OPA: Kagman school contractor overpaid

The nearly seven-month delay in the construction of the Kagman Elementary School was caused by several factors that include the contractor’s lack of resources and ineffective quality control system, the government’s lack of quality assurance and unclear oversight functions of both the Department of Public Works and the Public School System.

It not only resulted in the government overpaying the contractor by $36,928 but also in the government shelling out and paying $52,000 for two 1999 Toyota RAV4s as project vehicles that it does not even possess.

These were just some of the conclusion arrived at by the Office of the Public Auditor, in a report it issued yesterday after a review of the circumstances surrounding the construction of the school, the attendant delays in the project and the questionable structural quality of the work done.

Public Auditor Michael Sablan was quick to point out, however, that the OPA report is merely a compilation of information and should not be considered an audit. These included interviews with the contractor, the PSS, DPW, the Office of Insular Affairs, and the U.S. Army Corps of Engineers.

The Kagman Elementary School project officially took off on December 1, 1998, with the OIA giving the green light for the school project. Of the project’s $6.5 million funding, 80 percent (or $5.2 million) came from Section 702 Capital Improvement Projects grants, while 20 percent ($1.3 million) was from CNMI local matching contributions.

In its chronology of events during construction and the factors related to the delay and structural safety, the OPA report noted that comparison of contract time expended against work completed show that actual work lagged behind schedule through much of the contract period.

The construction contract was approved on December 18, 1998 and construction was to be completed by February 12, 2000. The school, however, managed to open only on September 1, 2000—nearly seven months later than scheduled.

The report quoted the DPW, PSS and the OIA as saying that the contractor failed to satisfactorily complete the project due to the lack of needed resources. Although the firm has completed smaller projects on Saipan, the report said that the Kagman school was its largest job to date.

“It appears that the contractor relied on at least 10 other firms to assist in completing this project because it lacked the needed personnel, equipment and financing,” said the report.

This arrangement resulted in blame being passed from contractor to subcontractor and vice versa, whenever problems arose. In one instance, the PSS refused to make further payments to the contractor because it claimed the contractor owed $300,000 in liquidated damages and another $300,000 for remedial work. This resulted in one of the subcontractors suing the contractor for failure to pay, prompting the contractor to sue the PSS for withholding payment.

The report also noted that poor quality control and quality assurance could have compromised the school buildings’ structural integrity, citing a separate report made by the U.S. Army Corps of Engineers.

In the matter of oversight functions, the OPA said that, despite the fact that construction management was already budgeted as an expense, both the DPW and PSS had agreed to DPW performing inspections.

However, this arrangement was not followed during the construction phase itself, with both PSS and DPW assuming the role of construction manager, prompting the OPA to say that this possibly created confusion as to which the contractor should follow in correcting deficiencies.

Another point of contention was the purchase of two project vehicles that were charged to project cost. The OPA said the DPW asked for the purchase of the cars, even though the PSS did not authorize the expense.

The OPA report said that, after questions were raised regarding the propriety of “project vehicles” charged to project cost, the OIA and OPA agreed that the vehicles were not an allowable project cost. However, the former DPW-Technical Services Director had already allowed the purchase of the vehicles and, even if the cars were already disallowed by the OIA, he still included the vehicles as a lease chargeable to the project cost.

While the project was budgeted at $6.5 million, actual project costs only amounted to $6.32 million, leaving unused funds of $174,089. As part of the settlement agreement, it provided that $405,163 would be paid to the contractor.