$23.64m over

A probe of Government’s acquisition and construction of 150 pre-fabricated steel-framed housing units from China has concluded that the project has not met its main objectives and faces $23.64 million in cost overruns.

The Ministry of Housing, Lands and Maintenance has, however, countered that the Auditor General “has not given due consideration to a number of realities that demanded an urgent response within the context of the circumstances” after Hurricane Elsa damaged or destroyed 2 300 houses in July 2021.

The ministry acknowledged that “in hindsight . . . some of its projections were off and that some pitfalls may have been avoided”, including that “the four-month timeline for the supply, shipping and the installation of housing units was unrealistic”.

All of this is detailed in the Barbados Audit Office Special Audit Report On The Acquisition And Construction Of Steel-Framed Housing Units by the Ministry of Housing, Lands and Maintenance, dated March 26, 2024, and laid in Parliament.

One of the Auditor General’s recommendations is that “given that many of the basic tenets of the contract have changed, there is a need to renegotiate this contract in order to ensure that Government is protected against undue risk. This would also provide the opportunity to evaluate the current state of the project and allow for price certainty”.

“As at February 2024, the timeline for completion of the project was significantly exceeded. In addition, based on the information provided by the Ministry of Housing dated 26 October, 2023, only 22 houses were completed,” the audit report stated.

“However, at November 2023, it was anticipated that on completion, the project would have incurred major cost overruns with the estimated budget increasing by $23.64 to approximately $52.72 million.”

“The factors which negatively impacted the project, such as the unavailability of suitable labour and the challenges with providing the requisite sites and foundations, could have been mitigated through more efficient planning,” the Auditor General said.

“Necessary processes such as due diligence and financial and technical assessment should have been carried out. Also, a more achievable deadline should have been set given the necessary prerequisites.”

The Auditor General said the special audit “revealed a number of issues which have prevented the successful completion of the project”.

The 54-page report said this included that “the Ministry of Housing did not make all of the necessary building sites available in a timely manner that would have allowed for the prompt erection of the housing units”.

“As at February 8, 2024, when a site visit was made by the auditors, only 42 of the required 103 foundations were completed and this has significantly impacted the completion of the project,” the document added.

The Auditor General noted secondly that it was projected that the project would have resulted in 150 families/persons affected by Hurricane Elsa receiving housing solutions as a result of the execution of the project by December 31, 2021.

“Over the course of the project, the number of families/persons to receive housing units has decreased, and at October 2023, only 23 of these housing units were slated to be assigned to those whose houses were destroyed,” the report outlined.

It was also pointed out that “the cost of the project has risen significantly”. The original estimated cost for the overall project being executed by an unnamed Chinese company was $29.08 million.

“At the February 8, 2024, more than two years later, less than half the housing units have been finished, the installation process has not yet begun for 89 housing units and some sites were still being prepared for the erection of foundations,” the Auditor General said.

The Ministry of Housing said in its response to the special audit report that “it is projected that at the end of the current financial year (today March 31) 115 of the 150 units will be completed, and the remainder should be completed during the 2024/25 financial year”.

However, the Auditor General stated that “based on site visits conducted by the Audit Office on the 8 and February 13, 2024, there is a high probability that this objective cannot be met since the required foundations have not been erected”.

Responding to concerns about the project having $23.64 million in cost overruns, the Ministry of Housing said that “the project costs were estimated at the outset of the project as were applicable to the circumstances at that time”.

“However, the unpredictable and changing circumstances, chief of which was the inability to source labour and the increase in construction materials for the foundations and the sites and services, resulted in increased costs against which the ministry has done its best to stymie as it worked to protect the public purse,” it explained.

“The inflation faced by the project with respect to construction materials has been a major challenge to the successful execution of the Government obligations [regarding] foundations, development services and sewage,” the ministry said.

The Ministry of Housing asserted that the Auditor General did not consider the circumstances which necessitated the urgency of the project, including Hurricane Elsa (July 2, 2021) compounding the pandemic fallout, people being displaced by the volcanic ash fall (April 9, 2021) and the “freak storm” (June 17, 2021).

This was in addition to what the ministry called “the inflationary environment caused by the COVID-19 pandemic with respect to the cost of containers given their scarcity and also for construction materials, especially for the foundations and the completion of sites and services for; [and] the lack of availability of labour from China as was anticipated in the contract for the installation of the houses and then thereafter labour from [United Arab Emirates] given the inability to access transit visas for eleven months for their travel to Barbados”.

“More than two years after the fact, hindsight may afford an audit the benefit to reflect more carefully and undertake a hypercritical analysis of each process in a manner that highlights the inadequacy of aspects of the Ministry of Housing’s response,” the ministry said.

Also pointing to supply chain issues, and related challenges linked to the pandemic, the ministry submitted that “a fair assessment must therefore avoid the subjective tendency to project that it was easy or even possible to predict everything that is now known more than two years later with the multiple crises that the country and the world was facing”.

The Auditor General raised questions about whether the Chinese contractor had a surety as required by the Financial Management and Audit (Financial) Rules, 2011. This was after $5.32 million was reportedly paid to the contractor “prior to any housing units being erected”.

The ministry said there was no financial rules breach and that “since it was a supply and installation contract, the majority of the value (70 per cent) of the initial contract signed was in the possession of the Ministry of Housing, Lands and Maintenance, and by extension Government of Barbados since December 2021”.

“Further, the Accountant General is still in receipt of a remaining 2.5 per cent of 50 per cent of the overall contract value which shall not be completely paid until there is satisfactory completion of the housing units, inclusive of photovoltaic panels, mounting measures and inverters,” it said.

“In addition, there is no payment of all of the remaining units until specific stages are reached in the installation of the units.”

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