‘Blatant disregard’ for financial controls
The Bermuda Government broke the law and showed “blatant disregard” for financial controls in the $60 million project to build Heritage Wharf, according to a report by the Auditor-General.
In her special report tabled in the House of Assembly yesterday, Heather Jacobs Matthews called for government officials responsible for “violations and neglect” to be held accountable and face appropriate sanctions.
Mrs Matthews highlighted a series of flaws with the project, which was overseen by the previous Progressive Labour Party administration and ended up costing taxpayers $20.8 million more than the original $38.9 million contract signed in April 2007.
Mrs Matthews said: “The blatant disregard for the policies, rules and procedures designed to protect the public purse is unacceptable and violates principles of good governance, accountability and responsibility.
“Those guilty of such violations and neglect must be held to account and the appropriate sanctions should be applied including appearance before the Public Accounts Committee.”
The project was overseen by the Ministry of Tourism and Transport, then headed by Ewart Brown, the Premier at the time.
Mrs Matthews said the Government “did not follow the law”, which states that accounting responsibility for capital projects rests with the Ministry of Public Works.
Among the flaws she highlighted were that the contract to build the pier, awarded to Correia Construction Company Ltd (CCCL), was not first approved by the Cabinet — as is required for all government contracts worth more than $50,000.
Cabinet had approved the selection of CCCL as the preferred contractor, Mrs Matthews said, and authorised Dr Brown, as the Minister of Tourism and Transport, to negotiate the terms of the contract with CCCL, subject to further Cabinet approval.
“Cabinet did not approve the negotiated contract terms,” Mrs Matthews said. “The Ministry admits that this failure to obtain Cabinet’s ‘further approval’ was due to an administrative oversight.”
Mrs Matthews said “the failure to obtain Cabinet’s approval for a contract of such significant financial magnitude and national interest represents a blatant disregard for the rules of the Government, exposed the Government to significant financial risk and ignored the role of Cabinet in providing scrutiny in safeguarding the country’s interests”.
Mrs Matthews said the contract for the project manager — the engineers hired to oversee the project — was not publicly tendered “in direct violation of financial instructions”.
Instead, three companies were invited to submit bids. The highest bidder, Entech Ltd, won the contract with a bid of $1.1 million.
The contract for the preferred contractor did not go through the public tender process either. Instead, three contractors were invited for interviews with Entech, the project manager.
Each was asked questions related to their capability to carry out the job, but none was asked to give a quote on what the project would cost, Mrs Matthews said.
“Based on the contractors’ responses in the interviews, the project manager recommended the preferred contractor and Cabinet was asked to approve the selection,” Mrs Matthews said. “From the onset, there were substantive concerns raised regarding the selection process for contractors as well as the knowledge and expertise of the preferred contractor.
“Questions were raised and concerns expressed not only at Cabinet level but by senior officials in Works and Engineering.”
Cabinet members questioned the method used to award the contract to CCCL and “questions were raised about the background and ability of the preferred contractor”, Mrs Matthews added.
Concerns were also expressed on behalf of other contractors over the lack of an open tender process.
Mrs Matthews concluded that “given the lack of competitive bidding, it is not clear what basis was used to determine that $38.9 million was a fair price” for the contract agreed with CCCL.
One of the reasons for the cost of the project swelling by more than 50 per cent was the lack of a detailed design before construction began. Mrs Matthews said conceptual design drawings, marked “Not For Construction”, had apparently been the basis for the work carried out.
The inadequacy of the design work led to a string of changes during the construction process, including a bigger terminal building, a larger ground transportation area and the use of a vibratory hammer for driving piles.
Change orders during the construction process tend to be more expensive than getting the design right in the first place, Mrs Matthews said.
“The changes are not typically subject to an open tendering process so it is up to the client, project manager and contractor to determine a fair price without the benefit of competition,” Mrs Matthews reported.
“Changes are also typically done at a premium when time constraints exist because it is difficult to make major changes without further delaying the project.”
The situation “exposed the Government to cost overruns with every change order providing the contractor with a significant advantage given the looming deadline and the natural reluctance to substitute a new contractor”, the report added.
• To see the report in full, click on the PDF under “Related Media”.