U.S. auditors to probe Saipan seaport scandal

Federal auditors are expected to begin a thorough investigation into the financial controversy surrounding the dredging and construction of the $43 million Saipan harbor which was completed April last year after almost six years since the project started.

Ports Authority Board Chair Roman S. Palacios made the audit request to the Office of the Inspector General of the interior department following a recommendation by the Governor’s Transition Committee because of the increase in the project’s scope and cost.

Mr. Palacios explained that the long delay in the project’s completion warrants a federal audit of the multi-million Saipan harbor improvement.

The same report recommended that the US Department of the Interior or the US Congress audit the Saipan Harbor Improvement Project [SHIP] because of the increase in scope and cost, as well as the delay in completion.

Inspector General Earl E. Devaney, in a letter to Mr. Palacios, said the audit of the Saipan seaport project will be included in the agency’s Fiscal Year 2001 workplan for its field office on Guam.

The investigation will be handled by Senior Auditor Peter Scharwark, Jr.
Mr. Palacios said the ports authority has already prepared documents relating to the harbor project which may be needed by federal auditors in their investigation.

The Saipan seaport project was partially funded by a United States congressional grant amounting $10 million. It underwent numerous change orders during the last three years following its completion in April 1999.

One of these include Change Order No. 7 which involved over $741,000 as additional fund to the existing contract for dredging work in Rota.

Previous requests for audit have been made to determine whether the change orders were justified and legal.

“It has been said that change order number 7 with over $741,000 of additive cost is a result of work initially intended to be covered by liquidated damage of $1 million against the contractor by performing certain dredging work in Rota harbor,” Mr. Palacios said.

During Fiscal Year 1995, none of the six supplemental budget requests for the Saipan Harbor Improvement Project, amounting to more than $6.5 million, were approved with the certification of the CPA comptroller.

In 1996, some $22.9 million in total supplemental budget were approved without the certification of the chief accountant, while close to $245,000 in total additional budget were okayed without the accountant’s knowledge.

The controversial seaport facility highlights a 2,600 linear feet of berthing space, a 22-acre container yard, a deeper channel and a wider turning basin. It also offers efficient water, sewer and fuel systems.

The project virtually started in early 1980s when a study conducted by the CPA noted that the existing harbor lacked some of the major qualities that would help attract bigger vessels to call port on Saipan.

Snags

A new design for the Saipan seaport was developed in 1987 by the Army Corps of Engineers which also rejected a CPA request for funding in 1989. But the United States Congress allocated some $10 million for the project in 1990.

CPA officials in 1992 decided to scale down the proposed dredging scope from minus 40 feet to minus 35 feet due to financial constraints but reinstated the original depth when the agency eventually secured additional funds.

Initial funding for the project came from US Congress, $10 million; $13 million from the Retirement Fund; and the Commonwealth Development Authority loaned out $13.5 million. Two separate bond issues followed in 1995 and 1998.

The project had been hounded by controversies following complaints on the allegedly unnecessary dredging work that has reportedly undergone several change orders.

Aside from funding problems, SHIP was also hounded by soil contamination at Baker Bay caused by wastes left by the USS Impedance which provided power to Saipan after Typhoon Jean wreck havoc in the island in 1968.
Change orders were also stemmed from this dilemma, paving the way for a new design which actually doubled the size of the seaport and created an additional five acres of land for container storage.

Under the old design, the completed dock would have had merely 1,400 linear feet of berthing space and a 17-acre container year, while the redesigned plan offered 2,600 linear feet of berthing space and a 22-acre container yard.

In addition, the channel, turning basin and berthing area would be wider and deeper to accommodate a larger number and greater variety of vessels.