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ECG incurs US$2.8m ‘extra cost’ in botched procurement – A-G’s report

The Auditor-General has observed that the Electricity Company of Ghana (ECG) incurred an extra cost of US$2,861,793.00 in procurement with “no consideration for value for money”.

Section 7(1a) of the Public Financial Management Act, 2016 (Act 921) states: “A Principal Spending Officer of a covered entity shall ensure the regularity and proper use of money appropriated in that covered entity”.

Also, Regulation 8(1) of the Local Content and Local Participation Regulations, 2017 (L.I. 2354) states: “A person who engages in an activity in the electricity supply industry and who requires equipment as set out in the Seven Schedule, shall purchase that equipment from an entity that manufactures the equipment in this country”.

The A-G’s report, however, said: “Contrary to the Local Content and Local Participation (L.I. 2354), ECG ordered goods from outside Ghana to the tune of US$6,671,100.00 in 2018 and 2019”.

These goods, according to the report, were supplied by foreign manufacturers and shipped directly to ECG in 2019.

“However, our comparison of the order prices with the manufacturing prices disclosed that ECG incurred extra cost of US$2,861,793.00 in dealing with the local suppliers instead of the manufacturers directly”, the report said.

The audit team attributed the lapse to ECG’s single-sourcing method of procurement.

The report noted: “ECG incurred extra cost of US$2,772,056.00, which could have been used to procure other goods or offsetting power producers’ liabilities”.

ECG material prices may be high as compared to the open market, therefore, major rechargeable jobs customers may prefer to buy their own materials for dedicated jobs, the report observed.

“We recommended that ECG should deal with foreign manufacturers directly, as much as possible, in order to achieve value for money, unless the items are produced by local suppliers”.

“We also urged the management to adhere to the Public Procurement Act”.

In their response, the management of ECG said: “The difference in cost between the manufacturer and the local supplier is often financing cost, which is carried by the local suppliers”.

The management said the “comments are, however, well noted”, adding: “ECG, as much as possible, will engage directly with foreign manufacturers for some high-value equipment such as power transformers, switchgear, earthing transformers etc”. We will expand the engagement to cover procurement of other critical equipment directly from foreign manufacturers”.

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