Poor management, inexperienced contractors contribute to project woes

E-Governance audit

… millions owed to contractors for E-Gov project – forensic audit

Ram and McRae, the auditing firm that conducted the forensic audit on the controversial E-Governance Project believes that poor management and inexperienced contractors were contributory factors to the many problems the project faced.

According to the report released by the Finance Ministry on Friday, the auditors held discussions with a number of contractors who were responsible for the installation of the fibre optic cable and numerous matters with regard to the failure and possible recovery of the cables and E-Gov Project were raised.

“It is therefore our opinion that the primarily reason for the Project’s failure was due to poor management and supervision, along with execution of the works by inexperienced contractors… Consequently, the fibre optic cables were not properly installed and were damaged… It is a matter of accepted fact that cables were installed at less than the agreed depth of 1.5 metres,” the auditors stated, while adding that they saw no evidence of the issue of incorrect depth installation being flagged by the contractor nor the technical advisor of the project.

Weak inadequate systems

Moreover, other findings from the auditors’ review include weak or inadequate systems and procedures to govern the project, and account for its finances, significant non-compliance with the Procurement Act and inadequate hiring practices.

Additionally, the auditors outlined that the financial systems of the E-Governance Project were generally inadequate. Due to the nature of the project, those charged with governance were not legally obligated to prepare and publicise financial statements on a periodic basis.

“The review revealed a number of issues, primarily in the areas of planning, management and supervision of contractors, payments to contractors above the contract amount and the lack of proper internal controls and maintenance of adequate financial systems. In our view, the failure of the E-Government DWDM Project was primarily due to the fact that no research and analysis was conducted prior to the implementation of the project. There was no project document detailing the technical specification with regard to the installation of the fibre optic cables,” the report outlined.

Nevertheless, though a majority of contractors believe the cables can be salvaged, Ram and McRae has advised that the government evaluate the works required to achieve the possible recovery.

“There is considerable uncertainty surrounding the state of the work done on the Fibre Optic Cable Project, there medial work and issues arising out of a contract signed by the previous Administration intended to fix the problems. These matters require immediate and high level attention by the Cabinet under whom the Project falls,” the report stated.

In this regard, Ram and McRae recommended that the entire E-Governance should design and implement an organisational chart and mission statement. Furthermore, the auditors believe it is important for the Project Manager to possess strong managerial skills in addition to technical competence.

“We believe Mr Alexei Ramotar (Project Manager) failed to properly manage the DWDM Project,” the report stated.

The project was administered by persons in and contracted by the Office of the President and it contained two distinct components. The first was the E-Governance Dense Wavelength Division Multiplex (DWDM) Project, which involved the laying of a fibre optic cable from Lethem to Georgetown; and the second aspect was the E-Governance (LTE) Project, which is a joint venture between the Government of Guyana and Huawei Technologies Co Ltd (China) for the construction of LTE sites and laying of fibre optic cables along the coast.

The project costs were estimated at US$5 million and US$32 million for the two components respectively.

Outstanding payments

According to the auditor’s report, following meetings with the contractors it was suggested that there may be outstanding payments of unspecified sums payable for works completed.

“We estimated that… the outstanding amounts would range between $35 million and $50 million,” the auditors stated.

It was pointed out that funding for the E-Governance (LTE) Project was provided by the EXIM Bank of China and payments were made directly from the bank to the contractor. However, as of May 25, 2015, Huawei had completed over 90 per cent of the project costing US$30.4 million of the total contract sum of US$32 million.

Nevertheless, the auditor stated that government was required to undertake, provide and finance certain elements of work in connection with the Huawei project.

It was also observed by the auditors that aspects of the DWDM Project were sub-contracted to nine major suppliers and in several cases the appropriate tender procedures prescribed by the Procurement Act were not followed: “We were also unable to determine the current status of each aspect based on the documentation available to us,” the accountancy firm stated.