31 AUGUST 2005
AUDITOR GENERAL FINDS RAIL CONTRACT MANAGEMENT PROCESS GOING WELL, BUT CHALLENGES LIE AHEAD
In a rare move, Auditor General Des Pearson has scrutinised the contract management arrangements of the City Rail Project midway into the contract, rather than at its completion.
And whilst his findings in regard the management process are positive, he warns that the eventual outcome cannot be predicted and significant challenges lie ahead.
“My motivation was that providing an audit view of the administration of the contract at this point in time is better than the traditional approach of conducting an audit after completion, when there is limited opportunity to address any issues arising,” Mr Pearson said.
“We examined the Public Transport Authority’s processes and systems and no significant audit issues were identified.
“Accordingly, I am satisfied that the Public Transport Authority has been competently managing the City Rail project.”
However, Mr Pearson then cautions that the eventual outcome cannot be forecast, with all parties involved under increasing pressure.
“The project is currently behind schedule, the complex tunnel boring phase is yet to commence, some high value claims are being disputed, and industrial issues are evident,” he says.
“These challenges will put all parties under increasing pressure.”
Competent contract management alone cannot guarantee a positive outcome for the project, Mr Pearson states, but it is fundamental to protecting the State’s interest.
“In this context, comfort can be taken from the robust processes and systems in place at the time of the audit.”
Key findings in the report include:
- The Public Transport Authority is capably fulfilling its contract management role by:
- using suitably qualified and experienced people
- maintaining sound systems and processes
- vigilantly monitoring the Contractor’s performance
- keeping up a cooperative working relationship with the Contractor.
- Despite the fixed-price nature of the contract, it is not possible at this stage to estimate accurately the final price paid to the Contractor, but it will likely be higher than the contract award price as the contract provides for:
- rise-and-fall – an indexed allowance for inflation that is applied to monthly progress payments and to most variations and claims
- variations to the scope of works
- allowable Contractor claims made under the contract and under law
- adjustments to the three per cent of the contract price that was estimated as provisional sums and quantities
- At 30 June 2005, the Contractor was targeting a practical completion date of 31 December 2006 (about two months later than the current contracted date), however, a number of key construction activities were more than two months behind schedule which could indicate a further delay in project completion.
- Any project delays will affect the people of the State and public transport operations, consequently the Public Transport Authority is preparing to systematically assess the risks and develop contingency plans in the event that City Rail is significantly late.
Ends/.
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