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05 November 2019

Improvement of contract management process on public construction is indispensable

Kontratat publike te ndertimit

A considerable amount of state budget is spent on the construction of education, culture, sports and leisure centre buildings for what, it is of utmost importance that budget organizations conduct a proper and efficient contract management.

However, the performance audit on Public Construction Contract Management performed by National Audit Office identified that the audited budget organizations failed to ensure that the construction of education, culture, sports and leisure centre buildings was completed in time, within the approved budgets and as per the contract agreement.

The audit report highlights that the main reasons the audited projects were not completed in due time, as contracted, are the failure to establish the factual situation at construction site, failure to prepare properly the key construction documents and lack of contract performance assessment.

The report further states that the budget organizations failed to make sufficient use of the legal remedies which would contribute to finalization of projects as per the plans and contracts. The identified weaknesses were the contract performance security being lower than advance payment, security timeframe not covering the contract timeframe, and 9 out of 11 audited contracts failed to set out the penalty clause; whilst for the remaining two cases where the penalty clause was included already, it failed to be applied although needed.

Furthermore, the report presents the weakness in terms of frequent use of annex contracts. Even though the Law on Public Procurement provides for use of annex contracts when the basic contract cannot envisage works, the audit highlights that works contracts were signed while they could be included in the initial project design. Consequently, the budget organizations paid more than they planned and the funds allocated for other projects were used to cover expenses incurred by annex contracts.

“Lack of performance monitoring in contract management is the reason why projects were not delivered as expected and thus making unable the timely handover of buildings to the aimed users. Improvement of some processes in contract management can assure that projects are fit for purpose and they can ensure the value for money invested thereto”, said the Auditor General, Mr Besnik Osmani.

Recommendations provided by the National Audit Office aim to ensure that the concerned authorities, namely the Ministry of Public Administration, Ministry of Education, Science and Technology and Ministry of Culture, Youth and Sports will intensify their attempts to improve contract management and ensure that projects are finalized within the expected timeframe and in line with terms of contract; all the legal remedied in protection of budget organizations’ interests are used; and use of annex contracts is reduced.

The full report can be found in the link.