OMBUDSMAN COMMISSION OF PAPUA NEW GUINEA REPORT OF AN INVESTIGATION INTO THE SPRING GARDEN ROAD POREPORENA FREEWAY PROJECT MEMBERS OF THE OMBUDSMAN COMMISION Charles Maino Ango Wangatau Jim Ridges Chief Ombudsman Acting Ombudsman Acting Ombudsman 18 December 1992 OMBUDSMAN COMMISSION OF PAPUA NEW GUINEA REPORT OF AN INVESTIGATION INTO THE SPRING GARDEN ROAD POREPORENA FREEWAY PROJECT PART I: NATURE AND PURPOSE OF THE INVESTIGATION 1. INTRODUCTION 2 2. BACKGROUND OF THE FREEWAY PROPOSAL 9 3. STRUCTURE OF THE REPORT 14 PART H: RECORD OF EVENTS AND FINDINGS OF THE OMBUDSMAN COMMISSION 4. DECISION TO PUBLICLY INVITE 18 EXPRESSIONS OF INTEREST: MAY 1990 5. ADVERTISEMENT INVITING 23 EXPRESSIONS OF INTEREST: JUNE 1990 6. RESPONSES TO THE ADVERTISEMENT: JULY 1990 35 7. SIGNIFICANT INTERDEPARTMENTAL 49 MEETING: 31 JULY 1990 8. PROGRESS DURING SECOND 54 HALF OF 1990 9. PREPARATION OF SHORTLIST: 73 FEBRUARY 1991 10. TERMS OF REFERENCE FOR THE 94 PROJECT: EARLY 1991 11. THE MINISTERIAL COMMITTEE MEETING 103 OF 18 JULY 1991 12. THE RELATIONSHIP BETWEEN THE CHINESE 120 CONSORTIUM AND THE MINISTER FOR TRANSPORT 13. FURTHER CHANGE IN COMPOSITION OF THE CHINESE CONSORTIUM: SEPTEMBER 1991 155 14. MINISTER FOR TRANSPORT SIGNS CONTRACT 162 FOR CONSTRUCTION OF FREEWAY: OCTOBER 1991 15. ROLE OF THE WORLD BANK IN THE SPRING GARDEN ROAD/POREPORENA 178 FREEWAY PROJECT 16. FATE OF THE POLICY SUBMISSION FAVOURING 185 THE CHINESE CONSORTIUM: DECEMBER 1991 17. CONCERNS ABOUT CREDENTIALS OF TUNSON ENGINEERING CO LTD: 196 DECEMBER 1991 - JANUARY 1992 18. MINISTER FOR TRANSPORT EXPEDITES PREPARATION OF NEW POLICY 707 SUBMISSION: FEBRUARY 1992 19. HISTORY OF THE PROPOSAL BY 217 KINHILL KRAMER PTY LTD 20. RESOURCE MANAGEMENT COMMITTEE RECOMMENDS RE-TENDERING 238 OF PROJECT: 20 FEBRUARY 1992 2L THE MINISTER FOR TRANSPORTS 241 POLICY SUBMISSION OF FEBRUARY 1992 22. FAVOURABLE ASSESSMENT OF THE KINHILL KRAMER PROPOSAL 23. NATIONAL EXECUTIVE COUNCIL DECIDES TO AWARD PROJECT TO KINHILL KRAMER 284 CONSORTIUM: 24 FEBRUARY 1992 24. OVERVIEW OF EVENTS BETWEEN APPOINTMENT OF KINHILL KRAMER CONSORTIUM AND 290 SIGNING OF CONTRACT: FEBRUARY - MAY 1992 25. CONCERNS RAISED BY DEPARTMENT OF WORKS ABOUT DRAFT CONTRACT: 304 MARCH - APRIL 1992 26. DEPARTMENT OF TRANSPORT RECOMMENDS SIGNING OF CONTRACT AGAINST ADVICE OF OTHER 321 DEPARTMENTS: 22 APRIL 1992 27. NATIONAL EXECUTIVE COUNCIL DECIDES THAT 332 CONTRACT MUST BE FINALISED: 23 APRIL 1992 28. ACTION TAKEN BY FOUR KEY DEPARTMENTS PRIOR TO THE NATIONAL EXECUTIVE COUNCIL 334 MEETING ON 29 APRIL 1992 29. NATIONAL EXECUTIVE COUNCIL REJECTS ADVICE OF DEPARTMENT OF ATTORNEY-GENERAL: 29 APRIL 1992 355 30. ACTING STATE SOLICITOR GIVES LEGAL CLEARANCE 358 DESPITE DEFECTS IN CONTRACT: 6 MAY 1992 31. NATIONAL EXECUTIVE COUNCIL APPROVES 367 EXECUTION OF CONTRACT: 6 MAY 1992 32. EVENTS LEADING UP TO EXECUTION OF 375 THE CONTRACT: 6 - 27 MAY 1992 33. THE CONTRACT OF 27 MAY 1992 395 34. EVENTS AFTER 27 MAY TERMINATION OF CONTRACT AND APPOINTMENT OF A 400 COMMISSION OF INQUIRY PART III: LAWS RELEVANT TO PUBLIC WORKS CONTRACTS 35. THE PUBLIC TENDER REQUIREMENTS OF 406 THE PUBLIC FINANCES (MANAGEMENT) ACT 36. THE PUBLIC WORKS COMMITTEE ACT AND THE ROLE OF THE PARLIAMENT IN MONITORING 424 PUBLIC WORKS PROJECTS 37. CONTROL OF OVERSEAS 39 BORROWING BY THE STATE 38. LAWS GOVERNING FOREIGN INVESTMENT 446 39. LIMITS ON THE POWERS OF MINISTERS 451 40. FUNCTIONS OF THE DEPARTMENT OF 460 TRANSPORT AND THE DEPARTMENT OF WORKS PART IV; FINDINGS UNDER SECTION 219(1) OF THE CONSTITUTION AND SECTION 22(1) OF THE ORGANIC LAW ON THE OMBUDS • COMMISSION 41. FINDINGS AS TO THE CONDUCT OF THE 468 FORMER MINISTER FOR TRANSPORT 42. FINDINGS AS TO THE CONDUCT OF THE DEPARTMENT OF TRANSPORT AND 480 THE SECRETARY FOR TRANSPORT 43. FINDINGS AS TO THE CONDUCT OF THE DEPARTMENT OF WORKS AND THE 497 SECRETARY FOR WORKS 44. FINDINGS AS TO THE CONDUCT OF THE DEPARTMENT OF ATTORNEY-GENERAL, THE 501 SECRETARY OF THE DEPARTMENT AND THE ACTING STATE SOLICITOR 45. FINDINGS AS TO THE CONDUCT OF THE DEPARTMENT OF FINANCE AND PLANNING 506 AND THE SECRETARY FOR FINANCE 46. FINDINGS AS TO THE CONDUCT OF THE 512 NATIONAL EXECUTIVE COUNCIL PART V; RECOMMENDATIONS OF THE OMBUDSMAN COMMISSION 47. RECOMMENDATIONS CONCERNING LAWS RELEVANT 518 TO PUBLIC WORKS PROJECTS 48. RECOMMENDATIONS AS TO THE EXERCISE 529 OF POWERS BY MINISTERS 49. RECOMMENDATIONS CONCERNING THE POWERS 534 AND DUTIES OF DEPARTMENTAL HEADS 50. RECOMMENDATIONS CONCERNING PROCEDURES 536 OF THE NATIONAL EXECUTIVE COUNCIL 5L RECOMMENDATIONS TO THE DEPARTMENT 544 OF TRANSPORT 52. RECOMMENDATIONS TO THE DEPARTMENT 548 OF ATTORNEY-GENERAL 53. RECOMMENDATIONS TO THE DEPARTMENT 550 OF FINANCE AND PLANNING 54. RECOMMENDATIONS TO THE MINISTER FOR TRADE AND INDUSTRY AND THE INVESTMENT 554 PROMOTION AUTHORITY 55. RECOMMENDED DISCIPLINARY PROCEEDINGS 557 56. RECOMMENDATIONS CONCERNING THE FUTURE OF THE 561 SPRING GARDEN ROAD/POREPORENA FREEWAY PROJECT PART VI SUMMING UP 57. SUMMING UP 566 LIST OF EXHIBITS 571 i PART I 1 NATURE AND PURPOSE OF THE INVESTIGATION 2 1. INTRODUCTION (1.1] THE OMBUDSMAN COMMISSION'S DECISION TO CONDUCT AN INVESTIGATION On 27 May 1992 the Governor-General, Sir Wiwa Korowi, signed a contract on behalf of the Independent State of Papua New Guinea for the design, finance and construction of a freeway in the city of Port Moresby. The Governor-General was acting on the advice of the National Executive Council, which a few weeks earlier had given final approval for the signing of the contract. The Ombudsman Commission received information from a number of different sources suggesting that normal procedures had not been followed. It was also alleged there were irregularities in the contract negotiations and that the terms of the contract were heavily weighted against the interests of the State. After making preliminary inquiries, it appeared that the project had neither been put to tender nor considered by the Parliament. As it was the Commission's understanding that public works projects of this magnitude (the contract committed the State to a minimum payment of US $67 million plus interest) were subject to these procedures, the Commission decided in May 1992 that it would conduct an investigation, on its own initiative, into the circumstances leading to and surrounding the decision of the National Chapter 1 3 Executive Council to advise the Governor-General to sign the contract for the design, finance and construction of the freeway. [1.2] JURISDICTION The Commission conducted its investigation under the Organic Law on the Ombudsman Commission. Section 13 authorises it to investigate, on its own initiative, any "conduct" on the part of any "governmental body" or any of its officers. The Commission can thus investigate the conduct of any arm, department, agency or instrumentality of the National Government, including the National Executive Council (Schedule 1.2(1) of the Constitution). The Commission can investigate the policy of the National Government or a Minister, to the extent that the policy is contrary to law or to the National Goals and Directive Principles, the Basic Rights or the Basic Social Obligations or any Act of the Parliament (Section 219(3) of the Constitution). The Ombudsman Commission is not authorised to conduct an investigation into the conduct of private citizens and companies. Nevertheless, in the course of reporting its findings and opinions on the conduct of governmental bodies, it is sometimes necessary to comment on the conduct of others who may not be within the jurisdiction of the Ombudsman Commission. That has happened in this report: we have occasionally made comments on the conduct of private companies, as part of the formation of an opinion on the conduct of various governmental bodies. Chapter 1 4 [1.3] THE PURPOSE OF THIS INVESTIGATION The purpose of this investigation was not to report on whether the city of Port Moresby needs a freeway. That could have formed a part of the investigation, because Section 219(3) of the Constitution allows the Ombudsman Commission to inquire into National Government policies which are contrary to the National Goals and Directive Principles. The second of our National Goals is for all our citizens to have an equal opportunity to participate in, and benefit from, the development of our country'. Directive Principles 2(3) and 2(4) require that every effort be made to achieve an equitable distribution of the benefits from development and an equalisation of services throughout the various parts of the country. It is arguable whether these objectives were advanced by the decision of the National Executive Council to commit a large amount of public money to the building of a freeway in the nation's capital; especially as it is widely recognised that the rural infrastructure of our country is seriously under- developed. Nevertheless, the Ombudsman Commission decided, in its deliberate judgment, not to make that policy decision of the National Executive Council the subject of this investigation. We were concerned, instead, with the decision-making process which attempted to implement that policy. In accordance with Section 219(1) (a) of the Constitution the purpose of the investigation was: to determine whether any of the "conduct" under investigation was "wrong"; and Chapter 1 5 to determine whether there were "defects in any law or administrative practice. [1.4] WHAT IS 'WRONG' CONDUCT? Section 219(2) of the Constitution states that conduct is "wrong" if, for example, it is: "(a) contary to law; or (b) unreasonable, unjust/oppressive or improperly discriminatory, whether or not it is in accordance with law or practices or (c) based wholly or partly on improper motives, irrelevant grounds or irrelevant considerations; or (d) based wholly or partly on a mistake of law or of fact or (e) conduct for which reasons should be given but were not, whether or not the act was supposed to be done in the exercise of deliberate judgement within the meaning of Section 62 (decisions in ‘deliberate judgement’).” However, Section 219(2) of the Constitution also provides that the Ombudsman Commission is not constrained in its determination of whether conduct is "wrong", by the examples listed above.