The Auditor General's Office has revealed that the former government overpaid USD 1.49 million in compensation to UMET Construction Private Limited following the termination of Kurendhoo harbour development project in Lhaviyani Atoll.
A special audit conducted by the Auditor General’s Office on the settlement agreement signed by the previous government found that a total of USD 1.68 million had been paid to UMET Construction as compensation. However, this amount is more than what was legally required, and recommended that the excess be recovered.
The construction of the Kurendhoo Harbour was awarded to UMET Construction in 2011 for USD 1.36 million. However, the contract was terminated on 10 March 2013 following an assessment conducted through Maldives Transport and Contracting Company (MTCC) which found lack of adequate progress after the contractor halted work.
Following the termination, UMET Construction filed a lawsuit challenging the termination. The Civil Court initially ordered the government to pay USD 842,851.49 in compensation to the company. However, the High Court overturned the ruling when the case was appealed, and the Supreme Court subsequently upheld the High Court ruling, concluding that no compensation was due. However, the Court added that the company could still pursue compensation by filing a new case.
Later, UMET Construction filed a petition in the Supreme Court on 2 October, 2022 seeking USD 3.67 million in compensation. The company also proposed an out-of-court settlement. In response, the then-government offered USD 1.57 million, which UMET Construction rejected, and countered with a demand for USD 1.69 million. The then-Ministry of Housing accepted this amount, and a settlement agreement was signed, with payment made on 18 June 2023. The then-government went ahead with the amount as it fell within the threshold approved by the government’s advisory committee on compensation disputes.
However, the Auditor General’s Office reported that the maximum compensation that should have been paid was USD 175,095, representing the idle cost of vehicles and equipment during the period of work stoppage. The report also noted that the advisory committee on compensation disputes had made several errors in calculating the compensation amounts.
The audit report further noted that the then-government had paid an amount that the courts had ruled out. The projected earnings from the circulation of project funds by UMET Construction were also incorrectly included in the sum, it noted. The then-government had not done enough to ensure the accuracy of the figures stated in the "Review of Loss Estimation" submitted by UMET Construction for compensation, it further noted.
Moreover, the audit report noted that the former government's compensation policy did not take into account the Supreme Court's findings and created room for overcompensation. It recommended the recovery of the additional USD 1.5 million paid by the previous government and the investigation of those responsible for issuing the unjustified compensation.