An Emergency on New Ireland

There is an emergency on New Ireland.

It is of a very peculiar nature. The emergency must be remedied ASAP, through:

1. The supply of 5,000 solar MHZ-2000 Lanterns; and
2. The upgrading and sealing of Lanzarotte Highway from Punam to Manmo

Well, so claims the New Ireland Provincial Supply and Tender Board.

According to the Auditor General’s Office (AGO) the Board has issued certificates of inexpediency for the lanterns and highway upgrade, allowing a contract to be awarded without a public tender.

Under the Financial Instructions, which all supply and tender board’s must observe, certificates of inexpediency can only be issued in a strict number of situations:

Certificates of Inexpediency will only be issued in situations where a declared: a. Natural Disaster, or b. Defence Emergency, or c. Health Emergency, or d. Situation of Civil Unrest exists, and procurement processes must be undertaken urgently, to remedy the situation.

While there is no declared emergency in New Ireland or state of civil unrest, “the New Ireland Provincial Supply and Tenders Board had issued a Certificate of Inexpediency authorizing the expenditure of K337,500 to Omnivoltiac PNG Limited for the supply of 5,000 Solar MHZ-200 Lanterns in respect of the Solar Lights Program of the Provincial Government”.

Having observed no relevant emergency situation, the Auditor General concluded that the award was “improper and inappropriate”.

The beneficiary of this “improper” award is Omnivoltaic PNG Limited. It is owned by a Hong Kong firm, Omnivoltaic Power Company Limited. Its Director from 2013-2018 was a Mr Chi Hin Tam. Mr Chi Hin Tan during the same period was also a Director of the PNG company Blue Sky Company No. 2 Limited.

Blue Sky is ultimately owned by Sir Julius Chan and his family. Sir Julius, is also the Governor of New Ireland.

Graph: Omnivoltaic and the Chan family

The second “emergency” highlighted by the Auditor General, required the upgrading and sealing of Lanzarotte Highway through a contract with the firm PNG SJ Construction Limited. PNG SJ Construction  is ultimately owned by the Metallurgical Corporation of China.

According to the Auditor General:

The Provincial Supply and Tenders Board had issued a Certificate of Inexpediency authorizing the expenditure of K4,983,313 for the project. Based on payment records and documents provided to audit, the contractor was paid K5,790,743 in total, after certificates of completion were issued for work done on each of the three stages of the project.

Besides being overpaid to the tune of K807,430, the Auditor General again points to the inappropriate use of the certificate of inexpediency.

Table: PNG SJ wins major contracts without public tender

He cites a letter from the Secretary for Works dated 21 April 2016,  “the contractor PNG SJ Construction Limited was recommended by the Governor and its Provincial Executive Council (PEC) as a reputable company with vast experience and resources capable of delivering the road project to standard and value as estimated”.

No reference is made to an emergency situation which would warrant circumvention of a public tender.

Compounding matters the certificate “was signed only by the acting Provincial Administrator without the other Board members”.

Image: The AGO documented a number of irregular payments.

The Auditor General found further disorder in the provincial government.

The AGO notes with an air of caution that the New Ireland Provincial Government had set up a private company, Public Works New Ireland Limited. Public Works New Ireland had been paid K2,630,800 to “participates in the management and implementation of capital works and maintenance projects on behalf of Provincial Government”.

This has all the hallmarks of an attempt to use public money outside the Public Finances (Management) Act 1995.

The Auditor General adds weight to this thesis when he observes: “I was not provided evidence to suggest the Public Works New Ireland Limited had acquitted the funds by way of furnishing an accountability report on the receipt and expenditure of these grant funds to the Provincial Government”.

In one instance, it is observed by the AGO, Public Works New Ireland contracted PNG SJ Construction Limited to upgrade and seal Burukalai Junction to Tubuana Junction Road in the Namatanai District. Despite having a budget of K3,405, 969, there “was no evidence to suggest proper tender procedures and guidelines were followed leading to the award of the contract to PNG SJ Construction Limited”.

This adds to the K5,790,743 improper award to PNG SJ Construction noted above. The question then is, why would the provincial government repeatedly break a law designed to prevent corruption and achieve value for money?

Then there is the case of Hardware Haus. It was paid K2,447,500 to supply 50,000 sheets of corrugated roofing iron. However, the AGO observes, “there was no evidence to suggest the Provincial Government had sought the required three written quotations from two other suppliers as Hardware Haus had been selected as the new supplier and neither the contract value of K2,447,500 was sanctioned by the Provincial Authority to Pre-Commit Committee (PAPCC) nor the award of contract was approved by the Provincial Supply and Tenders Board”.

Hardware Haus is owned by City Pharmacy Limited.

Other examples of improper activity was catalogued by the Auditor General. K3,221,889 in unacquitted travel advances were discovered – that is money was advanced for travel, but no expense report was submitted to prove the money was spent as intended. Fuel expenditure for the most recent year reviewed by the Auditor General was K1,951,717. It is observed, “The risk of misuse and abuse of public funds is very high in this area”. A further K1,552,680 was handed out to individuals, NGOs, and churches without evidence being presented of expenditure reports or any other form of oversight.

Sir Julius Chan wins specific rebuke over his housing allowance: “The Provincial Governor’s Housing Allowance entitlement was paid at the rate of K1,598 per week and therefore, should amount to K83,096 in total for the full year. I observed the Provincial Governor was paid a total of K140,624 in housing allowance for the year for two separate claims, one for K57,528 and the second claim for K83,096”.

There would appear to be an emergency in New Ireland, but not one that a certificate of inexpediency can resolve.