Exposed : How DPP tampered with ADB Contracts
By our reporter
Malawi government during the Democratic Progressive Party regime through Ministry of Agriculture, Irrigation and Water Development is said to have errored for unfairly terminating a contract for FISD Limited Company under contract No. 021/SRWIHL/W/2017/015a-LOT 1 for the rehabilitation, and expansion of three gravity fed water systems in Ntcheu district.
The project is titled Sustainable Rural Water Infrastructure for Improved Health and Rural Livelihoods Project
The contract valued at MK2.4 billion commenced on December 12, 2017 and was supposed to complete on December 12, 2018.
We understands that towards project completion period FISD through the project consultant requested for contract extension as the client wanted the contractor to do some additional works which were not part of the initial contract.
These works include construction of water points and associated connection pipelines from water points to main lines.
According to the contract seen, FISD was initially supposed to just supply the pipelines and associated water point materials and the Water User association (WUA) was supposed to do construction works as part of their community contribution.
As the works were implemented during the campaign period of last parliamentary and Presidential elections, FISD limited was instructed to do WUA assigned works to fast tract the same.
As these instructions came towards end of the project, FISD requested for an extension of contract period which the client refused and terminated the contract sitting failure to complete the works within the agreed contract period and defects on implemented works.
The contract for FISD was to construct seven (7) intakes, three (3) screening tanks, three (3) Slow sand Filters, Rehabilitation of Fourteen (14) old tank, Construction of Eight (8) new clear water tanks.
Of above mentioned works there are no works under the contract that FISD failed to implement within the contract period.
FISD went further to constructed 473 new water points across the three gravity fed schemes which were not part of the initial contract agreement.
Contract termination at a stage that the contractor had completed all the works under the contract was unfair. Unfairness in the whole process of contract termination for Ntcheu Project could be seen as the notice of intention for termination and letter of termination were very vague and did not give the particular of the reason why the contract was to be terminated.
The notice of the intention for termination was also irregular and premature in so far as it was issued on the very same date the contract renewal was refused and before the parties had a joint appreciation of the works on the ground and there was a clear indication of a malafide intent on the part of government, On the same day of contract termination, even before evaluation of works at termination, Government of Malawi wrote the bank to evoke performance guarantee. Before the contract was terminated and even after the same was terminated FISD made considerable efforts to meet government but all efforts proved futile. This forced FISD to proceed to arbitration,” read part of FISD arbitration documents accessed.
Initially, government unilaterally assessed the completion of works at 95%, assessment done by Ntcheu District Council in presence of the Consultant EMD and the Contractor. Surprisingly, similar project in the north of the country by foreign firm extension of period was granted. This is how unfair local companies are treated and here is where mindset change of government officials need to be initiated in the reform agenda of Tonse Government.
Due to unfair government decision over the project FISD Limited disputed the termination of the contract and the parties agreed to go for arbitration.
On February 17, 2020, an Abitrator was agreed upon. The Initial arbitrator gave an award which a week later was amended through addenda without hearing part of FISD or any communication on the same to FISD. This prompted FISD to apply to the High Court, to set aside the award which was granted and later another arbitrator was appointed to look at the matter in line with contract provision.
The parties agreed through a court consent for an Abitrator with legal background as opposed to an engineer as the issues under contention were to do with interpretation of the contract as opposed to engineering.
FISD Limited Company Claim for the works done at the time GoM terminated the contract was US$ 1,433,772.78 of which after deductions of advances given to the company, MK912 million was due at the time of contract termination in 2019.
But in an affidavit dated August 4, 2020, Secretary to The Treasury Chauncy Simwaka said government would only effect payment after engaging the office of the Attorney General (AG) regarding the Court order.
Read the affidavit in part: “Once we engage the office of the Attorney General on their position as regards the order or ruling and once the main budget is passed, my office will facilitate the payment of the judgment debt herein; hence, my failure to facilitate payment debt is not deliberate as the claimant wants the court to believe.
As per ruling court records show that August 13, 2020 nine days after Simwaka’s affidavit, Treasury partly paid FISD Limited MK627 million.
This payment was made four months after the court order.
In a written response on Monday, November 2, 2020, FISD Limited Company Secretary and legal advisor Gift Nankhuni said the firm will file for contempt of court since government has not paid the remaining balance.
Nankhuni told the Nation Newspaper that, “Our lawyer will go ahead with the contempt of court proceedings until the balance is paid. He will also go ahead to assess the interest and legal costs before the assistant registrar”.
FISD Limited Company is a wholly owned Malawian company started in 2005 by Four Bunda Graduates, who made a decision then of not seeking employment as opposed to self-employment. The company employs over 300 permanent staff and deserves much support from government in all fairness on how it was treated on this project.
It needs to be paid fully as ordered by the court for the works done in Ntcheu as there is no scam in the payment as being portrayed in the social media.