Report of an Investigation into the Spring Garden Road Poreporena Freeway Project (Part 1)

Mentions of people and company names in this document

The information these results are derived from was last updated in February 2021

Name References in this document Mentions in other documents

It is not suggested or implied that simply because a person, company or other entity is mentioned in the documents in the database that they have broken the law or otherwise acted improperly. Read our full disclaimer

  • About

    Part 1 of the Ombudsman Commission Report of an Investigation into the government's Spring Garden Road Poreporena Freeway Project.

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 150 of 397

  • 135

    [1215] THE TRIP TO TAIWAN AND HONG KONG WAS A VERY BAD PIECE OF
    ADMINISTRATION

    The three letters from Outlet Year Ltd were written at the
    time of the
    Minister for Transport’s visit to Hong Kong. When the
    letters are
    considered, together with the signing of the “Memorandum
    of Agreement”
    for the Southern Highlands-Gulf road, they show that, by
    shortlisting Outlet
    Year Ltd, the Minister had given that company favoured
    treatment.

    It would not be unreasonable for any person knowing these
    facts to
    wonder whether the Minister’s actions were a result of his
    trip to Hong
    Kong and Taiwan.

    The Minister had compromised his own impartiality by
    allowing his airfares
    and accommodation to be paid by foreign enterprises at a
    crucial time in
    the decision-making process.

    By taking it upon himself to become actively involved in
    the selection of a
    contractor for the Spring Garden Road/Poreporena Freeway
    project the
    Minister had a duty, as a matter of administration, to be
    totally impartial in
    his evaluation of the competing proposals. Not only that,
    he had to be
    seen to be totally impartial and objective.

    The Minister for Transport failed, in our view, to fulfil
    this basic
    administrative duty. The trip to Taiwan and Hong Kong and
    the signing a
    of the agreement on 12 February 1991 was a very bad piece
    of
    administration.

  • Page 151 of 397

  • Chapter 12

    [12.16] THE FINANCIAL STATUS OF OUTLET YEAR LTD136

    The three Outlet Year Ltd letters referred to
    earlier give the impression
    that the company is large and influential, with
    huge financial resources at
    its disposal. Mr Leo Moore’s evidence, however,
    suggests that this was far
    from being the case.

    Mr Moore testified that Outlet Year Ltd was quite
    a small company which
    simply did not have the sort of money to invest in
    Papua New Guinea it
    made out it had. He said this had first been
    brought to his attention in a
    facsimile message received on 27 March 1991 from a
    business adviser, Mr
    Stephen Zohr. [EXHIBIT 68]

    Mr Zohr was concerned about the uncertain
    financial background of Outlet
    Year Ltd and advised Mr Moore to be cautious in
    making any decisions
    about investing in Papua New Guinea.

    [12.17] OUTLET YEAR LTD HAD NO EXPERTISE IN ROAD PROJECTS
    AND NO
    EXPERIENCE IN PAPUA NEW GUINEA

    Mr Moore further testified that Mr Leung, of
    Outlet Year Ltd, had realised,
    soon after he wrote those letters, that his
    company would find it very
    difficult to raise the finances necessary to
    undertake projects such as
    Spring Garden Road and the Southern Highlands-Gulf
    Road. Mr Moore
    stated that the Minister for Transport, in all of
    his negotiations, had insisted
    on a 10% performance bond being given to the
    Government of Papua

  • Page 152 of 397

  • New Guinea.

    Nevertheless, Outlet Year Ltd continued to be
    involved in the negotiations,
    at least until July 1991. And it was not until
    September 1991 that the
    company formally dropped out of the negotiations
    (see Chapter 13).

    Chapter 12

    137

    The Ombudsman Commission was unable to question Mr Leung in
    the
    course of this investigation. However, on the basis of
    evidence available,
    we are satisfied that Outlet Year Ltd was quite a small
    company with no
    expertise in road construction or design and no prior
    experience in Papua
    New Guinea.

    THE MINISTER FO9 TRANSPORT AND MR LEO MOORE

    [12.18] MR LEO MOORE’S FIRST VISIT TO PAPUA NEW GUINEA

    Mr Moore first came to Papua New Guinea in May 1991. He was
    accompanied by his wife, Ida Moore, and Mr Leung of Outlet
    Year Ltd.
    They were met at Jacksons Airport by the four men who formed
    the
    delegation to Taiwan and Hong Kong in February 1991. Mr
    Moore said
    that on the second day of their visit, they had a meeting
    with the Minister
    for Transport to discuss the Spring Garden Road project. The
    cost was
    estimated to be US$50 million.

    The Minister wanted the Outlet Year consortium to build the
    road first and
    to pay them 5 to 10 years later. But Mr Leung was not very
    interested.
    In fact, he went home early, while Mr and Mrs Moore stayed
    behind for
    another week. During this time, the Minister introduced Mr
    Moore to the
    then Deputy Prime Minister and Minister for Fisheries and
    Marine

  • Page 153 of 397

  • Resources, Mr Akoka Doi, and various other investment
    projects were
    discussed.

    Chapter 12

    138

    [12.19] MINISTER FOR TRANSPORT APPEALS FOR LOAN FUNDS ON BEHALF
    OF PAPUA NEW GUINEA

    Before he returned to Hong Kong, Mr Moore was handed a
    letter from the
    Minister, under Ministry of Transport letterhead, in
    which he asked Mr
    Moore to arrange a loan to develop Papua New Guinea’s
    “ten year
    development plan”. The Ombudsman Commission obtained a
    copy of this
    letter. It is dated 24 May 1991 and reads as follows:

    “Mr Leo Moore,

    Papua New Guinea is a Country, full of all Natural
    Resources renewable and
    non renewable.

    At this stage Papua New Guinea requires Financial
    assistance badly.

    Our Economy will pick up in 1993 onwards.

    Until then Papua New Guinea requires at least US$50
    million dollars in
    infrastructure development in the next five (5)
    years from 1992 or sooner the
    better.

    Should you require my department’s ten (10) year
    development plan I will bring
    it with me.

    By this letter I am appealing on behalf of PNG
    Government that you arrange
    for a loan in kind or cash to develop and implement
    our ten (10) year

  • Page 154 of 397

  • development plan.

    Should you arrange for same, please try to make the
    loan finance cheaper than
    Asian Development bank and World Bank.

    I thank you and your group in advance, with kind
    regards.

    [Signed)
    ANTHONY TEMO
    Minister for Transport” [EXHIBIT 871

    The purpose of this letter was to enable Mr Moore to go
    back to Taiwan
    with some proof he had negotiations with a Minister of
    the State in Papua
    New Guinea.

    chapter 12

    139 II

    [12.20] MR MOORE RETURNS TO TAIWAN AND NEGOTIATES DIRECTLY WITH
    THE SSDI

    Mr Moore testified that, on his return to Taiwan in May
    1991, he contacted
    Mr Leung in Hong Kong and told him that, despite Mr Leung’s
    reservations, he was still very keen to see the Port Moresby
    road project
    go ahead, with the assistance of the SSDI.

    Mr Moore then started (with Mr Leung’s knowledge) to
    negotiate directly
    with Mr Lee Chong Chan, who was the link-man between the
    SSDI and
    the Government in Bejing. These negotiations resulted in the
    Bejing
    Government approving a visit to Port Moresby by
    representatives of the
    SSDI in July 1991.

    [12.21] ANOTHER VISIT TO HONG KONG BY THE MINISTER FOR TRANSPORT

  • Page 155 of 397

  • Prior to the visit to Port Moresby by the SSDI observation
    group, the
    Minister for Transport made another unofficial trip to Hong
    Kong, at Mr
    Leo Moore’s expense.

    This visit took place between 7 and 14 June 1991. The
    Minister was
    accompanied by his wife, whose airfare was paid for by Mr
    Leo Moore;
    the Minister for Transport had his own airfare on this
    occasion. The
    Minister and his wife again stayed at the Sheraton Hotel and
    all their
    expenses in Hong Kong, including meals and accommodation,
    were paid
    for by Mr Leo Moore.

    Chapter 12

    140

    [12.22] MINISTER FOR TRANSPORT HOLDS PRIVATE DISCUSSIONS WITH
    TOPBAY INVESTMENT LTD IN HONG KONG

    During this visit to Hong Kong, the Minister for Transport
    met with Mr Leo
    Moore and six representatives of a Hong Kong-based company
    called
    Topbay Investment Ltd.

    Mr Moore testified they had discussed the Spring Garden Road
    project for
    almost two days. Mr Moore arranged the meeting himself. By
    this stage,
    he had formed the view that Outlet Year Ltd may not have the
    ability to
    undertake the Spring Garden Road project. He had had
    previous business
    dealings with Topbay Investment Ltd and saw them as a good
    substitute
    for Outlet Year Ltd.

    The Ombudsman Commission asked Mr Moore whether Topbay
    Investment Ltd had any experience in road construction or
    design: they
    did not. The company had never done any business in Papua
    New
    Guinea and none of the company’s principals had ever been to

  • Page 156 of 397

  • Papua
    New Guinea.

    [12.23] EVIDENCE OF THE MINISTER FOR TRANSPORT’S PRIVATE
    DISCUSSIONS IN HONG KONG

    In the course of this investigation the Ombudsman Commission
    obtained
    from Mr Temo, a copy of a letter from Topbay Investment Ltd
    addressed
    to the Secretary for Transport, dated 14 June 1991. The
    letter reads:

    Chapter 12

    141

    “My Dear Secretary,

    Re: Burns Peak Freeway

    Please enclose our proposal as requested.

    We would like to show our interest to support
    funding this Freeway project
    subject to all details of construction plan will be
    released to us as soon as
    possible.

    Funding [illegible] US$50,000,000.00 (US Dollars,
    Fifty Million) will be available
    on receipt of our acceptance notification from PNG
    Government.

    Final terms and condition to be discussed on
    acceptances of our proposaL

    Note: The Company has changed from Outlet Year
    Company to Topbay
    Investment Ltd.
    Thank you and we are waiting your favourable reply.

    Yours sincerely,
    [Signed]
    W.C. Dave Kwok
    Group General Manager”
    [EXHIBIT 89]

  • Page 157 of 397

  • The date of this letter coincides with the date of the
    Minister’s visit to
    Hong Kong, which the Commission has confirmed by checking
    the
    Minister’s passport.

    We are satisfied, therefore, that the evidence given by Mr
    Leo Moore as
    to the Minister’s visit to Hong Kong between 7 and 14 June
    1991 is true
    and correct.

    [1224] WRONG CONDUCT BY THE MINISTER FOR TRANSPORT

    We have emphasised how important it is for Ministers of
    the State not to
    go on privately sponsored overseas trips, especially when
    they are
    provided by foreign enterprises which may expect to reap
    rewards by
    showing hospitality to a Minister.

    Chapter 12

    111

    142

    In our preliminary report, we suggested it was wrong for Mr
    Temo to
    make this second trip to Hong Kong. His response was as
    follows:

    “I met the expenses for my second trip to Hong Kong,my
    wife’s expenses were
    paid for by Mrs L Moore and were on a family business
    trip.
    While there I may have talked to somebody about Burns

  • Page 158 of 397

  • Peak as a total 10 year
    plan. However, the trip was for my private co. business
    and I have also advised
    the Ombudsman Commission about that trip.” [EXHIBIT 257,
    page 4]

    Mr Temo’s excuse that he was on a family business trip is
    not considered
    acceptable. As the Minister who had assumed primary
    responsibility for
    the Spring Garden Road/Poreporena Freeway project, he
    compromised
    his impartiality by accepting the benefits associated with
    this trip from an
    associate of one of the companies bidding for the project.
    There is also
    no evidence that the Department of Transport knew anything
    about the
    trip or the negotiations the Minister had with Topbay
    Investment Ltd.

    In the circumstances, it was wrong of Mr Temo to conduct
    these
    negotiations. It was another very bad piece of
    administration.

    CHINESE CONSORTIUM VISITS PORT MORESBY

    [12.25] SSDI VISITS PORT MORESBY IN JULY 1991

    An observation group from the Second Surveying & Designing
    Institute
    visited Port Moresby from 6 to 10 July 1991 – just a week
    before the
    Ministerial Committee decided to favour their proposal. The
    group, which
    consisted of about seven engineers, was led by Mr Sun Young
    Hse, who
    described himself as the “Executive Director on behalf of
    the Observation
    Group of the Second Surveying and Designing Institute
    Ministry of
    Railways”. [EXHIBITS 95, 96, 102B].

  • Page 159 of 397

  • Chapter 12

    143

    Mr Moore, his wife Ida Moore, Mr Leung and Mr Leung’s son
    also
    travelled to Port Moresby for the occasion. Mr Moore said
    that his group
    and the SSDI group were met at the Port Moresby Travelodge
    Hotel by
    the Minister and they spent considerable time inspecting the
    route of the
    Spring Garden Road/Poreporena Freeway project.

    12.26] CONFUSING ASPECTS OF THE OBSERVATION GROUP’S VISIT

    The Ombudsman Commission wonders why Mr Leung of Outlet Year
    Ltd
    would have made this trip to Port Moresby, in view of Mr
    Moore’s
    evidence that Mr Leung had already realised his company
    didn’t have the
    financial capability to undertake the project. There are also
    other aspects
    of the SSDI’s visit that the Ombudsman Commission finds very
    confusing:

    Evidence obtained by the Commission suggests that
    another
    agreement was signed by the Minister for Transport
    during
    the visit of the Chinese consortium. However, no such
    agreement appears in the files of the Department of
    Transport.

    We are also confused by the fact that two different
    proposals
    for the design, finance and construction of the freeway
    appear to have been submitted around this time on
    behalf
    of the Chinese consortium.

    Chapter 12

  • Page 160 of 397

  • 144

    [12.27] WERE ANY AGREEMENTS SIGNED DURING THE VISIT BY THE
    CHINESE CONSORTIUM?

    Mr Leo Moore testified that during the July 1991 visit by
    the Chinese
    consortium, the Minister for Transport signed a document,
    about two or
    three pages in length, which summarised the financial
    terms on which the
    Government of PNG would engage the consortium.

    The document was also signed by Mr Zhu Chuanhua, a member
    of the
    SSDI observation group. [A copy of a business card in the
    name of this
    person is located in the Department of Transport’s files:
    EXHIBIT 102B]

    According to Mr Moore, the signing of this agreement took
    place at the
    Port Moresby Travelodge Hotel.

    Mr Moore described this document as a “pre-agreement”. The
    Ombudsman Commission has tried unsuccessfully to obtain a
    copy of it.
    The document is not in the Department of Transport’s
    files. But, there is
    a reference to it in a letter to the Minister for
    Transport from the China
    Huashi Enterprises Corporation dated 6 September 1991.

    This letter reads:

    Your Excellency,

    Attached please find a CERTIFICATE issued by Bank of
    China Chengdu
    Branch, which we hope will provide you with a brief
    description of our firm’s
    financial status. We, China Huashi Enterprises Corp,
    (CHECO) joint with the
    Second Surveying & Designing Institute, Ministry

  • Page 161 of 397

  • Railways are very willing
    and fully capable to undertake the surveying,
    designing and construction of the
    proposed Spring Garden Road Link project

    In order to release current traffic congestion as
    soon as possible based on
    suggestion made by observation group of the Second
    Surveying & Designing
    Institute, Ministry of Railways, the proposed road
    will be constructed in
    following stages.

    Chapter 12

    145

    1. completion of engineering survey, design
    and geological work of above
    road project;

    construction of the first of a twin tunnel
    through the Burns Peak;

    3. construction of the missing sections (i.e.
    nonexisting sections) along the
    proposed route from Moresby Harbour in
    Konedobu to Jackson Airport;

    4. construction of the second of the twin
    tunnel and upgrading the
    existing road to 4-lane highway.

    If you agree the above-mentioned arrangement in
    principle, we intend to sign
    a main contract of contracting the Spring Garden
    Road Link project with you
    based on the Pre-agreement signed by you and Mr
    Zhu Chuanhua in P.N.G.
    And then to sign execution sub-project contract
    stage by stage, and provide you
    Bank Guarantee according to the stipulization of
    sub-project contract

    Please do not hesitate to contact us should you
    desire more information about

  • Page 162 of 397

  • our firm or clarification of the points in this
    letter.

    With best regards.

    Yours sincerely,

    Liu Shouning Mau Shesheng
    Deputy General Manager Second Surveying
    & Des-
    China Huashi Enterprises Corp. igning
    Institute, Ministry
    of
    Railways.” [11XIIIBTY 106]

    [12.28] WHAT IS THE CHINA HUASHI ENTERPRISES CORPORATION?

    Mr Leo Moore stated that this was another agency of the
    Peoples’

    Republic of China – a Government company closely linked
    with the SSDI.

    In Mr Moore’s view it was not unusual that the letter
    of 6 September 1991

    had come from it, rather than the SSDI, because the
    SSDI is not itself

    authorised to enter into contracts outside China. Only
    a company such as

    the China Huashi Enterprises Corporation can do this,
    he said.

    Chapter 12

    146

  • Page 163 of 397

  • [12.29] THE MINISTER HAD SIGNED A PRE-AGREEMENT

    The letter of 6 September 1991 confirms Mr Moore’s evidence
    as to the
    signing of some form of “pre-agreement” by the Minister for
    Transport
    during the visit of the SSDI in July 1991.

    When we made this finding in our preliminary report, it was
    not disputed
    by Mr Temo.

    In the opinion of the Ombudsman Commission it was wrong of
    Mr Temo
    to sign any “pre-agreement’. He had no authorisation from
    the National
    Executive Council to conduct negotiations, let alone sign an
    agreement.
    Even the so-called Ministerial Committee on Spring Garden
    Road had not
    authorised its signing. The Minister signed the agreement
    without the
    knowledge or advice of his Department.

    CONFUSION CAUSED BY LODGMENT OF DIFFERENT PROPOSALS

    [12.30] WHAT PROPOSALS WERE ACTUALLY SUBMITTED TO THE
    DEPARTMENT OF TRANSPORT DURING THE COURSE OF THE SSDI’S
    VISIT TO PORT MORESBY?

    As we noted in Chapter 11, it has been impossible to
    precisely ascertain
    which proposals were considered by the Ministerial Committee
    when it
    decided that the project be awarded to the Chinese
    consortium. Most of
    the proposals were lost after they were left in the Minister
    for Transport’s
    office, and the Department of Transport did not keep copies
    of them.

    Chapter 12

    147

    The confusion was made worse by our discovery of two
    different
    proposals on behalf of the Chinese consortium.

  • Page 164 of 397

  • Of course, it must be appreciated that whenever the term
    “Chinese
    consortium” is used in this report there is bound to be some
    confusion.
    This cannot be avoided because the composition of the
    consortium kept
    changing.

    Even with the benefit of hindsight it has been very
    difficult to ascertain
    which companies comprised the consortium at different times.
    Nevertheless, it is appropriate to always refer to the loose
    grouping of
    companies and individuals as ‘the Chinese consortium”
    because, despite
    frequent changes in its composition, it usually had some
    common
    elements, viz the SSDI and Mr Leo Moore.

    [12.31] THE PROPOSAL BY OUTLET YEAR LTD AND THE SSDI

    The files of the Department of Transport show a joint
    proposal being
    made by Outlet Year Ltd and the SSDI. The proposal was
    submitted
    under cover of a letter on SSDI letterhead addressed to the
    Secretary for
    Transport.

    This letter is undated. Also, there is no date-received
    stamp on it, which
    makes it doubly difficult to determine when it was
    submitted. [EXHIBIT 95]

    In the course of his interrogation by the Ombudsman
    Commission, Mr Leo
    Moore indicated that this letter had been typed on 8 or 9
    July 1991 at the
    Port Moresby Travelodge Hotel. It is poorly written and
    difficult to
    understand. It reads:

    Chapter 12

    148

    “Dear Sir,

    OBSERVATION REPORT (Draft)

  • Page 165 of 397

  • ON A PROPOSED FREEWAY PROJECT FROM PORT
    MORESBY TO JACKSON’S AIRPORT IN PNG

    It is really a pleasure to send you the Observation Report
    (Draft) on a proposed
    freeway project from Port Moresby to Jackson’s Airport in PNG.
    After having
    received your invitation letter and scrutinizing all relevant
    documents available,
    we, the Second Surveying and Designing Institute, Ministry of
    Railways P.ILC,
    immediately sent a observation group to your beautiful Country,
    (4 Senior
    Engineers and a Senior economist), together with Mr Leung Keung
    (Managing
    Director of Outlet Year Limited) and his partly. From July 6,
    arriving day, to
    July 10, we have made a on-the-spot investigation to the
    proposed freeway
    project. The Observation Report (draft) is attached to the
    Financial Proposal.

    The total project including the tunnel could cost almost US$50
    million are
    included. We believe it is unwise at this stage because the
    traffic lights can
    function just as effectively, but off cause it is negotiable.

    Hence, your government gives the approval of the construction
    of this project
    at a total cost of US$50 million which will become a loan to
    the Government
    in principle with the following Principal terms and conditions.

    Borrow: The Independent State of PNG on behalf of the
    Spring Garden Toll Road Corporation.
    Lender, The Bank of China and our Corporation
    Maturity: 10 years
    Grace Period: 3 years (including construction period)
    Amount: US$50 million (approx K million)
    Interest Rate: Nil
    Commitment Fee: Nil
    Management Fee: Nil
    Performance Bond 10% to be issue by the Bank of China.

    We hope all these reports and conditions for the funding are
    acceptable for
    your requirement.

    With Best Regards.
    Yours faithfully
    [Signed]
    MOORE’S INVESTMENT GROUP
    Sun Young HSE (Executive Director)

  • Page 166 of 397

  • On Behalf of
    Observation Group of
    The Second Surveying and Designing
    Institute
    Ministry of Railways.” [palIBIT 95]

    This undated letter was accompanied by an “Observation Report’. It
    states:

    Chapter 12

    149

    “This proposal has been prepared in response to an
    invitation from the
    Department of Transport to Outlet Year Ltd to submit
    a proposal for the
    development of the Spring Garden Road through BOT
    system…Outlet Year Ltd
    in joint partnership with the Ministry of Railways of
    People’s Republic of
    China will assume full responsibility to the
    Department of Transport for the
    successfully completion of the required services from
    planning, design,
    financing and implementation.” [EXHIBIT 951

    Curiously, most of this twenty-eight page “observation
    report’ was almost
    exactly the same (i.e. word-for-word) as another document
    the
    Ombudsman Commission obtained during the investigation.
    This other
    document is entitled “Spring Garden Road through BOT
    System Technical
    Proposal Submitted by Topbay Investment Limited Kowloon
    Hong Kong
    June 1991”. [EXHIBIT 91]

    [12,32] THE PROPOSAL BY TOPBAY INVESTMENT LTD

  • Page 167 of 397

  • The “Technical Proposal” in the name of Topbay Investment
    Ltd is not in
    the files of the Department of Transport. The Ombudsman
    Commission
    was not aware of its existence until it was produced under
    summons by
    Mr Temo. Although the greater part of this document
    [EXHIBIT 91] is
    exactly the same as the “Observation Report’ submitted by
    Outlet Year Ltd
    [EXHIBIT 95] there are significant differences between the
    two documents.

    [12.33] DIFFERENCES BETWEEN TOPBAY PROPOSAL AND THE OUTLET YEAR
    PROPOSAL
    11

    The most obvious difference is in the identity of the
    proponents. Whereas
    the “Observation Report” in the possession of the
    Department of Transport
    refers to Outlet Year Ltd and the SSDI, the document we
    obtained from
    the Minister for Transport states, in the corresponding
    paragraphs:

    Chapter 12

    150

    “This proposal has been prepared in response to an
    invitation from the
    Department of Transport to Topbay Investmented [sic] to
    submit a proposal for
    the development of the Spring Garden Road through the
    BOT system… Topbay
    Investmented [sic] in joint partnership with the
    Ministry of Foreign Economic
    Relations and Trade of the People’s Republic of China
    will assume full
    responsibility to the Department of Transport for the
    successfully completion
    of the required services from planning, design,
    financing and implementation.”
    [EXHIBIT 91]

  • Page 168 of 397

  • It will be observed that not only is there a different Hong
    Kong -based
    company referred to here, there is also a different agency
    of the Chinese
    Government: the Ministry of Foreign Economic Relations and
    Trade, rather
    than the Ministry of Railways. And at another point in the
    Topbay
    Investment Ltd document, there is a reference to yet another
    mysterious
    entity called the “China Guangzhou International Economic
    and Technical
    Co-operation Company”. [EXHIBIT 91, third last page]

    The “Financial Proposals” included in the two documents are
    also different.
    [Compare EXHIBIT 95, folios 96-101 with the last 3 pages of
    EXHIBIT 91.]

    However, the Topbay and Outlet Year proposals do have some
    things in
    common. They are equally vague and poorly drafted and they
    both
    contain bald assumptions about involvement of Motu-Koita
    landowners in
    the project. They both assume (alarmingly) that as part of
    the deal, the
    Chinese consortium will be awarded contracts for other major
    road
    projects in Papua New Guinea.

    [12.34] THE MYSTERY SURROUNDING THE TWO DIFFERENT PROPOSALS ON
    BEHALF OF THE CHINESE CONSORTIUM IS A MATTER OF SERIOUS
    CONCERN

    Although the bulk of the two proposals was exactly the same,
    they were
    in fact two separate documents. The Ombudsman Commission is
    mystified
    and seriously concerned by the fact that only one of the
    proposals was
    in the possession of the Department of Transport.

    Chapter 12

  • Page 169 of 397

  • 151

    It is also a mystery why the Topbay Investment Ltd Technical
    Proposal
    was linked with a Ministry of the Chinese Government different to
    the one
    which had consistently been referred to in earlier documentation.

    Even after closely examining the files of the Department of
    Transport and
    questioning two of the key persons in the negotiations at length
    (i.e. the
    Minister for Transport and Mr Leo Moore) it is impossible for us to
    say
    exactly what negotiations had taken place, when they took place and
    with
    whom.

    The mystery surrounding these two proposals is a small indication of
    how
    unprofessionally the whole negotiating process was being handled. tt
    was
    nothing short of a farce.

    The sad thing is that a group of well-intentioned foreign
    businessmen and
    representatives of the Government of the People’s Republic of China,
    were
    being given false expectations by a Minister of the State.

    The Minister was acting without the advice of his Department and had
    assumed far too much control over a decision-making process that
    should
    have been carried out objectively and fairly by other bodies using
    the
    normal and lawful procedures under the Public Finances (Man -gement)
    Act and other laws regulating public works projects (see Part Ill of
    this
    report).

    Chapter 12

    152

  • Page 170 of 397

  • [12.35] WHAT IMPRESSION WAS GIVEN TO THE CHINESE CONSORTIUM BY
    THE END OF THEIR VISIT IN JULY 1991?

    The Ombudsman Commission has no doubt that the observation
    group
    of the SSDI left Port Moresby at the end of their visit in
    July 1991 with the
    firm belief that, subject to confirmation of financing
    arrangements such as
    the 10% performance bond, they had “won” the contract for
    the Spring
    Garden Road/Poreporena Freeway project.

    This is evident from the undated letter to the Secretary for
    Transport which
    the SSDI delivered just before its departure. It stated:

    “Hence, your government gives the approval of the
    construction of this project
    at a total cost of US$50 million…”. [EXHIBIT 95, page
    1]

    The letter to the Minister for Transport from the China
    Huashi Enterprises
    Corporation of 6 September 1991 was in similar terms:

    “If you agree the above-mentioned arrangement in
    principle, we intend to sign
    a main contract of contracting the Spring Garden Road
    Link project with you
    based on the Pre-Agreement signed by you and Mr Zhu
    Chuanhua in PNG.”.
    [EXHIBIT 106, page 2]

    The Ombudsman Commission questioned Mr Leo Moore as to his
    view of
    the situation at the end of the observation group’s visit.
    He testified that
    the group appreciated the Minister’s decision had to be
    ratified by the
    National Executive Council. But they understood this to be
    only a formality.
    The Minister had told them he foresaw no problems. As long
    as they
    could arrange for a bank guarantee of the performance bond,
    the final
    contract would be signed.

  • Page 171 of 397

  • Chapter 12

    153

    IMPROPER RELATIONSHIP BETWEEN THE MINISTER AND THE CHINESE
    CONSORTIUM

    [12.36] SUMMARY OF THE RELATIONSHIP BETWEEN THE MINISTER FOR
    TRANSPORT AND THE CHINESE CONSORTIUM PRIOR TO THE
    MINISTERIAL COMMITTEE MEETING OF 18 JULY 1991

    In light of the evidence outlined above, the Ombudsman
    Commission is
    satisfied that, prior to the meeting of the Ministerial
    Committee on 18 July
    1991, the Minister for Transport had formed a very close
    association with
    members of the Chinese consortium.

    In particular we draw attention to the following
    unsatisfactory aspects of
    that relationship:

    1. The Minister had twice been on all-expenses-paid
    overseas trips to
    personally negotiate deals concerning the Spring Garden
    Road/Poreporena Freeway project and other national road
    projects.
    Both trips were paid for by one of the key persons
    involved in the
    bid by the Chinese consortium.

    2. On the first of these trips, the Minister signed a
    contract for
    construction of the Southern Highlands-Kikori Road with
    a company
    that was part of the Chinese consortium. He did this
    without
    authorisation and without the advice or knowledge of the
    Department of Transport.

    3. The first trip took place at the same time the Minister
    himself was
    preparing the shortlist for the Spring Garden Road/

  • Page 172 of 397

  • Poreporena
    Freeway project.

    Chapter 12

    154

    4. The Minister invited representatives of the Chinese
    consortium to
    Port Moresby on two separate occasions before the Ministerial
    Committee (which he chaired) made its decision on which
    consortium to favour. On both occasions the Minister engaged
    in
    detailed negotiations concerning the Spring Garden
    Road/Poreporena Freeway project, as well as other national
    road
    projects.

    5. On the second visit to Port Moresby by the Chinese
    consortium, the
    Minister signed a “pre-agreement” and gave the clear
    impression
    that, subject to finance, they had won the contract for the
    Spring
    Garden Road/Poreporena Freeway project.

    6. Furthermore, the Minister had formed a personal friendship
    with one
    of the key persons involved in the Chinese bid, Mr Leo Moore.
    This
    friendship was strengthened in the second half of 1991: the
    Minister had another visit to Hong Kong paid for by Mr Moore
    and
    the Minister went into business with Mr Moore.

    By forming this association with the Chinese consortium and entering
    into
    private negotiations without consulting the Department of Transport
    before
    the Ministerial Committee met on 18 July 1991 and before the matter
    was
    considered by the National Executive Council, the Minister for
    Transport,
    Mr Temo, had transformed the decision-making process for the Spring
    Garden Road/Poreporena Freeway project into a sham.

    * * * * * * * * * *

    Chapter 12

  • Page 173 of 397

  • 155

    13. FURTHER CHANGE IN COMPOSITION OF THE
    CHINESE CONSORTIUM: SEPTEMBER 1991

    [13.1] THE NEGOTIATING PATTERN IN THE FIRST HALF OF 1991

    During the first half of 1991 the Minister for Transport
    had been negotiating
    with a number of different companies and individuals, in
    relation to the
    Spring Garden Road/Poreporena Freeway project. In
    particular, the
    Minister had been negotiating with:

    Mr Leo Moore;

    the Second Surveying and Designing Institute,
    represented
    by Mr Sun Young Hse; and

    Outlet Year Ltd, represented by Mr Leung
    Keung.

    [13.2] WHO ELSE FORMED ‘THE CHINESE CONSORTIUM’?

    However, these were not the only parties that formed,
    what the
    Ombudsman Commission has termed in this report, “the
    Chinese
    consortium”. The following parties were also, at
    different times, involved:

    Topbay Investment Ltd: a Hong Kong-based
    company. The
    proposal endorsed by the Ministerial
    Committee on Spring
    Garden Road was actually in the name of this

  • Page 174 of 397

  • company.
    [EXHIBIT 99, at page 13]. However, the
    company had never
    conducted business in PNG and the principals
    of the
    company had never been to PNG.

    Chapter 13

    156

    China Guangzhou International Economic and Technical
    Cooperation Company and Ministry of Foreign Economic
    Relations and Trade of the Peoples’ Republic of China:
    referred to as joint partners in the Technical Proposal of
    Topbay Investment Ltd. [EXHIBIT 91] Their role in the
    negotiations is a complete mystery.

    China Ample Development Lid: also linked with Topbay
    Investment Ltd and the SSDI in the summary of proposals
    contained in the draft NEC Submission of July 1991. [EXHIBIT
    99, at page 13, discussed in Chapter 8] However, the name
    does not appear in any other documents in the records of
    the Department of Transport obtained by the for the purposes
    of this investigation. Its role in the negotiations is also a
    complete mystery.

    Moore’s Investment Group: a name used in two letters written
    by Mr Sun of the SSDI. It appears to be a name of
    convenience only, used to describe the consortium, of which
    the SSDI was an integral part.
    [EXHIBITS 95, 110]

    China Huashi Enterprises Corporation: from the evidence of
    Mr Moore, this Chinese Government company is closely linked
    with the SSDI. It was apparently intended that it would
    formally enter into the contract for the Spring Garden project
    Road/Poreporena Freeway with the PNG Government.

    Chapter 13

    157

  • Page 175 of 397

  • [13.3] THE ROLE OF MR LEO MOORE

    Mr Leo Moore’s role in the negotiations was not well defined,
    but it is clear
    he had an active and vested interest in everything that was
    happening in
    relation to the project.

    The Ombudsman Commission does not suggest there was anything
    illegal
    or improper in Mr Moore’s involvement. He was, however, at
    all times, an
    important link between the Minister for Transport and the
    other parties
    involved.

    [13.4] ANOTHER HONG KONG COMPANY JOINS THE CONSORTIUM

    During September 1991 there was a significant change in the
    negotiating
    pattern: another Hong Kong-based company was appointed to act
    on
    behalf of the SSDI. This company was called Tunson
    Engineering Co Ltd.

    News of this change of plan was conveyed to Mr Temo in a
    letter from the
    SSDI dated 28 September 1991. The letter reads as follows:

    ‘Dear Mr. Temo:

    Our second surveying & designing Institute, ministry of
    Railways Prc. Now
    has pass the burns peak project to our contractor in Hong
    Kong under the
    name of Tnnson Engineering Co. Ltd, 1-3/F, 21-23 Han Wong
    Road, Kowloon
    City, Kowloon Hong Kong. Who has the experience of
    contracting the Mordem
    constructions both in peoples republic of China as well as
    Hong Kong.

  • Page 176 of 397

  • Chapter 13

    158

    It would be much appreciated if your department will change
    your record
    Accordingly.

    Yours faithfully

    [Signed]
    MOORS INVESTMENT GROUP
    SUN YOUNG HSE (EXECUTIVE DIRECTOR)
    ON BEHALF OF OBSERVATION GROUP OF THE
    SECOND SURVEYING AND DESIGNING
    INSTITUTE, MINISTRY OF RAILWAYS [sic]. [EXHIBIT 110]

    The Minister for Transport made a handwritten note at the bottom of
    the
    letter, dated 10.10.91.

    “SECRETARY

    PLEASE TAKE NOTE OF ABOVE CHANGE AS I HAVE NO OBJECTION AS
    LONG AS THEY ARE MEETING OUR CRITERIA.
    ALSO PREPARE THE FINAL SUBMISSION TO CABINET. WORK CLOSELY
    WITH FINANCE DEPARTMENT.
    THANK YOU
    A. TEMO”. [EXHIBIT 110]

    In his response to the Ombudsman Commission’s preliminary report, Mr
    Temo also claimed that he had asked the Secretary for Transport to
    do
    a company search on all the companies that put in a bid:

  • Page 177 of 397

  • even instructed the Secretary to send someone to Hong Kong
    to find out in
    case we mislead the NEC.” [EXHIBIT 257, page 4]

    We have been unable to find any evidence to corroborate this claim.

    Chapter 13

    159

    [13.5] SIGNIFICANCE OF CHANGE IN COMPOSITION OF THE CONSORTIUM

    Tunson Engineering Co Ltd was at least the third Hong
    Kong-based
    company to join the Chinese consortium in less than six
    months. In the
    opinion of the Ombudsman Commission, the fact there had
    been yet
    another change in the composition of the consortium should
    have been
    a matter of great concern, both to the Minister for
    Transport and the
    Department of Transport.

    During the course of this investigation, the Ombudsman
    Commission found
    it impossible to identify the precise legal relationships
    between the various
    parties that, at different times, constituted the Chinese
    consortium. We are
    left to wonder how confusing it must have been at the
    time, with
    companies such as Outlet Year Ltd, China Ample Development
    Ltd and
    Topbay Investment Ltd, as well as “Moore’s Investment
    Group”, all being
    linked with the proposal of the SSDI and various other

  • Page 178 of 397

  • agencies of the
    Chinese Government.

    The addition of Tunson Engineering Co Ltd to the
    consortium in
    September 1991 could only have added to the utter
    confusion that any
    reasonably cautious administrator would have experienced
    at that time.

    [13.6] THE CONFUSION CAUSED BY A FURTHER CHANGE IN THE
    CONSORTIUM SHOULD HAVE LED TO A HALT IN NEGOTIATIONS

    There were some obvious questions to ask about the arrival
    of Tujison
    Engineering Co Ltd:

    Why was the change in composition of the
    consortium
    necessary?

    Chapter 13

    160

    Were the companies previously in the consortium
    disreputable?

    Did they have financial problems?

    If so, what guarantee was there that the same problems
    wouldn’t be encountered with this new company?

    Who was behind Tunson Engineering Co Ltd?

    Was it a reputable company?

    How long had it been established?

    Did it have any experience operating in PNG?

    Had any of its principals been to PNG?

    What was the company’s asset base?

  • Page 179 of 397

  • Did the company have experience in civil engineering
    projects?

    Was it registered with the National Investment and
    Development Authority (NIDA)?

    It later transpired that the Department of Transport did begin to
    ask some
    of these questions (see Chapter 15). The Minister’s reaction,
    however, was
    not the same as the Department’s.

    Chapter 13

    161

    [13.7] THE MINISTER’S LACK OF CONCERN WAS IRRESPONSIBLE

    The Ombudsman Commission considers that the Minister
    for Transport’s
    direction to the Secretary of the Department of
    Transport on 10 October
    1991 to “take note of the change” and the Minister’s
    comment that he had
    “no objection as long as they are meeting our criteria”
    was an ill-
    considered, inadequate and reckless response to the
    addition of Tunson
    Engineering Co Ltd to the Chinese consortium.

    The Minister for Transport showed a total disregard for
    all the normal and
    proper legal and administrative procedures regulating
    public works projects
    in Papua New Guinea.

    The Minister should have been deeply concerned about
    this development.
    But he was not concerned. Far from it. As we show in
    the next chapter of
    this report, only a few days after advising the
    Secretary for Transport about
    Tunson Engineering Co Ltd, the Minister signed a
    contract with that
    company for construction of the freeway.

    * * * * * * * * * *

  • Page 180 of 397

  • Chapter 13

    162

    14. MINISTER FOR TRANSPORT SIGNS CONTRACT FOR
    CONSTRUCTION OF FREEWAY: OCTOBER 1991

    [14.1] NEGOTIATIONS WITH TUNSON ENGINEERING CO LTD

    During October 1991, the Managing Director of Tunson
    Engineering Co
    Ltd, Mr Siu Chu Yen, visited Port Moresby and had
    negotiations with the
    Minister for Transport, concerning the Spring Garden Road/
    Poreporena
    Freeway project.

    Mr Siu was accompanied by four other Hong Kong businessmen,
    as well
    as Mr Leo Moore.

    Mr Moore testified that the Tunson group visited Port Moresby
    for one
    week and stayed at the Port Moresby Travelodge Hotel. He came
    on the
    same flight as the Tunson group and returned with them to
    Hong Kong
    in mid-October 1991.

    The Ombudsman Commission is satisfied that the negotiations
    between the
    Minister for Transport and Tunson Engineering Co. Ltd
    occurred without
    the knowledge of the Secretary for Transport, Mr Amini.

    [142] RESULT OF NEGOTIATIONS

    The result of the negotiations was that, on 15 October 1991,
    the Minister
    for Transport, purporting to act on behalf of the Department

  • Page 181 of 397

  • of Transport,

    Chapter 14

    163

    signed a contract for the construction of the Spring Garden
    Road/Poreporena Freeway. The contract was entered into with
    Tunson
    Engineering Co. Ltd. of Kowloon Hong Kong. [EXHIBIT 115

    THE CONTRACT OF 15 OCTOBER 1991

    [14.3] TERMS OF THE CONTRACT

    The contract dated 15 October 1991 is nine pages in length
    and is entitled:

    ‘CONTRACT AGREEMENT ■
    The agreement for the construction of (Burnspeak-Spring
    Garden Road) (from
    Port Moresby to Jackson Airport [sic].’

    The document states, amongst other things:

    To change the traffic condition from Port Moresby to
    Jackson airport, design
    the construction of the Spring Garden Road Link project
    from Port Moresby to
    jacksons Airport in PNG.

    From June 1991, we have invited by the Ministry of
    Transport of PNG to realize
    the work and make the agreement as following item.

    A. This agreement will be signed between the
    Transportation of PNG as
    Party A and Tunson Engineering Co., Ltd. as Party.

    B. Project Description:

  • Page 182 of 397

  • Bl(a) The proposed mad link will start from Moresby
    Harbour in Konedobu,
    along the existing Spring Garden Road crossed the Bums
    Peak saddle (by
    tunnel) and intersects with Wards, Waigani, Boroko Roads,
    and then along the
    Geauta Drive Road intersects with Hubert Murray Highway,
    finally to Jackson
    airport total length 8.8 km.

    B1(b) Based on the economic Assessment for Spring Garden
    Road on Port
    Moresby Road needs study and requirements pointed out by
    the Department
    of Transportation. The main technical standards are as
    follows:

    Chapter 14

    164

    Length of new mad : 4.6 kilometer
    Length of existing mad: 3.5 kilometer
    Number of Lanes : 4
    Width of each Lanes : 35m
    Medium 2m
    Width of each pedestrian
    (earth surface) (for : 3.5 m
    each side, not including
    tunnel)
    Width of Subgrade 23m
    Pavement Bituminous Concret
    Including Traffic Sign Board.’
    [EXHIBIT 115]

    [14.4] A POORLY DRAFTED AND BARELY INTELLIGIBLE DOCUMENT

    This is quite a remarkable document. It purports to be a
    contract for
    construction of the Spring Garden Road/Poreporena Freeway
    project. But

  • Page 183 of 397

  • it is so vague and poorly drafted, it is difficult to
    believe it was prepared
    by anyone with legal qualifications or, indeed, anyone
    reasonably fluent in
    the English language.

    Mr Moore testified the contract had been drafted and typed
    in a rush, and
    was not finished until the early hours of one morning at
    the Port Moresby
    Travelodge Hotel. This is evident from the quality of the
    document.

    It is riddled with bizarre and barely intelligible terms.
    For example, Clause
    E quotes a total construction cost of US$49,383,000.00.
    Clause F then
    states:

    Not including:

    F(1) Unexpected (nn-limited) cost etc.

    F(2) The cost for land acquisition and removal of
    existing structures,
    houses, electrical power cables, underground
    pipes and cable etc.

    Chapter 14

    165 1

    F(3) Party A shall be responsible for the net profit,
    import materials
    machinery and daily equipment taxes that can be
    omitted.

    F(4) Changing price for the requirements the money or
    other unexpect
    cost.
    From above F(1) and F(4) mentioned about the price
    will be
    written in details in construction agreement.

  • Page 184 of 397

  • F(5) The construction of channel, drainage, manhole,
    traffic lights and
    all E & M services works.’
    [EXHIBIT 115, page 4]

    It is stating the obvious to say that many of these
    provisions – which
    presumably represent additions to the “total construction
    cost” – simply defy
    comprehension.

    [14.5] THE MINISTER FOR TRANSPORT AGREED TO AWARD OTHER ROAD
    CONTRACTS TO TUNSON

    An alarming part of the Contract is Clause G, which relates
    to ‘Terms of
    Payment”. Its states:

    “G(1) Party A must pay in U.S. dollars and it must make
    promise from bank
    guarantee of (The Bank of Papua New Guinea).

    G(2) Payment to be paid with 10th years including
    construction period. Any
    default over 10th years % (percent) will be charge per
    year.

    G(3) In the meantime, Part A and Part B intend to sign
    other contract.

    G(4) If Party B sign more than one contract with Part A
    (Transportation
    Department of Papua New Guinea Government), the
    aforesaid item of
    G(2) must be voided and payment will according to the
    following
    payment terms, details as shown on G(7), (8), (9).

  • Page 185 of 397

  • Chapter 14

    166

    G(5) Party B is agree [sic] to sign one more contract for
    45 kilometer [sic]
    of Roadway with Party A (Minis’ try of Transport) Than
    the payment
    must be according to the Original Contract.

    G(6) Furthermore, Party B also intend to sign the another
    contract of
    construction for 147 kilometer length mad link will
    start from Bereina
    to Lae and Malalna to Erave with Party A after their
    future site
    investigation and other preparation works [sic].•
    [EXHIBIT 115, page 4]

    It is apparent from these terms that, in the course of
    negotiating
    construction of the Spring Garden Road/Poreporena Freeway,
    the Minister
    for Transport was also negotiating other road projects,
    including a road
    between Erave, Southern Highlands Province, and Malalaua,
    Gulf Province.

    The Department of Transport was not aware the Minister was
    conducting
    negotiations for the Erave-Malalaua road. Nor is there
    evidence the
    Minister was authorised by the National Executive Council to
    do so.

    [14.6] THE SCOPE OF THE PROJECT IN THE CONTRACT OF 15 OCTOBER
    1991

    The scope of the project is very poorly defined in the
    contract with Tunson
    Engineering Co Ltd.

    Clause B(1)(a), for example, describes the route of the
    proposed road link
    in very general terms and describes the total length as 8.8
    kilometres.

    Clause B1(b) then states the length of new road will be 4.6
    kilometres, and
    the existing road 3.5 kilometres, ie a total of only 8.1
    kilometres: 700

  • Page 186 of 397

  • metres of road has disappeared in the space of one paragraph.

    Chapter 14

    167

    Clause B1 (b) further states that there will be one
    tunnel, four bridges,

    sixteen cross road drainages and four junctions, but does
    not specify

    where any of them will be.

    These are only a few of the many defects in this woefully
    inadequate

    document The Ombudsman Commission is at a loss to find
    any good

    reason why a Minister of the State would have signed it.

    [14.7] COULD THE MINISTER’S ACTIONS BE JUSTIFIED?

    We emphasised in Chapter 12 that, in the opinion of the
    Ombudsman
    Commission, it is very wrong for any Minister of the
    State to sign contracts

    on behalf of his Department or the Government without
    express

    authorisation.

    In this case, the Minister for Transport repeated the
    mistake he made eight

  • Page 187 of 397

  • months earlier in Hong Kong: he signed a contract for a
    mufti-million kina

    transport project of national significance, without the
    authorisation of the

    National Executive Council and without the knowledge or
    advice of his

    Department This was unlawful and wrong, and was not in
    the best

    interests of the Government and the State.

    [14.8] WAS THE CONTRACT MERELY A *MEMORANDUM OF

    UNDERSTANDING’?

    The only conceivable way the signing of the contract with
    Tunson

    Engineering Co Ltd could be acceptable is if it were
    regarded as merely

    a record of an “understanding” reached between Mr Temo
    and the

    Managing Director of that company. This was the view
    taken by the

    Department of Transport, when it discovered the signing
    of the agreement.

    Chapter 14

    168

    In his response to our preliminary report, Mr Temo also claimed the

  • Page 188 of 397

  • contract was only meant to be a memorandum of understanding:

    The Secretary for Transport or in his absence there was always
    someone to
    give me advice in fact we had a morning briefing every week on
    Burns Peak
    and other matters.

    The contract was a documentation of some sort required by Chinese
    Government
    before they leave out of China.

    Because it was mentioned that they did not have office in PNG so
    they required
    a form and reason paper to show their Government so they could
    come again
    to PNG many times. This was very important to them as a
    requirement.’
    [EXHIBIT 257, page 41

    The Ombudsman Commission regards this as a very charitable
    assessment
    of the Minister for Transport’s actions, which were wrong and
    unacceptable.

    The document of 15 October 1991 is entitled “Contract Agreement”.
    Though it is poorly drafted and barely intelligible, it gives the
    appearance –
    at first glance – of being intended to be a binding agreement. It
    has a
    number of specific terms and sets a “total construction cost” of
    US$49,383,000.00. The document has been signed and witnessed in a
    way
    contracts are normally executed.

    The Ombudsman Commission therefore cannot accept that the “Contract
    Agreement” of 15 October 1991 was only intended to be a memorandum
    of understanding.

    Nor do we accept Mr Temo’s spurious claim that it was necessary to
    sign
    the contract, so that members of the consortium based in the
    People’s
    Republic of China would be allowed to leave their country. If there
    were

  • Page 189 of 397

  • such a requirement, then the only proper way to comply with it was
    to

    Chapter 14

    169
    formally advise and liaise with the Chinese Embassy in Port
    Moresby.
    However, there is no suggestion that that was done.111

    [14.9] THE DANGERS OF ENTERING INTO UNAUTHORISED AGREEMENTS
    WITH FOREIGNERS

    We do appreciate that, in his own mind, the Minister for
    Transport might
    have believed that the contract with Tunson Engineering Co
    Ltd was not
    enforceable without National Executive Council approval. But
    that does not,
    in our view, provide an excuse for his actions.

    When foreign enterprises enter into written agreements with
    Ministers, they
    expect those agreements to be honoured. If the agreements
    are not
    honoured, the time and money of the foreign enterprises can
    be wasted.
    This gives Papua New Guinea a bad name and the investment
    climate
    becomes uncertain, if not bad. Our image abroad is very
    important

    Foreigners who are not familiar with our laws and our
    Constitution won’t
    always understand that the Minister they were dealing with
    had no authority
    to sign the agreement entered into. Nor do they always know
    that an
    agreement will require the approval of the National
    Executive Council or
    a Supply and Tenders Board or the Public Works Committee.
    This is
    especially the case with businessmen from Asia, where
    accepted methods
    of doing business are often different from those