Massive fraud in PNG's Lae roads

A DAMNING report on the rehabilitation and upgrading of Lae city roads reveals there was foul play in the awarding of contracts amounting to almost K200 million.

The report by the Works Department, obtained by The National yesterday, reveals that:

Four contracts were procured for Stage I amounting to K24.4m;

12 contracts were procured for Stage II amounting to K104.3m plus variations;

an additional K28m was appropriated in 2012 to settle outstanding claims, and,

Additional funding of K27.39m is required to complete the remaining balance of work.

The report said the Government only transferred the administration and management of Lae roads rehabilitation and upgrading to the Works Department in August 2012 to ensure the successful completion of ongoing work.

Stage I began in 2009 with contracts given to three construction companies.

“In line with the national government’s aspiration to upgrade the Lae city roads to a standard urban city road status, K50 million was allocated in the 2010 supplementary budget,” the report says.

“By the virtue of the appropriation bill, the funding was allocated to DoW, however, the projects were hijacked at the central agencies and Central Supply and Tenders Board. 

A company was engaged as the State’s representative to manage all aspects – design, procurement, project management – of these projects. 

“A detailed audit has been undertaken to establish the project financial and physical status,” the report said.

“The audit reveals that 12 contracts were procured, which equates to K104.3 million, including variations. 

“The state erred from the beginning by awarding contracts above the K50 million funding appropriation. 

An additional K28 million was appropriate in 2012 to settle outstanding claims certified by the company as well as completing the outstanding works under Stage 2. 

“Additional funding of K27.39 million is required to complete the remaining balance of work,” it said.

“Most of this outstanding is paid from the K100 million appropriated for 2013.”

The report highlighted that most of these projects were procured under a certificate of inexpediency. 

“There was no justification for the expedited procurement for such important projects,” the report said.

“Ample time should be given for proper planning and technical design necessary to make informed investment decisions. 

“Consequently, a lot of ambiguities and variations have surfaced. Thus DoW is doing its best to address and conclude these projects.

The company scoped for concrete pavement works, a highly technical task. There was no proper design to guide contractors. 

“Most contractors lacked experience in such projects and were not familiar in executing it. 

“Inefficiency of unskilled contractors in concrete pavement and buildable design resulted in poor performance and slow progress.

“Engineers’ estimates were unavailable to compare and review the contractor’s prices. 

“All contracts were awarded as per contractor’s pricing. 

“These prices were further inflated by variations due to poor scoping and design. 

“Department of Finance paid over K30million in advance to contractors to commence work. 

“Some commenced as expected, however other did not commence until October 2012,” the report said.

“Due to misprocurement, some contracts have been suspended awaiting further instruction from CSTB.

The National