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2 Auditor General’s Department Special Audit - Jamaica+Development+Infrastructure+Programme">Jamaica Development Infrastructure Programme (JDIP)

Auditor General of Jamaica Auditor General’s Department 8 Waterloo Road, Kingston 10 Jamaica, W.I. www.auditorgeneral.gov.jm

November 2011

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3 Auditor General’s Department Special Audit - Jamaica Development Infrastructure Programme (JDIP)

Table of Contents

AUDITOR GENERAL’S OVERVIEW .................................................................................................................. 5

EXECUTIVE SUMMARY .................................................................................................................................. 6

KEY FINDINGS ...................................................................................................................................................... 7

SELECTION OF CONTRACTOR, SUB-CONTRACTORS AND PROJECTS ............................................................... 7

RECOMMENDATIONS ............................................................................................................................................. 9

PART ONE ................................................................................................................................................... 10

INTRODUCTION ........................................................................................................................................... 10

AUDIT SCOPE AND METHODOLOGY ........................................................................................................................ 10 BACKGROUND .................................................................................................................................................... 10

EXIM Bank of China US$400 Million Preferential Buyer’s Credit (PBC) Loan Facility ................................ 10

PART TWO .................................................................................................................................................. 15

SELECTION OF CONTRACTOR, SUB-CONTRACTORS AND PROJECTS ............................................................. 15

PBC FACILITY ALLOWS FOR THE SELECTION OF THE MAIN CONTRACTOR USING COMPETITIVE TENDER PROCESS ................... 15 NWA OPTED TO UTILIZE THE SOLE SOURCING PROCUREMENT METHODOLOGY IN THE SELECTION OF MAIN CONTRACTOR ......... 15 SUB-CONTRACTORS WERE SELECTED FROM NCC APPROVED LIST IN THE CATEGORY OF GENERAL ROAD WORKS ................. 16 NWA COULD NOT SUBSTANTIATE THE PROCESS USED FOR THE SELECTION OF JDIP PROJECTS ........................................... 17

PART THREE ................................................................................................................................................ 20

STAKEHOLDERS RESPONSIBILITY ................................................................................................................. 20

PROFESSIONAL SERVICE AGREEMENT BETWEEN NWA AND CHEC ............................................................................... 20 MANAGEMENT FEE BEING PAID FROM SPECIAL CONSUMPTION TAX (SCT) ................................................................... 21 THE NWA DOES NOT HAVE A FORMAL MECHANISM FOR NEGOTIATING BILL OF QUANTITIES FOR PROJECTS ....................... 21 BRIDGE STRUCTURE ACQUIRED UNDER MABEY JOHNSON BRIDGE PROGRAMME USED IN THE CONSTRUCTION OF BRIDGES

UNDER THE JDIP ................................................................................................................................................ 21 JDIP FUNDS USED TO SETTLE OUTSTANDING OBLIGATIONS FOR CONTRACTS AWARDED PRIOR TO THE PROGRAMME ............ 22 RMF UNABLE TO IDENTIFY WORKS VALUED JA$23.2 MILLION CLAIMED TO HAVE BEEN DONE BY NWA ........................... 22

PART FOUR ................................................................................................................................................. 23

QUALITY ASSURANCE .................................................................................................................................. 23

NWA FAILS TO MEET KEY PERFORMANCE INDICATORS (KPI) FOR THE MONITORING, SURVEILLANCE AND AUDIT OF JDIP

PROJECTS .......................................................................................................................................................... 23 LATE SUBMISSION OF DOCUMENTS AND LACK OF REVIEW THREATENED QUALITY ASSURANCE ........................................... 24

PART FIVE ................................................................................................................................................... 27

MAJOR PROJECTS........................................................................................................................................ 27

FIVE MAJOR PROJECTS BEING UNDERTAKEN DURING YEAR ONE OF JDIP ...................................................................... 27 CHRISTIANA DEVELOPMENT ROAD PROJECT ............................................................................................................. 27 POOR PLANNING RESULTS IN SEVERAL CHANGES TO THE DESIGN AND SCOPE OF THE ROAD .............................................. 27 JDIP LOAN FUNDS USED TO ACQUIRE LANDS FOR ROAD CONSTRUCTION ...................................................................... 29 FERN GULLY RESTORATION AND REHABILITATION PROJECT ......................................................................................... 30 RIO GRANDE BRIDGE PROJECT .............................................................................................................................. 30 CASSIA PARK BRIDGE PROJECT .............................................................................................................................. 30 QUEENS-BOROUGH BRIDGE PROJECT ...................................................................................................................... 31

APPENDICES ................................................................................................................................................ 32

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4 Auditor General’s Department Special Audit - Jamaica Development Infrastructure Programme (JDIP)

APPENDIX 1 DETAIL OF JDIP PROJECTS AWARDED TO SUB-CONTRACTORS .................................................................... 32 APPENDIX 2 ANALYSIS OF MONTHLY QUALITY SURVEILLANCE AND INSPECTION REPORTS.................................................. 39 APPENDIX 3 STATUS OF LAND ACQUISITION FOR CHRISTIANA DEVELOPMENT ROAD ........................................................ 42

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Auditor Generals Overview

Jamaica Development Infrastructure Programme represents a major undertaking by the GOJ to

improve significantly the Islands road network in order to enhance the quality of life of all citizens.

The Ministry of Transport and Works, together with the National Works Agency and the Road

Maintenance Fund, which has the responsibility for the implementation of the JDIP, has not

executed the Programme in a transparent manner. This is evidenced by inadequate capital project

planning, monitoring and record keeping.

The deficiencies highlighted in this report, threatens the Governments objective to achieve its goal

to improve the countrys road infrastructure under the Preferential Buyers Credit Facility with the

Chinese EXIM Bank. The MTW and the NWA in executing the programme of works under JDIP and

subsequent similar programmes, should seriously consider, for implementation, the

recommendations contained within this report.

~ / Pamela Monroe Ellis, FCCA, FlA, CISA Auditor General

5 Auditor Generals Department Special Audit - Jamaica Development Infrastructure Programme (JDIP)

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6 Auditor General’s Department Special Audit - Jamaica+Development+Infrastructure+Programme">Jamaica Development Infrastructure Programme (JDIP)

Executive Summary

The Government of Jamaica (GOJ), through the Road Maintenance Fund (RMF), and the Export-

Import (EXIM) Bank of China entered into a US$400 million loan agreement, in August 2009, to

finance the improvement and rehabilitation of the island’s road network under an initiative called

the Jamaica+Development+Infrastructure+Programme">Jamaica Development Infrastructure Programme (JDIP). The agreement was borne out of a

US$10 billion Preferential Buyer’s Credit (PBC) programme launched by the EXIM Bank of China,

through which the EXIM Bank agreed to make available US$340 million under the agreement, while

the GOJ/RMF Pari Passu contribution is US$60 million. JDIP represents a major undertaking by the

GOJ to improve the island’s road network in order to enhance the quality of life of the citizens and

to stimulate economic growth. The initiative is characterised as the single largest road

improvement exercise undertaken by the GOJ.

The programme of work which will be undertaken over a period of five (5) years (February 2010 -

2015) involves the repairs of main and parochial roads and the upgrading of the nation’s road

infrastructure. The breakdown is as follows:

 Repairs to the main road network US$60M

 Repairs to the parochial road network US$50M

 Upgrading of the nation’s road infrastructure US$290M

Our audit focused on whether the Ministry of Transport and Works (MTW) along with the National

Works Agency (NWA) and the Road Maintenance Fund (RMF) have employed appropriate

mechanisms to ensure the effective and efficient management of the programme. With this, we

seek to determine whether MTW/NWA employed adequate safeguards to ensure:

1. compliance with contractual obligations

2. transparency in the selection of the main contractor, sub-contractors and projects

3. value for money is obtained for projects undertaken

The audit did not seek to determine neither the quality nor the status of the roadwork,

consequently, no site visit was conducted.

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