Audit report gives Roads Directorate a bumpy ride

The National Audit Office, in a stinging report on road construction and restoration contracts, said yesterday that shortcomings in planning for procurement, project management and control by the Roads Directorate had led to substantial variations in costs and delivery time.

"These shortcomings emerged due to inadequate management structures and lack of human resources, both in quality and in the number of the organisations involved in public procurement."

It said the directorate "lacked a coherent project planning approach and full planning philosophy" and this deficiency led to weak execution during tender adjudication and poor project management performance and inconveniences to end-users.

The NAO said that in many cases it had reviewed, the General Contracts Committee (GCC) received inadequate information from the directorate and from bidders. The committee was unable to gain a full understanding of the prevailing market forces and to gauge the reliability of short-listed bidders.

The GCC nearly always based its decisions on pricing with non-financial considerations, such as supplier performance and capability, having a minimal impact on the final decisions. Established procedures, guidelines and methods to be adopted during projects by the Roads Directorate were not in place.

The Roads Directorate lacked adequate internal control systems both as regards financial as well as technical matters.

"The existence of a broad range of cost, time and quantity variations indicated the need for more preparatory work and effective management on the part of the Roads Directorate."

The audit office said value for money could not be achieved in the case of 11 contracts it had reviewed because the shortcomings in the planning, design, adjudication and delivery stages impinged on the overall economy, efficiency and effectiveness and distorted the final outcome of the projects.

The 11 contracts, issued by the department of contracts, covered nine road projects over a five-year period -1998 - 2002.

The audit office concluded there was:

¤ An incomplete approach to planning and design by the Roads Directorate.
¤ Inaccurate estimates by the Roads Directorate.
¤ Shortcomings in contract details affecting adjudication by the directorate and the contracts committee.
¤ Weaknesses in contract management by the directorate and the department of contracts.
¤ Considerable time and cost variations which were not always justifiable.
¤ Insufficient coordination between utility providers and key stakeholders.
¤ Shortcomings in the financial control system of the Roads Department.

The audit office said when discussing planning and design by the Roads Directorate that many important decisions were postponed till after the award of tenders or during works.

"In some of the studied cases, the (Roads Directorate) opted to leave out complete parts of the project planning process, some of which were critical for effective contract management and control. There were also cases of site investigations and preparatory work being left out in order to accelerate the publication of the calls for tender."

The office said initial proposals and estimates presented by the directorate for authorisation were inaccurate. In many cases, departmental estimates were revised during the adjudication process and work in progress to incorporate changes in designs and construction methodologies.

On contract management, the NAO said that although comprehensive technical standards and conditions were included in the awarded contracts, the Roads Directorate and the department of contracts weakened their position by not taking action to enforce contract clauses or by waiving prescribed sanctions against defaulting contractors.

"This was a major shortcoming which rendered ineffective the various legal safeguards incorporated in the contracts."

The office also found that although the Roads Directorate set up a road testing laboratory in 2001 "this is currently unmanned due to the alleged shortage of suitably qualified personnel".

NAO said it was understandable that, given the scale, complexity and unpredictable nature of road construction, during the course of works, it was necessary for the Roads Directorate to modify or expand planned works to cater for unforeseen eventualities. However, the audit had also identified time, cost and quantity variances that were not necessarily caused by unexpected conditions but, rather, by the directorate's inability to successfully minimise or prevent the risks of contract variations. The main causes of the variations were inadequate planning, design changes, late instructions and weak project management.

Critical and timely discussions with utilities and stakeholders on project proposals and key requirements as well as effective coordination during project planning were, in many cases, not properly organised or implemented by the directorate. However, it said, the utility companies were often unable to provide the directorate critical information on their infrastructure. This led to frequent changes during works and significant cost and time variations.

The audit office said it had found "significant weaknesses" regarding financial control.

"Invoices amounting to over Lm700,000 were not found. Out of 120 payment vouchers, no invoices were found in respect of 23 payment vouchers. Of the invoices that were found, covering the remaining 97 payment vouchers, there was no evidence in 14 cases that the invoices were checked by the quantity surveyor, project manager and chief engineer."

The audit office submitted a list of recommendations to the procuring entity. It said the directorate should lay the foundation for a thorough and complete planning and design system. It should have all plans, timetables and designs completed prior to calls for bids and it should ensure it had reliable information on the supply market.

It also called for enhanced ways of assessing bids and an open and active quality assurance mechanism. Quality and performance specifications should be enforced through more effective inspections and strict enforcement of contract conditions.

The department of contracts should minimise the risk of contract variations by demanding more technical evidence of planning and design from the purchasing unit prior to the issue of tenders.

The General Contracts Committee needed to discourage poor performance by the purchasing unit by returning for further evaluation all incomplete assessments of bids and technical reports. It needed to ascertain, in greater detail, claims made by short-listed contractors rather than base its decisions on lowest costs.

The report was tabled in parliament by the Speaker, Anton Tabone.