Maravi

Finance ministry reports ZAWA management to ACC

Finance ministry reports ZAWA management to ACC
Written by Chibaula Silwamba
Monday, June 08, 2009 6:39:23 PM

THE Ministry of Finance and National Planning has reported Zambia Wildlife Authority (ZAWA) director general Dr Lewis Saiwana and his management to the Anti Corruption Commission (ACC) for investigations over the alleged irregular awarding of a road construction contract in Mfuwe to Tomorrow Investments.

And the ACC confirmed receipt of the letter and forensic audit report from the Ministry of Finance and National Planning but referred all queries to the Zambia police, which was investigating the case.

The ministry's action follows the Norwegian government's forensic audit report on its funded road projects that revealed several irregularities allegedly committed by Dr Saiwana and his management in the awarding of a contract to Tomorrow Investments to construct the Chisengu-Mfuwe and Mfuwe-Chilongozi roads in Mfuwe [Mambwe district], Eastern Province.

According to a letter dated April 22, 2009 written and signed by acting Secretary to the Treasury Berlin Msiska to the ACC director general, the law enforcement agency was asked to study the forensic audit from the Norwegian government and determine whether the ZAWA management had committed offences.

"...Norwegian support to South Luangwa National Park -forensic audit. The above refers. Please find enclosed the forensic audit report from the Norwegian government. The same is being forwarded to you to determine whether offences were committed by ZAWA management and to assist the ZAWA board to determine the course of action to be taken if offences were indeed committed," stated Msiska in his letter copied to ZAWA board chairman.

And a forensic audit report commissioned by the Norwegian Embassy, which Msiska submitted to the ACC director general, had recommended that ZAWA had to investigate the employment contract of Dr Saiwana and charge him for gross negligence for the loss incurred by the statutory body due to his negligent acts and disciplinary procedure should be taken against him.

The final report dated March 18, 2009 entitled forensic review of the South Luangwa Area Management Unit (SLAMU) phase V of infrastructure component Chisengu-Mfuwe and Mfuwe-Chilongozi roads lot one and lot two was compiled by a financial consultant and a legal consultant for the Norwegian Embassy.

The Norwegian government through the Norwegian Agency for Development Co-operation (NORAD) funds SLAMU.

The report revealed that Dr Saiwana and the former head of procurement Bwalya Selemani, who were the key players in the awarding of the irregular contract, declined to appear before the experts assigned by the Norwegian Embassy to carry out the forensic audit.

"Introduction: We are pleased to submit our final report in connection with the forensic review of SLAMU phase V infrastructure component: Chisengu-Mfuwe and Mfuwe-Chilongozi roads lots 1 and 2. We gathered our evidence by review of documentation in connection with the award and execution of the contract and interviews with some ZAWA officers involved," stated the final report that was submitted to Odd Eirik Arnesen, counselor - natural resources management at the Norwegian Embassy in Lusaka.

"As discussed in our findings and observations below, we have not been able to interview the director general of ZAWA [Dr Saiwana] and the former head of procurement [a Mr. B. Selemani]. These two officers played a significant role in the award and execution of the contract under review and their responses are valuable to the understanding of the facts. Our efforts to arrange a meeting with the director general on several occasions through the legal counsel's office and the DG's office failed.

"In addition, we have not been provided with the tender document submitted by Tomorrow Investments to validate the facts on misrepresentation in respect of the contractor's capacity and legal actions disclosure as represented to us by the chairperson of the tender committee that deliberated on this contract."

The report revealed that the tender process including the basic rules for awarding the tender and contract adopted by ZAWA were materially breached.

"Main area of non-compliance include: contract value exceeded the authorized threshold for the tender committee. It should have been referred to the then Zambia National Tender Board (ZNTB) [now called Zambia Public Procurement Authority ZPPA]. According to ZNTB rules, all procurement with an estimated value of K2 billion should have been conducted through the ZNTB. Responsibility: The DG [Dr Saiwana] set up the tender committee. He should have known that the procurement value exceeded his authority and indeed that of the tender committee; no evidence that ZAWA reviewed the capacity of the contractor to deliver on the contract prior to the award of the contract as provided for in the procedures. There was no evidence that the following tasks were performed: - inspection of equipment and machinery listed in the tender document. This is potential misrepresentation by the contractor in respect of equipment and machinery tendered," the report revealed. "Responsibility: This procedure was recommended by the negotiation committee chaired by the then [eastern] regional manager for SLAMU Mr. [Edwin] Matokwani but the DG did not follow the recommendation before signing the contract. Confirmation of existence of contractor project personnel indicated in the tender document. It appears that most of the proposed personnel were not in the employment of the contractor. This is another potential misrepresentation by the contractor in the bid document.

"... existence of legal action against the contractor and implications on the ability to deliver on the contract. At the time of award of the contract there were court claims against the contractor for non performance as evidenced by the sheriff’s seizure form 775 dated 18th June, 2008 under cause numbers 2005/HPC/0198 and 2006/HPC/0064. The contractor should have disclosed this fact in the bid documents. Responsibility: the Road Development Agency (RDA) representatives on the tender committee ought to have had this information but there is no evidence that they brought it up. Based on our interview with the former regional manager for SLAMU [Matokwani], he informally alerted the DG about the bad track record of Tomorrow Investments and recommended that further investigation should be performed before signing the contract. The recommendation was not implemented."

The report revealed that the lowest bids were rejected without compelling justification.

It revealed that the lowest bids were rejected because they were outside the engineer's estimate.

"The engineer's estimate was later discovered to have been incorrect. Responsibility: the regional manager for SLAMU as the chairperson of the tender committee is expected to have challenged RDA to justify the reasons this criteria should override all others that were specified in the evaluation criteria," the report revealed. "One contract was executed for both lots instead of the planned separate contract. Responsibility: clear disregard by the DG of the recommendation by the negotiating committee. The contract was executed without involvement of the legal counsel's office. The legal counsel's office had no formal knowledge of the contract with Tomorrow Investments until there was a dispute. Responsibility: the DG should have consulted the legal counsel's office before sign off as per ZAWA internal procedure."

The report revealed that a study of the original contractual document between ZAWA and Tomorrow Investments showed major irregularities.

"The World Bank contract template was used but in many clauses the word 'Bank' has not been changed to read the 'employer' being ZAWA. [This is] evidence that the contract was not reviewed by a competent person. The bill of quantities which is part of the contractual document has contract amounts inserted by hand with several alternations that have not been counter signed by both parties. This raises the issue of whether the amounts were altered by one party to the contract without the agreement of the other or were inserted after the contract had been executed. [This is] evidence that the contract was not reviewed by a competent person. The contract required unconditional guarantees from the contractor under clause 51.1 and 52.1 but Tomorrow Investments provided guarantees that had an expiry date rendering them conditional. These guarantees should have been rejected for not meeting the contractual standard. In addition, the performance guarantees validity conditions were not in accordance with business norm. This was within the knowledge of Tomorrow Investments but it is unclear whether ZAWA was aware of this at the time of signing the contract. The legal counsel stated that they had come to know this fact only after the court case commenced by Tomorrow investments Limited. In our view this is an indication of negligence by ZAWA. [This is] evidence of gross negligence by ZAWA. This aspect was very obvious and is reasonably expected to have been noticed unless it was ignored by the DG and the former head of procurement," the report stated.

The report revealed that ZAWA and Tomorrow Investments were in constant breach of the contractual provisions relating to performance.

"The following major issues are supported by documentary evidence: it is apparent that Tomorrow Investments Limited did not own the necessary equipment and machinery as well as personnel to execute the contract. This is evidence by requests to facilitate importation of machinery using ZAWA's VAT and duty exempt status. This is further evidenced by the contractor hiring equipment from ZAWA and other third parties such as the Zambia National Service (ZNS). This matter continued throughout the contract period; the first termination letter dated 13th December, 2006 for the reason of failure to mobilize was for lot 2 only and quoted the wrong clause (1.2). ZAWA could not terminate the contract for lot 2 only because one contractual document was entered into for both lots. This anomaly could have been avoided had ZAWA taken due care. In addition, no warning notices had been served on the contractor. This supports our conclusion that the legal counsel, as a knowledgeable party to these matters, was not involved. The result was the withdrawal of the terminate letter because it was incorrect," the report revealed. "An action was commenced by Tomorrow Investments Limited under cause number 2006/HPC/394 seeking specific performance of the contract; consent judgment was agreed upon by both parties for specific performance of the contract and withdrawal of the termination letter by ZAWA and submission of a revised plan of work by the contractor; the contractor failed to perform and persistent in requesting for extensions due to adverse weather conditions and floods including shortages of cement. ZAWA agreed to the extension from 26th January, 2007 to 8th April, 2007; on 2nd February, 2007 the contractor sought approval for partial mobilization of lot 2 in spite of being paid the full amount on the advance payment. This was denied by the resident engineer."

The report revealed that by February 4, 2007, Tomorrow Investments was asking for suspension of works on lot one when in fact suspension had already been effected by removal of equipment from the site.

It stated that there was no response from ZAWA on partial mobilization.

"On 25th February, 2007 the contractor took advantage of the government of the Republic of Zambia (GRZ)'s statement to suspend any road works due to bad weather conditions. In addition, the contractor alleged that the works carried out for the period until suspension on lot 1 were for emergency mitigation and passage of traffic. This would be the basis for the claim on variation at a later stage," the report revealed. "What followed was a series of notices from the resident engineer for breach of contract by the contractor under clause 9.1 failure to employ key personnel, clause 23.1 not replacing the equipment on site, clause 27.3 failure to provide updated work programmes as per the contractual requirements. In our view notices of termination should have been served at a much earlier stage of the performance of the contract."

The report revealed that on March 18, 2007, ZAWA acting on the advice of the RDA terminated the contract once again on reason of convenience under clause 59.4, the one missing in the executed contract.

The report stated that the termination letter was signed by Dr Saiwana.

"ZAWA subsequently decided to withdraw the letter of termination by reason of convenience to that of fundamental breach. This letter was signed by the acting director Mr. E Matokwani. However, the fundamental breach termination letter could not be served on Tomorrow Investments because the company had moved from the registered office. Therefore, this letter has been disregarded in the current proceedings with the arbitrator. As this stand the reason for termination by ZAWA is still convenience which in our view is weak and may lead to costs. Responsibility: the legal counsel should have considered serving the replacement termination notice by 'substituted service.' The fact ought to have been known by the legal counsel. The contractor then accepted termination and submitted a summary of claim against ZAWA in the sum of K10,206,692,534.96 as at 19th December, 2008 which is rising on a continual basis. A dispute arose and the contractor sued ZAWA. On 28th May, 2008 the contractor issued the second progress against ZAWA under a writ of summons the original claim being K3,763,177, 530.00 for work done and loss of use of equipment and machinery," the report revealed. "There was a stay of proceedings on the matter and it has been redirected for arbitration as provided for under the contract. The contractor has submitted a bundle of documents and statements from six witnesses out of whom only two are employed by the contractor and the main witness being the managing director Mr [Augustine] Katotobwe. At the time of our visit, ZAWA did not have a copy of its bundle of documents. The scheduled date of hearing was 14th and 15th January, 2009 but was rescheduled to 6th February, 2009. The hearing was further rescheduled to 6th March, 2009. At the time of our visit on 26th February, 2009, the legal counsel had no strategy on what position they would consider acceptable from the arbitration. Witness statements were not reviewed at the time either."

The report revealed that ZAWA had not recovered advance payments from subsequent claims of work certified in accordance with the contract. It revealed that the total estimated loss by ZAWA was approximately K1.4 billion. The report stated that the recovery was not undertaken because there was a verbal agreement with Tomorrow Investments that the advance payments would be recovered after 30 per cent of the certified work was achieved.

"It was unrealistic for ZAWA to insist on this non binding commitment in light of the breaches by the contractor. The parties cannot demonstrate that the advance payments were used exclusively for expenditure under the contract. There is no evidence that ZAWA pursued the contract to account for the utilization of the advance payment and ZAWA made payments to the contractor in error and outside the contract that it has not been able to recover. Payments to the contractor amounting K341, 836, 000 in respect of materials are outside the contract and were not recovered from certificate 4 as instructed by the project manager," they stated.

The report revealed that the final claim by Tomorrow Investments was K10,206,692,534.96 against the counterclaim of K1,398,563,517.96 by ZAWA.

"The following risk factors have been identified for consideration: ZAWA appears not adequately prepared for the arbitration. At the time of our visit which was a week before the hearing, ZAWA did not have a strategy in respect of what an acceptable outcome from the arbitration should be. The legal counsel had not reviewed the witness statements and the related evidence for the hearing because ZAWA did not retain a copy of the bundle of documents submitted to the arbitrator. The meeting where the legal counsel would meet the witnesses was scheduled a day before the hearing. In our view these are serious indications of being unprepared for the hearing," the report revealed. "The basis of termination by ZAWA is still 'convenience'. Therefore, whatever the outcome, ZAWA is likely to be in a loss position. It's a question of how much; the guarantees that would otherwise cushion contractual loss have expired; the contractor does not appear to have substantial assets that can be attached or sold to recover any losses and liability would attach all ZAWA existing assets."

In conclusion, the report stated that based on review of the facts and observations the consultants concluded that ZAWA was grossly negligent in the award and execution of the contract, which had resulted in financial loss.

It stated that the quantum of the financial loss was likely to be significant.

"We are particularly concerned at the actions and decisions taken by the DG, Dr Saiwana, and the former head of procurement, Mr. B. Selemani, in the award and execution of this contract," the report stated. "Some of the inconsistent actions and decisions include: non compliance with key procurement procedures that are reasonably expected to have been known to the staff concerned, disregarding specific recommendations by the negotiation team to perform a due diligence on the contractor before award of the contract, executing the contract without involvement of the legal counsel, operating outside their authority, accepting conditional guarantees which are clearly in violation of the contract requirements and failing to demonstrate the concerned staff acted on information that cast doubt on the ability of the contractor to perform."

The report highlighted several recommendations which ZAWA was supposed to take.

"Recommendations: based on the facts and observations, ZAWA did not use the funds provided by the [Norwegian] Embassy for the intended purpose and according there is no assets. We, therefore, are of the view that ZAWA should refund the funds disbursed by the Embassy in connection with this contract. The refund should comprise both funds disbursed to the contractor and undisbursed in the bank account. At the time of our visit to SLAMU we noted that the road account had undisbursed funds amounting to K3, 470, 000,000. Review of other contracts executed by ZAWA should be considered to establish if there is a pattern in the decision errors or otherwise exhibited by ZAWA officers in the award and execution of this contract," the report recommended. "The ZAWA legal counsel's office should be involved in the approval of all contracts before execution. The ZAWA legal counsel's office should be the custodian of all contracts and monitor implementation. The DG [Dr Saiwana] has to take responsibility with possible action of breach of fiduciary duty. ZAWA has to investigate the employment contract of the DG and charge him for gross negligence for the loss incurred by the statutory body due to his negligent acts. Internal disciplinary procedures should be provided for that."

It recommended that ZAWA should consider civil action against Tomorrow Investments under contractual law for misrepresentation in respect of representations contained in the tender documents.

"This option is only possible after the arbitration hearing set for the 5th and 6th of March, 2009 is determined," the report stated. "...ZAWA to consider criminal action under S309A read together with S308 for obtaining pecuniary advantage by false pretenses. Matter to be reported by ZAWA to police for further investigations based on the tender document and oral testimony made available to us."

But when contacted for comment, Dr Saiwana said he had no idea about the issue in question.

Dr Saiwana said he had no idea on the contract and the concerns raised in the Ministry of Finance and National Planning's letter to the ACC.

Asked if he had availed himself to the consultants who were carrying out a forensic audit, Dr Saiwana responded: "No!"

Further asked why ZAWA awarded the contract to Tomorrow Investments without taking into consideration the recommendations of the negotiating team, before hanging up the line, Dr Saiwana responded: "No! I have got no idea. Thank you!"

And ACC public relations manager Timothy Moono confirmed that the ACC had received Msiska's letter.

"I wish to confirm that the Commission did receive the said correspondence and attachments from the acting Secretary to the Treasury," stated Moono in response to a press query. "I further wish to inform you that the Commission has not instituted any investigations into the matter as it came to our attention that the same was being investigated by the Zambia Police Service. You may therefore wish to direct your query to the Zambia Police Service for more information."

But Zambia police spokesperson Bonnie Kapeso declined to comment, saying he needed to consult Inspector General of Police Francis Kabonde, who was out of the country at the time, before issuing any statement.

On January 5, 2008, then president Levy Mwanawasa blacklisted Tomorrow Investments over the Chisengu-Mfuwe road after he was told that the contractor had failed to complete the project.

Mwanawasa, now late, had made the announcement during a rally at Chiutika Basic School in chief Munkhanya's area in Mambwe.

"We had a contribution from Honourable [minister of works and supply Kapembwa] Simbao who talked about Chisengu-Mfuwe Road [part of the Chipata-Mfuwe road] which ZAWA gave to Tomorrow Investments to work on. He has told us that Tomorrow Investments was found wanting but there are problems to terminate the contract because the contract they signed, there was no termination clause. But in your explanation you are saying that you tried to terminate the contract two times and third time you have terminated and given to somebody else," Mwanawasa had said. "My conclusion is that, and I am rarely wrong, either ZAWA wanted the confusion to continue because they were benefiting or when RDA came into the picture, wanted the confusion to continue because they were benefiting but when it was discovered that the President is going to Mfuwe, he had talked about this road in the past three years ago, that was when the contract was terminated."

Therefore, Mwanawasa declared: "I am invoking my powers under article 33 of the Zambian Constitution, Tomorrow Investments is hereby blacklisted. They are not to be given any government work. Whoever gives them the government work will be guilty of theft and will be equally answerable."

Mwanawasa had said earlier he had directed that the contract be terminated and the directors of Tomorrow Investments should be arrested and prosecuted but was surprised that nothing had happened up to then.

He had revealed that Tomorrow Investments had been given a contract to construct a hospital in Shang'ombo District but had failed over a period of six years.

Mwanawasa had further revealed that Tomorrow Investments had failed to finish the construction of a school in Chisamba and other projects in Western, Southern and Eastern provinces.

However, to date, the law enforcement agencies have not taken action against Tomorrow Investments and other companies, which the late Mwanawasa had blacklisted.

Labels: ACC, ZAWA

posted by MrK @ 3:32 PM