The parliamentary Public Accounts Committee (PAC) has given 30 days ultimatum to the ministry of transport and communication to produce a progress report on how it is going to recover the US$6, 271, 420 paid to MDC civil engineering for the supply of nine dredging machines.
This is in a matter where the ministry had signed a contract of US$11,875,800 to the named company for the supply of twelve (12) dredging machines in which only three machines valued at US$2,968,950 were supplied as of 2016 despite an advance payment of 75 percent.
Meanwhile contractor MDC civil engineering said the remaining dredging machines had not been delivered due to attempts by the ministry in charge to change the specifications of the dredging machines which were supposed to be supplied.
And solicitor General Abraham Mwansa said his office was already in the process of commencing legal action against the supplier of the machines in order to recover the monies for the dredgers that had not been delivered.
This came to light when the controlling officers from the Ministry of transport appeared before PAC to respond to audit queries cited in the 2016 Auditor General’s report.
The controlling officer had first appeared before the said committee on 23rd November 2017 where the committee asked the ministry to reappear on 15th December and furnish the committee with more clarifications on the failure to deliver the dredgers and excavators by the named company under consideration.
According to paragraph 40 of the Auditor General’s report of the financial year ended 31st December 2015, mention was made of the total amount of US$9, 240, 370 paid to MCD civil and mechanical engineering as of November 2015 for the supply of twelve (12) dredging machines at the total contract price of US$11, 875 875 800 and delivery period of eight (8) months from the date of advance payment.
It was further mentioned that as of July 2016, the supplier had not delivered any of the dredging machines.
A scrutiny of the contract document in 2017 revealed that specifications for the machinery to be delivered were six suction cutter dredgers and six excavators and not twelve dredgers as indicated on the face of the contract document.
But during its sitting on Friday, PAC Chairperson Howard Kunda said it had come to the attention of the committee that the manufacturer had since terminated the contract with he supplier and the outstanding dredging machines would not be delivered.
“PS, the committee is concerned that this matter has not been resolved as far as the committee is concerned. The financial obligations with the supplier had been met with 72.5 percent of the contract sum being paid. It was brought to the attention of the committee that the manufacturer had since terminated the contract with the supplier and the outstanding dredging machines would not be delivered. I would like to find out if you can inform the committee on what the status is on the remaining dredgers bearing in mind that those issues of supply had the contract terminated by the supplier or by the manufacturer,” Kunda demanded.
In response, Ministry of Transport and Communication Permanent Secretary Misheck Lungu said the matter had since been reported to the office of the Solicitor General to facilitate the recovery of the performance guarantee.
“After several reminders to MCD civil to supply the remaining nine dredgers on 13th October 2017, a letter was finally issued to MCD civil for non renewal of the contract. The matter has since been reported to the office of the solicitor general to facilitate the recovery of the performance guarantee as directed in the previous commitment and that was the contractual requirement to claim the performance guarantee for failure to perform by the contractor in the amounts of US$1,187,500 and US$5,641,707 held by MCD civil for undelivered nine pieces of equipment. Copy of the letter is attached in our submission. We also wrote a letter to the Ministry of justice requesting them to recover the money following the non renewal of the contract and acknowledgement letter from solicitor general agreeing to pursue and recover the money,” Lungu said.
“We wish to inform you that on 1st June 2017, the ministry reported the matter to the security wings and one security wing we reported the matter to was the Drug Enforcement Commission and Zambia Police. In that regard, DEC has been in touch with the ministry and in due course shall inform us according to when their investigations are completed. Apart from that chair, the manufacturer and the supplier have entered a patch as a third party because we saw that this issue was not moving in the direction hence the decision not to renew the contract. But I would report to you chair that the supplier who has accompanied me here today has sued the manufacturer for a breach of their contract in-between. And this matter has been referred to the office of the Solicitor General, we have left it that the legal arm of government will pursue it.”
Lukasha constituency member of parliament Mwenya Munkonge then asked if the contractor had paid the supplier for the dredgers.
“From your dealings with the contractor, did he pay for all the dredgers? Munkonge asked.
But PS Lungu requested that the contractor responds for himself since he was also in the committee room.
“I don’t want to speak on behalf of the supplier because he is with me in this gathering, maybe the supplier can speak by himself because my prerogative ends at paying or receiving the equipment,” PS Lungu said.
Solwezi west member of parliament Teddy Kasonso then added to the question.
“I am not satisfied with the response from the PS. PS, you are not just the PS for the ministry but you are also a controller. Surely it should be of your interest, if you paid me some money and I am not making goods, can it not be in your interest to find out whether I have paid my manufacturer? Kasonso asked.
In defense, MDC civil engineering Managing Director only identified as Mwenya narrated what transpired before problems arose.
“I can remember that we signed a contract of course between MCD which is my company and the ministry of transport. The contract was that after signing the contract, the ministry was suppose to pay 25 percent in 30 days . The 25 percent payment never came until after six months. That is when 15 percent was paid to MCD, not 25 percent. So as per contract between MCD and big machineries in Netherlands, we also paid 15 percent to big machineries because that is what was paid to us from the ministry. After that, it took probably two months, the ministry and me went to Netherlands to check for the first manufacturing of the equipment. We came back, it took another five months, that is when we were paid another…totaling to 72 percent. So when this 72 [per cent] was paid, 15 per cent which we had paid to Netherlands, in fact we have also paid Netherlands up to 60 percent and the other money has been owed as surety to focus on insurance. In fact, before we went to inspect, there was some communication between the director for this ministry to people in Netherlands that MCD has been paid so much money and then the problems started to say the specifications of the equipment are sent. So now, MCD and big machinery was quarrellings and things like that,” Mwenya said.
“The manufacturer said ‘we are adjusting the prices of the equipment because the ministry has changed the specification’. As MCD, I said ‘look, I am not the owner of the equipment and I am not going to agree to that until that specification is approved by government, the owners of the equipment’. So for the past one year plus, we were quarrellings over the specification and these guys from Netherlands simply said there was a 25 percent increase on the specification. So at the end of the day, I couldn’t sign a new price with the manufacturer because the government didn’t approve that. I didn’t have the authority from government to accept the changes. And these people from Netherlands said they are not going to deliver anymore equipment until the government pays the difference. The PS started going one by one and all what we found was that there was no changes in specifications. At the end of the day, the PS wanted to know how much money had been paid to Netherlands from the first contract and first contract between MCD and Big Machinery was US$4 million equivalent to seven machines.”
And Solicitor General Mwansa confirmed having received the instruction to recover the monies but could not comment further on the matter.
“I should confirm that we received instructions from the PS however, I am a bit constrained to make comments because the defendant is here and we are yet to meet in court in the event that they don’t make any payment,” Mwansa said.
Kunda however requested that the controlling officers to reappear again after 30 days with a detailed progress report on how the monies would be recovered.
“We have seen that there are a lot of issues that need to be ironed out and we expect that we see the results in the nearest possible time. We want a report about these dredgers in about a month, that is 30 days. We would need to see some progress report on this issue of recovery of these funds.