Default on state deals cost K500m

By JEFFREY ELAPA
millions of kina in default contractual obligations are accumulating due to the  state’s failure in releasing project funds, Lagaip-Porgera MP Philip Kikala said during question time last Thursday.
He said many approved projects throughout the nation had been completed while some had yet to be completed but funds for those projects “are delayed costing the state millions of kina in default contractual obligations”.
He said so far, more than K500 million had accumulated over the years for certain projects in which the government had to pay at a 5% daily rate.
He said for instance, several service providers had threatened to take him and his joint planning and budget priorities committee (JDP&BPC) and the state to court for not honouring the state commitment under terms and conditions of the Government Procurement of Goods and Services Act.
He said as a result 5% was charged daily on top of the contract value as stipulated under the contract’s clause.
He said five projects totalling K47,134,697.67 for his Lagaip-Porgera district were awarded in 2009, of which part payment, including mobilisation funds, had been paid while others had not been released.
He said in 2009, the project finances were secured under rehabilitation of education sector infrastructure (Resi), rural electrification, law and order, rural health service improvement programmes and capacity-building, while a counterpart funding of K3.5 million was made by his JDB&BPC.
He said the project was approved in 2009 and the funds were released when the NEC met in Wabag and implementation started the same year.
He said of the five projects, K7,398,301.01 had already been released while K26,494,661.67 had yet to be released to the district.
He said the Department of National Planning failed to pick up the balance under 2010 and 2011 PIP funding, “which is a normal budgetary process”.
He said this was the reason why projects were not completed on time and “cost was running high because the state is seen to have defaulted its contractual obligations”.