Govt to go after defaulting contractors’ bank, insurance bonds – VP Jagdeo

…says delays could hinder award of future contracts to companies

As the Guyana Government clamps down on delinquent contractors, banks and insurance companies that issue performance bonds to contractors would find themselves facing the consequences of the bonds being called for delays in public projects.
Vice President Bharrat Jagdeo made this disclosure on Thursday during a press conference at the Office of the President. He explained that as part of their contracts, contractors are required to put up a performance bond that the State can draw down on should they fail to complete their works on time or at all.
These performance bonds are often issued by commercial banks and insurance companies. As such, in addition to contractors, the Vice President is also putting these institutions on notice that Government intends to levy on these performance bonds.
“So, I want to urge the banks and the insurance companies too that if you’re giving a performance bond, you better make sure that your client is doing the work, too, because at the end of the day, we will come against the bond that you have issued. And therefore, the insurance company or the bank will be called upon to perform and because we will draw down on the bond from them.”

Vice President Dr Bharrat Jagdeo

“And so, I hope that they are also paying keen attention to this matter, because sometimes they think that the issuance of these performance bonds is risk-free. But if your client doesn’t perform, then the state has every intention of calling in the bond, and we’re doing this with greater frequency now,” Jagdeo noted.
The Vice President indicated that clear instructions have already been passed to all ministries and state agencies to look into cashing in the performance bonds. This move comes as part of widespread efforts by government to activate liquidated damages in contracts that have gone beyond the period of implementation in a number of state projects.

Future prospects
According to Jagdeo, in the past there was a “lax view” in instituting liquidated damages against contractors who had not completed their work within the contractual timeline – something that would no longer obtain.
While the International Federation of Consulting Engineers (FIDIC) Standard provide for an extension in time for certain mitigating factors beyond the control of contractors like extended rainy periods, the VP noted that these were “rare occurrences” when it came to delays in public projects.
Consequently, he announced that those contractors who failed to meet their deadlines would have this included in their track record and this would potentially their chances of securing future contracts from the Government.
“So, in the past because of the paucity of contractors, we may have turned a blind eye to some of these things, so when people don’t complete, they still get another project… But more and more, this [delay in completing a project] is going to be a factor in ensuring that people are penalised for not completing their contracts,” the Vice President stated.
Since the People’s Progressive Party/Civic (PPP/C) Government’s return to office, as many as 2000 new small contractors have been registered and have become involved in the procurement system as part of a new ecosystem of contractors that continues to grow.
Among the criteria the current Administration had changed to grant more opportunities to small contractors – companies that fall below the $15 million margin – had been the requirement of three-to-five-years’ experience.
The PPP/C Government has said that it has been hiring new contractors to keep pace with the ongoing rapid development in the infrastructure sector. During a previous press conference, Jagdeo had noted that this has sometimes meant compromising on contractors’ experience. But while experience may be subject to compromise, quality work is not.
Only last month, it had been announced that all Government Ministries would soon have a unit tasked with assessing the performance of contractors across the various sectors with the aim of going after the delinquent ones. These units will be supported by a Contract Compliance Unit within the Legal Affairs Ministry to provide guidance and file legal proceedings where necessary.
This move followed strict orders by President Dr Irfaan Ali that penalties like liquidated damages outlined in a number of Government contracts be enforced for companies that continue to default on their contractual obligations.
Attorney General Anil Nandlall had subsequently cautioned contractors to ensure that they execute their contracts diligently and deliver projects that could not be deemed substandard. He noted that this move by the Government was a demonstration of the Administration’s commitment to moving condignly against contractors who were negligent in the discharge of their duties.
In fact, only recently, Government moved to terminate the contract with Trinidadian company Kalco Guyana Incorporated, which had abandoned work on sections of the Conversation Tree Road Expansion Project.
Earlier this week, Public Works Minister Juan Edghill disclosed that Kalco has since repaid the outstanding mobilisation costs while Government has paid the Trinidadian company for works done so far.
Meanwhile, government has since retained S Jagmohan Construction and General Supplies Inc., which has already completed another section of the Conversation Tree Road, to finish the abandoned works.