Part I: Summary

1.1 Audit findings and opinion

1.1.1 Supervising the personnel of the project management technical team

Since the Transportation Infrastructure Office (hereafter abbreviated as GIT, according to its Portuguese designation) has no previous experience in preparing, building and managing such a big project as the Light Rapid Train System (hereafter abbreviated as LRT), it contracted a consulting company to manage the various phases of the project, for a fee of 176 million patacas. Effective from March 2009 and valid for 46 months, the contract obliges the consulting company to set up a resident technical team, composed of managers recruited from abroad and local staff who should possess good knowledge of the local conditions. According to the staff allocation plan proposed by the consulting company, the staff of the technical team in any given month should number between 20 and over 50. However, the Commission of Audit (CA) verified that during the first 24 months of the contract, the effective staffing was between 2 and 24 (between 6% and 45% of the planned figures), much lesser than the planned quantities. The finding reveals that GIT has been conducting an ineffective supervision on the technical team staffing.

In reaction to this finding, GIT referred that initially the supervision was performed merely through normal contacts with the consulting company and only from January 2012 onwards there were employees specifically assigned to supervise the composition of the technical team. However, CA verified that GIT’s supervision focused only on the total number of staff in the technical team, without confirming whether the staffs assigned to the different duties were according to the stated in the plan. The audit result reveals that GIT has no effective measures to perform a prior control of the staff allocation.

Confronted with the fact, GIT explained that it attached more importance to the performance of the consulting company than to the compliance with the staff allocation plan and in this sense the implemented supervisory procedure was deemed sufficient. But, according to CA’s examination results, during the audit period, GIT expressed to the consulting company more than once that it was not satisfied with the performance of the technical team and requested the consulting company to reinforce it adequately. According to the staff allocation plan, the technical team should include a full-time “systems coordinator” residing in Macau from the 11th month up to 46th month, i.e. until the end of the project management contract. However, CA found that the function has not been performed according to the staff allocation plan. GIT explained the function has been passed to be performed, in accumulation, by the two assistants to the former coordinator and the works schedule has not been affected. Nevertheless, CA found that GIT had complained to the consulting company that the two assistants were overburdened and have been underperforming. The disclosure demonstrates that by certain functions the compliance with the staff allocation plan must be upheld otherwise the progress of the works schedule and quality would be affected.

Following the good practices in risk management, GIT should have implemented measures to ensure that the consulting company would comply with the staff allocation plan.

According to the schedule, the four works that constituted the LRT line on Taipa should be finished up to June 2015. However, up to end of 2013, the finished works were roughly at the point of the foundations, which means the progress fell far behind the schedule. The audit found that the delay was essentially caused by insufficient allocation of workers and lack of machinery. During the year of 2013, in all four projects of the Taipa line, the number of workers effectively allocated was below the planned and, at the same time, some contractors were unable to secure the needed machinery. The audit also found that GIT and the hired supervisory companies did urge, by writing and for several times, the contractors to solve the verified problems. Notwithstanding the insistence, the lack in human resources and machinery persisted

1.1.2.1 Formulation and application of the penal clause

GIT included in all contracts the penalties stipulated in the Decree no. 74/99/M, but not those permitted by other laws of Macau, namely the compensatory penal clause set in the Civil Code.

Without a penal clause which sets the compensations and respective amounts, the contractor has no references to quantify the penalties he would be subjected to in case he fails to comply with the datelines fixed in the contract. The fact that the multiple warnings to the contractors didn’t lead them to meet any benchmarks (datelines for works within a global project) agreed in the contracts clearly demonstrates that the compensations and penalties stipulated in the contracts are not effective.

According to the Civil Code, in case of breach of contract, the Government has always the right to claim compensation from the contractor. However, the claimant, in this case GIT, must prove the damages resulted from the breach of contract and quantify them, which represents a complex and prolonged judicial procedure as well as costly, financially and in manpower. On the other hand, even in case of winning, the compensation would never be enough to offset the harm caused to the citizens and to the Government. It’s because of the complexity and morosity of the aforesaid process that the penal clause should be included in the contract, which would compel the contractor to observe the datelines.

1.1.2.2 Handling the delays in the works progress

According to number 1 and 2 of the Article 138 of the Decree no. 74/99/M, when delays occur in such a way that would jeopardize the compliance of the works schedule and, consequently, impeding the contractor to meet the dateline of the whole project agreed in the contract, the owner of the project could notify the contractor and order him to present a new working plan within 15 days. If the contractor is unable to come up with a new plan, or the presented new plan doesn’t satisfy the requirements, the owner can make his own plan. Further, if the contractor doesn’t execute the working plan he himself prepared or the one prepared by the owner, the latter, disregarding the progress of the works, can apply for the administrative possession of the works and handle them to be managed by an appropriate and qualified person or launch a new tender.

In the present audit, although the building works of the Taipa line were significantly behind the schedule, GIT didn’t apply the procedures offered by the abovementioned decree. Faced with the delays, GIT notified in May and June 2013 the contractors of the four segments of the Taipa line to present revised working plans with concrete measures to accelerate the progress. However, one year after the sending of the notifications, i.e. June 2014, the plans were still under revision, which means that GIT kept on waiting and didn’t activate the procedures set out in the above referred decree, namely, taking the initiative to prepare the working plans and notify the contractors to execute them accordingly.

In conclusion, GIT didn’t react timely to the problems nor took all possible actions at its disposal in order to make the contractors to reinforce their working teams and to bring together the needed machinery, so that the datelines agreed in the respective contracts could be met. Also, GIT didn’t make good use of the possibilities and rights conferred by the Article 138 of the Decree no. 74/99/M to normalize the works progress, in order to ensure that the LRT system could be ready according to the planned date.

1.1.3 Updating the total investment of the LRT system

In the two previous audits, CA found that GIT didn’t make the estimates completely nor using the dynamic methodology for the estimation. After the release of the audit reports, GIT started to apply methods that basically conform to those recommended by FIDIC (International Federation of Consulting Engineers) and similar international institutions. However, in this last audit, CA still detected some deficiencies with the updating of the global investment.

Due to the launching of the project of the new frontier access to Guangdong province and the controversy surrounding the section along Londres Street, it has been decided the projects relating to the Northern Section and Av. 24 de Junho Section should be revised. The big modifications would not only delay the works progress, but also demanded a revision of the estimation of the investment of the whole LRT project. However, after the last global revision made in September 2012, GIT kept updating only the expenses of the planned and already awarded projects relating to the Taipa line, leaving the costs of the Macau line unaltered. Explaining the situation, GIT said that without a final decision on the itinerary and the respective projects for the Macau line, i.e. without any solid working basis, any budgetary estimation would be of little use. In effect, the documentation used in the consultation activities on the Macau line, GIT only presented the costs of each of the proposed solutions for the Northern Section, which is around 500 million patacas/km, at prices of 2014, and no updated costs estimates were presented for the Av. 24 de Junho Section (a flyover).

Not knowing the financial impact the different solutions would cause to the investment on the whole LRT project, neither the authorities (by the decision process) nor the population (at the consultation activities) could assess the financial obligations to be supported by the tax payers or the economic benefits the project would bring. In order to avoid successive costs revisions, GIT decided not to present any global costs revision as long as no final decision on the itinerary and on the projects was reached, since, according to its reasoning, no realistic cost estimation could done when there were no concrete and final elements. However, this option of GIT clearly is an inversion between what is important and what is secondary.

1.2 Audit suggestions