NAO Detects Absence of penalty clause in Eco-Lodge Project

118

By: Kebba AF Touray

The National Audit Office dubbed NAO has revealed that it has detected the absence of a penalty clause in the eco-lodge project.

The audit made this revelation in its management letter on the audit of eco-tourism camps and lodges.

NAO further explained that a penalty clause is a contractual clause that imposes liquidated damages that are unreasonably high and represent a punishment for breach, rather than a reasonable forecast of damages for the harm that is caused by the breach.

The GPPA 2003 Regulation 130 states, “The procurement contract shall specify remedies available to the procuring organization in the event of a breach of the procurement contract by the supplier.

As highlighted by the audit those remedies include, but are not limited to rejection of defective performance; prompt removal and replacement of defective goods; liquidated damages for delay, in accordance with a rate set for each week or other unit of time, or part thereof, of delay; termination of the contract for default and purchase of replacement performance, at the expense of the defaulting party; and such other remedies as may be available pursuant to the contract or to applicable Act.”

The audit further explained that the 2019 GPPA Regulation 130 states, “The procurement contract shall specify remedies available to the procuring organization in the event of a breach of the procurement contract by the supplier.

“We noted that there is no penalty clause for possible breach of contract in the contract signed between GT Board and Lerr Group in March 2019 and as well as the amendments made in March 2020 in contravention to the GPPA regulation,” NAO noted.

The implications, as indicated by the audit, are that there is a risk that the contract agreement lacks sufficient indemnity clauses that fairly safeguard the interest of GT Board, saying “In the absence of a penalty clause, there is risk that the contractor cannot be held liable for any defective performance or obliged to provide compensation for any default”.

The audit recommended that the management of the GT Board provide an explanation for the above non-compliance contrary to the GPPA act and regulations, which should be adhered to at all times.

Management in its response said, “We will adhere to the recommendation of the Auditors to ensure that a penalty clause is always included in our future contracts, especially now that we have a Legal team in our Management set-up who review and advise on all GT-Board contract engagements.”

On short public notice to submit bids, the audit reported that the 2003 GPPA Regulations 42 (2) requires, “Public notice shall be by publication of the invitation for pre-qualification, and shall be published in the local press, and, in the case of international tendering, also in accordance with Regulation 29(2), at least thirty days prior to the deadline for submission of evidence of qualification requirements.”

The NAO said they reviewed the advertisement documents and noted that pre-bidding was scheduled to be held on 25 January 2019 while the deadline for submission of bids was scheduled for 13 February 2019.

According to the audit, the period between pre-bidding and the deadline for the submission of bids was less than 30 days in contravention of the GPPA regulations.

“The Implication amounts to the violation of the above section of the GPPA Act and regulations. There is a risk that interested bidders with better offers are denied the opportunity to submit bids due to the short notice period given to prospective bidders. They would be disadvantaged as they would have limited time to prepare and submit bids,’ said NAO.

The audit also said that there is an increased risk of deliberate attempts to limit the number of potential bidders in order to increase the chance of selected bidders who might have some form of relationship with management staff resulting in the stifling of fair competition.

NAO Recommended that the “GT Board management should explain the above violation of the GPPA Act and regulation. The GPPA requirements should be adhered to at all times.”

Management responded that they did not quite agree with the Auditors in this particular query highlighted above, adding that advertisement was placed with three media houses, namely, The Point Newspaper, Foroyaa and Daily News respectively.

Management added, “Thus the first advisements were published on 16 January 2019 which is within 30 days as required by the GPPA Act. We provided documentary evidence to show that the first advertisement was provided to your review team for further verification.”

“We were not provided with any evidence to suggest that the advertisement was indeed placed on 16 January 2019 as claimed by management. The evidence provided as claimed in the management’s response did not indicate information such as the name of the newspaper and the date of publication. Therefore, the finding remains unresolved,” the audit further commented.