This article is an excerpt from the 2023 edition of The Art of Tendering: A Global Due Diligence Guide.
Recent audits reveal how weak oversight remains a leading cause of project delays. These reports serve as useful reminders to all public institutions of the importance of establishing robust oversight practices to help reduce this risk.
For example, in its November 2021 report entitled HSA Outpatient Pharmacy Services, the Office of the Auditor General for the Cayman Islands found that weak oversight and planning resulted in a delayed Request for Proposals (RFP) process for the supply of medicine, which compelled the government to extend existing contracts numerous times before awarding new contracts. In fact, the report found that the existing contracts had expired before the RFP was even released, that the contract extensions did not comply with statutory requirements relating to contract extension approvals, and that the RFP was released before its business case was ever approved. Further, the audit found that the evaluation process was overly complex and that the evaluators failed to follow the scoring mechanism set out in the RFP, which exposed the contract awards to legal challenge. The Auditor General recommended that the government adopt better planning and project oversight practice to avoid similar future delays and evaluation infractions.
Similarly, in its December 2021 report entitled An Audit of Matters Relating to the Concession Awarded to Vitals Global Healthcare by Government, Malta’s National Audit Office (NAO) found that weak oversight during contract award negotiations undermined the government’s ability to enforce contract performance milestones. The audit involved the review of contract award negotiations under an RFP for long-term hospital maintenance.
The NAO determined that the government’s negotiation committee failed to maintain proper records of the negotiation process. As the audit stated, maintaining those records was “a basic premise of governance” and was “central in ensuring transparency and essential in ensuring accountability”. Further, given this lack of proper record-keeping, the NAO found that the project steering committee was negligent in overseeing the work of the negotiating committee, which the audit characterized as “a severe failure in governance.”
Further, the report found a lack of adequate Cabinet oversight. As the NAO stated, “although Cabinet’s authorisation of the negotiated concession was sought and obtained, notable gaps persisted, arising largely from the omission of key stakeholders in the review process.” Those missing stakeholders included the Ministry for Finance (MFIN), whom the NAO noted was conspicuously absent from steering committee proceedings. As the NAO stated, “notwithstanding the significant materiality of the project and its undoubted impact on public finances” the MFIN “was never involved, briefed or consulted in the negotiations process or any aspect of it, neither before nor after the award of the concession.” The NAO concluded that the “failure to consult with the MFIN regarding a concession conservatively valued at €4,000,000,000 is a gross shortcoming in terms of the financial management of public funds.”
The NAO found that the lack of oversight during the contract award negotiations ultimately contributed to the development of flawed project delivery milestones in the final services concession agreement (SCA). In fact, the report identified “substantial deviations” between the RFP timeframes and the milestones set out in the SCA. Even after those milestones were revised during contract negotiations, the NAO found that the revised milestones remained unrealistic. As the NAO stated, “it ought to have been evident at the negotiation stage that the milestones being committed to through the SCA would not be achieved within the required timeline.” The NAO characterized the revised milestones as “false promises and hollow commitments” and stated that the acceptance of those milestones by government representatives was “evidence of naivety” or “indicative of gross negligence in fulfilling their responsibilities of office.”
Unsurprisingly, the unrealistic SCA milestones were not met, prompting the need for a contract amendment, which further diluted the clarity of the project schedule since “the target dates for completion of the concession milestones were no longer specified but [were] now dependent on the issuance of the relative construction permit.” The NAO concluded that the “design of the concession milestones, as regulated in the SCA and the Addendum to the SCA, rendered Government powerless in ensuring their achievement.” As this case study illustrates, weak oversight ultimately results in the failure to set and enforce proper project timelines.
Similarly, in its February 2022 report entitled Performance Audit Report on the Management of Construction Development Projects Financed Through Loans, The United Republic of Tanzania’s Controller and Auditor General found that weak oversight repeatedly led to significant delays in government construction projects that were financed through loans. These delays ultimately increased the cost of those projects to the taxpayer. In fact, the report found that over 90 percent of reviewed projects were completed late, with delays ranging from under one month to almost four years. The report attributed those delays to ineffective project planning, the ineffective management of loans to achieve financing agreement terms, the ineffective monitoring of the development projects, and the ineffective co-ordination between the government and project implementers. In fact, Tanzania’s oversight weaknesses and the resulting project delays are not limited to externally financed projects.
In its March 2022 report entitled Performance Audit on the Management of Maintenance of Roads, The United Republic of Tanzania’s Controller and Auditor General also found weak oversight in the government’s road maintenance program, which was underfunded and behind schedule notwithstanding the critical importance of the road system to Tanzania’s economy. In fact, the report found, “the quality of most roads is still poor” and that this was impacted “by ineffective management of road maintenance activities in the country”.
The report noted that the government did not have an adequate road asset management system due to limited resources for the maintenance activities. The report also found that the government did not have “an active coordination mechanism for involvement of stakeholders in planning for maintenance of roads” as evidenced by the “failure to conduct opinion surveys to capture stakeholders’ views with regards to its performance on maintenance of roads.” The report also raised concerns over the lack of staff allocated to support the maintenance activities. Further, the government agency responsible for the work “didn’t have adequate capacity to supervise, inspect, monitor, and evaluate roads maintenance activities.”
The audit found widespread delays in the completion of the road maintenance works, with one-third of those projects behind schedule and delays ranging from 19 percent to 45 percent of the initial planning time. The report concluded that the government “has not conducted roads maintenance effectively to sustain their expected life span” due to “the widening maintenance funding gap which hinders improvement in the management of the maintenance of roads in the country.” The report also concluded that “ineffective planning for the maintenance of roads, ineffective coordination, as well as delays and deferment in conducting both preventive and periodic maintenance of roads are the main causes for having roads that are in poor conditions.” The Controller and Auditor General concluded that “delays in the disbursement of funds for the maintenance of roads and ineffective utilization of the available resources for the maintenance”, including the lack of a road maintenance system, and the “ineffective utilization of human resources” impacted the effective management of “road maintenance activities.”
Similarly, in its March 2022 report entitled New vessels for the Clyde and Hebrides, the Auditor General for Scotland found that weak oversight caused delays in the construction of new ships, which were already four years behind schedule at the time of the report. The report stated that the government’s “Programme Steering Group (PSG) had no clear role, and there were no formal escalation processes in place.” More specifically, the report found that while delivery problems and delays were first identified in 2015, Scottish ministers were only provided informal verbal briefings and were only formally notified in February 2017 “that it was highly probable that the vessels would be late.” Moving forward, the Auditor General recommended that Transport Scotland improve its project governance by “establishing clear roles and responsibilities, setting out a clear escalation process, and ensuring that risks are routinely recorded and monitored.”
As these case studies illustrate, cutting corners on proper oversight only serves to increase the risk of downstream delays in the execution of procurement projects. Public institutions should take the time to implement proper oversight practices if they are serious about avoiding those delays.
