Cost overrun and delays affected Mangaia harbour project
According to the report done by the Audit Office on the review of the tender and management process for the Mangaia Harbour Reconstruction Project, the contract was awarded to Pa Reu Machinery Ltd (PRML), a company owned by MP Winton Pickering and his wife, because the most important factor in awarding the contract was the price.
PRML was the only company to submit a bid ($1,750,222) under the appropriation amount ($1.83 million).
However, PRML was to receive more money, $199,039 due to a design variation. The variation was approved by Cabinet but contrary to Financial Policy which requires work over $30,000 to be tendered, this did not happen.
Interestingly, in 2006, Aid Management Consultants did a preliminary costing of the project at $2.4 million (excluding VAT).
In November 2008, the Ministry of Infrastructure budgeted $1,994,134.21 (excl VAT) for the project with a timeline of 100 days with completion by September 2009.
On 19 November 2008, $1.83 million was allocated for the project in the November Supplementary Budget for 2008/09
PRML won the contract with a bid of $1,750,222 and the contract was signed in May 2009. Work commenced in August 2009.
In November 2009, a further $199,039 (excl VAT) was allocated to the harbour project for the design variation, this money being taken from the Mangaia roading programme. This brought the total contract price to $1,949,261 (excl VAT).
The additional funds were paid out to PRML on 18 November 2009, well before the work was actually completed. Completion date was expected to be late November 2010. Instead of being completed in 100 days, the latest completion date was 480 days after work commenced.
Audit found the delays in the project were mainly due to adverse sea conditions, extra underwater drilling and dredging and machinery breaking down. Also, the cyclone season delayed the project by approximately 4 months. The original timeline was clearly unrealistic.
Audit was satisfied the delays were not due to contractor fault or incompetence however the contractor should have addressed staffing issues earlier.
For more on the Mangaia Harbour Audit, see page 8.
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