Section 135(1) of the Public Procurement Regulations of 2016 requires the rate for advance payment not to exceed 30% of the contract sum.
The advance payment shall be provided with a submission of a valid advance payment guarantee. A review of payment vouchers and contractof works at the Road Maintenance Fund Administration (RMFA) indicated that RMFA has been advancing some of the payment at a rate which is more than the allowable 30% stipulated in the law.
The Technical Audit Report 2019, reported that this practice violates the Public Procurement Act and risks the public funds disbursed to a particular contractor. All of the six contracts that were selected were paid 50% of the contract sum as an advance payment.
Additionally, the advance payments were not secured by an advance payment guarantee as per the procurement regulations. Furthermore, based on audit interviews held with officials from RMFA, the advance payments exceeded the required levels in order to speed up the implementation of the projects especially in the district councils.
However, the district council engineers did not confirm to the auditors whether the performance of contractors was motivated by the amount of advance payments because the projects were still experiencing delays despite disbursing this significant amount as advance payment. “Consequently, there is high risk for the government to lose the funds disbursed in case the contractors did not perform to the agreement” the auditors said.
Moreover, the additional sum paid in excess of the 30%
“unnecessarily reduces the liquidity of RMFA and therefore capacity to
pay for other
contractors or pay for interim payments in other contracts.” In response to this observation the management stated that for all local council projects stated, it is the responsibility of the councils to disburse to their respective contractors as per their stipulated contract agreements.
Disbursements made directly to implementing agencies can vary as per availability of funds, nature of programme/project and expediency of programme/project, ranging from 5 to 100%. The auditors insisted that RMFA did not abide with the public procurement regulations and the contracts with the contractors by paying advance payments to some of the contracts at a rate which is above the regulatory requirement of 30%.
It was recommended that RMFA should ensure that all the advance payments are within the regulatory requirement of 30%.
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