ATTORNEY GENERAL DIDN’T APPROVE REVISED $360 KKIA UPGRADE CONTRACT, REVEALS AG’S REPORT


By Ulande Nkomesha,

THE Auditor General’s Report on Accounts of the Republic for the financial year ended 31st December 2020 has revealed that the decision to revise the contract between government and China Jiangxi Corporation for infrastructure upgrade at Kenneth Kaunda International Airport was not approved by government and had no clearance from the Attorney General.

The Report stated that the contract price was first pegged at $385 million but was later revised to $360 million and it was converted to a turn key project.

“On 3rd June 2013, the government of the Republic of Zambia and China Jiangxi Corporation for International Economic and Cooperation signed a contract for the designing and construction of airport infrastructure upgrade at Kenneth Kaunda International Airport (KKIA) in Lusaka at a contract price of US$385,000,000 excluding all duties and local taxes with a completion period of 54 months. However, on 15th August 2013, the contractor requested the Ministry to revise the contract to US$360,000,000 and present the contract into an Engineering Procurement and Construction Contract (EPC)/Turnkey Projects (Turnkey project is a contract under which a firm agrees to fully design, construct and equip a service facility and turn the project over to the purchaser when it is ready for operation),” the Report stated.

“On 5th September 2013, the contract that was signed in June was revised to $360,000,000 resulting in the reduction of the initial contract price by $25,809,673 and changed the contract from a Bill of Quantity (BoQ) Milestone Payment Schedule to an Engineering Procurement and Construction Contract (EPC)/Turnkey Project. The contract came into effect on 10th March 2015 after the signing of the Concessional Loan Agreement $360,000,000) for financing the project between Ministry of Finance and National Planning of the Republic of Zambia and EXIM Bank of China. In this regard, the effective contract start date was 21st April 2015 and end date was 20th October 2019. The completion date was later revised to 10th March 2022.”

The Report stated that the costing variation was questionable as there was no evidence that the Ministry had conducted a price reasonableness analysis.

“The decision to convert the contract into a turnkey project and revising the contract price from US$385,000,000 to US$360,000,000 was questionable in that at the time of signing, the final design of the facility was not approved by the government and therefore the contract price could not be justified. Further, there was no clearance from the Attorney General for change of the contract terms. However, the decision to increase the contract price by US$9,235,359 was questionable in that the contract had been converted into a turnkey project and the contractor was responsible for the design,” The Report stated.

“In addition, the costing of the variation was questionable as there was no evidence that the Ministry had conducted a Price Reasonableness Analysis. Consequently, the contract sum increased to US$369,235,359 of which the balance of US$9,235,359 was to be paid by the government.”

And the Report stated the Ministry of Defence awarded various contracts without confirmation of availability of funds and committing the required funds before proceeding to award the contracts

“Section 54(2)(d) of the Public Procurement Act No. 12 of 2008 requires that no contract, purchase order, letter of bid acceptance or other communication in any form conveying acceptance of a bid or award of contract should be issued prior to among others confirmation that funding is available. Further, Section 122 of the Public Procurement Regulations of 2011 requires that a procuring entity should, after a contract award decision by an approvals authority, commit the required funds before proceeding to award the contract,” the Report stated.

“Contrary to the regulations, the Ministry awarded various contracts without confirmation of availability of funds and committing the required funds before proceeding to award the contracts. Consequently, the Ministry had accrued outstanding bills (debts) in amounts totalling K220,047,652 some of which had been outstanding from as far back as 2013.”

The Report stated that amounts totalling K20,914,069 were sent to the Defence Attache in Dar es salaam for clearance and escort of various defence equipment but contrary to the regulation, amounts totalling K10,699,554 (US$730,345) were unaccounted for in that there were no expenditure details.

“Financial Regulation No. 65 (1) requires that payment vouchers with supporting documents, and any other forms which support a charge entered in the accounts, should be filed, secured against loss, and be readily available for audit. During the period under review, amounts totalling K20,914,069 were sent to the Defence Attache in Dar es salaam for clearance and escort of various defence equipment,” the Report stated.

“Contrary to the regulation, amounts totalling K10,699,554 (US$730,345) were unaccounted for in that there were no expenditure details such as payment vouchers, acquittals and receipts as at 30th June 2021.”

And the Report revealed that the Zambian Army did not subject two procurements with contract amounts above K500,000 to open bidding but instead made split payments thereby circumventing procurement procedures.

“The Public Procurement Regulation No. 29 (3) of 2011 states that a procurement entity shall not divide requirements into lots for the sole purpose of avoiding thresholds or levels of authority. In addition, the Second Schedule (Regulation 8) of the Public Procurement Regulations of 2011 requires that all procurements above K500,000 must be subjected to open bidding. Contrary to the regulations, the Zambia Army did not subject two procurements with contract amounts above K500,000 to open bidding but instead made split payments thereby circumventing procurement procedures,” the report revealed.

“On 18th July 2018, the Ministry of Defence engaged Rene Enterprises Limited of Kenya for the supply of specialised marine equipment at a contract sum ofUS$14,944,471 (VAT exclusive) with a delivery period of 60 weeks. The terms of contract included: an advance payment of 25 percent to be paid within 30 days of signing of the contract against a receipt of bank guarantee; 50 percent of the contract price to be paid on receipt of the goods; and 25 percent to be paid within 60 days after the date of the acceptance certificate. As at 30th June 2021, a total amount of US$1,973,201 (K39,002,065) had been paid towards the 25% advance payment of US$3,736,117.”

The Report further revealed that the Zambian Army owed amounts totalling K6 billion which had been outstanding for the past three years.

“Public Stores Regulation No. 16, requires that every stores officer or any other officer having in his charge any public stores or other articles of public property must keep and maintain record of receipt and issue of such public stores. Contrary to the regulation, fuel costing K190,070 procured during the period under review was not accounted for in that there were no receipt and disposal details. As at 31st December 2020, the Zambia Army was owing amounts totalling K6,693,880,738 which had been outstanding for periods ranging for up to three years,” stated the Report.

Published by MyWritings

A Writer, A Diplomat in Waiting, Climate Change Advocate and a Football Administrator

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