PAC wants open books

The Public Accounts Committee has recommended the inclusion of provisions in government contracts over CI$100,000 that would allow the Auditor General to examine the books and records of contractors in relation to the contract.

Osbourne Bodden, chairman of the Standing Public Accounts Committee, made the recommendation while reading the committee’s report on the Special Report of the Auditor General on the review of the tendering and awarding of the debris removal contract in the aftermath of Hurricane Ivan.

Auditor General Dan Duguay said his office pointed out to the PAC during one of its meetings that there was no audit provision in the contract with the eventual successful bidder, MC Restoration.

In the end, Mr. Duguay said the Auditor General’s office had no problems with the company.

‘MC Restoration was very cooperative,’ he said. ‘They did open their books for us. But they didn’t have to.’

Mr. Duguay said it was important for the government to have the ability to enforce provisions in any contract it awards.

‘[The need to audit] doesn’t always come up, but you want to have the ability [to audit records] when you need to.’

On government projects like the Royal Watler Cruise Terminal, there was no need to audit the accounts of the contractors because of the nature of their contract, Mr. Duguay said.

However, the contract with MC Restoration called for certain quantity-based performances, which the Auditor General should have the ability to look at.

Mr. Duguay said another good example of when the Auditor General would need the ability to look at a contractor’s books and records is when a cost-plus profit contract is awarded, and it might be necessary for the contractor to prove his costs.

Not all records of interest would be financial.

‘For instance, a school project could call for an environmental assessment,’ he said. ‘The contractor might say he had it done, but when you ask him to see it, he could say ‘I don’t have to show you that’ without a provision in the contract saying he had to.

‘An audit shouldn’t just be thought of in terms of financial, although that’s certainly a big part of it.’

Mr. Duguay said it was common in other jurisdictions to include a standard contract provision that would allow the Auditor General the ability to inspect books and records of contractors with respect to government contracts.

The PAC looked at several other aspects of the controversial US$10.7 million debris removal contract, which was won by MC Restoration in spite of the fact that another, more experienced contractor bid almost $2 million less.

Regardless of the possible savings, Mr. Bodden said the PAC believed that the Government ultimately got value for money with the contract, even though there it was a common perception among local contractors at the time that it did not.

Still, the Government could have gotten even better value for money had it accepted the lower bid.

That bid, submitted by a company called DRC, was rejected by the government of the day because of a conflict of interest.

Mr. Bodden explained that DRC had some of the same ownership as the company James Lee Witt Associates, which already had been awarded the contract for the overall management of the Hurricane Ivan recovery process. In essence, then, James Lee Witt would have been charged with oversight on itself had DRC been awarded the debris removal contract.

Still, the PAC report contends the government could have done it differently.

‘Notwithstanding the appearance of a conflict of interest in the lower bid, it is the opinion of this committee that Government could have put in adequate controls to ensure the risk in question was reduced or eliminated and thereby had cost savings of approximately US$2 million.’

Mr. Bodden later explained the reasoning behind the PAC’s observation.

‘[The Government at the time] had their reasons for [rejecting the DRC bid], but we feel they could have still been overcome,’ Mr. Bodden said. ‘There could have been checks and balances put in place to manage any conflict of interest.’

The PAC concluded that every effort must be made to try and realize savings for any government contract.

In addition, the PAC recommended that ‘necessary arrangements be put in place so that local contractors have every opportunity to bid on all contracts regardless of size and specific nature of contracts’.

These comments in the report come just weeks after local architects complained they were forced to combine their bids with overseas architects with regard to the design of three planned new high schools. The size and the specific nature of that contract was a contributing reason why overseas participation was required in the bid.

Minutes of the PAC minutes from 28 November 2005 stated that the PAC had come to the conclusion that the real issue continued to be the way in which the [MC Restoration] contract was awarded and that the process must be more transparent in the future.

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