cost of $230,000, to design an appropriate system, the intention being to commence the computer processing of accounts for maintenance work on 1st October, 1975. Modifications to the system, which increased the cost by a further $15,000, and the correction of program errors during system testing, together delayed the completion of the project until February, 1976, but even then the system proved inoperable because user acceptance trials revealed an unacceptably high error rate in the input of raw data. Testing of the system is therefore still in progress.
37. Meanwhile attempts were made to clear the backlog in the processing of accounts for maintenance work completed but still subject to final payment and/or agreement by the contractor, which I reported two years ago was of serious proportions. In November, 1974 revised procedures were introduced to reduce the volume of checking work required whilst at the same time limiting the scope for overclaims in unchecked bills. This change has facilitated the processing of the accounts in that it has enabled bills to a value of $65 million to be dealt with during the period April, 1975 to March, 1976, compared with $41 million in the preceding twelve month period, but it has done little to reduce the arrears, the 6,600 works orders with an estimated value of $72 million issued prior to 30th September, 1975 and still outstanding at 31st March, 1976, showing no appreciable change on the comparable figure for the previous year. The Management Services Unit of the Public Works Department in a study of the problem has suggested further improvements to the system, and amendments to the conditions of contract to enable their recommendations to be implemented have recently been effected. The Unit estimates that savings in the region of $6.3 million per annum could be achieved, an indication that the concern which I have for so long expressed in this regard has not been misplaced.
38. Head 69-Public Works Recurrent. Subhead 172. Management of Crown land in the urban area. Audit reviews during the last three years, of a contract covering the demolition of buildings and the clearance of Crown land, have indicated several weaknesses in the system of internal control which could give rise to error or malpractice and result in payment to the contractor of excess claims. Although procedures have been revised and the controls improved, more recent observations indicated that, at least from an audit viewpoint, the overall management of a substantial clearance operation was not entirely satisfactory and led me to express doubt whether the payment of $748,250 claimed by the contractor was adequately assessed and verified, and indeed whether the most economical method of ordering the work had been adopted. I have accepted that the clearance operation concerned took place at a time when staff of the Crown Lands and Survey Office were unfamiliar with the work of contract management but I have suggested that it would be desirable for the overall administra- tion of the contract in general, and the records of this operation in particular, to be independently reviewed by one of the Contract Advisers of the Public Works Department. Meanwhile I have been informed that con- sideration is being given to whether the existing staff resources available to the Crown Lands and Survey Office are adequate in number and type to meet the requirements of the strict control warranted by the expenditure involved.
39. Heads 71, 72, 73 and 74—Public Works Non-recurrent-Wages and materials fluctuation claims. I have several times in recent years invited attention to difficulties which have arisen in interpreting wages and materials fluctuation clauses in civil engineering contracts and in verifying the correctness of claims made by contractors under such clauses. In the light of those difficulties a working party appointed in August, 1974 to report on the feasibility of simplifying the calculation of the fluctuations, made proposals for the introduction of a formula price adjustment system which, whilst it would require the compilation of statistics from which fluctua- tions would be calculated and would need very careful monitoring, was forecast to be of overall benefit by eliminating ambiguities in interpretation, substantially reducing clerical effort in calculating adjustments, and lessening the possibilities of malpractice. The views of the interested departments on the recommendations were obtained well over a year ago but pending further action to implement the proposals, difficulties in the applica- tion of wages and materials fluctuation clauses in existing contracts continue.
40. Amongst those difficulties is that of verifying by physical check, the labour returns rendered by contractors in support of wages fluctuation claims, especially on projects involving numerous sites of work between which frequent movements of labour may be effected. In one such case encountered during a recent audit inspection at the site of major construction works, labour returns rendered in support of fluctuation payments totalling over $6 million were not susceptible of proper verification by reference to the records main- tained by the consulting engineers, of workmen actually employed on the sites. Alternative methods of verifying the claims have been sought by the consulting engineers, who are currently examining the problem in an effort to resolve the difficulties encountered.
41. In the case of materials fluctuation the clause in relevant Government contracts normally restricts claims to a limited number of items but in one recent case the Government approved the ex-gratia inclusion on special grounds of a number of additional items. The relevant supplemental agreement concluded with the contractor provided for him to receive by way of price fluctuation, the difference between the prices paid from time to time for the materials concerned and base prices, being those for which he should reasonably have allowed at the time
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