Dis­cred­ited Aussie firm paid Rs. 1.4 bil­lion by for­mer regime

Sunday Times (Sri Lanka) - - FRONT PAGE - By Namini Wi­jedasa

SMEC In­ter nat i o n a l - - t h e Aus­tralian con­sul­tancy firm de­barred by the World Bank last week over “in­ap­pro­pri­ate pay­ments” for projects in Bangladesh and Sri Lanka--re­ceived more than Rs 1.4 bil­lion for an ex­press­way fea­si­bil­ity study which has still not been ap­proved by the Road De­vel­op­ment Au­thor­ity (RDA).

Not only was the paid sum nearly Rs 450mn over the orig­i­nal fee, SMEC claimed an ad­di­tional Rs 113.4 mil­lion as a sec­ond “cost vari­a­tion” that the RDA is yet to meet. If dis­bursed, the to­tal con­tract price would rise to Rs 1.519 bil­lion. Even now, the SMEC study for the North­ern Ex­press­way is the most ex­pen­sive fea­si­bil­ity study ever car­ried out for a road con­struc­tion project.

De­spite the tow­er­ing fee, the SMEC study was found un­suit­able for ac­cep­tance by the RDA. For in­stance, pro­jected traf­fic vol­umes were deemed in­cor­rect. A host of other ques­tions were also raised by the plan­ning divi­sion on the draft fi­nal re­port. Some were an­swered; oth­ers are yet to be ad­dressed.

A fea­si­bil­ity study is “an anal­y­sis and eval­u­a­tion of a pro­posed project to de­ter­mine if it is tech­ni­cally fea­si­ble, is fea­si­ble within the es­ti­mated cost and will be prof­itable”. It is an im­per­a­tive in ex­pen­sive projects.

The con­tract for the North­ern Ex­press­way ( which later be­came the Cen­tral Ex­press­way) fea­si­bil­ity study was awarded to SMEC in 2013 with­out ten­der for Rs 958 mil­lion. The com­pany had pre­vi­ously car­ried out the fea­si­bil­ity study for the Colombo-Katu­nayake Ex­press­way. It was not pos­si­ble to de­ter­mine whether the con­tract fee was fair as open com­pet­i­tive bid­ding was re­jected.

SMEC sub­con­tracted to a lo­cal c o m p a ny c a l l e d O cya n a Con­sul­tants (Pvt) Ltd. The pe­riod within which the study was to be com­pleted was ini­tially eight months from the start­ing date--that is, May 2013.

By Novem­ber that year, SMEC claimed its first “cost vari­a­tion” of Rs 450 mil­lion which was paid in Jan­uary 2014. The ad­di­tional fee was at­trib­uted to “changes made to the orig­i­nal work scope” and ap­proved by the Cab­i­net. This brought the to­tal amount paid to the com­pany to Rs 1.4 bil­lion. The Cab­i­net also al­lowed the sched­uled date of com­ple­tion to be ex­tended to March 2014.

Af­ter sub­mit­ting its fi­nal bill, a sec­ond vari­a­tion was claimed-- again due to “scope change to the orig­i­nal con­tract”. This amount of Rs 113.4 mil­lion was so­licited by SMEC in March 2015 say­ing the RDA project man­age­ment unit had wanted the com­pany to carry out a re­design of the trace “to satisfy M/s China Mer­chants Group’s pro­posal”.

At the time, Chi­nese fund­ing was only un­der con­sid­er­a­tion for the North­ern Ex­press­way. SMEC also said it had been directed to update the hy­dro­log­i­cal re­port in the fea­si­bil­ity re­port us­ing ac­cu­rate topo­graph­i­cal maps.

With the change in ad­min­is­tra­tion, how­ever, all cost vari­a­tions-- a pop­u­lar method of in­flat­ing prices to make al­lowance for cor­rup­tion--for road sec­tor projects came un­der scru­tiny. Ac­cord­ing to RDA sources, the sec­ond claim is yet to be paid.

Both the terms of ref­er­ence and the SMEC re­port were chal­lenged in de­tail by RDA’s plan­ning divi­sion di­rec­tor, who also said it did not dis­play “any of the fun­da­men­tal char­ac­ter­is­tics of a fea­si­bil­ity study”. It did not con­tain ref­er­ence to pre­vi­ous fea­si­bil­ity stud­ies done be­tween 1990 and 2013. Traf­fic sur­veys were found to be in­ad­e­quate. No con­sid­er­a­tion had been given to the ongo- ing de­vel­op­ment of the rail­way line (in­creased use of train ser­vices would neg­a­tively im­pact fu­ture road us­age).

In­put data for traf­fic fore­casts were not clear; the cor­re­la­tion be­tween GDP growth and traf­fic growth over the plan­ning pe­riod was not given; and there were ques­tions over costs pub­lished in the re­port. Sev­eral other queries were raised.

Last week, the World Bank an­nounced a ‘ Ne­go­ti­ated Res­o­lu­tion Agree­ment (NRA)’ t h at d e b a r red SMEC In­ter­na­tional for 12 months, as well as four of its con­trolled sub­sidiaries based in In­dia, Bangladesh, and Sri Lanka, for pe­ri­ods vary­ing from six to 30 months for mis­con­duct in the South Asia re­gion.

“The NRA fol­lows a World Bank in­ves­ti­ga­tion which re­vealed mis­rep­re­sen­ta­tions to meet bid­ding re­quire­ments un­der World Bank- fi­nanced projects in Sri Lanka and In­dia,” a state­ment said. “The in­ves­ti­ga­tion also found ev­i­dence in­di­cat­ing in­ap­pro­pri­ate pay­ments made in re­la­tion to World Bank-fi­nanced projects in Sri Lanka and Bangladesh.”

SMEC has com­mit­ted “to make any nec­es­sary en­hance­ments to its group-wide cor­po­rate in­tegrity com­pli­ance pro­gramme to en­sure that it is con­sis­tent with the World Bank’s In­tegrity Com­pli­ance Guide­lines”.

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