MHA files police reports after AGO flags 'possible irregularities' in quotations for construction contracts
SINGAPORE: The Ministry of Home Affairs (MHA) has lodged police reports over "possible irregularities" in quotations provided for two construction contracts, after the Auditor-General's Office (AGO) raised doubts about their authenticity.
The two construction contracts are valued at S$333.24 million. They were audited by AGO as part of its report for the year 2021/2022 and the findings were released on Wednesday (Jul 20).
Audits are conducted on a test-check basis. AGO said that its checks on MHA found lapses in the management of contracts for two development projects, singling out how quotations for star rate items were not adequately assessed and had possible irregularities.
Star rate items refer to items for which rates are not listed in the contract. These rates tend to be used for contract variations - when actual works performed are more complex than envisaged at tender - and result in increased costs.
"The inadequate scrutiny of contract variations did not provide assurance that MHA had obtained full value for the public funds spent," said AGO.
Besides issues with the star rate items, AGO also found lapses in valuations of contract variations, and a lack of supporting documents to substantiate payments made for variations involving dayworks.
MHA had appointed contractors for the construction contracts and engaged consultants to manage the main construction contracts on its behalf.
"The lapses indicated weaknesses in the monitoring of contract variations and inadequate oversight of the consultants by MHA," said AGO.
AUTHENTICITY OF QUOTATIONS IN QUESTION
In particular, AGO found that the "cost reasonableness" assessments for all but one of the 199 star rate items it test-checked in 11 contract variations under the two construction contracts were not based on independent sources.
The total value of these 198 star rate items was S$4.61 million, AGO said.
"The quotations used to assess price reasonableness of the star rate items were all provided either by the contractor or its sub-contractors involved in the projects," it said, adding that this was contrary to guidelines under the Government Instruction Manual on Procurement.
AGO said it also found "possible irregularities" in quotations for 531 out of 752 star rate items it test-checked. This came up to S$3.14 million or 34 per cent of the total value of star rate items test-checked, AGO said.
"As a result, there was inadequate assurance that value for money had been obtained for the star rate items," it said.
"As AGO had concerns over the authenticity of the quotations provided, AGO recommended that MHA carry out an investigation."
MHA has since lodged police reports, and informed AGO that it will take measures to strengthen its processes.
This includes carrying out sampling checks on star rate items for ongoing construction projects and conducting annual training for its officers.
VALUATIONS OF CONTRACT VARIATIONS
In its report, AGO also flagged 115 instances where variations works were not properly valued, including a failure to use contract rates and duplicate payments. The estimated total net overpayment amounted to S$298,700, AGO said.
AGO also found 14 instances where contract sums were not adjusted to account for variations, involving works that were not carried out or not carried out in accordance with contract requirements. The total net overpayment amounted to S$62,300, AGO said.
NO SUPPORTING DOCUMENTS
For one of the two main construction contracts, AGO said there were no supporting documents like timesheets to substantiate payments made for variations involving dayworks.
"Under the contract, the contractor was required to submit such supporting documents before payments were made. In addition, there was a lack of evidence that assessment was done by the consultant to substantiate the payments made," it said.
"As a result, there was no assurance that MHA did not overpay for these works."
MHA TAKING ACTION
According to AGO, MHA has said it will rectify the lapses and further strengthen its oversight of project consultants and contractors.
It will put in place measures to ensure contracted building works are carried out in accordance with contractual requirements and prevailing regulations, AGO said.
This includes a checklist to guide its officers and consultants on the management of star rates, enhanced reporting templates for star rate items, and standardised procedures for kick-off meetings to ensure that awarded consultants are aware of guidelines and procedures for assessing and documenting variations.
MHA will also set up an audit framework by December to ensure compliance to the improved requirements for ongoing construction projects, AGO said.
"MHA would be recovering the net overpayments from the contractors and issuing warning letters to the consultancy firms," it added.
In response to queries from CNA, MHA said its consultants had "generally adhered" to contractual conditions when administering the contracts, but had not abided by the "recommended good practice" of getting an independent comparison quotation in addition to the quotations received for the star rate items.
Consultants have since been informed of the required guidelines and procedures for assessing and documenting variations or deviations from the guidelines, the ministry said.
"We also take a serious view of possible irregularities in the quotations for star rate items. Police reports were lodged immediately after the observations were surfaced by AGO," a spokesperson said.
"Based on the investigations so far, MHA staff are not involved in the irregularities. As investigations are ongoing, we are unable to provide further details."
MHA said it agreed with AGO's audit findings on contract variations and has taken "immediate steps" to strengthen its contract monitoring processes.
"MHA will continue to improve its contract variation and contract monitoring process," a spokesperson said.
"At the same time, the competency framework and training modules for building and infrastructure processes are also currently being enhanced."