Over Rs500m NCA Lahore works come under PAC scrutiny as extension, penalty and price adjustment questions rise

The Public Accounts Committee has taken serious notice of audit observations involving the National College of Arts Lahore

Islamabad: The Public Accounts Committee has taken serious notice of audit observations involving the National College of Arts Lahore, where questions were raised over delayed construction work, repeated time extensions, non recovery of delay penalties and price adjustment payments in the Graduate Block project.

The matter became controversial as audit officials pointed out that the Graduate Block work was only 40 to 50 percent complete even after three years, although completion was due in October 2023. The audit also raised the issue of not recovering liquidated damages worth Rs78.882 million from the contractor. The 47th meeting of the Public Accounts Committee was held under the acting chairmanship of Syed Naveed Qamar.

During the meeting, audit para 10.5.4, regarding the irregular execution of civil works for the Graduate Block at NCA Lahore was taken up. According to the audit brief, NCA awarded the Graduate Block construction contract to M/s Construct, Lahore, for Rs788.825 million. Another consultancy contract worth Rs3.786 million was awarded to M/s Master Consultant. Audit observed that the Project Director did not provide the original or detailed estimates and technical sanctions.

Audit further noted that the work remained only 40 to 50 percent complete after three years. The NCA Building Committee had allowed an extension of 238 days. However, during verification, audit officials raised questions about the authority under which time extensions were granted. The committee was informed that four time extensions had been granted and audit questioned whether the Vice Chancellor was competent to approve them. During the discussion, the chairman asked why audit was still raising objections if documents had already been provided.

Audit officials replied that during verification it was found that the approval of extensions had been given by a person whose authority was in question. The issue then turned to whether the Vice Chancellor had the legal power to approve such extensions or if approval was required from a higher authority. It was stated during the meeting that if the agreement and project approval were signed by the Vice Chancellor, the extension of time should be granted by the next higher authority, which audit identified as the Principal Accounting Officer or Secretary.

On the other hand, officials explained that the NCA Act does not clearly mention who should grant such extensions. The Secretary stated that the approval of extension was with the Secretary and that the record was available. The chairman directed that if the approval record exists, it should be shown to audit for verification. Audit also pointed out that NCA hired another contractor for shuttering work worth Rs2 million, while questions were raised about the justification for doing so.

The audit brief further stated that M/s Niazi Design System was hired for third party validation at a cost of Rs9.800 million, but the related report was not produced before audit. The PAC took serious note of unauthorized extensions and directed that the matter be verified through proper proceedings. The committee also discussed audit para 10.5.5 regarding unjustified payment of price adjustment worth Rs88.620 million. According to the audit brief, NCA paid the contractor Rs391.665 million under price adjustment.

Audit observed that the Site Supervisor did not record the Measurement Book on a daily basis. It further stated that the contractor was allegedly paid at escalated rates based on the claim submission date instead of the date when the work was actually carried out. One example discussed was that steel work done in May 2023 was paid according to August 2023 rates. Audit viewed that this delay in claim submission allowed the contractor to benefit from inflation at the government’s expense, causing an alleged financial loss of Rs88.620 million.

The matter was referred to the Pakistan Engineering Council for validation. During the meeting, officials informed the committee that they had written to PEC three times and expected the report within two weeks. Chairman Syed Naveed Qamar directed the Principal Accounting Officer to take responsibility and obtain the PEC report. He said the committee could not discuss the matter halfway without the required technical report.

The para on price adjustment was pended with directions to obtain the PEC report. The committee also discussed the issue of extension of time and penalties. Officials said that granting an extension of time saves the contractor from penalties. Therefore, it is important to know whether the delay was caused by the contractor or by management. The Secretary informed the committee that the revised PC-1 had been approved, granting six months until June 30. After that, another year was requested.

The chairman observed that if the Principal Accounting Officer is satisfied, the matter should be examined in the Departmental Accounts Committee under the Secretary’s chairmanship. The committee directed that the Secretary should personally preside over the DAC meeting and ensure proper verification of the approval documents.