7 February 2013

Zambia: Govt Loses Kr46.7 Million in Shaddy Deals

THE latest Auditor-general (AG)'s report has revealed errors where Government was charged US$8.9 million (KR46.7 million) as penalty in an irregularly awarded contract for the supply of eight fire tenders, of which only two have been supplied.

In another development, the AG's report also reveals that a contractor, Ng'andu Consulting Limited was paid KR50.3 million (K50.3 billion) for abandoned works to construct a new international airport at Kasaba Bay on the shores of Lake Tanganyika in Northern Province.

The report mentioned the irregularities in the procurement of 17 Titan fire-fighting equipment and nine Iveco Trauma ambulances at a contract price of $26.7 million (KR124.7 million) in a deal with a United States based company, Carmichael International Limited.

A follow-up review in the latest report released last week revealed that the Government had failed to adhere to the terms of payment stipulated in the contract, which the supplier consequently claimed and was paid the KR46.7million as penalty.

Additionally, the report stated that on June 5, 1996, the Ministry of Health engaged Carmichael International to supply eight fire tender trucks at a contract price of £3.4 million (KR25 million).

However, due to the Government's failure to meet contractual obligations, only two fire tenders had been delivered as of December last year.

The report said due to changes in vehicle specifications, the contracted models became obsolete and in 2009, the contract price was adjusted upwards from £3.4 million (KR25million) to £7.5million (KR60million).

Further, Carmichael International claimed a fee of £1.1 million (KR8.8 million) that was paid as of October last year.

And contrary to financial regulations number 96 (1), imprest amounting to KR160, 665 issued to six officers during the period under

review, had not been retired as of December last year.

On the Kasaba Bay airport project, the report stated that the Government at the time of contracting had decided to use its own

equipment by engaging the Rural Roads Unit (RRU) for the project which was to financially consume KR63.4million.

The 1.5kilometre bituminous runway meant for landing small aircraft was to be replaced by an international airport capable of accommodating a Boeing 737-800 jet airliner.

The Ng'andu Consulting contract was priced at KR63.4 billion and later adjusted upwards to KR71.8 million.

Variations were revealed when Ng'andu Consulting was given leeway to hire equipment and proceeded to do so with RRU at a price of KR20 million.

"The rationale of hiring the contractor who was later to use the RRU equipment and labour when the RRU could have done the job was questionable," the report said.

Although the contractor had been paid the KR50.3 million, he had not paid RRU and Global Limited for the hire of the plant and equipment, as of December last year.

The Auditor-general conducted a tour of the project site in August last year and discovered that the works had not been completed and the RRU and Global had demobilised due to non-payment for the hire of equipment by Ng'andu Consulting.

The report said there was, however, no provision in the contract for liquidated damages for non-performance.

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