical verification was only $2.686M – a difference of $34.253M.
At the time of the physical verification, several works were still to be completed. These include the pouring of concrete for the foundation; pouring of concrete for columns, beams, floor slab; construction of kerb wall and sand filling; construction of internal and external walls, roof, electrical and plumbing installations; installation of windows; and external works and finishes.
It was also discovered that only one ‘L’ shaped building is being constructed instead of two independent buildings, as per original contract. Further, no variation order, revised designs or costing were seen for the changes.
Auditors found that the performance bond expired since July 2017 and was not renewed, while the mobilisation bond expired since 2 January 2017 and was not renewed.
When the Audit Office brought this to the attention of the Ministry of Public Health, the ministry indicated a letter was sent to the contractor in July this year, terminating his services, and a final valuation is to be prepared for the works executed to date.
The Audit Office recommended that the ministry desist from certifying and making payments for works which have not been completed and ensure that performance and mobilisation bonds are valid as required under the contract. The Audit Office also noted that all changes to the design/ scope of works should be well documented, and all relevant approvals should be obtained.
There was another such situation. In this case, approval was granted by NPTAB for the award of the contract for the construction of Infectious In-Patient Facility, Port Kaituma Hospital Complex to the lowest evaluated bidder. The awarded contract was for $40.963M.
The contract was signed in December 2015 with duration of six months and defects liability period of six months. The start date was noted as 21 days after the signing of the contract. The contractor received an advance payment of $10.183M representing 20% of the contract sum.
By the end of last year, the contractor was paid $39.938M. A physical verification was carried out at the end of August this year by the Audit Office.
Following the inspection, auditors noted that while the intended completion date for the works was July 2016, at the time of the physical verification, approximately one year since the contractual completion date expired, the works were still incomplete and the contractor had demobilized from the site. There has been no approval for extensions of time.
It was also discovered that the contractor received $39.938M or 97.5% of the contract sum for incomplete works. According to the scope of works, works totaling $8.631M were not completed.
Further, there were no breakdowns or details attached to the payment voucher submitted for audit examination neither was there evidence that liquidated damages were deducted from the payments made to the contractor, despite the fact that the works have been significantly delayed.

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