Auditor General u-turns on k567m

The Auditor General has withdrawn his earlier endorsement and consent for government to pay K567 million interest claim to a Malawi Police Service (MPS) food rations supplier.

Auditor General Stephenson Kamphasa yesterday told the Public Accounts Committee (PAC) of Parliament that the contract signed between MPS and Pioneer Investments Limited for the supply of rations was null and void; hence, his withdrawal of consent.

The Auditor General made his position known when he appeared before PAC and presented documentation which he said was omitted when the Secretary to the Treasury (ST) requested an audit verification of the arrears.

Kamphasa said the documents included bid documents, bid data sheets and a restriction order which clearly stated that the contract would not be subject to revision.

When verifying the arrears, the documents at the National Audit Office (NAO) disposal were contract agreements, payment vouchers, invoices and delivery notes where he found that there was no provision for interest for delayed payments, he said.

However, upon consulting the Attorney General, the Auditor General said he gave a certificate for MPS to pay as there was a payment period stipulated within the contract; meaning that any late payment would attract interest.

Kamphasa told the committee that upon reviewing the documents, he was of the view that MPS should not have accepted invoices with interest because there was no such agreement.

He said: “If documents had not been there, they [Pioneer Investments] had a right to claim [interest] but can now withdraw the certificate because this information was not before me when I made the declaration that the government should pay the interest amount.

“The whole document, including general conditions of the contract such as bid details, letters of offer and acceptance letter were not used. This interest claim is null and void and should not have been entertained.”

The Auditor General also faulted MPS for awarding the contract to Pioneer Investments when the supplier had asked for a price adjustment which bloated the contract price from K2.3 billion to K2.8 billion.

The Auditor General has also found that the 20 percent price adjustment which he said MPS erroneously agreed to was overblown because the depreciation of the dollar to kwacha rate at the time was less than 20 percent.

He said: “The Malawi Police Service should have gone back to the Office of the Director of Public Procurement to communicate the request for change in contract price but they did not.”

Pioneer Investments agreed to a five percent adjustment during bidding on August 4 2015, but six days later requested a price adjustment of 20 percent.

Said Kamphasa: “Don’t believe it [kwacha devaluation] was such a big adjustment that’s why there was five percent price allowed in the contract. I don’t know why they engaged the supplier when he was already violating the bid document agreement.”

The committee accused Pioneer Investments of trying to cheat other bidders by bidding a low price only to request a higher bid with a higher price adjustment when it was accepted.

But Pioneer Investments director Zameer Karim, who was accompanied by private practice lawyer Frank Mbeta, insisted that the price adjustment was requested after taking into consideration the fluctuation of the kwacha against the dollar at the time.

He said the price adjustment was to protect the interests of the company so they did not lose out in case of continuing devaluation of the kwacha.

On the interest claim, Karim said there was an interest clause in the contract, but the payment terms indicated this would be paid upon presentation of the delivery note.

Mbeta, on the other hand, insisted that the government had an obligation to pay the interest payment because it had breached the contract by failing to pay Pioneer Investments on time.

He said: “Where the contract does not include interest payment, the law allows for it if there was an agreement on payment period. In this case, there was a delay in payment. Unless the contract specifically excluded interest payment then you don’t need to pay.”

The committee is yet to meet the Attorney General on whose advise the Auditor General based the certification to pay the interest.

In its January 21 2018 edition, our sister newspaper, Nation on Sunday, quoted the Inspector General (IG) of Police Lexten Kachama as telling PAC that interest payment was not part of the K2.3 billion contract with Pioneer Investments Limited. n