Rationale for Inability to Recover Overpayment Amount for Contract Variations in National Gallery Development Project

Mr Png Eng Huat asked the Minister for Culture, Community and Youth with regard to the Report of the Auditor-General for FY2018/19, what is the reason for the AGO's conclusion that it may be too late to recover the overpayment of $13 million from the contractor in its audit finding of improper waiver of contractual provision for the National Gallery development project.

Mr Speaker, please allow me to state that as AGO is an independent organ of state, I am here to represent MCCY and not AGO in this reply.

MCCY has reviewed AGO's findings and is satisfied that there was no fraud involved in the National Gallery of Singapore's (NGS's) waivers of contractual provisions. MCCY provided funding for this project to be directly managed by NGS, so as to achieve greater efficiency and savings from aligning the design and construction to its operational requirements.

NGS duly executed all contracts under its purview to deliver the project on time and below budget. The $13 million was not overpayment, but primarily waivers of penalties for additional time taken by the contractor to complete construction works. During the course of the project, NGS addressed all findings from MCCY's progressive audits. MCCY's fifth and final audit has since resumed after being suspended due to the AGO audit. Arising from the AGO audit and MCCY's final audit, MCCY will work with NGS to enhance their financial processes and procurement policies.

Thank you, Sir. Just a quick question. Would MCCY be recovering that $13 million penalty as well?

Let me explain again. It is not a penalty; it is actually waivers and also for variation orders, which are to be expected for a project that is that massive, that involves two monuments and an extension connecting the two. I would broadly explain that this $13 million probably has two main audit findings from AGO. The first are specific items of claims amongst quantity agreements and so on. This part of the work is still being finalised and in order not to compromise our position, I would not say how it would go one way or another.

Another part of these findings relates to the systems of approval of the variation orders. This part, NGS has fully adopted the recommendations of the AGO and MCCY would work with them to see that these are implemented. Having said all that, we are going through a final audit and we have not completed the audit. But based on my understanding at this point in time, and having gone through the AGO reports extensively and several times with NGS, we are satisfied that the claims or the variation orders have good basis and there is no reason for us to believe that there is any need for major recoveries.