Money Increase in Existing Contract by jba60919

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									       DEPUTY CHIEF COMMISSIONER’S OFFICE
4.1 Construction of New Anse Raffin Dam

The contract for the construction of the New Anse Raffin Dam was awarded to a Joint
Venture on 23 December 2002 for an amount of Rs 71,005,468, inclusive of VAT. The
contract price included an amount of Rs 5,460,460 for provisional works and Rs
8,053,550 (15 per cent) as contingencies.

Key Observations

 The original contract price amounting to Rs 71,005,468 has been revised to
  Rs 134,915,895, that is 90 per cent increase due to poor design and study at initial
  stage of project.

 The total quantity of excavation increased from the tendered quantity of 3000 m3 to
  18,300 m3 that is 510 per cent increase.

 The original Consultancy fee of Rs 1,530,500 and US$ 91,190 had been increased to
  Rs 2,038,000 and US $ 127,380 as a result of additional supervisory works.

 Retention money was based on the original contract price amounting to Rs
  61,743,885 (VAT exclusive) and not on works certified to date.

 Responsibilities of the Design Consultant and the Supervising Consultant for increase
  in scope of works were yet to be determined.


Detailed Audit Findings and Recommendations

Award of Contracts

(i) Design Consultant.

In July 1997, a contract was awarded for an amount of Rs 158,000 and US $ 27,675 to
the Design Consultant to study the safety aspects of three dams in Rodrigues.

In respect of the Anse Raffin Dam, the Consultant recommended the construction of a
new dam immediately upstream of the existing dam instead of its rehabilitation. Tender
documents were based on the design made by the Consultant.




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(ii) Supervising Consultant

In July 2002, a contract for the supervision of the construction of the dam was awarded
for an amount of Rs 1,530,500 and US $ 91,190 (approximately Rs 4,303,615) exclusive
of VAT.

The scope of services included evaluation of tenders received, assisting the client in
negotiating and awarding contract, preparation of construction drawings and supervision
of the construction works

Revision of Contract Price.

The stipulated duration of contract was 12 months, starting from 6 February 2003 to
5 February 2004. During the construction stage, the Supervising Consultant requested for
changes in the Bill of Quantities prepared by the Design Consultant bringing along
revised cost estimates. The revisions are shown in Table 4

                              Table 4 Revised Contract Price


         Date of          Revised          Increase Over            Percentage
         Revision         Amount          Original Tender            Increase
                           (Rs)               Amount
                                                (Rs)

      March 2003         107,468,499         36,463,031                  51
      July 2003          118,656,062         47,650,594                  67
      February 2004      134,915,895         63,910,427                  90



The main reason for the change in scope of works was the increase in dam length from 77
to 106 metres. This resulted in review of quantities and cost. Some examples are shown
below:

 The revised quantity of excavation was 18,300 m3 compared to tendered quantity of
  3,000 m3 or 510 per cent increase.

 Inadequate provision for the treatment plant, pipe works and access roads.

 Increase in fill quantities. For instance, rockfill and spillway prices increased from the
  tendered amount of Rs 27 million to Rs 68.9 million.




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It was noted that revision of the contract price was effected as and when works
proceeded. Instead, initially, a complete survey should have been made to determine the
scope of work.


Follow up Actions.

The Central Tender Board (CTB) queried the substantial increase in contract price. The
RRA and the Ministry of Public Utilities requested for explanations from the Design and
the Supervising Consultants.

Views of the Design Consultant

The initial scope of works was limited to studies for identification of distress and
suggesting rehabilitation measures for the existing dams. The geo-technical investigation
carried out was solely for the purpose of considering rehabilitation. Subsequent to
detailed analysis, it was concluded that the dam was not in a state to be rehabilitated and
a new dam was proposed.

As per the provision in the tender document, additional confirmatory geo-technical
investigations comprising core drilling should have been carried out by the Supervising
Consultant before taking up any excavation.

Views of the Supervising Consultant.

The existing tender documents prepared by the Design Consultant indicated that the
length of the dam as 77 metres. The dam is shown to span between two hill features
protruding into the Anse Raffin Dam river bed and providing an ideal location for
shortest and economical site for the dam.

However, actual verification of the dam site topography shows the two banks nearly
parallel and the so-called hill features completely non-existent. As verified on site, the
length of the proposed dam was in fact 106 metres against 77 metres as indicated in the
tender drawings.

As for additional geo-technical investigation, the Supervising Consultant stated that this
was not included in his scope of works but he still did a couple of trial pits by manual
labour.




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Follow up actions by the Parent Ministry.

The data and information provided by both Consultants were examined by the Parent
Ministry. Due to lack of information, it had not yet been established from a technical
point of view who was at fault.

In July 2004, additional information was sought from the RRA, concerning points of
elevation near the Anse Raffin dam, which has not yet been replied.


Observations and Recommendations

   In March 2003, the cost estimate was increased to Rs 107.5 million. The Supervising
    Consultant recommended that the length of the dam be increased to 106 metres due
    to topographical deficiencies.
   In view of its financial implications, the Ministry of Public Utilities and the
    Rodrigues Administration should have sought for a second opinion on the alleged
    deficiency. Site measurements should have been re-performed independent of the
    Supervising Consultant instead of agreeing to the proposed increase.

   A joint site inspection including both the Supervising and Design Consultants should
    also have been carried out to resolve the differences.

   Before seeking the CTB’s approval for revised cost in March 2003, explanations and
    comments of both Consultants should have been sought. On the contrary, it was the
    CTB that queried the increase and asked for explanations.

   The 90 per cent increase in contract price had definitely disrupted the cash flow
    projections of the RRA.


Retention Money

As per the terms of the contract agreement, retention money is ten percent and limit of
retention is five per cent of the Contract price.

As at 30 June 2004, a total amount of Rs 85,842,981 was paid to the Contractor.
However, retention money amounted to only Rs 3,087,194, representing five per cent of
Rs 61,743,885 (Original Contract Price exclusive of VAT).

The idea behind holding a sum in the form of retention money is to ensure that in case of
non performance and defects, remedial actions can be taken with the available sum.




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Implication

The actual revised contract price is Rs 134,915,895. The contract price has nearly
doubled and the money retained considering the revised cost is only two per cent.


Recommendation

For future capital projects, the RRA must specify in the conditions of contract that
retention money be based on revised contract price in case of variations.


RRA’s Reply

The contract is silent on the provisions of retention money in case of increase in project
cost due to variations. RRA however took note of this issue and will ensure that in future
contract, same does not occur.




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