What audit on Roads Directorate?

I refer to the write-up Audit report gives roads directorate a bumpy ride (January 31) and the editorial "The road to perdition" (February 3).

While the Malta Transport Authority (ADT) welcomes the analysis resulting from the report prepared by the National Audit Office (NAO), as its findings would assist it in the ongoing evaluation and improvement of its operations, the ADT feels it needs to clarify a number of points.

To begin with, the projects selected by the NAO for this study were started and implemented well before the establishment of the Malta Transport Authority and its coming into effective operation. To this end, we find the repetitive use of the word Roads Directorate and photos of the ADT offices façade undoubtedly misleading, entirely uncalled for and misappropriate, to say the least.

Furthermore, we fail to understand why the NAO failed to publish the report at an earlier stage especially when one considers that some of the audits were carried out as far back as 1998. The publication of such a report at this stage makes it, to a certain extent, a far-reaching, albeit futile exercise, if it were expected to serve its original purpose.

This notwithstanding, the following points, relating to the respective issues touched on in the executive summary of the NAO report, beg clarification and are deemed pertinent to enable a judicious interpretation of the issues raised in the report:

a) Incomplete approach to planning and design by the Roads Department (RD).

The report states that "effective planning... requires complete and thorough preparatory work" and qualifies this by adding that "the extent of such planning depends on the nature and size of the proposed road project" (page 18).

It essentially follows that there is a substantial element of discretion as to how preparations are conducted on a project depending on the complexity discerned therein. This discretion does not appear to have been given due considerations in the NAO study. The NAO study states that no formal prioritisation reports, feasibility studies and cost benefit analysis had been prepared before these projects were undertaken. It is widely recognised that when these projects were undertaken there was sufficient institutional and public awareness regarding the need to carry out the works on the projects selected as to render any further considerations on the way forward superfluous.

The main purpose of the government's recourse to German expertise in road design and construction was essentially intended to address the identified planning and engineering lacunae represented by these circumstances.

The preparation of the roads master plan and its associated prioritisation analysis as well as the training of university undergraduates to specialise in road engineering are still ongoing and are a result of this initiative.

b) Inaccurate estimates by the Roads Department.

It is not unusual that there may be differences between a pre-tender estimate and the value of the adjudicated contract following receipt of tenders.

The NAO should attribute such differences to inaccurate estimation when, as the study recognises, a cartel situation existed for several years - this until this cartel was declared illegal on the intense initiatives of the Roads Department, the Department of Contracts and the Department for Consumer Affairs.

Had the Roads Department increased its estimates, the result would have further unwarranted spiralling of tender rates to the detriment of the government.

c) Shortcomings in contract details affecting adjudication by the Roads Department and the General Contracts Committee.

The study confirmed that the contract documentation applicable to these contracts were comprehensive. It is mentioned, however, that due to the unavailability of detailed designs, quantities were underestimated as to result in the ensuing variations in the course of works.

It is submitted that, although in principle one cannot but agree that such situations should be contained to the barest minimum, no estimates are written in stone. The standard General Conditions of Contract for Works in Malta, as applicable to all government contracts, do, in fact, allow for such variations as these can arise even with the most well-prepared and detailed projects.

d) Weaknesses in contract management by the Roads Department and the Department of Contracts.

This situation was well recognised for many years, the availability of professional and technical staff at the Roads Department having been invariably limited.

Indeed, in this regard, initiatives were taken to procure the services of engineers from the private sector to project manage Roads Department projects while at university, undergraduates were being trained specifically in disciplines related to the road construction field.

Today, the engineering complement at the Roads Directorate is entirely made up of new graduate engineers who have completed this road-engineering stream.

e) Considerably high time and cost variations, not necessarily justifiable.

One cannot but agree that the projects under review showed considerable time and costs variations that are essentially and invariably undesired on any project.

In all fairness, however, it would be inappropriate to attribute such circumstances as being solely due to circumstances at the Roads Department.

These circumstances should be viewed in the light of the prevailing situation in the construction field generally and this, not simply in Malta, but also overseas.

f) Evidence of insufficient coordination by the Roads Department with utilities and key stakeholders.

This may have been wrongly interpreted in the study under review. Coordination was carried out in all instances. Unfortunately, it resulted that, although at the coordination meetings a utility may have indicated the existence of buried plant, it would eventually turn out that either the buried plant was found to be wrongly placed in the roadway during the course of the work or, in other instances, that its condition had deteriorated and therefore necessitated replacement.

As such, works would not have been deemed necessary during the tendering stage and no provision for these additional works would have been made in the respective contract.

To further complicate matters, utilities informed the Roads Department that they had no intention of replacing any of this apparatus and, as a consequence, refused outright to consider paying contractors for undertaking such works even though these works had been carried out under the direct instruction and supervision of the utilities engineers.

g) Shortcomings in the financial control system at the Roads Department.

An invoicing system, in the case of road construction contracts, came into use with the introduction of the Departmental Accounting System (DAS) in the Roads Department during 2001.

This was necessary because the DAS computerised system would not process an instruction for payment unless a corresponding invoice is submitted.

Prior to the introduction of DAS, the Roads Department officials would measure up the works carried out by a contractor and subsequently would prepare intermediate and then final bills of quantities. These were the basis on which the payment certificates were then raised and referred to the Treasury for settlement.

The same practice as that in place before the DAS introduction was retained with the addition that when measurement of the work was completed, the contractor would raise a tax invoice for the value of work being settled. This invoice would be referred to the Treasury with the DAS payment certificates.

The absence of an invoice in a Roads Department file should not be construed as a shortcoming. Such invoices could either not have been required at those particular instances of time or, alternatively, such invoices would have been passed to the Treasury. The invoices found in the Roads Department files were in fact photocopies of the originals.

Checking of the invoices is irrelevant as these would have been drawn up to the value of the certified bill of quantities previously prepared by the Roads Department officers preparing the payments.

Although it is agreed that requests for variations should be made before the work is carried out it has to be stated that the Department of Contract and the General Contracts Committee sanction variations. In the cases at issue, such variations were deemed justified by these approving authorities.

There was no intended negligence in observing VAT legislation. All payment vouchers raised following the introduction of VAT recorded a requirement that recipients should forward a fiscal receipt to the department on receipt of the payment.

While many contractors forward fiscal receipts, others consider that the forwarding of the fiscal invoice replaces the fiscal receipt and that, in fact, if both are issued this could represent double accounting in their records.

Since the NAO study was carried out, the matter has been clarified with the VAT Department in that as the Roads Department was not VAT registered, fiscal receipts have to be collected from payment recipients. Consequently, missing VAT receipts have now been obtained from the applicable contractors. On a positive note, the ADT is generally satisfied that the various shortcomings that have been reported upon are being most actively addressed by the authority. Since the advent of its present chairman, the ADT started functioning as one holistic authority knowing exactly where it is going.

The ADT is today made up of five directorates. One of these is the Corporate Services Directorate which is responsible for all administrative functions such as tendering procedures, budgeting, financial control and accounting.

The ADT is most actively engaged in recruiting the required staff to enable it to perform its functions. Apart from the head of the directorate, 11 other architects and a trainee engineer are today engaged at the Roads Directorate, five of whom occupy the position of chief engineer, major projects manager, construction manager, maintenance manager and engineering manager respectively.

A sixth officer occupies the position of design and planning manager. Moreover, the head of the directorate is also assisted by an assistant director who is responsible for the various administrative functions within the Roads Directorate.

The German consultants have continued to provide invaluable consultancy to the authority, the Roads Directorate and the contractors rendering services to ADT.

Through in-house initiatives, led by the German experts, various standards were drawn up during 2003 as follows:

Volume 1 - Specifications for roadworks.
Volume 2 - Notes for guidance on the specification for roadworks.
Volume 3 - Road construction details.
Volume 4 - Method of measurement for roadworks and notes for guidance of measurement of roadworks.
Volume 5 - Design manual for roads and bridges.
Volume 6 - Guidelines for the standard presentation of design documents for road construction.
Volume 7 - Directives for the standardisation of pavements for traffic areas.

Through a foreign consultancy contract undertaken by GOPA of Germany, a method of developing contract rates for roadworks has been developed. Standard rates have been drawn up and forwarded to road construction contractors.

Substantial work was carried out during 2003 on the redesign of various road corridors for upgrading and reconstruction through financing under the fifth Italian protocol.

Extensive engineering and topographical surveys were also undertaken and, with the advice of the German consultants, engineering requirements for restoration have been defined.

The necessary construction drawings have been prepared by Roads Directorate personnel as have been the related estimates of the quantities and costs of the works.

All details have been forwarded to Italy's ANAS which has reported favourably to the Italian foreign ministry recommending implementation of these road projects. Extensive consultations have also been carried out with all the utilities on a number of road projects.

Various studies have been undertaken over the years in the formulation of the Road Restoration Master Plan for the arterial and distributor road network and for roads with an important linking function.

More recently, through EU pre-accession funding, studies were also carried out on Transport Infrastructure Needs Assessments (TINA) through which the European road network (TEns) for Malta has been defined.

These studies constitute the appropriate prioritisation documentation for the undertaking of the necessary roadworks affecting these roads.

During 2003, a call for tenders was published for feasibility and environmental impact assessment studies for the road restoration and upgrading projects that have to be undertaken on Route 1 and other associated road upgrading projects.

The contract has been awarded to a French company that specialises in such fields. This contract is being co-financed by the EU and the government.

Steps to undertake identical studies for roads in Gozo have also been implemented and the necessary tender documentation has been referred to the Commission.

The ADT has taken cognisance of the conclusions and recommendations in the NAO study and is confident that these converge with the aims and initiatives of the authority.

The authority is confident that under its current management structures, as well as through its ongoing staff development and recruitment programmes, the concerns and recommendations in the NAO study are being suitably addressed.

This will ensure that the desired objective of operating a robust procurement management system at ADT is maintained.

Ms Borg Mizzi is manager, public relations and marketing, Malta Transport Authority.