Sep 18, 2017

True facts behind Central Expressway stage 3 come to light

For the first time in the history of Sri Lanka, an expressway project or a road project of over USD 100 million was awarded to a contractor / consortium of two Japanese companies   on a "Competitive & Transparent Tender" basis, a comprehensive government investigation report claimed.

Further, considering the high value and the technical complexity (first expressway with 3 tunnels) of the project, Sri Lankan government has been able to attract the Government of Japan in every possible way for the Central Expressway stage 3 project including consultation on the prospective contractors thus not leaving any room for blame games in the future.

Unfortunately, expectation of competition again did not materialized, the Japanese chamber as done in the past again had a hidden agenda and recommended parties who will back out at the tender stage thus making a one sided affair. Despite 03 companies being nominated only one company submitted the bid and that was making the project head towards a "no competition" scenario.

The introduction of the fourth bidder - Fujita was a welcome move of the Japanese government since it introduced competition to the project. This was clearly evident with Taisei Corporation with bid of Rs 159Billion, reducing it to Rs. 147 billion once the tender was re done with the participation of Fujita.

If not for Fujita, Sri Lankan government would have ended up awarding the project to Taisei at Rs. 159 billion  losing the staggering saving of Rs. 25 billion  which is achieved now solely due to the introduction of "Competition induced by Fujita"

Despite the embassy letter which was shown in the media, the Japanese embassy did recommend Fujita as a technically competent company.

Fujita is owned by Daiwa House which is the largest developer in Japan. Questioning the integrity or the competence of Fujita based on a "Manipulative pre qualification criteria" included by the RDA officials with vested interests would have been a national crime, the report said.

It is common sense that the USD 600 million criteria only suits Taisei and it is anybody's guess that such tricks of eliminating competition even before price bids are opened has been the old habits of the road contractors and agents in Sri Lanka who made billions with such unethical tricks, the report disclosed.

There were no documentation to prove RDA has informed Japanese government there is a technical qualification for recommended contractors require to have minimum of USD 600mn one single project completion within last 10 years.

It is a fact that all the past road projects have been awarded at an average of over 25% and some going over 30% against the engineers estimate.  Whereas this project was able to achieve the said difference at 9.8%, similar to recently concluded central 2 expressway which was 8.6%.

It is a fact that the "insurance premiums" of the past projects were hidden inside the contract value to create a false impression about the true finance costs of those projects. However, this project was awarded with a clear separation between the two thus avoiding unnecessary obligations of the RDA to the contractor due to this "cover up" mechanism. Further this is the only project, finance with six years grace period and the overall interest rate including insurance premium is to be less than 3% per annum.

Normally, No road project of over 500Mn in the world is ever given to a single contractor. Larger the value of the contract it is wise to spread the risk and involve multiple contractors in order to achieve the positive results of their combination of synergies. In this project, the creation of the consortium fast tracks the project "at the same price and terms" since each member of the consortium will start work in two separate ends of the road thus accelerate the implementation.also this eliminates later variations due to delays and other unforeseen. Which was again the game plan previously.  Incidentally the current contractor Taisei have claimed from Sri Lankan government USD 90 million, which is now in dispute over the construction of outer circular highway section 2.

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