Document content

• 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

• Page 2 of 397

• 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

• Page 3 of 397

• 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

• Page 4 of 397

• 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

• Page 5 of 397

• 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

• Page 6 of 397

• 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

• Page 7 of 397

• 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.

• Page 8 of 397

• 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

• Page 9 of 397

• 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

• Page 10 of 397

• 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?

• Page 11 of 397

• 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. The
  Ombudsman

  Commission has a wide discretion to exercise in making this
  determination.

  In exercising its discretion the Commission is guided, in
  particular, by the

  National Goals and Directive Principles and the Basic Rights
  and the Basic

  Social Obligations, as permitted by Sections 25 and 63 of
  the Constitution.

• Page 12 of 397

• Chapter 1

  6

  (1.51 RELEVANCE OF THE LEADERSHIP CODE
  The Ombudsman Commission of Papua New Guinea is entrusted with
  the
  task of administering two Organic Laws:

  the Organic Law on the Ombudsman Commission; and

  the Organic Law on the Duties and Responsibilities of
  Leadership.

  The provisions of the Organic Law on the Duties and
  Responsibilities of
  Leadership, together with those in Division 111.2 of the
  Constitution,
  comprise the Leadership Code.

  We emphasise that this report has not been prepared for the
  purpose of
  recording alleged breaches of the Leaddership Code. The
  procedure for
  dealing with such matters is prescribed by the Organic Law on
  the Duties
  and Responsibilities of Leadership. This report has Int been
  prepared
  under that Organic Law.

  This is a report prepared in accordance with the Organic Law on
  the
  Qmbudsman Commission. Our primary function in this
  investigation has
  been to investigate and report on wrong conduct and defective
  laws and
  administrative practices and to make recommendations
  accordingly.

  In discharging that function the Ombudsman Commission has not
  formed
  any judgment on whether any of the persons involved have

• Page 13 of 397

• breached the
  Leadership Code.

  Chapter 1

  7

  METHOD OF INQUIRY

  The Commission obtained documents and other evidence from a number
  of different sources and used its powers under Section 18 of the
  Organic
  Law on the Ombudsman Commission to summon persons to attend before
  the Commission and give evidence under oath and produce documents
  in their possession or control. Most persons summoned to attend were
  co-
  operative. However it was, on occasions, necessary to warn some
  persons
  of their obligation to comply fully with the terms of the summons
  served
  on them.

  We take this opportunity to point out that it is not sufficient for
  a person
  who has been required to produce all documents pertaining to a
  certain
  subject matter to attend the Commission and produce only some, or
  even
  most, of the documents required. Failure to comply fully with an
  Ombudsman Commission summons is a serious criminal offence under
  Section 30 of the Organic Law on the Ombudsman Commission, the
  penalty for which is a K500.00 fine or three months imprisonment for
  each
  offence (see The State v Allan Ebu Marai, National Court decision,
  O.P. 1
  of 1991, 12.2.92).

  A number of the documents obtained by the Ombudsman Commission
  under summons would in the ordinary course of events be regarded as
  confidential in nature,e.g. those providing evidence of the
  proceedings of
  the National Executive Council. However, the effect of Section 19(1)
  of the
  Organic Law on the Ombudsman Commission is that the Ombudsman
  Commission can only be denied access to such documents when the
  Prime Minister, after consultation with the Chief Ombudsman,
  certifies that
  their production is likely to:

• Page 14 of 397

• Chapter 1

  “(a) prejudice the security, defence or international
  relations of Papua New
  Guinea (including Papua New Guinea’s relations with the
  Government
  of any other country or with any international
  organization) or the
  investigation or detection of offences; or

  (b) involve the disclosure of proceedings, deliberations or
  decisions of the
  National Executive Council which the “‘time Minister
  certifies relate
  to matters of a secret or confidential nature,
  disclosure of which would
  be contrary to the public interest.”

  In the present case, no certificate under Section 19(1) was issued
  in
  respect of any documents which the Commission sought access to and
  so the Commission was able to require the production of those
  documents.

  The investigation was conducted in private, as required by Section
  17(2)
  of the Organic Law on the Ombudsman Commission.

  * * * * * * * * * *

• Page 15 of 397

• Chapter 1

  2. BACKGROUND OF THE FREEWAY PROPOSAL

  [2.1] PORT MORESBY’S TRAFFIC PROBLEMS

  It has been recognised for many years that the peculiar
  geography of the
  city of Port Moresby has given rise to a serious traffic
  problem. Other than
  following the long and winding “back road” through Baruni, or
  the
  inconvenient route along Scratchley Road through Kila Kila,
  only the Sir
  Hubert Murray Highway can carry traffic between downtown Port
  Moresby
  and the other major traffic-generating parts of the city at
  Gerehu, Waigani,
  Hohola, Boroko and Jacksons Airport.

  The Highway, however, is not a high quality road and it is
  often congested.
  Breakdowns and accidents on some sections, particularly Three
  Mile Hill,
  can cause huge traffic jams.

  2.2] THE UNCONNECTED SECTIONS OF THE SPRING GARDEN ROAD
  NETWORK

  Construction of an alternative route, between the suburbs of
  Hohola and
  Konedobu, has long been regarded as the solution to the
  problem.
  Various proposals have been put forward over the last thirty
  years and

• Page 16 of 397

• most have favoured a road passing through the saddle of Burns
  Peak
  linking two presently unconnected sections of “Spring Garden
  Road”.
  These two unconnected sections are shown on the map at the end
  of this
  chapter. They are:

  Chapter 2

  10

  from Champion Parade Konedobu to a point close to the
  Department of Transport headquarters in Konedobu: see
  map, points “B” to “C”; and

  from Burns Peak Road Hohola to Wards Road Hohola: see
  map, points “D” to “E”.

  There are also other unconnected sections of the Spring Garden Road
  network which have, at various times, been earmarked for
  construction or
  redevelopment. These are:

  from Wards Road Hohola to a point near the Hohola
  Demonstration School: see map, points “E” to “F”; and

  from Hekakora Street Hohola to Boroko Drive: see map,
  points “G” to “I”.

  More recently, it has been proposed that the Spring Garden Road
  network
  be extended at “both ends”, to form one arterial road linking the
  seaport
  at downtown Port Moresby with Jacksons Airport: see map, points “A”
  to
  ‘. Under this proposal, the extended sections of the Spring Garden
  Road
  network would have been:

  from Stanley Parade in downtown Port Moresby, along
  Champion Parade, to Spring Garden Road, Konedobu: see
  map points “A” to “B”; and

  from the intersection of Spring Garden Road and Boroko
  Drive, Gordons, via Geauta Road, across the Sir Hubert
  Murray Highway at Erima to Jacksons Airport: see map,
  points “in to “K’. via “J”.

  Chapter 2

  11

• Page 17 of 397

• [2.3] DECISIONS OF THE NATIONAL EXECUTIVE COUNCIL DURING THE
  1980s

  In the 1980s, the Spring Garden Road issue was addressed by
  the
  National Executive Council on a number of occasions. In
  dealing with
  National Executive Council submissions and decisions in this
  report, we
  have paid special reference to the “Submissions Handbook for
  National
  Executive Council and National Parliament”. [EXHIBIT 1]

  In 1984, the National Executive Council directed the then
  Department of
  Transport and Civil Aviation to arrange a feasibility study on
  the “Burns
  Peak Road” and to ensure that funding was available under the
  National
  Road Improvement Programme for 1985-88. [EXHIBIT 2]

  In 1988, requests for assistance were made to the GoVernment
  of Japan
  for possible funding under grant aid and soft loan
  arrangements for a
  number of projects, including the Burns Peak tunnel. [EXHIBIT
  3]

  Also in 1988, Barclay Bros (PNG) Pty Ltd put a proposal to the
  National
  Government which included an open-cut road through Burns Peak,
  linking
  the Konedobu and Hohola sections of Spring Garden Road, at an
  estimated cost of K11 million. It was proposed that the
  project take place
  in conjunction with the redevelopment of Port Moresby’s port
  facilities. The
  Barclay Bros proposal was discussed by a committee which
  recommended
  that the project be tendered. This proposal also failed to
  come to fruition.
  [EXHIBITS 4 & 4A]

  In 1989, the Departments of Transport, Foreign Affairs and
  Finance and
  Planning were directed by NEC Decision No. 76/89 to approach
  the
  Government of Denmark for aid funding on this and other
  transport
  projects. [EXHIBIT 5]

  Chapter 2

• Page 18 of 397

• 12

  [2.4] THE NATIONAL EXECUTIVE COUNCIL DECISION OF 25 JANUARY
  1990

  It was against this background that the National
  Executive Council
  reconsidered the matter at its meeting on 25 January
  1990, following a
  Policy Submission by the Minister for Transport, Mr
  Anthony Temo.
  [EXHIBIT 6]

  In Decision No.14/90, the National Executive Council:

  directed the Department of Transport,
  Department of Works and
  Department of Finance and Planning to
  formulate detail plans for the
  construction of Burns Peak Road;

  2. directed that the plan should include the
  re-evaluation of the Barclay
  proposals and any other Turn-Key’
  proposals available;

  3. approved the engaging of Ove Amp and
  Partners (Pacific) Pty Ltd, to
  undertake the Port Moresby Road Needs
  Study (Arterial Roads);

  4. advised the Governor-General to enter into
  agreement on behalf of the
  State with Ove Amp and Partners (Pacific)
  Pty Ltd” [EXHIBIT 6A]

  * * * * * * * * * *

• Page 19 of 397

• Chapter 2

  MAP: THE SPRING GARDEN
  ROAD NETWORK AND THE ROUTE OF

  THE PROPOSED POREPORENA FREEWAY

  Points marked:

  A Stanley Parade/
  Champion Parade
  B Champion
  Parade,Spring Garden Road
  C End of Spring.
  Garden Road Konedobu
  D Spring Garden
  Road/Burns Peak Road
  E Spring Garden
  Road/Wards Road
  F Spring Garden Road
  (Near Hohola Demonstration School)
  G Spring Garden
  Road/Hekakora Street
  H Spring Garden
  Road/Waigani Drive
  I Spring Garden
  Road/Boroko Drive/Geauta Road (Courts’ Roundabout)
  Geauta Road/
  Kookaburra Street/Sir Hubert Murray Highway
  K Jackson
  International Airport

• Page 20 of 397

• • Burns Peak

  Chapter 2

  14

  3. STRUCTURE OF THE REPORT

  [3.1] FOCUS OF INVESTIGATION

  On 6 May 1992 the National Executive Council decided to advise
  the
  Governor-General to enter into a contract with Kinhill Kramer
  Pty Ltd and
  Curtain Bros (Old) Pty Ltd for the design, finance and
  construction of the
  Poreporena Freeway. That decision was a crucial one. However,
  in
  conducting this investigation, the Ombudsman Commission was
  not only
  interested in the circumstances immediately surrounding that
  particular
  decision. Our wider concern was to determine whether the whole
  decision-
  making process which occurred after the National Executive
  Council
  decision of 25 January 1990 was carried out lawfully in
  accordance with
  sound administrative practices.

  The Ombudsman Commission therefore considered all the events
  that
  occurred after 25 January 1990, which culminated in the
  signing of the
  contract on 27 May 1992. After examining the evidence obtained
  in the
  course of the investigation, the Commission made a number of
  findings.

  These are set out in Part II of the report, which contains a
  chronological
  account of the events which led to the signing of the
  contract. Each of
  Chapters 4 to 33 highlight a significant incident or decision
  which formed
  the chain of events up to 27 May 1992.

• Page 21 of 397

• Chapter 3

  15

  2] ALL PERSONS ADVERSELY COMMENTED ON HAVE BEEN GIVEN A

  RIGHT TO BE HEARD

  During the course of documenting these findings, the
  Ombudsman

  Commission found it necessary to be critical of the conduct
  of some

  individuals and governmental bodies. All of these persons
  and, in the case

  of governmental bodies, their representatives, were given an
  opportunity

  to be heard prior to the completion of this report, in
  accordance with the

  duties imposed on the Ombudsman Commission under Section
  17(4) of

  the Organic Law on the Ombudsman Commission.

  Section 17(4) states:

  “Nothing in this Law compels the Commission to hold any
  hearing and no
  person is entitled as of right to be heard by the
  Commission except that –

  (a) where a report of the Commission may affect a State
  Service, provincial
  government body or statutory body, the Commission
  shall provide

• Page 22 of 397

• reasonable opportunity for the Permanent Head of
  that service or the
  statutory head of that body, as the case may be, to
  comment on the
  subject of the investigation; and

  (b) the Commission shall not make any comment in its
  report that is adverse
  to or derogatory of any person without –

  (i) providing him with reasonable opportunity of
  being heard; and

  (ii) fairly setting out his defence in its report”

  3.3] RELEVANT IAM

  One of the main concerns of the Ombudsman Commission at the

  commencement of the investigation was the allegation – which
  came from

  many sources – that proper financial and contractual
  procedures had been

  bypassed.

  Chapter 3

  16

  Part II( of the report accordingly gives an account of
  some of the important
  laws regulating public works contracts in Papua New
  Guinea.

  [3.4] PART IV SUMMARISES AND FORMALISES ADVERSE FINDINGS

• Page 23 of 397

• Part IV of the report summarises the adverse findings
  made against
  individuals and governmental bodies in Part II. These
  findings are based
  on Section 219 of the Constitution and Section 22 of
  the Organic Law on
  the Ombudsman Commission, which prescribe the type of
  conduct which
  is “wrong” or otherwise requires criticism by the
  Ombudsman Commission.

  [3.5] RECOMMENDATIONS OF THE OMBUDSMAN COMMISSION

  Part V of the report contains a number of important
  recommendations
  arising from our investigation. In particular, we make
  suggestions as to the
  manner in which public works projects such as the
  Spring Garden Road
  (also known as the Poreporena Freeway) project should
  be handled in
  future.

  [3.6] SUMMING UP

  Part VI sums up the investigation and the findings of
  the Ombudsman
  Commission.

  * * * * * * * * * *

  Chapter 3

  17

  PART II

  RECORD OF EVENTS
  AND FINDINGS OF THE OMBUDSMAN COMMISSION

  18

• Page 24 of 397

• 4. DECISION TO PUBLICLY INVITE EXPRESSIONS OF INTEREST:
  MAY 1990

  [4.1] THE INTERDEPARTMENTAL MEETING OF 22 MAY 1990

  After the National Executive Council decided in January 1990
  that detailed
  plans ‘tor the construction of Burns Peak Road” be drawn up,
  very little
  happened until May 1990, when the Minister for Transport, Mr
  Anthony
  Temo, convened an interdepartmental meeting. The meeting was
  held on
  22 May 1990 and was chaired by Mr Temo. The subject was ‘the
  Burns
  Peak Road Development’. [EXHIBIT 8]

  Representatives from various departments and the Harbours
  Board were
  present, as well as a consultant employed by Ove Arup and
  Partners, the
  firm engaged to conduct the Port Moresby Road Needs Study.
  This study
  later concluded that construction of a link through Burns Peak
  would have
  a beneficial effect on the Port Moresby economy and that
  traffic flow on
  the Three Mile Hill section of the Sir Hubert Murray Highway
  would
  consequently be reduced by almost 50%.

  [42] ISSUES UNDER CONSIDERATION

  During this meeting, two crucial issues were addressed:

  Chapter 4

  19

  1. The method of construction of the Bums Peak link

  Once it had been decided that the route for the new road
  would pass through Burns Peak, the next thing to decide was
  the best way of getting through. Should a tunnel be
  constructed or would it be better to make a “cut” through the
  mountain?

• Page 25 of 397

• 2. The method of financing the project

  The other crucial issue discussed at the meeting was the
  method of financing the project. One proposal, closely linked
  with the tunnel option, was that part of Spring Garden Road
  would become a tollway.

  This later became transformed into the Build-Operate-Transfer
  (BOT) concept. Under this method of financing, it was
  envisaged that the Government would engage a contractor
  to build and operate the road as a tollway, holding the ‘title’
  to it for, say, twenty years, until the contractor made a
  reasonable return on its investment, and then returning the
  road to the State. el

  The Minister for Transport favoured this option, though he
  was also willing to consider other options, provided they
  involved no financial cost to the Government.

  Chapter 4

  20

  [4.3] NO FIRM POUCY DECISIONS MADE

  No firm decisions were made on either the method of
  construction or the
  method of financing the project at the meeting of 22 May 1990.
  The most
  important outcome was that the Minister for Transport directed
  the
  Department of Transport to advertise the project so that
  interested parties
  could express their interest.

  The Minister also announced that he intended to direct the
  Department of
  Works to commence detailed design of the project immediately
  and to
  complete the design within six months. This was confirmed in
  writing the
  following day, 23 May 1990, in a letter to the Acting
  Secretary of the
  Department of Works, Mr G Morea. [EXHIBIT 9]

• Page 26 of 397

• [4.4] MINISTER FOR TRANSPORT EXCEEDED HIS POWERS

  It should be noted that the Minister for Transport had no
  power to give this
  direction to the Department of Works.

  Section 148 of the Constitution states that Ministers only
  have such titles,
  portfolios and responsibilities as are given to them, from
  time to time, by
  the Prime Minister. During 1990, Mr Temo had no responsibility
  for the
  Department of Works and therefore it was wrong of him to
  direct the
  Department to finish the design within six months. We are not
  suggesting
  there was anything improper about getting the design phase
  underway;
  but if the Minister for Transport wanted to expedite the
  project, he should
  have gone about it the right way, by liaising with the
  Minister for Works,
  Secretary for Works and Secretary for Transport.

  Chapter 4

  21

  When we made this finding in our preliminary report, Mr Temo
  responded
  as follows:

  ‘The direction to Secretary for Works was a result of a
  suppose to be ministerial
  committee meeting. When the respective ministers did not
  turn up their
  respective secretaries or their nominees turned up.
  The Department of Works representative suggested the
  idea that it would take
  up to 6 months to have the Geo-Technical report ready
  and he wanted the
  decision to be relayed officially as a result of this
  meeting.
  This letter was drafted by my staff relaying the
  decision of the meeting.
  I was also acting as Chairman of ministerial committee
  on infrastructure_
  [10331BIT 257, page 1]

• Page 27 of 397

• Mr Temo’s response does not address the thrust of our
  criticism. His
  direction to the Department of Works was unlawful and wrong,
  in that it
  was contrary to Section 148 of the Constitution.

  .5] MINISTERS DO NOT HAVE THE POWER TO DIRECT DEPARTMENTS IN 1
  THEIR DAY-TO-DAY ACT1VMES

  There is an important aspect of Sectior 148 of the
  Constitution that muss
  be emphasised here: though Section 148 gives Ministers
  “political.
  responsibility for particular Departments, it does not give
  them any power
  to direct or control a Department in its day-to-day
  activities.

  A Minister is not the boss of a Department – the Head of the
  Department
  is the boss. The Ministers job – in conjunction with the
  National Executive
  Council – is to set the Department’s policy on important
  issues. It is not his
  job to give directions to the Departmental Head or to
  Departmental officers
  on day-to-day matters. The only exception is where a Minister
  is specifically
  empowered by an Act of Parliament to give directions or make
  certain
  decisions. 1

  Chapter 4

  22

  This important constitutional principle was explained
  by the Supreme Court
  in Supreme Court Reference No. 1 of 1982: Re Bouraga
  [1982] PNGLR
  178. We discuss it further in Chapter 39 of this
  report.

  So, even if Mr Temo had had political responsibility

• Page 28 of 397

• for the Department of
  Works, it still would have been wrong for him to direct
  the Secretary for
  Works to complete the design within six months. He
  could only request
  that that be done and ensure that there were sufficient
  funds available for
  that purpose.

  [4.6] IGNORANCE OF SECTION 148 OF THE CONSTITUTION: A MAJOR
  PROBLEM
  There is a lot of misunderstanding of Section 148 of
  the Constitution in the
  Public Service, and some Ministers appear to know
  little about it.

  The Ombudsman Commission often finds that Ministers
  believe that, simply
  because they are Ministers, they have the right to give
  directions to anyone
  in “theirs Department, or even, as shown in the present
  case, in a
  Department for which they have no responsibility. This
  is wrong. It is
  unconstitutional and it leads to chaos.

  Unfortunately, there were many occasions during the
  life of the Spring
  Garden Road/Poreporena Freeway project when the
  Minister for Transport
  exceeded his powers as a Minister. This was the first
  of them.

  * * * * * * * * * *

  Chapter 4

  23

  5. ADVERTISEMENT INVITING EXPRESSIONS OF INTEREST:
  JUNE 1990

  [5.1] ADVERTISEMENT PUBLISHED IN POST COURIER AND NATIONAL
  GAZEnE
  Advertisements inviting expressions of interests in the “Burns
  Peak/Spring

• Page 29 of 397

• Garden Road Link” were published in the Post Courier on 20 and
  22 June
  1990 and the National Gazette on 28 June 1990. [EXHIBITS 12 &
  18]

  There are three points that should be noted about the
  advertisement. They
  concern:

  the scope of the project;

  co-ordination of the project; and

  financing of the project.

  I. THE SCOPE OF THE PROJECT

  [5.2] TERMS OF THE ADVERTISEMENT

  The advertisement stated that the National Executive Council
  had decided
  that “the section of Spring Garden Road in the National
  Capital District
  between Waigani Drive and Kaevaga/Konedobu … is to be
  constructed as
  soon as possible”.

  Chapter 5

  24
  This statement was a little misleading.

  What precisely had the National Executive Council decided?

  What the National Executive Council had, in fact, decided by
  Decision No.
  14/90 was that “plans for the construction of Burns Peak Road”
  be
  formulated.

  This was a very vague decision. The only road in Port Moresby
  that is
  called “Burns Peak Road” is the dirt track running from Spring
  Garden
  Road, near Walnut Place, Hohola to the top of Burns Peak where
  the
  telecommunications transmitters are located.

  Despite the vagueness of Decision No. 14/90 it was assumed by
  everyone
  concerned that the National Executive Council was actually
  referring to

• Page 30 of 397

• Spring Garden Road. However, this interpretation still caused
  problems,
  because the National Executive Council did not specify (and
  has never at
  any stage specified) the particular parts of Spring Garden
  Road it wanted
  constructed and/or upgraded.

  [5.3] WHAT WAS MEANT BY ‘THE BURNS PEAK ROAD” OR “SPRING GARDEN
  ROAD”?

  This was not just a small side issue – it concerned the scope
  of the whole
  project. Did the National Executive Council want the upgraded
  road to
  begin at the junction of Stanley Esplanade and Cuthbertson
  Street in
  downtown Port Moresby or was the network to begin at the
  junction of
  Champion Parade and Spring Garden Road in Konedobu? Was the
  road
  to go through Burns Peak to Wards Road? Or one stage further,
  to
  Waigani Drive? Or to the end of Spring Garden Road at Boroko
  Drive? Or
  further still, to the Sir Hubert Murray Highway, at Erima? Or
  was the road
  required to go all the way to Jacksons Airport?

  Chapter 5

  25

  Any of these options could conceivably have been brought
  within the
  terms of the decision that “plans for the construction of the
  Burns Peak
  Road” be formulated.

  The Policy Submission which had generated the decision did not
  shed any
  light on this issue. It simply made reference to the scope of
  the project in
  general terms such as:

  The purpose of the Submission is to request the National
  Executive Council
  to direct Department of Works, Department of Transport and
  Department of

• Page 31 of 397

• Finance and Planning to adopt special procurement
  procedures to undertake the construction of Burns Peak Road
  (Spring Garden Road). The measures could
  construction of Burns Peak Road (Spring Garden Road). The
  measures could
  include turnkey arrangements.-
  Construction of the BUMS Peak will involve considerable
  financial commitment’ [EXHIBIT 6, page 1]
  [EXHIBIT 6, page 1]

  5.4] THE DEPARTMENT OF TRANSPORTS INTERPRETATION OF THE
  5.4] THE DEPARTMENT OF TRANSPORTS INTERPRETATION OF THE
  NATIONAL EXECUTIVE COUNCIL DECISION

  The Secretary for Transport, Mr B K Amini CBE, interpreted the
  decision
  as applying only to the section of Spring Garden Road between
  Konedobu
  and Waigani Drive. This is evident from a letter dated 7 June
  1990 he
  wrote to the Secretary for Works, Mr A Temu. Mr Amini
  described the
  scope of the project in the following terms:

  ‘I wish to restate that the scope has not change except the
  grade and the
  elimination of the design of the tunnel option. Basically
  the scope of works am-
  am-

  8% grade
  4 lanes (2 lanes in each direction)
  80 km/ph
  Establishment of a highway link between Rohola (Junction of
  Waigani Drive
  and Spring Garden Road East) and Konedobu (Junction of
  Champion Parade
  and Spring Garden Road West) by improving and extending
  Spring Garden
  Road over Burns Peak, Intersecting and crossing Wards
  Road.’
  [EXHIBIT 10, page 1]

  Chapter 5

• Page 32 of 397

• 26

  [5.5] CHANGE OF SCOPE WITHOUT EXPLANATION

  The Secretary for Transport’s interpretation of the National
  Executive
  Council decision was reflected in the advertisements inviting
  expressions
  of interest. But that interpretation did not remain constant.

  Two years after the advertisement was published, the State had
  entered
  into a contract for construction of a freeway all the way from
  downtown
  Port Moresby to Jacksons Airport. This was a considerable
  expansion in
  the original scope of the project. [EXHIBITS 231 A, 231 B,
  232]

  [5.6] WHO MADE THE DECISION TO EXPAND THE SCOPE OF THE PROJECT?

  In the course of this investigation, the Ombudsman Commission
  was never
  able to identify when the decision was made to alter the scope
  of the
  project. Nor can we say who made it. It seems to have “just
  happened’
  that way.

  Mr Amini’s explanation

  When we raised this matter in our preliminary report, the
  Secretary for
  Transport, Mr Amini, responded in the following terms:

  For every major project undertaken by the Department of
  Transport, there is
  a feasiblity study that defines the scope in general terms.
  The outcome of the
  feasibility study is a three-part report – a summary
  containing the main findings

• Page 33 of 397

• and recommendations, – a main report containing the main
  issues and – technical
  appendices or working papers. These serve as working papers
  on each project,
  including this one and there is minimum of paperwork. After
  these reports,
  follows the detailed design that pins down the last
  centimetre of the project’s
  scope – where it starts and where it ends. It should be
  noted that, for this
  project, the detailed design had not been done as it was
  part of the turn-key –
  the consortium was going to do that as part of the
  contract.

  Chapter 5

  27

  The project feasibility report prepared by the
  consultants, Ove Arup of Australia
  – entitled ‘Spring Garden Road Economic Assessment’ –
  contained the detailed
  scope of the project and it is a reference point and not a
  file. The scope was
  extended to connect the new DCA road from the airport
  (note this is normal to
  extend the scope – Department of Works almost invariably
  extend every project
  they implement). The end of the DCA project was known
  because it had been
  designed and that is where we were to end this project.
  The DCA project was
  two-lane and wisely we decided to widen it to four to
  conform with the
  Freeway. Both the start and the end of the project were
  clearly known. The
  Department followed its set procedures and this cannot be
  construed as
  defective administration.” [EXEUBIT 254, pages 2-3]

  Unsatisfactory explanation

• Page 34 of 397

• In our view, Mr Amini has not given a satisfactory explanation of
  his
  Department’s failure to make a careful and reasoned and properly
  documented decision as to the scope of the Spring Garden
  Road/Poreporena Freeway project.

  His reference to the ‘Spring Garden Road Economic Assessment’ report
  by Arup Australia is, with respect, misleading. Mr Amini suggests
  that the
  scope of the project was determined in accordance with that report.
  Even
  if that were true, we would still expect to find evidence that at
  some stage
  the Department of Transport had made a formal decision to adopt the
  recommendations of the report.

  However, the Arup report entitled ‘Spring Garden Road Economic
  Assessment’ did not provide any basis for the decision to extend the
  scope of the project to Jacksons Airport along the route envisaged
  in the
  contract with the Kinhill Kramer/Curtain Bros consortium.

  Despite Mr Amini’s claim that the start and end of the project were
  clearly
  known, the ‘Spring Garden Road Economic Assessment Report’ only
  contemplated a four-lane road from downtown Port Moresby to the
  intersection of Spring Garden Road and Waigani Drive (see Chapter 2

  Chapter 5

  28
  map, points “A” to “H”), plus other associated works. The Spring
  Garden
  Road project, according to that report, did not include the
  upgrading of
  Spring Garden Road from Waigani Drive to Boroko Drive (see map, “H”
  to
  “I”). The project also did not include a four-lane arterial road
  from the
  intersection of Spring Garden Road and Boroko Drive to Jacksons
  Airport,
  via Geauta Road, which was the route envisaged in the contract
  entered
  into with the Kinhill Kramer/Curtain Bros consortium (see map,
  points “I”
  to “K”). [EXHIBIT 9A, page 10, para 5.12; EXHIBIT 233, Part Z
  Description of Concept]

  In Arup’s Study Report, which was separate from the Spring Garden

• Page 35 of 397

• Road
  Economic Assessment Report, it was recommended that, in addition to
  the
  Spring Garden Road project, many other road construction and
  improvement projects should be undertaken in the city of Port
  Moresby.
  These included widening the section of Spring Garden Road between
  Waigani Drive and Boroko Drive to four lanes (see map, “H” to “I”).
  However, the Study Report did not recommend the widening or
  upgrading
  of Geauta Road, from Boroko Drive to the Sir Hubert Murray Highway
  (see
  map, “I” to “J”). The Study Report, in fact, recommended that the
  most
  direct route between downtown Port Moresby and Jacksons Airport
  should
  be via Sir John Guise Drive, which was proposed to be extended as a
  two-lane arterial road. [EXHIBIT 69A, para 7.0, table 1]

  Thus, neither the Spring Garden Road Economic Assessment Report nor
  the Study Report recommended a four lane arterial road along the
  route
  contained in the contract executed with the Kinhill Kramer/Curtain
  Bros
  consortium.

  Mr Hitola’s explanation

  When our criticism of the Department of Transport’s failure to
  specify the
  scope of the project was conveyed to the Secretary for Works, Mr
  Hitolo

  Chapter 5

  29
  (who was responsible for this project for a considerable time in the
  Department of Transport) he offered a different explanation.

  Mr Hitolo said that because the project was to be implemented using
  Build-Operate-Transfer financing, it was up to the private sector to
  determine the financial viability of the project before proposing
  the scope
  to the Government for approval. Mr Hitolo also said that a careful
  and
  reasoned and properly documented decision about the scope of the
  project required a feasibility study costing between K200,000.00 and
  K400,000.00, which had not been budgeted for.
  [EXHIBIT 265, page 2]

  Explanation rejected

  We find Mr Hitolo’s explanation unconvincing. Even if we accept

• Page 36 of 397

• that, in the
  case of a Build-Operate-Transfer project, the scope is determined by
  the
  developer, the fact is that no Build-Operate-Transfer proposal was
  ever
  lodged for the Spring Garden Road/Poreporena Freeway project. All of
  the
  proposals involved turnkey financing.

  This meant that inevitably – at some stage – the Government would be
  paying for the freeway. It was therefore necessary for the
  Government to
  know exactly where it wanted the freeway to go and how long the
  freeway
  would be.

  No proper comparison of competing proposals could be made unless
  everyone concerned knew the beginning and end points of the freeway
  and its route.

  It was the Department of Transport’s responsibility to make a
  careful and
  reasoned decision on this basic issue. However, it failed to do
  this.

  Chapter 5

  30

  [5.71 CHANGE OF FUNDAMENTAL DESIGN ALSO WITHOUT EXPLANATION

  We make a similar observation on the decision about the
  tunnel/cut option.
  Mr Amini’s letter to the Secretary for Works of 7 June 1990
  makes mention
  of the fact that the tunnel option had been eliminated.
  [EXHIBIT 10, third
  paragraph] But, at an interdepartmental meeting on 31 July
  1990, it was
  decided that a geotechnical investigation was required, before
  a final
  decision could be made (see Chapter 7).

  Throughout 1991, when negotiations were taking place with
  likely
  contractors, it was assumed the project would include a
  tunnel. When the
  National Executive Council made Decision No. 36/92 in favour
  of IGnhill
  Kramer Pty Ltd in February 1992, one of the key criteria (and
  one on
  which Knhill Kramer was rated “excellent”) was the “expected

• Page 37 of 397

• quality of
  tunnel”. But when the contract was signed, on 27 May 1992,
  there was
  no mention of a tunnel.

  MrAminarasmnrA

  In our preliminary report, we were critical of the Department
  of Transport
  for the haphazard manner in which the tunnel/cut issue was
  addressed.
  The Secretary for Transport, Mr Amini, replied that the
  geotechnical
  investigation undertaken by Coffey Partners International (see
  Chapter 8)
  was meant to give a conclusive answer; but he said it turned
  out to be
  inconclusive. As to the eventual decision to opt for the cut,
  rather than the
  tunnel, Mr Amini said it was made by the Department of Works.
  [EXHIBIT
  254, page 3]

  Chapter 5

  31

  Mr Hitolo’s response

  Mr Hitolo’s explanation of the confusion over the tunnel/cut issue
  was that
  it was an investment decision, to be made by the consortium selected
  to
  undertake the project. [EXHIBIT 254, page 2]

  Neither response was satisfactory

  Having considered the responses of Messrs Amini and Hitolo, we
  conclude
  that neither offered a satisfactory explanation for the Department
  of
  Transport’s failure to make a careful, reasoned and properly
  documented
  decision on the tunnel/cut issue.

  Mr Hitolo’s claim that it was an “investment decision” could only
  possibly
  make sense if the project were based on Build-Operate-Transfer
  financing.

• Page 38 of 397

• But, as pointed out earlier, no such proposal was ever put to the
  Department of Transport. The Government of Papua New Guinea was
  always going to pay for this project and therefore it should have
  decided
  whether a tunnel or a cut through Burns Peak was preferable.

  We accept Mr Amini’s description of the geotechnical report as
  inconclusive. But that report was made available in May 1991 – the
  Department of Transport had ample time after that to make a
  determination
  on this basic technical issue. Though the Department of Works was
  eventually consulted, this should have been done on a formal and
  methodical basis – not by means of casual conversation between
  officers
  of the two Departments.

  We simply do not regard it as an acceptable administrative practice
  for the
  Department of Transport to have prepared a Policy Submission which
  assumed the project would include a tunnel and then – without any
  record

  Chapter 5

  32
  of consultation or any record of any different decision – to
  allow a situation
  to develop in which the project included a cut through Burns
  Peak, rather
  than the tunnel.

  [5.8] ADMINISTRATIVE INCOMPETENCE BY THE DEPARTMENT OF
  TRANSPORT

  It is stating the obvious to say that decisions concerning
  Papua New
  Guinea’s transport infrastructure should not be made as they
  were in the
  case of the Spring Garden Road/Poreporena Freeway project.

  Decisions such as the length of a freeway and its fundamental
  design
  should not be made haphazardly. These decisions involve the
  expenditure
  of large amounts of public money. They must be made carefully
  and
  methodically and they must be properly documented. If
  Government
  departments make important policy decisions haphazardly, it is
  virtually
  impossible to keep a check on the expenditure of public money.
  And it

• Page 39 of 397

• creates an environment ripe for corruption.

  When an investigatory agency such as the Ombudsman Commission
  does
  a check on a decision-making process which led to the
  commitment of
  millions of kina of public money, it should be able to find
  evidence of a
  series of reasoned and methodical steps and the careful
  evaluation of
  alternatives. But the evidence we have gathered shows the
  exact
  opposite: it was as if decisions – like the route of the
  freeway – were falling
  out of the sky.

  The Ombudsman Commission has concluded that this situation
  arose
  because of the administrative incompetence of the Department
  of
  Transport.

  Chapter 5

  33

  IL CO-ORDINATION OF THE PROJECT

  [5.9] EXPRESSIONS OF INTEREST CO-ORDINATED BY DEPARTMENT OF
  WORKS
  ■

  Despite the Minister for Transport’s direction at the
  meeting of 22 May
  1990 that the project be advertised by the Department of
  Transport, the
  advertisements were actually organised by, and the
  responses had to be
  made to, the Department of Works.

  Apparently, this turnaround occurred because the First
  Assistant Secretary
  (Planning and Research) in the Department of Transport, Mr
  Amoako, •
  asked the Department of Works for assistance in drafting
  the
  advertisement. The Principal Engineer (Roads), Mr
  Newberry, prepared a
  draft which was forwarded to the Department of Transport

• Page 40 of 397

• for review and
  issue. However, Mr Amoako returned the document to Mr
  Newberry,
  advised him that it was satisfactory and requested that it
  be published by
  the Department of Works. [EXHIBIT 51, page 2 and EXHIBIT
  52, page 2]

  [5.10] A SIGNIFICANT LACK OF CO-ORDINATION

  Though there was nothing improper in what was done by Mr
  Amoako, this
  incident is significant because it typified what was, and
  continued to be,
  a confusing state of affairs regarding the implementation
  of the whole
  project: there was a great deal of confusion as to the
  respective roles of
  the Department of Transport and the Department of Works,
  which we
  consider was ultimately detrimental to the overall
  interests of the State.

  Chapter 5

  34

  III. FINANCING OF THE PROJECT

  [5.11] TERMS OF THE ADVERTISEMENT

  The advertisement of June 1990 alluded to the issue of
  financing the
  project, in the following terms:

  “The work may be financed by a combination of
  any or all of the following:

  a toll on the new road link
  commercial leases on reclaimed

• Page 41 of 397

• land
  grant funding by external agencies

  Other means of funding will be considered but
  it is not intended that the
  Government will contribute to any major
  extent.”

  [EXHIBITS 12 & 18]

  The advertisement did not stipulate that the
  successful contractor would
  have to itself finance the project.

  This is significant, because, as the Commission was to
  discover in the
  course of the investigation, there were a number of
  interested parties that
  were later summarily rejected because of the
  inadequacy of their financing
  proposals.

  We consider this to have been quite unfair, because,
  though the
  advertisement stated that the Government would
  probably not finance the
  project, it did not stipulate that any company which
  failed to submit a
  “financial package” would be automatically excluded
  from consideration.

  * * * * * * * * * *

  Chapter 5

  35

  RESPONSES TO THE ADVERTISEMENT: JULY 1990

• Page 42 of 397

• 6.1] RESPONSES SENT TO DIFFERENT PLACES

  The Ombudsman Commission discovered that some of the
  expressions of
  interest were sent to the Department of Works, whereas others
  went to the Department of Transport.
  Department of Transport.

  [6.2] EXPRESSIONS OF INTEREST SENT TO THE DEPARTMENT OF WORKS

  We have been able to confirm, by examining the files of the
  Department
  of Works, that ten expressions of interest were registered
  with it, on or before 31 July 1990, as required by the
  advertisement:
  before 31 July 1990, as required by the advertisement:

  Coecon Pty Ltd [EXHIBITS 13, 21]

  Barclay Bros (PNG) Pty Ltd [EXHIBIT 14]

  Connell Wagner (Old) Pty Ltd [EXHIBIT 17]

  Willing and Partners Pty Ltd [EXHIBIT 20]

  Robert Laurie Company Pty Ltd [EXHIBIT 20AA]

  Maunsell Consultants PNG/Hornibrook
  Constructions Pty Ltd [EXHIBIT 22]

  Chapter 6

  36

  Curtain Bros (PNG) Pty Ltd [EXHIBIT 23]

  LKN Construction Pte Ltd [EXHIBIT 25]

  Cardno & Davies PNG Pty Ltd [EXHIBIT 26]

  Juara Ltd [EXHIBIT 29]

  (A number of documents we obtained referred to an expression
  of interest
  being received from Frame Harvey West (e.g. EXHIBITS 24, 38,
  50, 148).
  However, we could find no evidence of this. The consulting
  firm of Frame
  Harvey West & Maso later joined with Periquan International
  Resources
  and submitted a proposal to the Minister for Transport in July

• Page 43 of 397

• 1991, but
  it appears not to have formally expressed any interest before
  that.)

  [6.3] EXPRESSIONS OF INTEREST SENT TO THE DEPARTMENT OF
  TRANSPORT

  Despite the clear statement in the advertisement that
  expressions of
  interest be registered with the Department of Works, five
  groups wrote to
  the Department of Transport. These were:

  Executive Decisions Inc Pty Ltd [EXHIBIT 1 OA]

  Kumagai Gumi Co Ltd/Kinhill Kramer Pty Ltd
  [EXHIBITS 15, 16]

  Pan Asia Management Consultants Center [EXHIBIT 27]

  Chapter 6

  37

  Ove Arup & Partners (Pacific) Pty Ltd [EXHIBIT
  21A]

  Sabina Ltd/Peter Chen & Partners Pty Ltd
  [EXHIBIT 35]

  [6.4] MOST EXPRESSIONS OF INTEREST HELD BY DEPARTMENT OF WORKS

  The Department of Works was made aware of all but one of
  these
  expressions of interest (from the Singapore-based
  Executive Decisions Inc
  Pty Ltd) when the Department of Transport faxed copies to
  them on 1 and
  2 August 1990. [EXHIBITS 34, 35] Mil

  In light of the above, we are satisfied that as at 2
  August 1990, the II
  Department of Works had at least fourteen expressions of
  interest in its
  possession and that they were held by the Principal
  Engineer (Roads), Mr IN
  E Newberry, who was the Department of Works co-ordinator
  of the project.

• Page 44 of 397

• IR
  [6.5] NO ACKNOWLEDGEMENT OF THE EXPRESSIONS OF INTEREST

  During the first week of August 1990, Mr Newberry
  prepared a summary
  of the expressions of interest and delivered it to the
  Department of
  Transport. No attempt was made at this stage to rank them
  in any way.
  We are not critical of this, because the advertisement
  had not called for
  firm proposals – all that was required were expressions
  of interest.

  We consider, however, that the Department of Works should
  have at least
  sent an acknowledgment to each of the interested groups,
  indicating when
  a more detailed information package would be available,
  which could be
  used to formulate firm proposals for the project.

  Chapter 6

  38

  When we expressed this opinion in our preliminary report, the
  Department
  of Works advised that, in fact, several of the expressions of
  interest were
  acknowledged. We were referred to letters sent to Connell Wagner and
  Ove Arup and Partners Pacific and to a telephone call made to the
  Robert
  Laurie Company. [EXHIBIT 261, page 1]

  We accept that acknowledgements were given to each of these
  companies
  in the manner described. [EXHIBITS 17A, 19A AND 20AA]

  However, acknowledgements were not given to the other twelve
  interested
  parties. In his response to the Ombudsman Commission, the Secretary
  for Works, Mr Hitolo, gave an explanation for this:

  ‘It seems that the major reason that E0Is were not acknowledged
  was the rush
  that things were done in. This meant that a proper terms of

• Page 45 of 397

• reference (TOR)
  was not sent out, so most EOI’s came in, not so much as
  expressions of interest,
  but as queries about the project. Concurrently, Mr Newberry was
  singlehandedly writing a further TOR (which would have involved a
  full team
  of !specialists for a project of this scope and magnitude) and
  handling all of
  the other National Road Design Projects. For a period Mr Newberry
  was (or
  very nearly was) the only Road Engineer in the Roads & Bridges
  Branch, where
  the work load is more than 10 engineers ems could handle. He
  probably ran out of
  time to perform everything. This staff shortage still plagues the
  branch…

  One further complication was that Department of Transport
  contacted some of
  the parties independently, asking for different information and
  receiving their
  expressions of interest. These were then passed on to Department
  of Works two
  weeks after the dosing of expressions of interest.

  These factors all contributed to the overlooking of the
  acknowledgement of
  most of the Expressions of Interest. There is no indication that
  the failure to
  acknowledge them was purposeful.’ [EXHIBIT 263, page 1]

  While we appreciate the difficulties faced by any Department
  suffering
  from shortages of staff or other resources, the Ombudsman Commission
  remains critical of the Department of Works for not sending
  acknowledgements to all the companies which had expressed interest
  in
  the project. It was a simple administrative task to perform. It was
  wrong
  of the Department of Works not to carry it out.

  Chapter 6

  39

  [6.6] BREAKDOWN IN COMMUNICATION BETWEEN DEPARTMENT OF WORKS
  AND DEPARTMENT OF TRANSPORT

  We noted earlier that despite the Minister for Transport’s
  direction that the project be handled by his Department, the

• Page 46 of 397

• advertisements calling for
  project be handled by his Department, the advertisements
  calling for
  expressions of interest were actually organised by the
  Department of
  Works.

  This was very surprising because it is clear that the Minister
  for Transport, Mr Temo, and the Secretary for Transport, Mr
  Amini, both genuinely
  Mr Temo, and the Secretary for Transport, Mr Amini, both
  genuinely
  believed that the project “belonged” to the Department of
  Transport.

  The Ombudsman Commission formed this view after interviewing
  both Mr
  Temo and Mr Amini in the course of the investigation. It was
  also apparent
  from correspondence between the Minister and the Secretary for
  Transport, that the project was regarded as belonging to the
  Department
  of Transport. We refer, for example, to a letter from Mr Amini
  to Mr Temo
  on 28 June 1990 in which, only a few days after publication of
  the
  advertisement, Mr Amini gave Mr Temo an update on the
  expressions of
  interest for his “advice and directive”. [EXHIBIT 1 9]

  [6.7] DEPARTMENT OF TRANSPORT SUDDENLY INVITES DETAILED
  PROPOSALS

  The closing date given by the advertisements for registration
  of
  expressions of interest was 31 July 1990. The Ombudsman
  Commission
  was surprised to find that before that date, the Department of
  Transport
  decided – without consulting the Department of Works -to
  contact a
  selected group of companies and invite detailed proposals for
  the project.

  Chapter 6

  40

  [6.8] ONLY A SELECT GROUP OF COMPANIES WERE INVITED TO SUBMIT
  PROPOSALS IN JULY 1990

• Page 47 of 397

• This surprising turn of events occurred around the period
  17-20 July 1990.
  A pro-forma letter headed “HEARING FOR DEVELOPMENT OF THE
  SPRING GARDEN ROAD” was drafted within the Department of
  Transport
  [EXHIBIT 20A]. It was apparently meant to be sent to all the
  companies
  which had lodged expressions of interest. We infer this from
  the “List of
  Interested Companies” attached to the pro-forma letter in the
  Department
  of Transport file. [EXHIBIT 20A, page 3]

  However, the Ombudsman Commission is not satisfied that the
  letter was
  in fact sent to all of those companies. There is no evidence
  on file
  verifying the postage or facsimile transmission of the letter
  to all of the
  companies that had lodged expressions of interest.

  Furthermore, the list in the Department of Transport file
  excludes four
  groups that had registered interest with the Department of
  Works:

  Curtain Bros (PNG) Pty Ltd;

  Cardno & Davies (PNG) Pty Ltd;

  Maunsell Consultants/Hornibrook
  Constructions Pty Ltd; and

  Juara Ltd.

  Chapter 6

  41

  [6.9] WHY WERE SOME COMPANIES DROPPED FROM THE UST?
  [6.9] WHY WERE SOME COMPANIES DROPPED FROM THE UST?

  Perhaps the reason for these companies not being on the
  Department of
  Transport’s list was that their expressions of interest were
  received later
  than the others (the four referred to above were received by
  the
  Department of Works during the period 27 July 1990 to 1

• Page 48 of 397

• August 1990).
  But other than the expression of interest from Maunsell/
  Hornibrook (which
  was one day late) all were received within the period
  specified in the
  advertisement.

  There was therefore no justification for these companies
  being dropped
  from the list and deprived the opportunity to submit a formal
  proposal.

  During the course of the Commission’s investigation,
  representatives of
  both Cardno & Davies and the Maunsell/Hornibrook consortium
  were
  questioned and they confirmed that they had never received
  any formal
  acknowledgement of their expressions of interest, or been
  invited to submit
  a formal proposal.

  It is surprising that these particular companies were omitted
  from the short- list, even though they all have permanent
  bases in Papua New Guinea and
  list, even though they all have permanent bases in Papua New
  Guinea and
  their expressions of interest were among the most detailed of
  those
  received by the Department of Works.

  Indeed, it is ironic that the company which provided the
  least amount of
  information in its expression of interest – Curtain Bros
  (PNG) Pty Ltd – was ultimately selected to be closely
  involved in construction of the freeway.
  ultimately selected to be closely involved in construction of
  the freeway.
  [EXHIBIT 23]

  Chapter 6

  42

  [6.1 0] RESPONSE BY THE SECRETARY FOR TRANSPORT

  When we made these findings in our preliminary report, the

• Page 49 of 397

• Secretary for
  Transport, Mr Amini, responded in the following terms:

  ‘The Department did not receive any complaint from any
  developer. I will urge
  the Ombudsman Commission to be cautious in promoting any
  particular
  developer. If it was unreasonable, at least one or two of
  the developers would
  have made suggestions as they always do. No developer was
  ever stopped or
  prevented from submitting a proposal. They were actively
  encouraged. In any
  case, the submission date was extended twice to
  accommodate late bids. This
  is not defective administration.’ [EXHIBIT 254, page 31

  The Ombudsman Commission does not regard Mr Amini’s response
  as
  satisfactory. His assertion that no developer was ever
  prevented from
  submitting a proposal is not borne out by the facts.

  We are not suggesting the Department rejected or refused to
  accept any
  proposal. What the Department did wrong was to invite
  proposals from
  only a select group of companies, thus excluding a number of
  companies
  from consideration.

  [6.11] OTHER MATTERS OF CONCERN

  The Ombudsman Commission is not only concerned about the
  Department
  of Transport letter being sent to only a select group of
  companies. What
  is also disconcerting is the timing of the letter and the
  demands placed
  upon the companies chosen to receive it.

  The Ombudsman Commission has been able to confirm that the
  letter
  inviting proposals was sent, during the second half of July
  1990, to at least
  five of the companies and consortiums referred to on the

• Page 50 of 397

• Department of
  Transport list:

  Chapter 6

  43

  Coecon Pty Ltd [EXHIBIT 20B]

  Willing and Partners Pty Ltd [EXHIBIT 22A]

  Ove Arup & Partners Pacific Pty Ltd [EXHIBIT 28]

  Sabina Ltd/Peter Chen & Partners Pty Ltd [EXHIBIT 30]

  Kumagai Gumi Co Ltd/Kinhill Kramer Pty Ltd. [EXHIBIT
  31]

  [6.12] THE DEPARTMENT’S REQUIREMENTS COULD NOT BE MET

  Unreasonable and unrealistic demands were imposed by the
  Department
  of Transport. The letter stated:

  “Dear Sir

  HEARING FOR DEVELOPMENT OF THE SPRING GARDEN ROAD
  This is to inform you of the fact that the Steering
  Committee administering
  the above-mentioned project will be meeting to consider
  your proposals and
  you are advised to send the details to this Department
  before the 25/7/90.

  The following planning information is required from you to
  assist the
  Government in selecting the developer.

• Page 51 of 397

• I. Technical Feasibility Report

  2. Preliminary Design or Plans.

  3. Financial Viability for a Toll System.
  4. Details of Financial Arrangements.

  5. Involvement of Landowners in the Development

  Chapter 6

  44

  Since the Government is anxious to complete this project
  by September next
  year in preparation for the South Pacific Games, it is
  important that you state
  very clearly whether you can achieve this time frame.

  Yours faithfully
  [Signed]
  BRIAN K AMINI CBE
  Secretary’. [EXHIBIT 20A]

  The Ombudsman Commission is at a loss to see how the
  Department of
  Transport could reasonably have expected these requirements
  to be met
  within one week. The only specifications available to the
  companies were
  those in the June 1990 advertisements. How could they be
  expected to
  submit meaningful technical feasibility reports, preliminary
  designs and
  financial arrangements, as well as give a proper assessment
  of the financial
  viability of a toll system and the involvement of landowners,
  in the space
  of a few days?

• Page 52 of 397

• As one consultant explained to the Ombudsman Commission, a
  detailed
  feasibility study of the type being sought by the Department
  of Transport
  would cost thousands of kina and it would take considerably
  longer to do
  than the few days suggested in the letter.

  In sending this letter, the Department of Transport gave the
  impression it
  had no idea at all of what was involved in a project of this
  magnitude.

  [6.13] MR HETOLO’S EXPLANATION

  In his response to our preliminary report, the former head of
  the Policy
  Secretariat in the Department of Transport, Mr Hitolo, made
  these
  comments:

  Chapter 6

  45

  ‘The unreasonable and unrealistic demands were placed on
  the plight&
  developers because the department was under pressure to
  meet the September
  1991 Games as mentioned in the letter. This letter was
  sent to a selected few
  which was a normal practice and usually is called
  selective tendering. As long
  as three or more proposals are tendered a selection can be
  convened. The
  whole purpose was for interested and so-called reputable
  companies to propose
  a plan of execution of the tasks mentioned in the letter
  and propose an
  alternative if they cannot meet the deadline of September
  Games stated in the

• Page 53 of 397

• letter. It was not mandatory to include all those that
  showed interest because
  some of the companies saw me personally or phoned to find
  out whether
  funding was available and when it was explained otherwise
  they indicated
  disinterest as most of them are not financiers. They only
  offer their engineering expertise and were unable to
  finance such a big project.•
  expertise and were unable to finance such a big project.•
  [EXHIBIT 265, page 3]

  Mr Hitolo’s explanation that representatives of some companies
  had seen
  him personally or telephoned to find out whether funding was
  available is
  not considered satisfactory. There were no file notes kept of
  the occasions
  on which these companies signalled their loss of interest in
  the project. We
  are also unimpressed by the suggestion that, provided at least
  three
  proposals were received, a proper selection could be made.

  The private and undocumented “selective tendering” evident in
  the limited
  dispatch of the letters of July 1990 is very, very dangerous,
  because it can
  easily lead to corruption. It is vitally important that the
  public tendering
  procedures in the Public Finances (Management) Act are
  strictly adhered
  to, especially in projects which involve millions of kina of
  public money (see
  Chapter 35).

  6.14] LETTERS WERE SENT LATE

  The unreasonableness of the demands contained in the letters
  of July 1990
  was exacerbated by the fact that the letters were sent late.

• Page 54 of 397

• Chapter 6

  46

  Of the five companies we verified as receiving the letter,
  only one received
  it before the deadline for submission of proposals. [See the
  reference in
  each of EXHIBITS 28, 30 and 31 to the letter having arrived
  late and the
  date-received stamp of 26 July 1990 on EXHIBIT 22k]

  An example of the confusion caused by the Department of
  Transport

  Coecon Pty Ltd received its letter by facsimile transmission
  at 9.32 am on
  20 July 1990, but the company was obviously (and
  understandably)
  confused as to what was required of it. At 2.25 pm on the
  same day, the
  General Manager, Mr P J Neville, sent a facsimile message to
  the Principal
  Engineer (Roads), Mr Newberry, at the Department of Works:

  ‘Please advise us of present stage of development for
  Burns Peak. For instance:
  any technical reports such as preliminary design plans
  etc.’ [EXHIBIT 711

  There is a handwritten note at the foot of that document
  (though it is not
  clear who its author is, it was probably made by an officer
  of the
  Department of Works) that typifies the general state of
  confusion:

  ‘The information requested of Department of Works by
  Coecon is what is
  requested of Coecon by Department of Transport. We seem to
  be going around
  in circles? [EXHIBIT nj

• Page 55 of 397

• [6.15] ADMINISTRATIVE INCOMPETENCE BY THE DEPARTMENT OF
  TRANSPORT

  To sum up, the Ombudsman Commission is of the view that the
  conduct
  of the Department of Transport in dispatching the pro-forma
  letter dated
  17 July 1990, advising companies that they had to send
  details of their
  proposals by 25 July 1990, was unfair, unrealistic and
  incompetent
  administratively for the following reasons:

  Chapter 6

  47

  (a) the letter was sent to only a select group of
  companies and,
  furthermore, excluded the two PNG-based companies
  which
  had submitted detailed expressions of interest;

  (b) the Department of Transport failed to advise the
  Department
  of Works (which was co-ordinating the expressions
  of interest)
  that it was sending the letter;

  (c) the letter placed unrealistic demands on the
  companies,
  which made it impractical for them to respond by
  the
  deadline;

  (d) the deadline for submission of proposals was on a
  date It
  before the closing date given in the
  advertisements for
  registration of expressions of interest; and

  (e) the letter was sent late, which resulted in most
  of the
  companies not receiving it until after the
  deadline set for
  submission of proposals.

• Page 56 of 397

• [6.16] SOME COMPANIES WERE NEVER GIVEN ANOTHER OPPORTUNITY TO
  SUBMIT PROPOSALS

  The conduct of the Department of Transport during July 1990
  cannot be
  dismissed as a mere administrative hiccup. It would have
  been possible
  to *forgive” the Department for its unfairness and
  incompetence if, at some
  later time, a proper opportunity to submit detailed
  proposals was given to
  a companies which had expressed genuine interest in the
  project. But this
  never happened.

  f’hRpter 6

  48

  As we show later in the report, a number of companies
  were never
  considered or even contacted by the Department of
  Transport again. This
  was a disgraceful state of affairs.

  When this sort of thing goes on, how can honest and
  responsible
  companies have confidence in the Department of
  Transport, or any other
  Department for that matter? How can anybody have
  confidence in the
  integrity of government in Papua New Guinea? The
  selective picking-
  and-choosing of companies to submit proposals must be
  avoided at all
  costs, since it is unfair and not in the best interests
  of the State and such
  practices breed corruption.

  [6.17] LITTLE RESPONSE TO THE REQUEST FOR PROPOSALS

  The Department of Transport’s attempt, in July 1990, to
  get the “selected”
  companies to submit proposals, was so badly
  implemented, that hardly
  any of those companies responded. This meant that in
  1991, the

• Page 57 of 397

• shortlisting process had to begin again.

  But as we show in Chapter 9, the shortlisting process
  in 1991 was also
  carried out in an arbitrary, unfair and unsatisfactory
  way.

  * * * * * * * * * *

  Chapter 6

  49

  SIGNIFICANT INTERDEPARTMENTAL MEETING:
  31 JULY 1990

  7.1] ORIGINAL PURPOSE OF MEETING

  An interdepartmental meeting, involving representatives of
  the Departments
  of Transport, Works, Finance and Planning and Attorney-
  General, was held
  on 31 July 1990. It was jointly chaired by the Secretary
  for Transport, Mr
  Amini, and the Secretary for Works, Mr Temu.

  It was originally intended that the meeting would consider
  proposals invited
  by the Department of Transport’s letters of 17-20 July
  1990. [See the
  minute from the Director of the Department of Transport’s
  Policy
  Secretariat, Mr Hitolo, to Mr Amini dated 27 July 1990 at
  paragraph 2 and
  the handwritten notes which refer to the “selection
  criteria”: EXHIBIT 24.]

• Page 58 of 397

• However, because the letters were sent late, the companies
  could not
  respond in time. Rather than being a forum for assessment
  of proposals
  the meeting therefore focused on other important issues
  concerning the
  project.

  2] ISSUES DISCUSSED AT THE MEETING OF 31 JULY 1990

  The minutes of the meeting record discussion of the
  following issues:

  Chapter 7

  50

  The name of the project – the Secretary for Transport
  favoured the name “Spring Garden Road (Burns Peak) Link”.

  Funding of the project – Mr Hitolo advised that the World
  Bank had been approached.

  The Port Moresby Roads Needs Study – the First Assistant
  Secretary of the Department of Transport’s Planning and
  Research Division, Mr Parakei, advised that the Burns Peak
  project was part of the Study.

  Engineering details – the Department of Works’ Principal
  Engineer (Roads), Mr Newberry, addressed the tunnel/cut
  option, particularly the problems associated with disposal of
  the cut.

  Landowner issues – Mr Hitolo advised that preliminary
  discussions had been held with landowners, some of whom
  were claiming lump sum payments prior to commencement
  of the project.

  Scope of the project – some consideration was given to
  upgrading other sections of the Spring Garden Road network,
  particularly Wards Road to Waigani Drive.

• Page 59 of 397

• Target date for completion – it was generally agreed the
  project could not be completed by the original target of
  September 1991, coinciding with the South Pacific Games.
  [EXHIBIT 33]

  Chapter 7

  51

  [7.3] FUTURE ACTION
  [7.3] FUTURE ACTION

  As to the next action to be taken, two things were decided:

  1. The National Executive Council was to be informed that the
  project
  could not be completed for the South Pacific Games.

  2. Further geological investigations would have to be
  undertaken, so
  that a decision could be made on the tunnel/cut option.
  [EXHIBIT
  33, paragraph 5 and EXHIBIT 51, page 4, para 3]

  [7.4] PROPOSALS WERE NOT CONSIDERED AT MEETING ON 31 JULY 1990
  [7.4] PROPOSALS WERE NOT CONSIDERED AT MEETING ON 31 JULY 1990
  MAIAITLOILEBIEIEIIING
  We note there is a reference to this meeting of 31 July 1990
  in the Policy Submission presented to the National Executive
  Council in February 1992,
  Submission presented to the National Executive Council in
  February 1992,
  which led to the decision to award the project to Kinhill
  Kramer Pty Ltd
  (see Chapter 21).

  It was suggested in the Policy Submission that the various
  expressions of interest and proposals had been presented at
  the meeting of 31 July 1990.
  interest and proposals had been presented at the meeting of 31
  July 1990.

  However, it is quite dear, from the minutes of the meeting and
  other
  documents considered by the Ombudsman Commission, that the
  proposals were Dot presented at that meeting. There were no
  proposals,
  as at 31 July 1990, that could be considered.

• Page 60 of 397

• Moreover there was never, in the life of the Spring Garden
  Road/Poreporena Freeway project, any interdepartmental meeting
  at which
  all the proposals were considered. Neither was there a meeting
  within the

  Chapter 7

  52

  Department of Transport at which all the proposals were
  considered. There
  was not even a meeting at which all the expressions of
  interest were
  considered.

  The Department of Transport’s failure to methodically consider
  all options
  available to the Government was one of the worst aspects of
  the decision-
  making process that led to the National Executive Council
  decision in
  favour of IGnhill Kramer Pty Ltd in February 1992.

  It was very unfair of the Department of Transport to
  arbitrarily reject
  expressions of interest from other companies that had put
  considerable
  time and effort into responding to the June 1990
  advertisement.

  [7.51 SECRETARY FOR TRANSPORT CLAIMS THAT ALL OPTIONS WERE
  CONSIDERED

  When we put these allegations to the Secretary for Transport,
  he claimed
  that all options were considered:

  “As I have said, all options were considered, including the
  Barclay proposals.
  Mr Lohia Hitolo with his immense breath of experience and
  qualifications, did
  the assessment. Although he did not use the preferred
  approach, nevertheless,
  the approach he used has been used quite often by the

• Page 61 of 397

• Department of Works
  Design Branch. In addition, an NEC sub-committee reviewed
  his assessment
  This is not defective administration.”[EXHIBIT 254, page 4]

  [7.6] MR HITOLO CONCEDES THAT SOME COMPANIES WERE REJECTED ON
  THE BASIS OF THEIR EXPRESSION OF INTEREST

  In contrast to Mr Amini’s response, the former head of the
  Department of
  Transport Policy Secretariat, Mr Hitolo, conceded some
  companies had ngt
  been seriously considered. The reason, he said, was that their
  expressions

  Chapter 7

  53
  of interest did not state that they were willing to
  finance the project.
  [EXHIBIT 265, page 3, para 5]

  .7] FAILURE TO CONSIDER ALL OPTIONS
  In our view, Mr Hitolo’s response is testimony to the
  lack of effective
  communication which pervaded the whole project.

  As we pointed out in Chapter 5, the June 1990
  advertisement did rat state
  that the successful contractor had to itself finance the
  project. Nor had
  such a requirement been imposed by the National Executive
  Council.

  It was therefore unfair and wrong of the Department of
  Transport to
  summarily reject companies, simply because they had not
  indicated an
  ability to provide finance.

  In the opinion of the Ombudsman Commission, by failing to
  convene a
  meeting at which all expressions of interest could be
  formally considered,
  the Department of Transport failed to consider all of the

• Page 62 of 397

• options available
  to the Government. This was wrong and defective
  administration.

  * * * * * * * * * *

  Chapter 7

  54

  8. PROGRESS DURING SECOND HALF OF 1990

  [8.1] A PERIOD OF INACTION 1

  The period between the meeting of 31 July 1990 and the
  beginning of
  1991 was significant in three respects:

  1. There was little action taken to follow-up the
  expressions of
  interest.

  2. The geotechnical survey was initiated by the
  Department of
  Works, but not completed.

  3. A draft information paper was prepared for the
  National
  Executive Council, but not presented.

  LACK OF ACTION FOLLOWING INVITATION FOR EXPRESSIONS OF INTEREST

  [8.2] DEPARTMENT OF WORKS GUILTY OF DEFECTIVE ADMINISTRATION

  Other than the unsuccessful attempt by the Department of
  Transport in
  July 1990 to obtain firm proposals from some companies, no
  further action

• Page 63 of 397

• was taken by either the Department of Transport or the
  Department of
  Works during the second half of 1990 to follow-up the
  expressions of
  interest.

  Chapter 8

  55

  It is apparent that Mr Newberry, of the Department of Works,
  drafted a
  letter of acknowledgment around the end of October 1990, which
  was
  intended to be sent to all companies which had expressed
  interest.
  [EXHIBIT 50]. But this was not done. The letter was drafted
  very late and
  shows incompetence by the Department of Works. In a minute to
  the
  Secretary of the Department of Works, Mr Temu, on 11 January
  1991, Mr
  Newberry conceded “an acknowledgement should have been sent’,
  and
  added “… but I wished to advise them what was happening or
  going to
  happen. There was/is considerable confusion over the
  acceptability of a
  tunnel proposal.” [EXHIBIT 51, page 5, paragraph 3]

  In our view, this was not an acceptable reason for not sending
  the
  acknowledgments. A number of companies had invested time and
  expense in formulating their expressions of interest and the
  very least they deserved was an acknowledgment. Mr Newberry’s
  draft letter of 31
  deserved was an acknowledgment. Mr Newberry’s draft letter of
  31
  October 1990 correctly and succinctly stated the position as
  at that date
  and we can see no good reason for it not being dispatched,
  although it
  was very late.

  Since the Department of Works was at that time co-ordinating
  the
  expressions of interest, it should be held responsible for
  this bad
  administrative error.

  THE GEOTECHNICAL INVESTIGATION
  THE GEOTECHNICAL INVESTIGATION

• Page 64 of 397

• [8.3] PROS AND CONS OF TUNNEL AND CUT
  [8.3] PROS AND CONS OF TUNNEL AND CUT

  The most important outcome of the interdepartmental meeting of
  31 July
  1990 had been the decision to conduct a comprehensive
  geotechnical
  investigation of the Burns Peak Saddle.

  Chapter 8

  56

  The rationale for this decision was explained in a minute
  from Mr Newberry
  to the Secretary for Works on 11 January 1991:

  ‘Confusion was increased by the letter/fax sent by DOT to
  some of the
  registrants on 20 July. The DOW/DOT meeting on 31 July did
  clarify some of
  the issues.
  Since that time Works has proceeded on the basis that no
  requests can be made
  for detailed proposals until the additional geotechnical
  investigation provides
  data sufficient to allow a developer to make a reasoned
  choice between a tunnel
  and a cut.

  The concept of the project if a tunnel is chosen is
  entirely different from that
  if a cut is to be constructed. A tunnel provides very
  little material for filling
  or for use in other parts of the construction. If any
  reclamation is to be carried
  out it would have to be from imported materiaL The road
  pavement and fill
  materials would also have to be imported. The tunnel also
  has a continuing
  high operation and maintenance cost. The tunnel option
  also carries a higher
  risk of damage, closure or operational loss as a result of
  an accident or
  vandalism particularly with only a single two lane tunnel
  for the initial period.
  The presently proposed tunnel cross section may be
  inadequate for safe use by

• Page 65 of 397

• trucks carrying containers. Trucks with dangerous
  materials would not be
  allowed to use the tunnel but would have to use an
  alternate route.

  It has been claimed that the tunnel would allow a grade of
  only 3% for the
  road connection. This is possible but would require a
  tunnel of much greater
  length and cost than that presently proposed. The present
  proposal has grades
  of over 8% on the western approach road.

  The cut provides considerable, possibly excessive,
  material for use in the
  construction of the project and connecting roads
  embankments and pavements
  and also for port and other reclamation. The cut would
  provide an immediate
  four lane road connection. The provision of four-lanes
  reduces the risk of
  accident, damage and operational loss. However the risk of
  loss from collapse
  of part of the cut wall still exists with the level of
  risk increasing as the cut
  slopes are steepened and the volume and cost of the cut
  decrease. There is
  however increased opportunity for early financial return
  from port and harbour
  reclamation works which may reduce the financial risks in
  the project.

  The developer has a difficult choice to make between the
  tunnel and cut options
  and the government also has to make an assessment of the
  risks it is prepared
  to take and the charges (eg. toll) it is prepared to allow
  the developer to make
  for provision of facilities.’ (Emphasis added) [EXHIBIT
  511

  [8.4] WHY WAS A FURTHER GEOTECHNICAL INVESTIGATION NECESSARY?

  A preliminary study in 1977 by consultants Dames and Moore
  had found
  it was geologically feasible to build a tunnel, but the
  Department of Works

• Page 66 of 397

• Chapter 8

  57

  obviously felt that a more detailed investigation should be
  carried out. This
  point was explained in a press statement drafted by Mr
  Newberry on 18
  January 1991 (which apparently was not released):

  The last time a detailed investigation was made of the
  underground conditions
  along the Spring Garden Road Link from Hohola to Konedobu
  was in 1977.
  Then holes were drilled in the rock and samples of the
  rock taken for
  examination. These holes were generally along the line of
  a proposed deep cut
  It was then decided that the sides of the cut may fall
  down unless flatter side slopes were used so a tunnel was
  proposed. However tunnels are expensive as
  slopes were used so a tunnel was proposed. However tunnels
  are expensive as
  the rock in the tunnel roof must be supported so that it
  does not fall into the tunnel Ventilation also becomes
  important as air can only enter and leave at
  tunnel Ventilation also becomes important as air can only
  enter and leave at
  the ends of the tunnel and fans may be necessary.

  Since 1977 there have been other geological investigations
  around Port Moresby
  and it is now believed that the underground rock
  conditions may be more
  complicated than was thought in 1977. It is now considered
  too risky to decide
  on building either a tunnel or a rock cut without further
  investigation of the
  underground conditions. This is particularly important
  since the estimated cost of the rock cut for a 4-lane mad
  is about 1(20 million, 2-lane tunnel would cost about 1(20
  million and a 4-lane tunnel would cost about IC40 million with about
  another KS million for improvements to Champion Parade, Wards Road,
  Waigani
  of the rock cut for a 4-lane mad is about 1(20 million, 2-
  lane tunnel would cost about 1(20 million and a 4-lane
  tunnel would cost about IC40 million with about another KS
  million for improvements to Champion Parade, Wards Road, Waigani
  about 1(20 million and a 4-lane tunnel would cost about
  IC40 million with about another KS million for
  improvements to Champion Parade, Wards Road, Waigani
  another KS million for improvements to Champion Parade,

• Page 67 of 397

• Wards Road, Waigani
  Drive and the existing sections of Spring Garden
  Road.’ [EXHIBIT 52A]

  [8.5] CO-ORDIANATION OF THE GEOTECHNICAL INVESTIGATION
  [8.5] CO-ORDIANATION OF THE GEOTECHNICAL INVESTIGATION

  The geotechnical investigation was co-ordinated by Mr
  Newberry and also
  involved the Senior Engineering Geologist from the Geological
  Survey of
  PNG in the Department of Minerals and Energy. It was decided
  the project
  would be offered to a private consultant, so the first step
  was to formulate
  terms of reference for the project. This was done during
  August 1990 by
  Mr Newberry. [EXHIBIT 51, page 4]

  [8.6] THE PROCEDURE USED TO SELECT THE CONTRACTOR
  [8.6] THE PROCEDURE USED TO SELECT THE CONTRACTOR

  Terms of Reference

  The terms of reference was sent to the Department of
  Transport for
  ratification during August 1990. The Secretary for Transport
  replied that

  Chapter 8

  58
  his Department agreed with the course of action proposed by the
  Department of Works.
  [EXHIBIT 42A]

  Invitations, accompanied by a document entitled “Sub Surface
  Exploration
  and Assessment for Spring Garden Road Link between Hohola and
  Konedobu Via Burns Peak Saddle: Terms of Reference for Consultants
  Brief’, were sent in September 1990 to the following companies:

• Page 68 of 397

• Engineering Geology Ltd, of Lae.

  Coffey Partners International Pty Ltd, of Australia.

  Cardno & Davies Pty Ltd, of Port Moresby.

  Kinhill Kramer Pty Ltd, of Port Moresby

  Maunsell Consultants PNG Pty Ltd, of Port Moresby.

  Ove Arup & Partners Pacific Pty Ltd, of Port Moresby.

  Snowy Mountains Engineering Corporation, of Australia.

  Hollingsworth, Dames & Moore (PNG) Pty Ltd, of Port
  Moresby. [EXHIBITS 44A, 44B1

  Failure to publicly invite tenders

  We note that there was no public advertisement inviting tenders for
  the
  geotechnical project. Nor was a “certificate of inexpediency” –
  which could
  have authorised the selective tendering procedure – issued under
  Section

  Chapter 8

  59
  40(3)(b) of the Public Finances (Management) Act. This meant that,
  though the matter was ultimately referred to a Supply and Tenders
  Board,
  there had been a breach of the Public Finances (Management) Act.

  Section 40(1) of the Act requires that tenders be publicly invited
  for the
  supply of works and services expected to cost more than the
  prescribed
  amount (which at the relevant time was K5,000.00). The public tender
  procedures of the Public Finances (Management) Act are discussed in
  detail in Chapter 35 of this report.

  We are satisfied that none of the exceptions to the general rule
  imposed
  by Section 40(1) applied in the case of the geotechnical project.

  The Department of Works therefore acted wrongly, by engaging in the
  process of selective tendering without obtaining a certificate of
  inexpediency in accordance with the Public Finances (Management)
  Act.

  Evaluation of proposals

• Page 69 of 397

• The closing date for submission of proposals was 25 October 1990
  and,
  according to Mr Newberry’s minute to the Secretary for Works of
  January
  1991, this was when the task of evaluating the proposals began.
  [EXHIBIT
  51, page 4] However, because of ambiguity in the wording of the
  terms
  of reference, due to the incompetence of the Department of Works, it
  was
  necessary to obtain supplementary proposals from a number of
  respondents. This delayed the selection process by at least a month.
  [EXHIBITS 48A, 50A, 50B]

  Submission to Design Priorities Committee and Tender Board

  On 5 December 1990, Mr Newberry presented a detailed submission to
  the Design Priorities Committee and Tender Board, recommending the

  Chapter 8

  60
  contract for the geotechnical investigation be awarded to
  Coffey Partners
  International of Sydney, Australia, at a cost of K184,000.00.
  [EXHIBIT 500].
  The recommendation was endorsed by the Board at its meeting on
  11
  December 1990. [EXHIBIT 50F] Coffey Partners International was
  subsequently advised it had won the contract and arrangements
  were
  made to commence the seismic field work during January 1991
  [EXHIBITS
  50G, 51A]

  [8-7] GEOTECHNICAL INVESTIGATION DURING JANUARY – MAY 1991
  The investigation took approximately four months to complete.
  A “Burns
  Peak Geotechnical Steering Committee” was established to
  monitor the
  project and progress reports were provided during the course
  of the
  investigation [EXHIBITS 55A, 64A, 66A, 79A, 80A, 84A]. The
  final report
  was presented to the Department of Works at the end of May
  1991.
  [EXHIBITS 87A, 87B]

  It was recommended that “the deep open cut option through
  Burns Peak
  Saddle will involve greater financial uncertainty than the

• Page 70 of 397

• tunnelling option”.
  [EXHIBIT 87B, page 29, paragraph 8]

  The time it took to organise the geotechnical investigation
  was a cause of
  frustration to some people, including the Minister for
  Transport, Mr Temo.
  On the EM TV news bulletin of 8 January 1991 he was reported
  to be
  highly critical of the Department of Works and apparently
  blamed the
  Department for delaying the project. This prompted a detailed
  response
  from the Secretary for Works, Mr Temu, which was forwarded to
  the
  Secretary for Transport in a letter dated 11 January 1991
  [EXHIBIT 52]

  Chapter 8

  61

  .8] THE GEOTECHNICAL INVESTIGATION CAUSED A DELAY OF NINE
  MONTHS

  In retrospect, it can be seen that the decision to undertake the
  geotechnical investigation delayed the planned commencement of
  the
  project by about nine months. After the interdepartmental
  meeting on 31
  July 1990:

  It took five weeks for the terms of reference for the
  consultancy brief to be finalised and invitations for
  proposals
  to be dispatched.

  The consultants were given six weeks to lodge their
  proposals.

  Six weeks were spent on clarifying and evaluating the
  proposals.

  The recommendation favouring Coffey Partners International
  was before the Design Priorities Committee and Tenders
  Board for about a week before a decision was made and
  announced.

  It took Coffey Partners International about five weeks to
  mobilise its equipment and personnel and commence the

• Page 71 of 397

• seismic field work.

  The actual investigation, including laboratory testing of
  core
  samples, took four months to complete (from late January
  1991 to late May 1991).

  Chapter 8

  11

  62

  [8.9] FINDINGS IN RELATION TO THE GEOTECHNICAL INVESTIGATION

  1. The need for the investigation

  We do not question the need for the investigation.
  Irrespective of whether
  a tunnel or a cut is built through Burns Peak, safety
  considerations
  obviously must be paramount.

  2. IMaltinSIII .cgAngthatthQinvgggigatcKLI8MINKMEM:Y.
  investigation
  However, we are critical of the Department of Works for the
  delay in
  making the decision that a geotechnical investigation was
  necessary.

  The decision to go ahead with the Spring Garden Road project
  was
  conveyed to the Department of Works in late January 1990. The
  Department of Works, amongst others, was directed to
  “formulate detailed
  plans for the construction of the Burns Peak Road”. [EXHIBIT
  61■] We
  have already noted the impreciseness of that decision and
  criticised the
  National Executive Council for not being more explicit in its
  requirements.
  However that does not excuse the Department of Works for its
  failure to
  expeditiously implement the decision.

  Nor is it an excuse to say that the Department of Works was
  waiting for
  an indication from the Department of Transport as to the route
  of the road.
  The geotechnical investigation was a matter that was clearly
  within the
  jurisdiction of the Department of Works.

• Page 72 of 397

• When we raised these matters in our preliminary report, the
  Secretary for
  Works responded in the following terms:

  Chapter 8

  63

  ‘What caused the delay in deciding to perform the Geotechnical
  Investigation?
  Initially it was not projected to perform a further Geotechnical
  Investigation.
  However, Department of Transport wanted to jump in and build the
  project
  without any significant planning, while Works was pushing for as
  much
  planning and advise from specialists as possible. Several times
  Mr Newberry
  (then Principal Engineer Roads) met with the Geological Survey
  Section of
  DME to discuss the project. Of specific concern was the “ICold
  Fault’ which
  was known to run right through the ‘saddle’. It appears that the
  requirement
  for further investigation was not seriously considered until
  advised accordingly
  by a Senior Engineering Geologist at an inter-departmental
  working group on
  19 July 1990 [see Exhibit 51]—This seems to be the conception of
  the requirement
  for further geotechnical investigation to give a degree of
  confidence to any
  decision regarding ‘Open Cut” or ‘Tunnel”‘ [OCKIBIT 263, page 1]

  Having considered this response, the Ombudsman Commission retains
  the
  view that the Department of Works should have, by itself, raised the
  issue
  of the need for a geotechnical investigation sooner than it did,
  since it is
  the appropriate Department responsible for such matters in the
  interests
  of the State.

  The excavation of the Burns Peak Saddle was clearly going to be a
  complex engineering task. It was up to the Department of Works to

• Page 73 of 397

• find
  out whether any further geotechnical investigation was necessary as
  soon
  as possible and take follow-up action. The need for this should have
  been
  raised at least as early as the interdepartmental meeting on 22 May
  1990
  (see Chapter 4).
  N

  The Ombudsman Commission considers that the six month delay in
  making the decision to undertake the geotechnical investigation was
  unjustifiable. Furthermore, in the absence of a certificate of
  inexpediency,
  invitations to submit tenders for this work should have been
  publicly
  advertised – not selectively issued.

  Once the decision was made, on 31 July 1990, to undertake the
  investigation, there were some further delays but – with the
  exception of
  the failure to publicly invite tenders – the Department of Works
  handled the
  matter well from then on.

  Chapter 8

  64

  We note that various proposals were carefully and
  methodically evaluated.
  The proposal made by Coffey Partners International was
  detailed and well
  presented [EXHIBIT 48A]. There was a sharp contrast between
  the quality
  of that document and some of the atrocious documents [eg
  EXHIBIT 115]
  that were later to be paraded as serious proposals for
  construction of the
  freeway.

  Indeed, the professional way in which the geotechnical
  investigation
  proposals were evaluated was in stark contrast to the events
  which later
  led to the execution of the contract for the design, finance
  and
  construction of the Poreporena Freeway.

• Page 74 of 397

• THE MINISTER FOR TRANSPORTS DRAFT POLICY SUBMISSION OF AUGUST 1990

  [8.10] DECISION TO ADVISE NATIONAL EXECUTIVE COUNCIL OF PROGRESS

  Besides the decision to undertake the geotechnical
  investigation, the other
  important outcome of the interdepartmental meeting of 31 July
  1990 was
  the decision to advise the National Executive Council of
  progress on the
  project, in particular to clarify the fact that it would be
  impossible to finish
  the Burns Peak link in time for the South Pacific Games in
  September
  1991. To this end, a document headed “Policy Submission For
  Members
  of the National Executive Council” was drafted within the
  Department of
  Transport in August 1990. [EXHIBIT 36]

  Chapter 8

  65
  1

  8.11] CONTENT OF THE DRAFT POLICY SUBMISSION

  This document gave an update of the status of the project
  as at August

  1990, and referred to the decision to undertake a further
  geotechnical

  investigation of the Burns Peak Saddle. The bulk of the
  document,

  however, was devoted to explaining the need for public
  participation in the

  planning process and the preparation of an environmental
  impact

• Page 75 of 397

• statement.

  The document concluded as follows:

  It is recommended that the Spring Garden Road
  project scope includes
  the commencement point (Cuthbertson and
  Stanley Esp. Junction) at the
  Port Moresby main overseas wharf and
  termination at the Jackson’s
  AirPort-

  2. It is recommended that an Environmental
  Impact Statement be made
  of the whole route using the N.S.W. manuals
  including soil erosion
  guide for the assessment.

  3. It is recommended that the upgrading to the
  Waigani Road and any
  other spot improvements along the main
  arterial network be done as
  a matter of urgency in preparation for the
  South Pacific Games in 1991.

  4. It is recommended that the savings be
  immediately identified in the
  current capital works and studies votes in
  order to implement these
  projects.

  5. It is recommended that the Council note that
  advice of the experts for
  delay in the opening of the Burns Peak link
  and approve the new scope
  to be implemented in three stages.

  6. It is recommended that this project be
  developed through involvement
  of the private sector and the landowners
  using toll for financing.”

• Page 76 of 397

• .12] WIDE CIRCULATION OF THE DRAFT POLICY SUBMISSION

  This document was widely circulated and comments were
  received from

  a number of Government departments. [EXHIBITS 39, 40, 41,
  42, 43, 44,

  48]

  Chapter 8

  66

  Some departments expressed serious reservations about its
  recommendations. The Secretary for Finance, Mr Morea Vele,
  for example,
  was particularly concerned about the economic viability and
  the security
  risk of the tunnel/toll road proposal. [EXHIBIT 42]

  The Secretary of the Department of Environment and
  Conservation, Mr
  Barney Rongap, pointed out that Papua New Guinea had its own
  environmental impact legislation – the Environmental Planning
  Act (Chapter
  No. 370) – and therefore it was inappropriate to rely on the
  New South
  Wales model for this purpose.

  The draft policy submission was also sharply criticised
  within the
  Department of Transport itself. [EXHIBITS 46, 47] The First
  Assistant
  Secretary (Land Transport Division), Mr M Ume, went so far as
  to say:

  ‘It is very difficult to follow what the Submission is
  about and perhaps if it is
  on Burns Peak then more discussion should be on Burns Peak
  Road itself.*

• Page 77 of 397

• [8.13] RE-DRAFTING OF THE JULY 1990 DOCUMENT

  In January 1991, after receiving the views and comments from
  various
  departments, the Department of Transport redrafted the
  National Executive
  Council submission. This time, the document was entitled
  “Information
  Paper For Members of the NEC: Burns Peak Link of Spring
  Garden Road”.
  [EXHIBIT 54]

  This document also emphasised the need for an environmental
  impact
  statement. But it was different to the earlier document in a
  significant
  respect: whereas the July 1990 document contained very little
  discussion
  of the method of financing the project, the January 1991
  document was
  dogmatic in its assertion that “this project will be
  constructed under Build,
  Operate and Take-over (BOT) system”. [EXHIBIT 54, page 5,
  para 2.12]

  Chapter 8

  67

  [8.14] POUCY SUBMISSION AND INFORMATION PAPER NOT PRESENTED TO
  NATIONAL EXECUTIVE COUNCIL

  The Ombudsman Commission was surprised to discover that,
  despite the
  time and effort put into the drafting and redrafting of the
  National Executive
  Council submission and the wide circulation of the first
  draft, neither the
  first nor the second draft submission was actually filed with
  the National
  Executive Council.

  That is, despite the fact that draft submissions had been
  circulated for
  more than six months, the National Executive Council was not
  fully
  informed – as it should have been – of progress on the
  project and the
  reasons for delay in its commencement.

• Page 78 of 397

• We note that the Department of Transport complied with the
  normal
  administrative requirement to give status reports to the
  Secretary of the
  Department of Prime Minister and National Executive Council.
  [EXHIBITS 6C, 25A, 63A, 77A, 87C & 124A]

  However, the Ombudsman Commission considers that, because of
  the
  magnitude of the project, the Minister for Transport had an
  administrative
  obligation to ensure the National Executive Council was fully
  and formally
  advised of the important developments that were taking place.
  In our view,
  this duty was not discharged.

  [8.15] MINISTER FOR TRANSPORT FAILED TO PROPERLY ADVISE NATIONAL,
  EXECUTIVE COUNCIL OF PROGRESS

  There were some aspects of the August 1990 document which
  should
  have been brought to the attention of the National Executive
  Council as a

  Chapter 8

  68
  matter of priority, particularly the recommendation that the
  scope of the
  project be expanded. But this important policy matter was
  very poorly
  documented and was eventually put before the National
  Executive Council,
  in February 1992, without explanation or justification. The
  scope of the
  project, being essentially important, should have been
  explained and
  defined in detail for the benefit of the members of the
  National Executive
  Council.

  The August 1990 document was widely circulated for views and
  comments.
  The failure to present it reveals a lack of regard for proper
  administrative
  procedures by the Minister for Transport, Mr Temo. He did not
  appreciate
  the importance of keeping his colleagues, at the National
  Executive Council
  level, fully informed of progress of the project and
  explaining significant

• Page 79 of 397

• changes in policy.

  [8.16] THE NEED TO KEEP THE NATIONAL EXECUT1VE_COUNCIL FULLY
  INFORMED

  There is a lesson to be learned here by all departments and
  ministries: if
  delays are experienced in the implementation of Government
  policies, the
  National Executive Council must be advised of the delay and
  the reasons
  for it.

  Often there are justifiable reasons for projects not being
  implemented as
  soon as originally planned. But if the National Executive
  Council is not
  advised why there has been a delay, it will naturally be
  assumed that there
  are no good reasons for further delay. The National Executive
  Council will
  become frustrated and impatient and the environment will be
  ripe for the
  making of rash and ill-considered decisions in the end.

  Chapter 8

  69

  All of these things happened in the case of the Spring Garden
  Road/Poreporena Freeway project.

  3.17] SCOPE OF THE PROJECT

  The first recommendation of the August 1990 “Policy
  Submission” was that
  the scope of the project should be expanded, so as to create a
  direct link,
  via Spring Garden Road, between downtown Port Moresby and
  Jacksons
  Airport. [EXHIBIT 36, page 5, para 11.1]

  However, there was no discussion or analysis – in fact, hardly
  a mention –
  of this crucial policy decision in the text of the Submission.

  As we emphasised in Chapter 5, the Ombudsman Commission found
  ft
  extraordinary that in the course of this investigation we were
  not able to

• Page 80 of 397

• pinpoint when the decision was made to expand the scope of the
  project,
  from the original proposal to link the two unconnected
  sections of Spring
  Garden Road between Konedobu and Hohola.

  The way in which this recommendation was added to the document
  –
  giving the appearance that it was an afterthought – simply
  adds to the
  mystery surrounding that decision.

  18] THE BUILD-OPERATE-TRANSFER CONCEPT

  Another feature of the January 1991 draft “Information Paper’
  is that it is
  the first Department of Transport document which referred to
  the Build-
  Operate-Transfer method of financing the project.

  Chapter 8

  70

  However, just as the August 1990 document failed to explain
  or discuss
  the pros and cons of expanding the scope of the project, the
  January
  1991 document failed to weigh the pros and cons of different
  methods of
  financing the project. [EXHIBIT 54, page 5, paragraphs 2.12 –
  2.13]

  These failures clearly indicate lack of consultation
  resulting in the poor
  drafting of the documents for the National Executive Council.

  [8.19] DEFICIENT POUCY MAKING BY THE DEPARTMENT AND MINISTRY OF
  TRANSPORT

  The fact that both the August 1990 Policy Submission and the
  1991
  Information Paper documents were only in draft form and never
  actually
  filed with the National Executive Council means that the
  Ombudsman
  Commission cannot be overly critical of their contents.

  But, in the absence of evidence to the contrary, these
  documents support

• Page 81 of 397

• our conclusion that important policy decisions such as the
  length of the
  freeway and the method of financing were being made by the
  Department
  and Ministry of Transport without proper analysis or
  documentation.

  SUMMARY OF DEVELOPMENTS DURING 1990

  [8.20] PROGRESS DURING 1990

  Progress on the project during 1990 can be summarised as
  follows:

  Chapter 8

  71

  In late January 1990 the National Executive Council directed
  the Department of Transport, the Department of Works and
  the Department of Finance & Planning to formulate detailed
  plans for the project.

  Nothing was done until 22 May 1990, when the Minister for
  Transport chaired an interdepartmental meeting and directed
  that design of the project be finalised within six months and
  expressions of interest be publicly invited.

  An advertisement inviting expressions of interest was
  published in June 1990 by the Department of Works.

  Around 17 – 20 July 1990, the Department of Transport invited
  a select group of companies to lodge proposals for the
  project, but this exercise was incompetently handled, hence
  there was little response.

  On 31 July 1990, it was decided that the Department of
  Works would arrange a further geotechnical investigation of
  the Burns Peak Saddle.

  A draft policy submission, intended to provide an update on
  progress, was circulated for comment during August and
  September 1990. The submission was subsequently revised
  but never presented to the National Executive Council.

  The first version of the submission proposed that the scope
  of the project be considerably expanded, but there was no
  documented discussion or analysis of this proposal.

• Page 82 of 397

• Chapter 8

  72

  On 11 December 1990, the contract for the
  geotechnical
  investigation was awarded to Coffey
  Partners International Pty
  Ltd of Australia after invitations were
  sent to selected
  companies by the Department of Works.

  [8.21] STATUS OF THE SPRING GARDEN ROAD PROJECT AT THE END OF
  1990

  By the end of 1990:

  The National Executive Council had not
  been fully and
  formally advised of the delay in
  commencement of the project
  or the apparent proposal to expand its
  scope.

  The geotechnical investigation had not
  begun, so no decision
  had been made on the tunnel/cut option.

  No decision had been made on the exact
  route or length of
  the road.

  No decision had been made on the method
  of financing the
  project.

  * * * * * * * * * *

  Chapter 8

  73

  9. PREPARATION OF SHORTLIST: FEBRUARY 1991

• Page 83 of 397

• 9. PREPARATION OF SHORTLIST: FEBRUARY 1991

  [9.1] FIFTEEN GROUPS HAD EXPRESSED INTEREST
  [9.1] FIFTEEN GROUPS HAD EXPRESSED INTEREST

  The advertisements in June 1990 inviting expressions of
  interest in the
  “Burns Peak/Spring Garden Road Link” had attracted fifteen
  interested
  parties. In July 1990, the Department of Transport made an
  abortive
  attempt to get some of them to submit firm proposals.

  It was later decided that the Department of Works would
  organise a
  detailed geotechnical investigation of Burns Peak, so a firm
  decision could
  be made on the tunnel/cut option. This investigation began in
  January
  1991 and continued until May 1991. While that investigation
  was still in
  progress, a shortlist of prospective developers was prepared.

  In this chapter we record our findings as to the preparation
  of the shortlist.
  .

  MINISTER FOR TRANSPORT PREPARES SHORTLIST
  MINISTER FOR TRANSPORT PREPARES SHORTLIST

  [9.2] WHEN WAS THE SHORTLIST PREPARED AND WHO PREPARED IT?
  [9.2] WHEN WAS THE SHORTLIST PREPARED AND WHO PREPARED IT?

  The Ombudsman Commission has concluded that the shortlist was
  prepared in February 1991 by the Minister for Transport, Mr
  Anthony
  Temo.

  Chapter 9

  74

  On 27 February 1991, Mr Temo wrote to the Secretary of the
  Department
  of Transport in the following terms:

• Page 84 of 397

• “My Dear Secretary

  A total of 15 (Fifteen) companies have shown or
  registered expressions
  of interest to design and construct the Burns Peak
  Road..

  This is under Turnkey arrangement meaning financing
  will be done
  by them.

  The following Companies have been selected for short
  list-

  1. Outlet Year Limited

  2. Sietco

  3. Barclay Bros and Maunsell Joint

  4. Curtain Bros

  5. L.K.N. Construction

  6. Kumagai Gumi

  7. Sabina Group Consortium

  Please inform them respectively by way of fax and
  organise a bid walk
  in 3 weeks from 27/2/91.” [EXHIBIT 631

  [9.3] A LATE ADDITION TO THE SHORTLIST

  On 28 March 1991, the Minister for Transport wrote another
  letter to the
  Secretary for Transport:

  ‘My dear Secretary

  I refer to my letter dated 27 February, 1991 in which I
  short listed a number of
  companies for the Burns Peak Project.

• Page 85 of 397

• Chapter 9

  75

  I now wish to include the following on the short list-

  Tasman Pacific International

  Please inform the Company accordingly” [F3CIBB1T 69]

  [9.4] THE MINISTER PREPARED THE SHORTLIST WITHOUT ADVICE OR
  CONSULTATION

  In his response to our preliminary report Mr Temo
  emphatically denied
  that he had prepared the shortlist. He said the letter to the
  Secretary for
  Transport of 27 February 1991 was simply a list of companies
  which had
  sent written expressions of interest to his office. He said
  his staff in the
  Ministry did not understand the term “shortlist”:

  ‘The various expressions of interest in the Burns Peak
  Road project by different
  companies was sent by way of letter or verbal to 3
  different place:

  (a) Department of Works
  (b) Department of Transport
  (c) Chairman of Ministerial Committee and Minister for
  Transport.

  Some companies about 15 contacted my office. About half of
  them verbally and
  the other half by way of letter or fax.

  It was the Department of Transport in consultation with
  Department of Works
  that prepared the short list not me or my office.

• Page 86 of 397

• Department of Works and the Department of Transport did
  their short list and
  Chairman of the Ministerial Committee did their own short
  list”
  [EXHIBIT 257, page 1]

  With due respect to Mr Temo, the Ombudsman Commission cannot
  accept
  what he says about the preparation of the shortlist. The
  terms of his letter
  to the Secretary for Transport on 27 February 1991 were quite
  clear: he
  advised that seven companies “have been selected for
  shortlist”. There is
  no evidence the companies on the Minister’s list had written
  directly to him,
  rather than the Department of Transport.

  Chapter 9

  76

  The Ombudsman Commission is satisfied that neither the
  Department of
  Transport nor the Department of Works had any involvement in
  the
  preparation of the shortlist. The Minister prepared the
  shortlist without
  consulting either Department.

  [a5] MINISTERS SHOULD NOT BE INVOLVED IN IMPLEMENTATION MATTERS

  The Minister for Transport’s preparation of the shortlist in
  February 1991
  was defective administration in a number of respects.

  First, there was no need for a shortlist to be prepared. The
  interested
  parties had only submitted expressions of interest in the
  project and had
  not been given the opportunity to submit firm proposals, so
  preparation
  of a shortlist was premature.

  Even if it had been an appropriate time to prepare a
  shortlist, this job
  should have been done by officers of the Department of

• Page 87 of 397

• Transport and/or
  the Department of Works. It is not the function of a Minister
  to prepare a
  shortlist for a public works project.

  Too often in Papua New Guinea, Ministers make unilateral
  decisions without
  calling on their qualified and experienced Departmental
  officers for advice.
  This is very bad. If Ministers cut themselves off from their
  Departments –
  by always giving directions, rather than asking for advice –
  it is inevitable
  they won’t always have the best information before them on
  which to make
  decisions.

  It was very naive of the Minister for Transport to believe he
  had the
  necessary technical knowledge to prepare a shortlist of
  developers without
  the advice of his Department.

  Chapter 9

  77 O

  Whenever a Minister makes an important decision in this way,
  it inevitably
  leads to suspicion about his motives. People start to ask
  questions. Why
  were some companies selected for the shortlist and others left
  out? Did
  some companies make the shortlist because the people running
  them
  were friends or wantoks of the Minister? Was anyone bribed? Et
  cetera.

  The only way the People can have confidence in their
  Government
  departments and Ministers is if normal, established procedures
  are
  followed.

  The decision-making process must be above suspicion.

  [9.6] SOME COMPANIES WERE SHORTLISTED WITHOUT JUSTIFICATION

  The Ombudsman Commission makes the following findings in
  relation to
  the eight groups shortlisted by the Minister for Transport:

• Page 88 of 397

• 1. Outlet Year Ltd
  This Hong Kong-based company had not lodged an expression of
  interest.
  It first became interested in the project in February 1991,
  when the Minister
  for Transport travelled to Taiwan and Hong Kong and was
  entertained by
  the company’s officers and its associates (see Chapter 12).

  As a result of the Minister’s visit, the company’s Managing
  Director, Mr
  Leung Keung, wrote a letter dated 12 February 1991 to Prime
  Minister
  Namaliu. Outlet Year Ltd offered to “design and build Southern
  Highlands
  Kikori Road and Burns Peak Road in Port Moresby’ and “invest
  up to US
  dollars 5 billion in Papua New Guinea.” [EXHIBIT 57]

  Chapter 9

  78

  On 13 February 1991, Outlet Year Ltd wrote similar letters addressed
  to:
  “Hon. Anthony Temo, Minister for Transport or Hon. Ted Diro, Deputy
  Prime Minister, Acting Transport Minister”. [EXHIBITS 59 & 60]

  Soon after that, on 19 February 1992, Mr Diro wrote to the Secretary
  for
  Transport, advising that he had received advice from Mr Temo that
  Outlet
  Year Ltd be “included in the pre-qualification for all tenders in
  Erave-Kikori
  and Burns Peak roads in Port Moresby”. Mr Diro directed the
  Secretary
  to take “necessary actions” in relation to the “pre-qualification”
  of Outlet
  Year Ltd. [EXHIBIT 61]

  The Ombudsman Commission was to discover in the course of this
  investigation that the Minister for Transport’s trip to Hong Kong,
  where he
  held discussions with Outlet Year Ltd, was paid for by associates of
  that
  company. This is wrong.

  The shortlisting of this particular company was therefore improper.

  It should also be noted that the Deputy Prime Minister does not have
  power to give directions to a Departmental Head, unless such a power

• Page 89 of 397

• is
  expressly given by an Act of the Parliament or some other law. The
  office
  of Deputy Prime Minister is created by Section 2 of the Prime
  Minister Act
  (Chapter No. 27 of the Revised Laws). However it does not carry with
  it
  any greater power of direction and control than those held by other
  Ministers. The purpose of the office of Deputy Prime Minister is to
  enable
  a Minister to step into the shoes of the Prime Minister whenever the
  Prime
  Minister is unable to perform the duties of his office or any of the
  other
  situations in Section 143 of the Constitution exist.

  Chapter 9

  79

  That is, the person holding the office of Deputy Prime Minister
  is not the
  “second-in-charge” of the Ministry and does not have any powers
  of
  direction and control by virtue of holding that office. His
  powers and
  responsibilities are at all times constrained in accordance with
  Section 148
  of the Constitution (see Chapter 39).

  2. Sietco
  The company known as Sietco (PNG) Pty Ltd is a PNG off-shoot of a
  government agency in the People’s Republic of China, known as the
  “China Sichuan Corporation for International Techno-Economic Co-
  operation”. Neither of these groups had lodged an expression of
  interest.

  Sietco is interested in road construction projects in the
  Southern Highlands
  Province and, during 1991, the company had a very close business
  connection with the Minister for Transport, Mr Temo. In fact,
  just a few
  weeks before directing that Sietco be included on the shortlist,
  the
  Minister’s family company, Outskirts Construction Pty Ltd, had
  entered into
  a “partnership agreement” with Sietco, whereby the two companies
  agreed
  to jointly invest in Papua New Guinea and set up a “partnership
  enterprise”

• Page 90 of 397

• to undertake “construction and maintenance of roads and some
  other civil
  engineering projects as contractor or sub – contractor’. This
  agreement
  was signed by the Minister, on behalf of Outskirts Construction
  Pty Ltd.
  [EXHIBIT 55B]

  The closeness of the relationship between the Minister and Sietco
  is further
  demonstrated by the fact that only five days before including the
  company
  on the shortlist, the Minister had visited China and signed an
  agreement
  with Sietco’s Chinese parent company, which was intended to
  clarify the
  partnership contract signed just a couple of weeks before in
  Papua New
  Guinea. [EXHIBITS 62k 62B]

  Chapter 9

  80

  When the Minister was interviewed by the Ombudsman Commission, he
  was asked whether he thought it improper a company he was so
  closely
  involved with, was asked by him to lodge a proposal for
  construction of
  the freeway. He did not deny his close relationship with Sietco
  but stressed
  that, as soon as the company had expressed an interest, he had
  instructed
  that it not be further considered because it might not look
  right.

  But, if that is the case, why did the Minister put the company on
  the
  shortlist?

  The Ombudsman Commission cannot accept Mr Temo’s explanation and
  is forced to conclude that his decision to shortlist this company
  was
  improper.

  3. Barclay Bros and Maunsell Joint
  Both of these groups had lodged expressions of interest -but not
  as joint
  venturers. Maunsell Consultants were linked with Barclay Bros in
  1988
  (see Chapter 2), but had actually lodged a joint expression of
  interest with

• Page 91 of 397

• Baulderstone Hornibrook in response to the June 1990
  advertisement.

  The Minister’s decision to link Maunsell with Barclay Brothers
  therefore did
  not make sense.

  4. Curtain Bros
  This company – though it ultimately became closely involved with
  the
  consortium selected to undertake the project – had submitted the
  expression of interest with the least amount of detail.

  Chapter 9

  81 ■

  While it is an established construction company, with experience
  in Papua
  New Guinea, we query its inclusion at the expense of other
  companies
  which had expressed their interest in the project in a more
  active and
  detailed manner.

  5. LKN Construction
  This Singapore-based company, represented by LKN (PNG) Pty Ltd,
  had
  lodged a two page expression of interest in July 1990.

  6. Kumagai Gumi
  This Japanese company had lodged a joint expression of interest
  with
  Kinhill Kramer Pty Ltd in 1990. The company had shown interest
  in the
  project for some time.

  7. Sabina Group Consortium
  Peter Chen and Partners, of Brisbane Australia, had lodged an
  expression
  of interest on behalf of the Sabina Group Consortium, in July
  1990. A
  brochure, giving details of the consortium’s previous
  activities, was
  enclosed, but otherwise no details concerning the Spring Garden
  Road
  project were provided.

  8.. TagitaL.PagifiCalea

• Page 92 of 397

• This PNG company is essentially a K2.00 shelf company, which
  operates
  a small consultancy business in Port Moresby. It was added to
  the
  shortlist one month late. At the relevant time, its 100%
  shareholder was
  Mr Sam Pepena.

  The Ombudsman Commission also became aware that the Deputy Clerk
  of the National Parliament, Mr Ano Pala, had a close association
  with the
  company.

  Chapter 9

  82

  Tasman Pacific International has few assets and no employees.
  It has no
  experience in road construction or design. It had not lodged
  an
  expression of interest.

  The company later joined with the Australian company Cooks
  Mitchell
  Peacock Stewart Pty Ltd to lodge a formal proposal for the
  project.

  However, in March 1991, there was little justification for
  Tasman Pacific
  International being on the shortlist at the expense of other
  established
  PNG companies.

  [9-7] PREPARATION OF THE SHORTLIST WAS IRRESPONSIBLE AND
  QUESTIONABLE

  Three of the groups on the shortlist had not submitted an
  expression of
  interest. Of these, the Ombudsman Commission discovered that
  the
  Minister for Transport, Mr Temo, had direct negotiations with
  two of them
  (Outlet Year and Sietco) outside Papua New Guinea, just a
  couple of
  weeks before he gave the shortlist to the Secretary for
  Transport. The
  other one – a Port Moresby shelf company with no experience in
  road
  construction or design, Tasman Pacific International – was
  added to the

• Page 93 of 397

• shortlist one month later.

  Question-marks also surround the decision to put companies
  such as
  Curtain Bros and Sabina on the shortlist, because their
  expressions of
  interest were flimsy compared with the carefully documented
  expressions
  of interest submitted in July 1990 by established PNG
  consulting firms
  such as Cardno & Davies and Maunsell Consultants.

  Chapter 9

  83

  In the opinion of the Ombudsman Commission the most favourable
  view
  that can be taken of the Minister for Transport’s shortlist is
  that it was
  unfair and arbitrary. But unfortunately the way in which it was
  prepared
  leaves room for suspicion that the Minister for Transport was
  compromised.
  Whether this was, in fact, the case, the Ombudsman Commission
  cannot
  say, because we found no hard evidence of bribery.

  However, the evidence shows that, if the Minister was not
  compromised,
  he was at least naive and irresponsible in believing that he
  alone – and not the officers of the Department of Transport or
  the Department of Works –
  the officers of the Department of Transport or the Department
  of Works –
  had the necessary technical expertise to decide which companies
  were
  to be shortlisted.

  VENTS AFTER PREPARATION OF SHORTLIST

  ).8] WHAT ACTION WAS TAKEN FOLLOWING PREPARATION OF THE
  MINISTER’S SHORTLIST?

  Shortly after preparation of the shortlist, a standard letter
  was drafted
  within the Department of Transport, over the signature of the

• Page 94 of 397

• Secretary for
  Transport, Mr Amini.

  Copies of this letter – dated 8 March 1991 – were apparently
  intended to
  be dispatched to each of the shortlisted companies, explaining
  the
  information to be contained in their proposals.

  Chapter 9

  84

  The letter read, in part:

  Your company has been short-listed for the above-
  mentioned project and you
  are hereby requested to send K40.00 … for cost of
  reproducing the Terms of
  Reference and preliminary “Economic’ and “Financial
  Assessment’ reports plus
  air mail to your address if you do not have an
  Office here in Port Moresby —

  Your proposal should contain the following
  information:-

  Financial Plan

  1.1 Traffic Forecasts

  Traffic throughout estimates and
  anticipated growth of Pori
  Moresby with your estimate of timing for
  maximum capacity,

  1.2 Design, construction and other
  associated costs for suggested
  alternative schemes must be on a fixed
  prize [sic] basis.

  These conceptual designs should
  estimated Bills of Quantifies
  for our guide only.
  The estimate of total project cost must
  include the engineering

• Page 95 of 397

• elements of the work as well as costs
  payable to Government,
  including a land premium for area
  occupied if and when needed,
  An estimate cost of setting up the
  project company for this
  project and training the operatives
  prior to opening _11
  [EXHIBIT 64, page 1]

  The letter concluded by stating:

  It must be pointed out very clearly that all
  financing will be your
  responsibility.” [EXHIBIT 64, page 3]

  [9.9] MISSING DOCUMENTS

  There are some perplexing things to note about the
  standard letter drafted
  by the Department of Transport. In particular, there are
  no copies of it on
  any Department of Transport files that the Ombudsman
  Commission
  inspected: there is simply no Departmental record that
  these letters were
  sent, or even that they were drafted.

  Chapter 9

  85

  We only became aware of their existence when the former Minister for
  Transport, Mr Temo, was summoned to appear before the Commission
  and produce relevant documents. Mr Temo had fourteen copies of the
  letter in his possession, addressed to the following companies:

  1. Barclay Bros (PNG) Pty Ltd 1
  2. Cardno & Davies PNG Pty Ltd
  3. Coecon Pty Ltd

• Page 96 of 397

• 4. Connell Wagner (Old) Pty Ltd
  5. Curtain Bros (PNG) Pty Ltd
  6. Frame, Harvey and West
  7. Juara Ltd
  8. Kumagai Gumi/Kinhill Kramer
  9. LKN (PNG) Pty Ltd – •
  10. Maunsell Consultants PNG
  11. Ove Arup & Partners Pacific Pty Ltd ■
  12. Robert Laurie Pty Ltd
  13. Sabina Group Consortium
  14. Sietco (PNG) Pty Ltd
  [EXHIBITS 64, 64B – 64N] •

  I

  We also became aware that a copy of the same letter – dated 28 March
  1991 – was sent to Tasman Pacific International, the company that
  was a
  late addition to the Minister’s shortlist. There was also no copy of
  this
  letter in the Department of Transport’s files. [EXHIBIT 68B]

  Chapter 9

  86

  [9.10] FURTHER MYSTERY SURROUNDING THE LETTERS OF MARCH 1991

  Each of the letters dated 8 March 1991 began by stating:
  “Your company
  has been short-listed for the above-mentioned project” (but
  the letters in
  fact had no title). This was very strange. The Minister had
  short-listed
  seven companies for the project on 27 February 1991. Why were
  fourteen
  companies being advised by a letter dated 8 March 1991 that
  they had
  been short-listed? This simply did not make sense.

  Upon discovering the existence of the fourteen letters dated
  8 March
  1991, each of which bore the signature of the Secretary for
  Transport, the
  Ombudsman Commission conducted interviews with

• Page 97 of 397

• representatives of
  four Port Moresby-based companies, among the list of
  fourteen:

  Barclay Bros (PNG) Pty Ltd

  Maunsell Consultants PNG

  Cardno & Davies (PNG) Pty Ltd

  Frame Harvey and West.

  Some companies did not receive the Secretary’s letter

  Each of the persons interviewed had knowledge of the Spring
  Garden
  Road project and their company’s interest in it. They each
  stated that they
  had never seen the letter of 8 March 1991 before. Not only
  that, they had
  never received acknowledgment of their company’s expression
  of interest
  in the project, let alone been advised that their company had
  been short-
  listed.

  Chapter 9

  87

  9.11] OTHER COMPANIES DID RECEIVE THE LETTER

  Some companies did receive a copy of the letter of 8 March
  1991. A
  representative of LKN Construction (PNG) Pty Ltd, for
  example, was able
  to confirm, by checking the company’s files, that the letter
  had been
  received. [EXHIBITS 66B, 70]

  It is also likely that Sabina Ltd, of Brisbane Australia,
  received a copy of
  the letter. [See the letter from Sabina to Mr Amini of 8
  April 1991, which
  refers to a letter dated 18 March 1991: EXHIBIT 71]

  9.12] THE SECRETARY FOR TRANSPORTS EXPLANATION

• Page 98 of 397

• Mr Amini’s explanation of the confusion over the letters of
  March 1991 was
  as follows:

  ‘Normally for a common letter meant for more than one
  addressee, the original
  is signed and then photocopied for the different
  addressees to be typed on. In
  so doing, the clerks were missing out mating additional
  copies for files. In the
  end, only one copy was left for filing. This practice was
  discovered and
  corrected. As far as I am aware, all those short-listed
  were sent an invitation.
  Some were by facsimile. To suggest that such a simple
  mistake could not occur
  is just being unrealistic. This is not defective
  administration.’ [EXHIBIT 254,
  para 71

  (9.13] DEPARTMENT OF TRANSPORT GUILTY OF DEFECTIVE ADMINISTRATION

  We accept Mr Amini’s point that simple mistakes can occur in
  any
  organisation. But we find it difficult to understand why the
  Department of
  Transport files contain no record at all of the existence of
  these letters.
  And why were fourteen letters drafted, when only seven
  companies had
  been shortlisted? Why did some companies not receive the
  letter? Why is
  there no record of the existence of the Tasman Pacific
  International letter
  in the Department’s files?

  Chapter 9

  88

  If no proper records are maintained, especially in projects
  such as this,
  how can the decision-making process be properly put in place
  and
  justified?

• Page 99 of 397

• One of the themes of this report is that unequal treatment
  was given to
  companies which had expressed interest in the project. Some
  were treated
  very favourably, whereas others did not even have their
  expressions of
  interest acknowledged.

  There are too many unanswered questions surrounding the
  letters of
  March 1991 to dismiss the above matters as a minor
  administrative bungle.
  We are surprised that the Minister for Transport had copies
  of the letters
  and not the Department of Transport – though they were signed
  by the
  Secretary for Transport.

  We can only conclude that the Department of Transport’s
  failure to retain
  any record of these letters and the failure to ensure that
  all the letters
  were sent was a serious case of defective administration,
  which had the
  effect of denying a number of companies the opportunity of
  making a bid
  for the project.

  [9.14] THE STATE OF THE SHORTLIST IN MARCH 1991

  In light of the above evidence, the situation with the
  Minister’s shortlist, as
  at March 1991, can be summarised as follows:

  In February 1991 the Minister short-listed seven
  companies,
  two of which had not lodged expressions of interest,
  without
  the advice of his Department.

  Chapter 9

  89

  One month later, the Minister added another company to
  the
  shortlist, even though it also had not lodged an
  expression
  of interest. This company had no experience in road
  design

• Page 100 of 397

• or construction. It was advised in writing it had been
  shortlisted, but there is no copy of the letter in the
  Department’s files.

  In the meantime, standard letters advising fourteen
  companies they had been short-listed, were signed by
  the
  Secretary for Transport.

  However, there is no record of the existence of these
  letters
  in the Department’s files.

  At least four of the fourteen letters were not
  received.

  At least one of the companies on the Minister’s
  shortlist –
  Barclay Bros (PNG) Pty Ltd – did not receive the
  letter.

  This was all quite bizarre. However, even stranger things
  were to
  happen in the months ahead. •

  [9.15] THE FATE OF THE SHORTLISTED COMPANIES

  As at the end of March 1991, the Minister had shortlisted
  eight
  consortiums for the project. However, when the Ministerial
  Committee on
  Spring Garden Road met on 18 July 1991, it had a shortlist of
  five:

  Chapter 9

  90

  Topbay Investment Limited & China Ample
  Development Ltd, the Second Surveying & Designing
  Institute, Ministry of Railways, People’s Republic of
  China, together with Moore’s Investment Group.

  Kumagai Gumi-Kinhill Kramer consortium.

  Periquan’s International Resources Pty Ltd and Pty Ltd
  Asia Management Consultants Centre.

  Tasman Pacific International and Crooks Mitchell
  Peacock Stewart Pty Limited.

• Page 101 of 397

• McConnell Dowell.

  Only two of these were on the original shortlist of eight.
  So, what
  happened to the six groups that disappeared from the list?
  And
  where did the three new ones come from?

  [9.16] THE COMPANIES WHICH LEFT THE SHORTLIST

  The Ombudsman Commission makes the following observations
  in
  relation to the six companies which disappeared from the
  shortlist:

  1. Outlet Year Ltd – in June 1991 it was “substituted” by
  Topbay
  Investment Ltd, another Hong Kong-based company (see
  Chapter 12).

  Chapter 9

  91
  III

  2. Sietco (PNG) Pty Ltd – there is no evidence that
  this U
  company was advised it was on the shortlist. In
  fact, there
  is no evidence on the Department of Transport
  files of any
  correspondence from or to this company.

  III
  3. Barclay Bros (PNG) Pty Ltd/Maunsell Consultants
  PNG Pty
  Ltd – neither of these companies were advised
  they had la
  been shortlisted.

  FE
  4. Curtain Bros – there is no evidence that either
  Curtain Bros
  (PNG) Pty Ltd or Curtain Bros (Old) Pty Ltd were
  advised II
  they had been shortlisted.
  5. LKN Construction – on 8 April 1991 LKN (PNG) Pty
  Ltd wrote II

• Page 102 of 397

• to the Department of Transport and advised that
  it was
  withdrawing its expression of interest. [EXHIBIT
  70]

  6. Sabina Group Consortium – this group was
  definitely aware
  it had been shortlisted, but was unable to meet
  the deadline
  for submission of proposals. [EXHIBITS 76, 82,
  83]

  [9.17] THE THREE NEW GROUPS “ADDED ” TO THE SHORTLIST

  The Ombudsman Commission makes the following
  observations in
  relation to the three groups included in the July
  1991 shortlist, but
  not in the March 1991 shortlist:

  1. Topbay Investment Ltd – this company replaced
  Outlet Year
  Ltd, but essentially the same group of Asian
  businessmen
  was involved (see Chapter 12).

  Chapter 9

  92

  2. Periquan’s International Resources Pty Ltd – this
  company
  joined with the Port Moresby consulting firm, Frame
  Harvey
  West & Maso, and submitted a late proposal. But no
  formal
  expression of interest had been lodged before this.

  3. McConnell Dowell – this Brisbane-based company only
  heard
  about the project in April 1991. On the basis of a
  half-page
  fax to the Department of Transport and two telephone
  conversations with the Director of the Policy
  Secretariat, Mr
  Hitolo, a letter was dispatched to the company,
  advising it
  had been shortlisted. [EXHIBITS 74, 75, 77]

• Page 103 of 397

• SUMMARY OF PREPARATION OF SHORTLIST

  [9.18] UNEQUAL TREATMENT WAS GIVEN TO COMPANIES WHICH HAD
  EXPRESSED INTEREST IN THE PROJECT

  There was a great disparity in the treatment given to the
  various
  companies that had expressed interest in the Spring Garden
  Road project
  since July 1990:

  Some companies were shortlisted, even though they had
  not
  lodged an expression of interest (e.g. Outlet Year Ltd,
  Topbay Investment Ltd, Tasman Pacific International and
  McConnell Dowell) whereas others which had lodged
  detailed expressions of interest in July 1990 were
  excluded
  and never received acknowledgement of their interest
  (e.g.
  Cardno & Davies and Maunsell Consultants).

  Chapter 9

  93

  Some shortlisted companies were allowed extensions of
  time
  to submit proposals [see EXHIBITS 67, 72, 76, 78, 79,
  81,
  83, 93, 94] whereas others (e.g. Barclay Bros) were
  not even
  advised they had been shortlisted.

  The result of this arbitrary and unsatisfactory process was that, by
  July
  1991, a shortlist of five had been prepared for the consideration of
  the
  Ministerial Committee on Spring Garden Road.

  * * * * * * * * * *

• Page 104 of 397

• Chapter 9

  94

  10. TERMS OF REFERENCE FOR THE PROJECT: EARLY 1991

  [10.1] PURPOSE OF THE TERMS OF REFERENCE

  In early 1991, a document was drafted within the Department
  of Transport,
  entitled ‘Terms of Reference-Spring Garden Road”. The purpose
  of this
  document was to describe the requirements of the Department
  of
  Transport and assist potential developers in the formulation
  of proposals.
  [EXHIBIT 55]

  In the Ombudsman Commission’s view, the document was
  seriously
  flawed and very confusing. It failed to specify the scope of
  the project
  and its technical parameters. The timing of the document’s
  release, its
  limited circulation and. its stipulation concerning Build-
  Operate-Transfer
  financing are also matters for concern.

  [10.2] THE SCOPE OF THE PROJECT

  We reported in Chapter 5 that, despite extensive
  investigations, we were
  never able to pinpoint who made the decision to extend the
  scope of the
  Spring Garden Road/Poreporena Freeway project from the
  original plan to
  link Konedobu, through Burns Peak, with Hohola.

• Page 105 of 397

• Nor could we determine when the decision was made that a
  freeway
  should be built all the way from downtown Port Moresby to
  Jacksons
  Airport.

  Chapter 10

  95

  The problem of defining the scope of the project was
  exacerbated by the
  Terms of Reference document. Whereas the advertisements
  published by
  the Department of Works in June 1990 had specified
  (arbitrarily) that the
  new road would link Konedobu and Waigani Drive, the
  Department of
  Transport’s Terms of Reference simply spoke in vague terms
  such as “the
  Spring Garden Road Link near the Burns Peak”.

  [10.3] WHAT DOES THE “SPRING GARDEN ROAD UNK” MEAN?

  This term can mean at least three things:

  a link between Champion Parade Konedobu and Wards
  Road Hohola; or

  a link between Champion Parade Konedobu and Waigani
  Drive; or

  a link between Champion Parade Konedobu and Boroko
  Drive. [See the map at the end of Chapter 2]

  All of the above alternatives would “link” various
  unconnected sections of
  Spring Garden Road, which runs from Champion Parade Konedobu
  to
  Boroko Drive, Gordons.

  The Terms of Reference document was seriously deficient in
  its failure to
  specify exactly what was required of prospective developers.
  The
  qualifying words which appear in the document – “near the
  Bums Peak” –
  suggest the scope of the project was intended only to be the
  link between
  Champion Parade and Wards Road.

• Page 106 of 397

• Chapter 10

  96

  But if that was the case, why did the State eventually enter
  into a contract
  for the construction of a freeway going all the way from
  downtown Port
  Moresby to Jacksons Airport?

  [10.4] THE TERMS OF REFERENCE DEFIED COMMON SENSE

  It seems common sense that when the Government commissions
  the
  building of a road, one of the first things to decide is
  where the road is
  going to go and how long it should be. How can a company
  lodging a
  proposal to build a road estimate the total project cost
  (inclusive of design
  and construction) when it doesn’t know where the road is
  supposed to
  go or how long it is supposed to be?

  In his response to our preliminary report, the Secretary for
  Works, Mr
  Hitolo, who was responsible for the project for a
  considerable time in the
  Department of Transport, stated that the scope of the project
  was
  deliberately not specified in the Terms of Reference
  document, because
  this was to be a Build-Operate-Transfer project:

  “Government’s role is purely to create the business
  atmosphere conducive to
  the private company to become interested in investing on a
  scale and scope it
  believes it can get a profitable return.” [EXHIBIT 265,
  page 3]

  Mr Hitolo said it would have been premature to specify the
  scope of the
  project in the Terms of Reference. He also suggested that the
  Ombudsman Commission did not understand the Build-Operate-
  Transfer

• Page 107 of 397

• concept.

  By contrast, when the Secretary for Transport, Mr Amini,
  responded to our
  preliminary report, he maintained that the detailed scope of
  the project
  was contained in the Terms of Reference document. However,
  when
  asked to point to the section of the document which specified
  the scope,
  Mr Amini was unable to do so. [EXHIBIT 254, page 4]

  Chapter 10

  97

  Quite dearly, the Terms of Reference did nol specify the
  scope of the
  Spring Garden Road project. It did not state where the road
  was
  supposed to begin and end. We reject Mr Amini’s claim that it
  did. We
  also reject Mr Hitolo’s claim that it was unnecessary for the
  scope of the
  project to be specified.

  The Ombudsman Commission concludes that the Terms of
  Reference
  document was vague and confusing, especially because of its
  failure to
  specify what was required of prospective developers.

  The inadequacy of the document is borne out by the fact that,
  despite its
  insistence that proposals be based on Build-Operate-Transfer
  financing,
  no such proposal was ever lodged with the Department of
  Transport.

  [10.5] THE TERMS OF REFERENCE ALSO FAILED TO SPECIFY THE
  TECHNICAL PARAMETERS OF THE PROJECT

  Another serious defect in the Terms of Reference document was
  its failure
  to specify the fundamental technical parameters of the

• Page 108 of 397

• project. This point
  was made by the World Bank Mission which visited Port Moresby
  in
  September 1991 to monitor the Spring Garden Road project:

  Mu technical parameters are left =claw as to whether Papua
  New Guinea
  was seeking a two or four lane road, one or two tube
  tunnels, and whether the road surface would be of
  compacted gravel or asphalt concrete, and whether an open
  cut or tunnel was desired.’
  road surface would be of compacted gravel or asphalt
  concrete, and whether an open cut or tunnel was desired.’
  open cut or tunnel was desired.’
  [EXHIBIT 111, at page 1 and see generally Chapter 15J

  [10.6] TIMING OF THE RELEASE OF THE TERMS OF REFERENCE

  The Terms of Reference document was first released in March
  1991. This
  was before the results of the geotechnical investigation
  undertaken by

  Chapter 10

  98
  Coffey Partners International was completed. However, the
  interdepartmental meeting on 31 July 1990 had decided that
  firm
  proposals would not be called for, until after that
  investigation was
  complete (see Chapter 7).

  The Ombudsman Commission therefore seriously questions the
  timing of
  the release of the document

  0.7] LAVED CIRCULATION OF THE TERMS OF REFERENCE

  An even more serious concern is the fact that the Terms of
  Reference
  document was only circulated to a limited number of
  developers. It was
  only those companies shortlisted by the Minister for
  Transport, Mr Temo,
  in February/March 1991, that were eligible to receive a

• Page 109 of 397

• copy.

  We have already commented on the unsatisfactory and
  arbitrary way in
  which that shortlist was prepared (see Chapter 9). It would
  have been far
  better to publicly advertise the availability of the Terms
  of Reference,
  rather than selectively offer it to only a few companies.

  Whenever investment opportunities are offered to companies
  “selected” by
  a Minister, there are bound to be suspicions of corruption.
  The best way
  to avoid this is to give all interested companies an equal
  opportunity to
  submit proposals through public advertisements.

  .8] BUILD-OPERATE-TRANSFER FINANCING

  A feature of the Terms of Reference document. is that it
  dictated that the
  project be undertaken using the Build-Operate-Transfer (BOT)
  method of
  financing.

  Chapter 10

  99

  The Ombudsman Commission has been unable to establish how or, even,
  when this important policy decision was made, because the Terms of
  Reference document is undated and the Department of Transport files
  did
  not disclose this information. It was certainly never the stated
  policy of the
  National Executive Council that the project be financed in this way.

  In the absence of such a policy directive, the Ombudsman Commission
  expected to find some evidence that, before stipulating the project
  would
  be financed in this way, the Department of Transport had carefully
  and
  methodically considered all the policy options available and
  formally made
  a decision to invite proposals on the basis of Build-Operate-
  Transfer
  financing. However, our examination of their files revealed that
  Build-
  Operate-Transfer financing was addressed only in the following
  documents:

• Page 110 of 397

• the Information Paper that was supposed to be presented to
  the National Executive Council, but which never was (see the
  final part of Chapter 8); and

  the Terms of Reference document. [Exhibits 36 & 55]

  Neither document could satisfy us that the decision concerning
  Build-
  Operate-Transfer financing for the Spring Garden Road project had
  been
  made carefully or competently.

  In our preliminary report we suggested that the Department of
  Transport
  had failed to make a careful, reasoned and properly documented
  decision
  on financing the Spring Garden Road project. The Secretary for
  Transport,
  Mr Amini, responded by stating:

  Chapter 10

  100

  ‘The concept of BOT was debated at length at our Executive
  Meetings. It was
  introduced by Mr Hitolo. I do not encourage new concepts which
  are not fully
  assessed for implications and impacts to be put before the NEC.’
  [EXHIBIT 254, page 31

  However, when Mr Amini was pressed on this issue, the only evidence
  he
  could provide was the minutes of a Department of Transport Executive
  Staff Meeting on 14 September 1990. The minutes stated:

  “Director (Policy Secretariat) said he will prepare a submission
  to NEC for
  discussion when considering plans for the project on the BOT
  system. HOT
  stands for Build, Operate and Takeover.

  The system simply means that the company awarded the contact will
  build the
  mad (project) and operate it in a bid to recover costs and

• Page 111 of 397

• expenses. Then hands
  the mad back to National Government.” [EXHIBIT 45A, page 4]

  Mr Amini also provided copies of two papers presented at a Transport
  Sector Seminar held in Port Moresby in 1991, which addressed the
  issue
  of Build-Operate-Transfer financing. One of them was prepared by Mr
  Hitolo, then Director of the Policy Secretariat in the Department of
  Transport, entitled “Spring Garden Road BOT Concept’. Mr Hitolo
  stated:

  ‘The main reason to get Spring Garden Road to be proposed for
  financing
  through private sector was the fact that the Government’s
  intention for this
  project to attract aid was not successful despite its good
  economic justifications.
  Hence the Government, decided to get private funding by directing
  the
  Department of Transport to assess the turn-key concept as the
  basis for
  implementing the project. This simply meant that a particular
  company be
  selected on a competitive basis and get it to arrange a private
  loan on behalf
  of the Government. As the general policy and understanding was to
  use the
  private sector for the total financing, construction and
  operation so that
  efficiency in the private sector may be tapped in the provision
  of infrastructure
  services.

  In actual fact the BOT (Build, Operate and Transfer) or the
  alternative BOO
  (Build, Own and Operate) systems were implied in the above-
  mentioned policy.
  Hence the concept of BOT system came into consideration followed
  by an
  invitation for interests in this sort of scheme. Unfortunately,
  the concept was
  not very well known in this country and therefore the responses
  were not
  satisfactory.’ [EXHIBIT MA, page 303]

  Chapter 10

• Page 112 of 397

• 101

  The Ombudsman Commission does not dispute Mr Hitolo’s
  expertise. Nor
  do we take issue with the Build-Operate-Transfer concept, as
  such. As an
  innovative method of financing it deserved to be closely and
  widely
  considered.

  What we are critical of is the Department of Transport’s
  failure to carefully consider all the financing options
  available and its failure to formulate a
  consider all the financing options available and its failure
  to formulate a
  policy and advise the Minister for Transport to table it
  before the National
  Executive Council so that a formal Cabinet policy decision
  could be made
  on this important issue.

  10.9] SUMMARY OF THE TERMS OF REFERENCE: INCOMPETENT
  ADMINISTRATION BY THE DEPARTMENT OF TRANSPORT

  There were many unsatisfactory aspects of the Terms of
  Reference
  document prepared by the Department of Transport in early
  1991:

  As a document which was supposed to indicate to developers
  what
  was required in their proposals, it was very vague. It did
  not
  mention where the road would go, or how long it would be.

  It also failed to specify basic engineering aspects of the
  project.

  It was prematurely released.

  It dictated that the proposals incorporate Build-Operate-
  Transfer
  financing, however no formal decision in favour of this
  method of
  financing had been made by the Department of Transport, the
  Minister for Transport or the National Executive Council

  Chapter 10

  102

• Page 113 of 397

• It was made available – unfairly – to only a selected group of
  companies.
  In the opinion of the Ombudsman Commission the preparation and
  distribution of this important – but defective – document was
  another
  example of incompetent administration by the Department of
  Transport.

  * * * * * * * * *

  Chapter 10

  11. THE MINISTERIAL COMMITTEE MEETING
  OF 18 JULY 1991

  [11.1] PERSONS PRESENT AT THE MEETING

  The Minister for Transport Mr Anthony Temo convened a meeting
  of “the
  Ministerial Committee on Spring Garden Road” in his
  Parliamentary office
  on 18 July 1991. Present at the meeting were:

  Mr Temo, MP;

  the Minister for Lands and Physical Planning, Sir Hugo
  Berghuser MP;

• Page 114 of 397

• the Minister for Works, Lukas Waka OBE, MP;

  the Parliamentary Secretary for Finance and Planning,
  Thomas
  Negints MP;

  the Head of the Policy Secretariat in the Department of
  Transport, Lohia Hitolo; and

  the First Assistant Secretary (Planning & Research) in
  the
  Department of Transport, Henry Paraket.

  Chapter 11

  104
  [11.2] WHAT WAS THE PURPOSE OF THE MINISTERIAL COMMITTEE
  MEETING?

  The purpose of the meeting was to select a developer to
  undertake the
  Spring Garden Road project. As a result of the arbitrary and
  unsatisfactory
  shortlisting process between February and July 1991
  (considered in
  Chapter 9) five consortiums were to be considered.

  THE MINISTERIAL COMMITTEE ON SPRING GARDEN ROAD

  [11.3] STATUS OF THE MINISTERIAL COMMITTEE

  Before we address the deliberations of the Ministerial
  Committee, there is
  one important point to note: in the course of its
  investigation the
  Ombudsman Commission was unable to find any document showing
  how
  or when this Committee was established or who its members
  were.

  The Secretary to the National Executive Council testified
  there was no
  record of the establishment of such a committee and the
  Secretary for
  Transport said his Department had also tried in vain to find
  some record
  of the Committee’s existence.

• Page 115 of 397

• When we put the issue to Mr Temo, he was adamant that the
  Committee
  had been duly authorised by the National Executive Council to
  report back
  to it on the preferred method of implementing the project. He
  could not,
  however, provide any details of the Committee’s
  establishment.

  Chapter 11

  105

  Mr Temo stated:

  “My mind is quite clear that there was a NEC
  decision which authorised the
  Minister for Transport to be Chairman of the
  Ministerial Committee on
  infrastructure. Also the same Ministerial Committee
  used NEC decision to
  bypass normal tender procedures to construct Enga
  Highway Stage 2 or 3. If
  NEC did not make this decision), Porgera mine would
  not have started
  production on time because normal department tender
  procedures normally
  takes a very long time even the normal political
  will does not work.

  One should understand that if there was no such
  Ministerial Committee
  established why was NEC recognising and expecting
  Ministerial Committees
  recommendations?

  Therefore obviously I acted with some lawful
  authority even if we are unable
  to get the records. See letter from NEC Secretary
  dated 19 November 1992′
  [EXHIBIT 257 para 2]

• Page 116 of 397

• When we questioned Sir Hugo Berghuser on this point, he
  stated that the

  Committee had been established at his initiative. But Sir
  Hugo, also, could

  not point to any formal record of its existence.

  [11.4] THE MINISTERIAL COMMITTEE ACTED WITHOUT AUTHORITY

  The Ombudsman Commission concludes that the “Ministerial
  Committee

  on Spring Garden Road” was never formally established by
  the National

  Executive Council and had no authority to make decisions
  binding or

  purporting to bind the National Executive Council.

  At this juncture, we note that Section 149(4) of the
  Constitution provides:

  ‘Except where the contrary intention appears,
  nothing in this
  Constitution prevents the powers, functions, duties
  or responsibilities
  of ti e [National Executive Council] from being
  exercised, as determined
  by t, through a Minister.”

• Page 117 of 397

• Thus, the Constitution does allow the powers of the
  National Executive

  Council to be delegated to Ministers.

  Chapter 11

  106

  But this does not mean that any group of Ministers can
  appoint
  themselves to “committees” of the National Executive Council
  and clothe
  that “committee” with powers or status.

  A Ministerial Committee – even one which only intends to make
  recommendations to the National Executive Council – must have
  its powers
  and responsibilities properly delegated and controlled by the
  National
  Executive Council under Section 149(4) of the Constitution
  before it makes
  any decisions or holds itself out as having any powers or
  responsibilities.

  This did not occur in relation to “the Ministerial Committee
  on Spring
  Garden Road”. It therefore had no lawful status or power or
  authority.

  [11.5] WHAT DOCUMENTS WERE CONSIDERED AT THE “MINISTERIAL
  COMMITTEE” MEETING?

  The Head of the Policy Secretariat in the Department of

• Page 118 of 397

• Transport, Mr
  Hitolo, brought the following documents to the meeting on 18
  July 1991,
  for the consideration of the Ministerial Committee:

  the proposals of the five shortlisted consortiums; and

  a document dated 17 July 1991 entitled “Financing the
  Construction of the Spring Garden Freeway”.

  Chapter 11

  107

  LOSS OF DOCUMENTS

  [11.6] MOST OF THE FIVE PROPOSALS HAVE BEEN LOST

  It has been very difficult for the Ombudsman Commission to
  ascertain
  exactly which proposals the Ministerial Committee had before
  it. By the
  time we conducted our investigation, most of the proposals
  had been lost.

  The investigation was also hampered by the fact that the
  meeting is poorly
  documented in the files of the Department of Transport. In
  fact, the only
  evidence of the meeting taking place is a letter from the
  Minister for
  Transport to the Secretary for Transport asking him to attend
  the meeting
  and a one-page memorandum of the decisions made at the
  meeting.
  [EXHIBITS 97,102]

  [11.7] HOW WERE THE PROPOSALS LOST?

  Mr Hitolo testified that at the end of the meeting he had
  left all five
  proposals in the Minister for Transport’s office at the
  request of Sir Hugo
  Berghuser, who said that he wanted to study them further
  before making
  a decision.

• Page 119 of 397

• When Sir Hugo was questioned on this point, he agreed the
  proposals
  had been left, at his request, in the office. But he said he
  only asked that
  copies be made for him. He was dissatisfied with the
  proposals before
  the Committee and he said as much to the other members of the
  Ministerial Committee. ‘When I left the office, the proposals
  were still there
  and I have never seen them since’, Sir Hugo said.

  Chapter 11

  108

  Correspondence between Mr Hitolo (who became Secretary for
  Works in
  early 1992) and Mr Amini in March 1992 confirmed that this
  incident took
  place [EXHIBIT 160, final paragraph]. But the Ombudsman
  Commission
  has not been able to trace the whereabouts of the proposals
  left in the
  Minister’s office.

  The Ombudsman Commission concluded that the proposals were
  lost by
  the Minister for Transport, Mr Temo.

  When we made this allegation in our preliminary report, Mr
  Temo claimed
  that, in fact, the proposals had been lost by Sir Hugo
  Berghuser.
  However, even if this were, in fact, the case, Mr Temo was
  the Minister of
  the State entrusted with custody of these important and
  confidential
  documents. It was his responsibility to take adequate steps
  to ensure the
  documents were in safe hands.

  [11.8] THE DEPARTMENT OF TRANSPORT FAILED TO KEEP COPIES OF THE
  PROPOSALS

  Surprisingly, the Department of Transport had not kept copies
  of the
  proposals, except the one made by the Chinese consortium –
  which was
  the group selected by the Ministerial Committee to undertake
  the project.

• Page 120 of 397

• This meant, therefore, that most of the proposals had been
  lostTM.

  This particular administrative mistake was to have far-
  reaching
  consequences several months later, when pressure was put on
  the
  Department to expedite the project and the Department had
  second-
  thoughts about supporting the Chinese proposal (see Chapter
  18).

  Chapter 11

  109

  It meant that when the Department was required to prepare a
  National
  Executive Council Policy Submission in February 1992,
  recommending a
  consortium to undertake the project, it only had one proposal
  in its
  possession.

  [11.9] DEPARTMENTAL RECORDS SHOULD NOT BE GIVEN TO MINISTERS

  As a general rule the Ombudsman Commission believes that
  official
  Government records and files should not be left in the
  possession of
  Ministers. An official Government file is the property of the
  State – it does
  not belong to a Minister. A Minister has the right to be
  fully and objectively
  briefed by his or her Departmental Head. But he does not have
  the right
  to keep possession of official files.

  If this principle of sound public administration had been
  followed in the
  present case, the proposals probably would not have been
  lost.

  EVALUATION OF PROPOSALS

  [11.10]la
  SPRING GARDEN FREEWAY

• Page 121 of 397

• This document was the focus of discussion ac the Ministerial
  Committee
  meeting of 18 July 1991. It is dated 17 July 1991, i.e. one
  day before the
  Ministerial Committee meeting. were in fact two versions of
  it:

  Chapter 11

  110

  One version was addressed to “the Members of the
  Resource Management Committee”. It was drafted as a
  submission by the Department of Transport and shows the
  submitter as “B K Amini CBE Secretary”; however, it was
  unsigned. [EXHIBIT 100]

  The other version of the document was drafted as a Policy
  Submission to the National Executive Council by the Minister
  for Transport; it was signed by Mr Temo. [IXHIBIT 99]

  Although there are some minor variations, both versions of the
  document
  are essentially the same:

  They outline the background of the Spring Garden Road
  project.

  The scope of the project is described as being from
  downtown Port Moresby to Jacksons Airport.

  The five short-listed proposals are evaluated, according to
  ten criteria.

  The conclusion is reached that the Second Surveying and
  Designing Institute of the Peoples’ Republic of China (which
  lodged a proposal in conjunction with Topbay Investment
  of Hong Kong) be “appointed” to commence negotiations
  with the Department of Transport for the development of the
  Spring Garden Road.

  Chapter 11

  111

  [11.11] THE METHOD USED TO EVALUATE THE SHORTLISTED PROPOSALS

• Page 122 of 397

• The “Financing the Construction of the Spring Garden
  Freeway” document
  evaluated the five proposals according to ten criteria:

  1. Interpretation of the Terms of Reference.
  2. Logical Phasing of Tasks in the Methodology.
  3. Environment Impact Statement.
  4. Financier’s Credibility.
  5. Main Contractor’s Relevant Experience.
  6. Local Partner Participation.
  7. Proposed Equity Distribution.
  8. Personnel Proposed in General.
  9. Team’s Experience in B.O.T. System.
  10. Funding Proposal for the Project.

  The proposals were given a rating of “Excellent”, “Very
  Good”, “Good”,
  “Fair” or “Satisfactory” on each criteria.

  The proposals were then given an overall ranking, as
  follows:

  1st: Topbay Investment Ltd/Second Surveying & Designing
  Institute, People’s Republic of China.

  2nd: Periquan’s International Resources.

  3rd: Kumagai Gumi/Kinhill Kramer.

  4th: Tasman Pacific International.

  5th: McConnell Dowell.

  Chapter 11

  112

  In light of these rankings, the document concluded that the
  project be
  awarded to the Chinese consortium.

  (11.12] FURTHER UNSATISFACTORY ADMINISTRATION BY THE DEPARTMENT
  OF TRANSPORT

  We have noted elsewhere in this report that the standard of
  documentation of important policy decisions by the
  Department of
  Transport was extremely poor. We made that finding in
  relation to a
  number of issues, e.g. the decision to extend the freeway to
  Jacksons

• Page 123 of 397

• Airport, the tunnel/cut issue and the Build-Operate-Transfer
  method of
  financing (see Chapters 5 & 10).

  We make a similar finding in relation to the evaluation of
  the five proposals
  shortlisted for consideration by the Ministerial Committee.
  The
  Ombudsman Commission considers that a much more detailed and
  methodical comparison of the alternative proposals was
  required than the
  one page table attached as an appendix to the “Financing the
  Construction of the Spring Garden Freeway” document.

  The subjective rankings on the basis of the ten selected
  criteria were
  vague and meaningless.

  This situation occurred because the Department of Transport
  did not have
  any established procedures for evaluating proposals for
  construction of
  roads or other transport infrastructure. The Department of
  Transport, on
  the instructions of the Minister for Transport, had wrongly
  assumed
  responsibility for a task that should have been carried out
  by a Supply
  and Tenders Board, in accordance with the Public Finances
  (Management)
  AM

  Chapter 11

  113

  [11.13] OTHER DEPARTMENTS NOT INVOLVED IN THE RANKING OF
  PROPOSALS

  A feature of the decision-making process which led to the
  selection of the
  consortium to build the Spring Garden Road/Poreporena
  Freeway, is the
  flagrant disregard of normal tender procedures (see Chapter
  35).

  If the project had been properly put to public tender in the
  first place, the
  Ministerial Committee would not have had to deliberate on
  the matter and
  the Department of Transport would not have been required to
  rank the
  proposals shortlisted by the Minister.

• Page 124 of 397

• Though these mistakes were made, the maladministration would
  not have
  been so serious, if the Minister for Transport and the
  Department of
  Transport had been willing to consult other Departments when
  ranking
  the shortlisted proposals. However, no consultation took
  place.

  We are particularly concerned that the Department of Works
  was not
  consulted. This Department has far more experience in
  selection of
  contractors to undertake road projects than the Department
  of Transport.

  It was also wrong for the Department of Transport not to
  consult the
  Department of Finance and Planning. There is no evidence
  that any proper
  checks were made by the Department of Transport on criteria
  such as
  “Financier’s Credibility” and “Funding Proposal for the
  Project”. We note the
  Chinese proposal was rated “excellent” on both these
  criteria. Yet six
  months later the Department of Transport found it necessary
  to seriously
  question the bona fides of the proponents (see Chapter 15).

  Chapter 11

  114

  [11.14] DID THE PROJECT “BELONG” TO THE DEPARTMENT OF TRANSPORT?

  We have no doubt many mistakes were made because the
  Minister for
  Transport and the Secretary for Transport believed that the
  Spring Garden
  Road/Poreporena Freeway project was “a Department of
  Transport project”
  – not “a Department of Works project”.

  However, the terms of National Executive Council Decision
  No. 14/90 were
  that “the Department of Transport, the Department of Works
  and the
  Department of Finance and Planning formulate detail plans

• Page 125 of 397

• for the
  construction of Burns Peak Road”. [EXHIBIT 6A]

  We could therefore see no justification for the Minister for
  Transport or the
  Department of Transport shutting out these two other
  departments from
  the decision-making process.

  Though it was within the policy prerogative of the
  Department of Transport
  to determine where the freeway would go, whether there would
  be a
  tunnel or cut through Burns Peak and whether the project
  would be
  undertaken using Build-Operate-Transfer financing, it was
  wrong for the
  Minister for Transport and the Department of Transport to
  exclude the
  other key Departments from the decision on who was going to
  design,
  finance and build the freeway.

  [11.15] THE FORMAL RECORD OF THE MINISTERIAL COMMITTEE’S DECISION

  In his oral testimony to the Ombudsman Commission, Sir Hugo
  Berghuser
  stated that the Ministerial Committee meeting lasted not
  much longer than
  30 minutes and that the discussion had been confined to the
  contents
  the “Financing the Construction of the Spring Garden
  Freeway” document.

  Chapter 11

  115

  No minutes of the meeting were kept and the only record
  of the
  Committee’s decision is a document, under Ministry of
  Transport
  letterhead, that was signed by Mr Temo, Mr Waka and Mr
  Negints. It
  stated:

  ‘On the 18th day of July 1991, the Ministerial
  Committee On The Spring Garden

• Page 126 of 397

• Road Development met at the Transport Minister’s
  office in the National
  Parliament House and authorized and approved the
  following recommendation:

  That the Chairman of this Committee seek
  National Executive Council
  (NEC) endorsement for the appointment of
  The Second Surveying and
  Designing Institute, Ministry of Railways
  of Peoples Republic China to
  commence negotiation for the development
  of the Spring Garden Road.

  2. That the Chairman of the Committee seek
  National Executive Council
  endorsement to authorize the Attorney-
  General’s Department and the
  Department of Finance and Planning to
  negotiate and execute the
  principle terms and conditions of the
  contract emerging from their
  proposals.

  3. That the Chairman of this Committee seek
  National Executive Council
  endorsement to negotiate and use B.O.T. or
  turnkey as the basis of
  funding the Spring Garden Road
  Development.

  4. That the Chairman of the Ministerial
  Committee seek National
  Executive Council endorsement in order to
  authorize Department of
  Finance and Planning to negotiate and
  execute the Franchise agreement
  and any other necessary and desirable
  documents relating thereto on
  behalf of the State? [EXHIBIT 102]

  Sir Hugo testified that this document was not signed at
  the meeting of 18
  July 1991 and we accept that that was in fact the case.

  [11.16] WHAT HAPPENED AFTER THE MEETING?

• Page 127 of 397

• The document recording the decisions of the Ministerial
  Committee
  appears to have been signed a day or two after the
  meeting took place.

  Chapter 11

  116

  Sir Hugo stated that, though he had seen this document, he
  had
  deliberately not signed it because he did not agree with its
  contents. He
  was very suspicious about the negotiations that had already
  taken place
  with the Chinese. In fact, Sir Hugo alleged that he had been
  invited to a
  Chinese restaurant in Port Moresby, and asked to sign the
  document in
  the presence of other members of the Ministerial Committee
  and
  representatives of the Chinese consortium. He said that he
  refused to sign
  the document and walked out of the restaurant.

  The Ombudsman Commission has been unable to obtain any
  corroborating evidence of this particular incident. However,
  we share Sir
  Hugo’s concern about the propriety of the decision to favour
  the Chinese
  consortium.

  WAS THERE AN OBJECTIVE EVALUATION?

  [11.17] HAD THERE BEEN A GENUINE ATTEMPT TO EVALUATE THE
  ALTERNATIVES?

  On the face of it, the selection of the Chinese consortium
  was yet another
  example of the type of haphazard and careless decision

• Page 128 of 397

• making that had
  come to characterise the Ministry and Department of
  Transport’s handling
  of the Spring Garden Road/Poreporena Freeway project. But
  our
  investigations revealed that there was more to the selection
  of the Chinese
  than just slipshod administration.

  Chapter 11

  117
  [11.18] THE DECISION HAD ALREADY BEEN MADE

  In the opinion of the Ombudsman Commission, the Ministerial
  Committee
  meeting of 18 July 1991 was really just a rubber-stamping
  exercise for a
  decision already made by the Minister for Transport, Mr
  Temo, to award
  the project to the Chinese consortium.

  Both versions of the “Financing the Construction of the
  Spring Garden
  Freeway” document actually referred to “the Ministerial
  Committee’s
  decision to appoint the SSDI to commence negotiations …for
  the
  development of the Spring Garden Road”. But the document was
  dated
  17 July 1991 – one day before the Ministerial Committee made
  that
  decision!

  The Ombudsman Commission discovered that, in fact, the
  Minister for
  Transport had formed a close association with members of the
  Chinese
  consortium well before the meeting. He had entertained a
  delegation from
  the consortium, in Port Moresby, only one week before the
  Committee’s
  decision to favour them (see Chapter 12). 1

  In light of that evidence, the Ombudsman Commission was
  forced to
  conclude that the deliberations of the Ministerial Committee
  were not a
  genuine attempt to objectively evaluate the five short-
  listed proposals.

• Page 129 of 397

• [11.19] MR TEMO’S RESPONSE

  When we suggested in our preliminary report that Mr Temo had
  improperly arranged the selection of the Chinese consortium,
  he
  responded in the following terms:

  Chapter 11

  118

  “Most of the companies that showed or expressed interest either did
  not
  understand the terms of reference of the project or did not bother
  to re-check
  with the Committee or Departments of Transport or Works.

  As you can see in NEC decision or purpose of the NEC submission No.
  14/90
  it was the wish of the NEC to speed up the project. That is why the
  NEC
  submission’s purpose was to bypass normal tender procedures in order
  to speed
  up the project to be completed in time for the SP Games. Also there
  was a
  criticism against me in NEC or Parliament every time there was a
  traffic
  problem along Sir Hubert Murray Highway even by public what are you
  doing
  Mr Chairman or Mr Minister for Transport.

  While I was being pressured by the public NEC and Parliament I had
  to
  negotiate with any of these companies that showed interest as a
  Chairman of
  Committees I was left to look like a fool if I did not report back
  to NEC with
  a positive report I would have failed my duty and I was scared I
  could loose
  my job.

  No companies complained because it was a new concept proposed by
  Barclay
  Bros. before my time. I had to carry on from that initiative. It has
  been a very

• Page 130 of 397

• tough job trying to get the best companies to do the job.

  Some companies responded again when it was convenient to them. We
  had to
  follow them because PNG does not have the resources in monetary and
  manpower.

  The companies that came up with fancy proposals and sort of got in
  touch with
  my office or the Secretary’s office kept getting our attention.

  At least I was given a responsibility to present to NEC. I did not
  discriminate
  other companies against that showed interest It was a mere who comes
  first
  with the best proposal for PNG.

  I have a feeling that the Chinese companies were not consortium but
  they were
  selling their information from one company to another.

  The Department was very uncooperative to me or NEC.

  I, Mr Temo was not hiding any transactions from the Department. I
  always
  notified of the progress that is why I have them all information. I
  therefore
  regardless whether I had meeting or not prior to not really relevant
  in the
  situation of this new confused situation as there was no better
  proposals and
  interest shown other than that of the Chinese.

  All the time the Department was aware I did not organise any secret
  de–11c an
  my mine was dear all the time.” [EXHIBIT 257, page 2]

  Chapter 11

  119

  [11.20] CONCLUSION AS TO THE DELIBERATIONS OF THE MINISTERIAL
  COMMITTEE

• Page 131 of 397

• With due respect to Mr Temo, he has not satisfactorily
  answered our
  criticism of the way in which the Chinese consortium
  was favoured by the
  Ministerial Committee. We conclude that he convened the
  meeting of the
  Ministerial Committee for the purpose of facilitating
  the Chinese consortium
  selected by himself to undertake the project.

  The closeness of the relationship between Mr Temo and
  the Chinese
  consortium is explored further in the next chapter.

  * * * * * * * * * *

  Chapter 11

  120

  12. THE RELATIONSHIP BETWEEN THE CHINESE
  CONSORTIUM AND THE MINISTER FOR TRANSPORT

• Page 132 of 397

• [12.1] A MATTER OF CONCERN

  The manner in which the Chinese consortium was chosen by the
  Ministerial Committee was a matter of concern to the
  Ombudsman
  Commission.

  We therefore wanted to find out who was actually behind the
  proposal of
  the “Second Surveying and Designing Institute, Ministry of
  Railways,
  People’s Republic of China”. We were also interested to know
  whether the
  Minister for Transport had any particular association with
  those negotiating
  on behalf of the Chinese.

  WHO WAS IN THE CHINESE CONSORTIUM?

  [12.2] KEY PARTIES IN THE PROPOSAL INVOLVING THE SECOND SURVEYING
  AND DESIGNING INSTITUTE

  Mr Leo Moore of Taiwan

  Our investigations revealed that a key person was Mr Leo
  Moore, a citizen
  of the Republic of China (Taiwan). Mr Moore is a businessman,
  with
  interests in the Taiwanese fishing industry, who had made a
  number of
  visits to Papua New Guinea during 1991 and 1992.

  Chapter 12

  121

  Mr Moore was called to give evidence under oath on several occasions
  in
  the course of this investigation. We formed the view that he was a
  co-
  operative and reliable witness. His evidence shed considerable light
  on
  the events leading to the selection of the Chinese consortium.

  Outlet Year Ltd and Mr Leung Keung of Hong Kong

  Mr Moore stated that he had first become interested in Papua New
  Guinea
  in September 1990, after a meeting in Taiwan with another

• Page 133 of 397

• businessman,
  Mr Leung Keuno (hereafter referred to as Mr Leung).. Mr Leung is the
  head of a Hong Kong-based company known as Outlet Year Ltd, which
  was supposedly considering making large investments in Papua New
  Guinea. The meeting between Mr Moore and Mr Leung was arranged by
  Mr To Ken Chung (Mr Moore’s godfather and Mr Leung’s close friend)
  and Mr Stephen Zohr (one of Mr Moore’s business advisers).

  At that meeting it was agreed that an invitation would be extended
  to a
  group of government officials from Papua New Guinea to come to
  Taiwan
  to discuss business opportunities in Papua New Guinea.

  Business relationship between Outlet Year Ltd and the SSDI

  Mr Moore explained that Outlet Year Ltd had business connections
  with
  a number of government authorities in the Peoples’ Republic of China
  (ie
  mainland China); one of them being the Second Surveying and
  Designing
  Institute (SSDI).

  The SSDI is a civil engineering agency involved in design and
  construction
  of railways and highways. Mr Moore supplied the Ombudsman
  Commission with a brochure describing its activities. [EXHIBIT 102A]

  Cnapter 12

  122

  Mr Moore explained that, as a result of overtures made by Mr
  Leung, the
  SSDI had contacted Mr Moore on 27 January 1991. In a one page
  facsimile transmission, a representative of the SSDI
  indicated that they
  were a very strong and influential government company in
  China and that
  they were keen to go into business with Mr Leung and Mr Moore
  for the
  purpose of building a freeway in Port Moresby, which they had
  been
  informed about by Mr Leung. [EXHIBIT 53]

  OVERSEAS TRIP PAID FOR BY CHINESE CONSORTIUM

  [12.3] VISIT TO TAIWAN AND HONG KONG BY PAPUA NEW GUINEA

• Page 134 of 397

• PARLIAMENTARIANS IN FEBRUARY 1991: A MATTER OF CONCERN

  Mr Moore testified that on 6 February 1991 he purchased four
  return
  tickets from Port Moresby to Hong Kong, which were later
  picked up at
  the Cathay Pacific office in Port Moresby.

  After being invited to Taiwan and Hong Kong, a “delegation”
  from Papua
  New Guinea arrived in Taipei on 8 February 1991. The
  delegation
  comprised:

  the Minister for Transport, Mr Anthony Temo;

  the Member for Gulf Province, Mr Aaron Noaio;

  the Member for Sohe Open, Mr David Beu; and

  Chapter 12

  a member of the Official Personal Staff of the
  Minister for
  Fisheries & Marine Resources (who at that time was the
  Deputy Prime Minister Mr Akoka Doi) Mr Chris Maravis.

  The Ombudsman Commission interviewed Mr David Beu in
  connection
  with this trip and the evidence he gave corroborated that
  given by Mr
  Moore.

  [12.4] STATUS OF THE PNG DELEGATION

  Before we address the events that transpired during and after
  the trip,
  there is one important matter to emphasise: the Papua New
  Guinea
  “delegation” had no official status. Although the members of
  the group
  were, in a sense, representing the Government of Papua New
  Guinea, the
  delegation was privately sponsored. All the expenses,
  including airfares,
  accommodation and meals, were paid for either by Mr Leo Moore
  or
  Outlet Year Ltd.

• Page 135 of 397

• [12.5] PRIVATELY SPONSORED OVERSEAS TRIPS CAN BE UNLAWFUL

  It is important for all leaders of Papua New Guinea who
  contemplate
  privately sponsored trips to bear in mind that it is a
  requirement of the
  Leadership Code that permission from the Ombudsman Commission
  be
  obtained before accepting the benefits of such a trip.

  This is a principle of Papua New Guinea law that should also
  be
  considered by any person or company thinking about offering
  such a trip
  to a leader.

  Chapter 12

  124

  [12.6] THE MINISTER ALLOWED HIMSELF TO BE ENTERTAINED BY ONE OF
  THE COMPANIES BIDDING FOR THE PROJECT AT THE SAME TIME HE
  WAS PREPARING THE SHORTLIST

  The Ombudsman Commission is concerned that the Minister for
  Transport,
  Mr Temo, made his trip to Taiwan and Hong Kong and involved
  himself
  in negotiations for the Spring Garden Road/Poreporena Freeway
  project
  at the same time be was preparing the shortlist of
  prospective developers
  (see Chapter 9).

  The Ombudsman Commission emphasised earlier in this report
  that
  Ministers should not be preparing shortlists for public works
  projects. In
  this case, the Minister for Transport was not only preparing
  the shortlist,
  he was, at the same time, allowing himself to be wined and
  dined
  overseas, at the expense of one of the companies interested
  in getting the
  contract for construction of the freeway.

  When this sort of thing happens, it is very difficult to
  conclude that the
  decision-making process was legitimate, fair and proper.

  It is also difficult to say there was no bribery or
  corruption.

• Page 136 of 397

• [127] THE MINISTER FOR TRANSPORTS DEFENCE

  When we suggested in our preliminary report that it was wrong
  of Mr
  Temo to make an overseas trip, paid for by one of the
  companies bidding
  for the project, at the same time he was preparing a
  shortlist of
  prospective developers, he denied any impropriety. He said he
  did not
  realise it was a privately sponsored trip until after he
  accepted the
  invitation to go to Hong Kong:

  Chapter 12

  125

  “The trip to Taiwan and Hong Kong was organised by a Chris
  Maravis in Mr
  Akoka Dors office. Mr Doi was the Deputy Prime Minister so I took
  it that
  I was going on an official trip. later I realised that it was a
  PAP fishing trip
  paid by Mr Leo Moore and some fishing people.

  While in Taiwan and Hong Kong as I was not Minister for Fisheries
  so I was
  asked about Transport Projects and I said we have a 10 year plan
  that need to
  be completed. However, we did not have finance and manpower it
  was paid
  by Mr Leo Moore not short listed company.

  I did not prepare the final short list.

  While in Hong Kong I told the company representative to let the
  Prime
  Minister, Minister for Finance and the other senior ministers
  know of their
  investment proposal in PNG.

  According to me I did not hide anything and I told them, if you
  want to invest
  for the trip and accommodation while in Taiwan and Hong Kong. I
  did this
  after learning that it was a PAP fishing trip. Therefore, I

• Page 137 of 397

• notified the
  Ombudsman in writing about who was paying for the trip and
  accommodation
  while in Taiwan and Hong Kong. I did this after learning it was a
  PAP fishing
  trip.” [F.XHIBIT 257, page 3]

  The Ombudsman Commission, with respect, does not consider Mr Temo’s
  explanation to be satisfactory. We find it difficult to believe that
  a Minister

  of the State would legitimately travel overseas without knowing what
  the
  purpose of the trip was.

  As to the claim that he advised the Ombudsman Commission of the trip
  and who was paying for it, we refer to a letter dated 28 March 1991
  received by the Commission from Mr Temo:

  Mr Temo stated:

  ‘Thank you for your very helpful Leadership Manual received
  today. I note
  that I must declare to the Commission every time I leave for
  overseas be it
  official or unofficiaL

  I therefore wish to inform the Commission that from the 22
  February, 1991 until
  4 March, I was on an official visit paid for by M.T.L
  Organisation. This trip
  was approved by the National Government to lead a delegation to
  Taiwan.’
  [EXHIBIT 68B]

  Chapter 12

  126
  [12.8] POOR ADMINISTRATION BY THE MINISTER FOR TRANSPORT

  One thing is certain: irrespective of whether Ministers and
  other
  Government officials breach the Leadership Code when they

• Page 138 of 397

• accept
  benefits such as free travel, free accommodation and gifts
  from foreign
  enterprises, it is a very bad administrative practice.

  It undermines the integrity of the decision-making processes
  of
  Government. It creates the impression that to get Government
  approval for
  a project in Papua New Guinea, it is necessary to be on
  friendly terms
  with the right Minister. It attracts the wrong sort of
  foreign investors to
  Papua New Guinea. It creates a bad image of Papua New Guinea.

  If this sort of administrative practice continues, instead of
  honest and
  genuine investors coming to our country, we will be overrun
  by fly-by-
  night operators, only too willing to bypass normal procedures
  in the quest
  for easy money for themselves and not for the People of Papua
  New
  Guinea. Papua New Guinea has had enough of them already.

  Since it is not in the best interests of the People of Papua
  New Guinea
  and our country, such practices must be stopped at all costs.

  [12.9] WHAT HAPPENED DURING THE TRIP TO TAIWAN AND HONG KONG?

  Mr Moore testified that Messrs Temo, Noaio, Beu and Maravis
  spent three
  days in Taipei, followed by four days in Hong Kong.

  Three days in Taipei

  In Taipei, the members of the PNG “delegation” were
  entertained by Mr
  Moore.

  Chapter 12

  127
  Mr Moore testified that during this visit there was a lot
  of talk about road
  projects, particularly “the 8.8 km road in Port Moresby”,
  as well as other
  investment opportunities in Papua New Guinea. The Papua
  New Guinea
  people described their country as a good place to invest –
  particularly in

• Page 139 of 397

• mining, oil, fishery and forestry projects – but they said
  the road network
  was not very good and that is why Papua New Guinea is a
  poor country.

  Mr Moore told the Minister for Transport he would like to
  come to Papua
  New Guinea and see the country for himself.
  Four days in Hong Kong

  After spending three days in Taiwan the group from Papua
  New Guinea
  travelled to Hong Kong, leaving Mr Moore behind. Mr Moore
  stated that
  throughout their stay in Hong Kong, the group from Papua
  New Guinea
  was looked after by Mr Leung of Outlet Year Ltd. He said
  that, as it was
  Chinese New Year, much of the time was taken up in social
  activities and
  the group from Papua New Guinea was housed at the Sheraton
  Hotel.

  It was during this visit to Hong Kong that Mr Temo, in his
  capacity as
  Minister for Transport, signed a quite extraordinary
  document: a
  “memorandum of agreement” for the construction of the
  Southern
  Highlands-Kikori Road. [EXHIBIT 58]

  [12.10] THE MEMORANDUM OF AGREEMENT FOR THE CONSTRUCTION OF
  THE SOUTHERN HIGHLANDS – GULF ROAD

  The Minister for Transport, Mr Temo, signed this agreement
  in Hong Kong
  on 12 February 1991, on behalf of “the Ministry of
  Transport, National
  Government of Papua New Guinea”. The other signatory was
  Mr Leung
  Keung, who entered into the agreement on behalf of Outlet
  Year Ltd of

  Chapter 12

  128

  Hong Kong. The document was witnessed by Mr Aaron Noaio, the
  Member for Gulf Province and Mr To Ken Chung (Mr Leo Moore’s
  godfather).

• Page 140 of 397

• Terms of the agreement for the construction of the Southern
  Highlands
  Gulf Road

  The terms of this agreement, which appeared under the letterhead of
  Outlet Year Ltd, were as follows:

  ‘MEMORANDUM OF AGREEMENT

  ‘KNOW ALL MEN BY THESE PRESENTS:

  This Memorandum of Agreement is entered into and executed this
  12th day of
  February, 1991, by and between:

  Ministry of Transport, National Government of Papua New Guinea
  with
  principal offices of P.O. Box 457 Konedobu, National Capital
  District, Papua
  New Guinea represented by Hon. Anthony Temo, Minister for
  Transport
  (hereinafter referred to as NPG).

  and

  Outlet Year Limited, a duly registered Hong Kong Corporation
  with principal
  offices at No. 20, HOK Yuen Street, Block FL 3/F Hunghom,
  Kowloon, Hong
  Kong, herein represented by Mr Leung Keung, Managing Director
  (hereinafter
  referred to as HK).

  1NITNESSETH:

  WHEREAS, the National Government of Papua New Guinea has fully
  authorized NPG to implement an Infrastructure Development Plan

  WHEREAS, NPG is willing to undertake this job per engineering
  details and
  specifications, contained in the NPG’s Cost Study (Gulf-Southern
  Highlands
  Province – ERAVE to KEREMA [sic]).

  WHEREAS, NPG has found the credentials of HICG to be financially
  qualified
  and technically capable to execute this project in a manner
  consistent with the
  technical standards set forth by engineering standards.

• Page 141 of 397

• WHEREAS, HEW has offered to undertake construction of this
  project.

  NOW, THEREFORE, for and in consideration of the above premises
  and of the
  mutual covenants heretofor set forth, the parties have agreed,
  as they hereby
  agree, on the following terms and conditions:

  Chapter 12

  129

  1. PROJECT

  NAME Southern Highlands Kikori Road

  LOCATION From ERAVE to KIKORI

  SPECIFICATION AND INSPECTION
  Per Cost Study (Gulf-Southern
  Highlands Province – ERAVE to KEREMA)

  DURATIONFrom May 1st, 1991 to May 1st, 1993.
  BONUS AND PENALTY.

  2. CONTRACT PRICE : HKG shall submit within 60 days after
  signing of this Memorandum a price, to
  be forwarded to and acceptable to PNG.

  3. PAYMENT Payment plan to be negotiated between
  PNG and HKG on an equitable and
  acceptable basis to both parties

  4. PERFORMANCE Upon signing of Contract by both parties
  BOND MG shall provide to PNG a
  Performance Bond in the form of cash,
  bank guarantee or other form of
  guarantee acceptable to PNG, for an
  amount not less than 10% of the Contract
  value, to warrant the performance of
  EKG’s obligation under the Contract
  (Gulf-Southern Highland Province –
  ERAVE TO KEREMA). This

• Page 142 of 397

• Performance Bond shall be returned
  HKG without interest, when HKG shall
  have fulfilled its obligations under the
  Contract.

  5. FORCE MAJEURE HKG is not responsible for delay or non-
  performance of its contractual obligation
  to construct, caused by war, blockade,
  revolution, insurrection, civil commotion,
  riots, mobilization, strikes, Act of God,
  plague, or other epidemic, fire, flood,
  action or acts of government or public
  enemy.

  Chapter 12

  130

  6_ CANCELLATION & : PNG may cancel the Contract, and
  ALTERATION OF confiscate the Performance Bond,
  if
  CONTRACT IIKG is unable to deliver in
  accordance
  with the stipulated time schedule
  or
  breath of Contract.

  Postponement or alteration of the
  Contract if required, should be
  agreed
  by both parties in writing.

  IN WITNESS WHEREOF, the parties hereto have hereunto
  affixed their
  signatures at Hong Kong this 12th day of February
  1991.

  MINISTRY OF TRANSPORT

  [signed]

• Page 143 of 397

• HON. ANTHONY TEMO
  MINISTER FOR TRANSPORT

  WITNESS: MEMBER OF PARLIAMENT

  [signed]

  HON. AARON NOAIO
  MP For Gulf Province

  For and on behalf of

  OUTLET YEAR LIMITED

  [signed]

  Authorized Signature

  LEUNG KEUNG
  MANAGING DIRECTOR

  WITNESS:

  [signed]
  TO KEN CHUNG” [EXHIBIT 58]

  [12.11] THE AGREEMENT OF 12 FEBRUARY 1991 DID NOT MAKE SENSE

  Any person with a basic knowledge of contracts and the
  English language
  would realise that this document is very poorly drafted. The
  grammar is
  atrocious and, in places, the document just does not make
  sense. For

  Chapter 12

  131
  instanLe though the subject of the agreement is described
  in Clause 1 as
  “Southern Highlands Kikori Road from Erave to Kikori”,
  there are three sai
  other references in the document to the “Erave to Kerema”
  Cost Study or
  Contract.

• Page 144 of 397

• 1111

  The Ombudsman Commission is left wondering whether the
  parties to this
  agreement actually knew what they were agreeing to. In
  view of this, it is
  very doubtful whether the agreement could have ever been
  regarded as
  valid or enforceable.

  But that does not, in our view, excuse the Minister for
  Transport for his
  actions in signing this agreement.

  [12.12] THE PROPRIETY OF THE MINISTER FOR TRANSPORTS ACTIONS

  In the opinion of the Ombudsman Commission, it is very
  embarrassing for
  our country when persons holding official positions sign
  documents as
  amateurish as the agreement for the construction of the
  Southern
  Highlands-Kikori Road. It is terrible administration for
  any office-holder,
  particularly a Minister of the State, to unilaterally
  decide to enter into such
  agreements.

  The Ombudsman Commission believes that whenever any
  Minister goes
  overseas to engage in negotiations on behalf of Papua New
  Guinea, he
  should be accompanied by at least one senior Departmental
  adviser. If
  that had happened in this case, we have no doubt the
  Minister for
  Transport would have been advised not to sign the
  agreement for the
  construction of the Southern Highlands-Guff Road.

  Having said that, the Ombudsman Commission still finds it
  remarkable
  that, during the course of being entertained by foreign
  businessmen, and

  Chapter 12

  132

  while outside Papua New Guinea, the Minister for Transport

• Page 145 of 397

• would have
  signed an agreement for the carrying out of an extremely
  important
  national road project without the advice or knowledge of the
  Department
  of Transport or the Government he was supposed to be
  representing.

  This sort of thing simply should not happen. It raises
  questions of legal
  authority and breeds the atmosphere and environment ripe for
  bribery
  and corruption.

  [12.13j COULD THE MINISTER’S ACTIONS BE JUSTIFIED?

  During the course of this investigation, the Ombudsman
  Commission
  questioned the former Minister for Transport on his actions.
  He agreed he

  had been to Hong Kong and signed the Memorandum of
  Agreement. In
  his view, however, he had done nothing improper. His
  explanation was

  that it was not intended to be a binding document:

  “While in Hong Kong I signed a couple of pages
  documents as memorandum
  of understanding. This a Chinese Government policy that
  before they leave
  to go out of R.O. China it is a mandatory that they
  must have some form of
  agreement of some sort so they be allowed to leave
  their country. They had
  no choice but to show their Government information why
  they were leaving
  for PNG. I was authorised by NEC to negotiate on Burns
  Peak Road.

  Therefore, I had some authority to negotiate not make a
  decision. The
  Department was made known as usual.”
  [EXHIBIT 257, pages 3-4]

• Page 146 of 397

• In the opinion of the Ombudsman Commission, that is not a
  satisfactory
  explanation.

  A Minister should not sign any document which purports to
  bind himself
  or his Department or the Government of Papua New Guinea to
  any course
  of action unless he has been expressly and lawfully
  authorised to do so.
  L

  Chapter 12

  133

  There is no evidence, as Mr Temo claims, that he was
  authorised by the

  National Executive Council to conduct any negotiations.
  Nor is there any

  evidence he advised the Department of Transport what he
  was doing.

  The Secretary for Transport’s evidence was to the
  contrary. 11

  The Minister for Transport had no authorisation to conduct
  negotiations 11

  concerning the Southern Highlands-Gulf Road or the Spring
  Garden

  Road/Poreporena Freeway project. He had no right to sign
  this

• Page 147 of 397

• document He signed it without the advice or knowledge of
  his

  Department or the National Executive Council. tt was very
  wrong of him to

  sign it.

  [12.14] OTHER EVIDENCE OF OUTLET YEAR LTD’S INTEREST IN PAPUA NEW

  GUINEA

  a

  Mr Leo Moore’s oral evidence of Outlet Year Ltd’s interest
  in Papua New

  Guinea is corroborated by three documents that the
  Ombudsman

  111
  Commission has obtained:

  a
  (i) A letter from Outlet Year Ltd. dated 12 February
  1991, to the then

  Prime Minister. Mr Rabbie Namaliu. The letter states:

  ‘Your Excellency:

• Page 148 of 397

• A delegation from your Government headed by
  Hon. Anthony Temo,
  Minister for Transport, approached our Company
  seeking funds and
  technical assistance to develop – an
  infrastructure Development Plan –
  in your country Papua New Guinea. We are
  interested to invest up to
  US Dollars 5 billion in Papua N. G.

  As per our meetings, [with Mr Terns)] we wish
  to design and build
  Southern Highlands ICikori Road and Burns Peak
  Road in Port Moresby.
  We shall build these roads under a Turnkey
  arrangement, which means
  we shall supply manpower as well as financing.
  111

  Should your Government endorse this idea,
  please send me an
  invitation so our delegation consisting of the
  undersigned and Mr
  Steven Zohr and Mr Leo Moore, could assist your
  Country in the
  nearest future.

  Chapter 12

  1111

  134

  We are taking this as a matter of urgency and priority,
  and hope to
  meet you personally.

  Respectfully yours,
  [signed]
  LEUNG ICEUNG
  MANAGING DIRECTOR”

• Page 149 of 397

• This letter was marked:

  “c.c. His Excl. Ted Biro [sic], Deputy Prime Minister
  His Excl. Sir Michael T. Samare, [sic], Foreign Minister
  His Excl. Hon. Paul Bora [sic], Finance Minister
  His Excl. Hon Anthony Temo, Minister for Transport’.
  [EXHIBIT 57]

  (ii) A letter from Outlet Year Ltd dated 13 February 1991 to Mr
  Temo
  (also addressed to Deputy Prime Minister Mr Ted Diro, who was
  described as the Acting Transport Minister).

  This letter was headed “Application for pre-qualification of
  Southern
  Highlands Kikori Road’ and states:

  “We wish to design and construct Southern Highlands/
  Kikori Road in
  Port Moresby [sic] under a Turnkey arrangements which
  means we will
  supply manpower and finance’. [EXHIBIT 59]

  (iii) Another letter from Outlet Year Ltd dated 13 February 1991 to
  Mr
  Temo (also addressed to Mr Diro).

  This letter was headed “Application for Pre-qualification of
  Bums
  Peak Road” and states:

  ‘We wish to design and construct Burns Peak Road in Port
  Moresby
  under a Turnkey arrangements which means we will supply
  manpower
  and finance”. [EXHIBIT 60]

  Chapter 12

• Page