Tendering bids: government departments asked to accept only bank guarantees

Public Accounts Committee (PAC) on Thursday directed the government departments to accept only bank guarantees and not insurance bonds as sources of security while tendering bids. The committee met under the chairmanship of Syed Khurshid Shah which examined the project audit report of Ministry of Communications on "Construction of bridge over River Indus connecting Larkana-Khairpur Districts" for financial year 2010-11.
Audit observed that National Highway Authority (NHA) did not obtain valid Performance Bonds from the Contractor M/s Sultan Mehmood & Company while awarding the contract for the works regarding construction of Approach Road for Bridge over the River Indus connecting Larkana and Khairpur (River Protection Bund to Tando Masti Khan Package-III) and construction of Bridges on Approach Road on Larkana Khairpur Districts (Larkana side) Package-IV in December 2008 against an amount of Rs 1.6 billion.
The contractor submitted Performance Bonds issued by M/s United Insurance which was an 'A' rating instead of 'AA' rating Insurance Company. When these Performance Bonds were not accepted by NHA, the contractor provided Performance Bonds of the same amount by M/s Adamjee Insurance on December 10, 2009. Later on, when NHA reconfirmed from Insurance Company, these Performance Bonds were proved as bogus. Payments to the contractor were made without valid Performance Bonds which resulted in non-recovery of Rs 1.6 million.
The committee directed the ministry to recover the bonus payment of Rs 59.648 million from the contractor who was awarded extension of period after completion of "construction of bridge over the River Indus between Larkana and Khairpur districts". Audit observed that National Highway Authority (NHA) Executive Board in its 181st meeting on November 26, 2009 permitted unjust extension of time to the contractor upto April 30, 2014 which was already completed. The NHA paid Rs 59 million in October 2010 as bonus to the contractor for early completion of work on December 12, 2009.
Members Committee, Sheikh Rashid and Arif Alvi, said that ministry was presenting bogus document of the case before the audit. They added that the bonus given was unjust and a recovery should be made. The audit report states that the date of commencement of work as per contract agreement amount of Rs 990.293 million was December 15, 2006 with date of completion as June 14, 2009. NHA Executive Board in its 151st meeting on September 22, 2007, revised the date of completion of work as October 31, 2009 due to an increase in the scope of work from Rs 990.293 million to Rs 1.2 billion. NHA Executive Board in its 175th meeting on July 17, 2009, revised the project cost from Rs 1.2 billion to Rs 1.4 billion without extension of time.
A payment was made for 30 months to the contractor for total work done of Rs 1.2 million measured in October 2009. As per consultant progress report of February 2010 the contractor completed the bridge work including the additional extended work in contract schedule.