OAG recommends resuming CST construction work

Those involved in fraudulent practices would be prosecuted  

Rinzin Wangchuk

The Office of the Attorney General (OAG) recommended the Royal University of Bhutan (RUB) to terminate the College of Science and Technology (CST) construction project’s contract awarded to Jachung Builders (JB) and resume the remaining works at the earliest.

The decision comes after the OAG reviewed the case and after considering to charge the defendants in the court.

Attorney General Lungten Dubgyur wrote to the Vice Chancellor of RUB on October 19 stating that the delay in construction of CST’s project-II had sustained massive cost to the State and had also caused considerable damage to the public.

“If RUB does not make timely intervention, it would also lead to cost escalation and affect the CST in receiving such funding from other countries in the future,” the letter stated.

CST awarded the ‌project-II package worth Nu ‌145.459 million (M),‌ two-year contract beginning ‌November 1,‌ ‌2010‌ to JB . The project funded by the Government of India was to construct a ‌gymnasium‌ and ‌laboratory,‌ ‌self-catering‌ ‌hostel,‌ ‌an executive‌ ‌guest‌ ‌house,‌ ‌and‌ ‌ associated‌ ‌site‌ ‌development‌s at the college campus in Rinchending, Phuentsholing.

However, the contractor failed to complete the work within the contract period despite extension of the contract term and release of budget. The supervising and designing contract for the project was awarded to Yalalma Arts and Consultancy (YAC) and was supervised by its engineer Lha Wangchuk. CST released Nu 156.961M to JB between 2010-2014, exceeding the contract cost by Nu 11.501M.

The construction stalled since February 2014 after some allegations of collusive and fraudulent practices among the contractor, YAC engineers, supplier Jaigaon Shakti Sales and other CST officials surfaced.

Anti-Corruption Commission (ACC) forwarded the case to the OAG, and upon review, prosecutors found criminal elements involved while executing the construction works, which grossly affected the entire project.

“It is also observed that the CST management failed to act as per conditions specified under clause 58 of General Conditions of Contract (GCC) which further aggravated in the failure of project II,” the OAG’s letter to the RUB VC  stated.

As per the conditions set under clause 59 of GCC, if the employer determines that the contractor has engaged in corrupt, fraudulent, collusive practices in executing the contract, the employer may, after giving a 14-day notice to the contractor, terminate the contractor’s employment under the agreement.

After analysing all the conditions, OAG recommended continuing construction of the remaining works.

“This office is of the view that the ongoing prosecution in no way should impose a further financial burden to the government and the college should not suffer from such indefinite suspension of the project,” the letter stated. “Education services are fundamental facilities, for which the project has justly intended to benefit.”

Arbitral Tribunal’s decision

‌The contractor had‌ ‌drawn‌ ‌payments‌ ‌above‌ ‌the‌ ‌actual‌ ‌value‌ ‌of‌ ‌works‌ ‌executed‌ ‌, and‌ ‌since‌ CST ‌failed‌ ‌to‌ ‌solicit‌ ‌the‌ ‌contractor’s‌ ‌cooperation‌ ‌to‌ ‌complete‌ ‌the‌ ‌works,‌ ‌and‌ ‌settle‌ ‌the‌ ‌outstanding‌ ‌payments,‌ CST‌ ‌filed‌ ‌the‌ ‌request‌ ‌ for‌ ‌arbitration‌ ‌before‌ ‌Arbitral‌ ‌Tribunal‌ ‌(AT) against‌ ‌the‌ ‌respondent‌ JB‌ ‌on‌ ‌‌July 14, ‌2016.‌ ‌

Initially,‌ CST ‌submitted‌ ‌the‌ ‌total‌ ‌liabilities‌ ‌of‌ ‌JB‌ ‌ ‌to‌ ‌the‌ ‌tune‌ ‌of‌ ‌Nu‌ ‌73.553M, which included Nu 9.3M for unconditional‌ ‌performance‌ ‌guarantee, Nu 15.745M ‌in unconditional‌ ‌guarantee‌ ‌for‌ ‌security‌ ‌deposit, Nu 32.762M ‌paid‌ ‌as‌ ‌advance‌ ‌to‌ JB ‌and‌ ‌suppliers and 10 percent ‌delay‌ ‌penalty‌.‌

‌JB ‌had‌ ‌also‌ ‌put‌ ‌up‌ ‌counterclaim‌ ‌amounting‌ ‌to‌ ‌Nu‌ ‌6.313M, including Nu 4.842M ‌against‌ ‌human‌ ‌and‌ ‌other‌ ‌resources, Nu 0.802M ‌refund‌ ‌paid‌ ‌to‌ ‌CST‌ ‌in‌ ‌2015 and Nu 0.669M refund ‌of‌ ‌retention‌ ‌amount. ‌

However,‌ ‌the tribunal ‌after‌ ‌examining‌ ‌and‌ ‌analysing‌ ‌all‌ ‌the‌ ‌documents‌ ‌submitted‌ ‌by‌ ‌both‌ ‌the‌ ‌parties‌ ‌asked JB to pay Nu‌ ‌43.637M‌ ‌to‌ ‌the‌ ‌CST‌. It declared that ‌JB’s‌ ‌counter claims‌‌‌ were ‌unfounded.‌ ‌JB appealed to the High Court and then to the Supreme Court, which ordered to enforce the arbitral tribunal’s decision.

The‌ ‌OAG‌ ‌established‌ ‌that‌ ‌there‌ ‌were‌ ‌no‌ ‌differences‌ ‌in‌ ‌the‌ ‌calculation‌ ‌of‌ ‌the‌ ‌refundable‌ ‌claims‌ ‌and‌ ‌the‌ ‌final‌ ‌amount‌ ‌determined‌ ‌by‌ ‌arbitration‌ ‌award.‌ ‌

ACC’s findings

The commission began the investigation on an allegation of collusive and fraudulent practices on November 24, 2017, after one of the parties complained to the commission. ACC took more than a year to complete its investigations.

ACC’s investigation found that the JB colluded with YAC’s engineer Lha Wangchuk and Shakti Agarwal of Jaigaon Shakti Sales, which is also the supplier and sub-contractor for the construction and made fraudulent claims amounting to Nu 3.809M from CST.

ACC also found that all fraudulent claims by JB were made in connivance with Lha Wangchuk and his site supervisor, Tshering Dorji. Lack of due diligence from CST management starting from the president, officiating directors and construction manager, and their total dependence on Lha Wangchuk largely contributed to the failure of the project, according to ACC’s findings.

Based on the findings, ACC recommended the OAG to charge 10 individuals, including four public officials for various offenses under the Anti-Corruption Act 2011 and restitute Nu 26.311M from JB.

The OAG is going to charge all involved in the illegal practices to the court.

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