COPE to probe irregularities in Central Expressway project

The Committee on Public Enterprises (COPE) will next week consider the Auditor General's special report on the feasibility study and procurement activities of the Central Expressway Project (CEP).

Among other things, the report concluded that public procurement guidelines had been violated in selecting a consulting company and contractors for sections I, II and III.

CEP III -- estimated at the time to cost around Rs. 134.9bn or nearly US$ 1bn -- was particularly controversial. The Highways Ministry did not call competitive tenders. Instead, it followed orders from the Cabinet

Committee on Economic Management, which was headed by the then Prime Minister Ranil Wickremesinghe to invite limited bids from Japanese companies.

Officials claimed that this was a prerequisite to securing concessional terms from Bank of Tokyo-Mitsubishi UFJ Ltd (BTMU).

Such tenders are not advertised and other bidders typically do not know when they are floated.

But the special audit report says that the Japanese Embassy disputed the“informal procurement process ”. Nevertheless, the Ministry Secretary did not comply with established guidelines. Several other aspects of the process related to CEP III were against procurement rules, the Auditor General holds.

A company named Fujita Corporation was handpicked. And despite a Technical Evaluation Committee rejecting it over lack of capacity and for exceeding the engineering estimate by Rs 24.2bn, the bid was reconsidered at “the special request of the Japanese special adviser contrary to the procurement guidelines”.

Based on a trail of documents, the Sunday Times reported in September 2017 that an adviser to the Japanese Government “pressured Sri Lanka directly, including in writing, into giving a disqualified Japanese company a stake in the exorbitant 134.9bn rupee (nearly 1bn USD) third section of the

Central Expressway (CEP III)”.

Because of canvassing by the Japanese adviser, the Cabinet decided that Fujita-- despite being rejected twice by technocrats-- can stay in the equation by forming a consortium for the project with another company named Taisei Corporation. However, Japanese funding did not eventually materialise.

The Audit report reveals that bidding documents and even estimates had been prepared before route of the proposed expressway was clearly identified.

Separately, an international company named SMEC

International ( Pvt) Ltd was appointed as consultant for the feasibility study and paid Rs 1.759bn by December 2014. But since its reports were “not in an acceptable position”, further Rs 65mn were paid to other institutions to carry out various necessary studies. A final feasibility study report was not even available at the date of the audit.

The Auditor General says public money and other resources were wasted owing to mismanagement. For instance, the Swedish Government and Swedish International Development Agency provided Rs 119mn for

a detailed feasibility study along 98km of the Central Expressway. It was carried out by a Swedish consultancy firm. However, the Road Development Authority had spent Rs 85.1mn of this sum before the establishment of a project management unit and could not account for it.

The special audit records that there had been an “unusual delay” in construction of the Central Expressway “due to non-carrying out of a formal feasibility study and nonallocation of adequate time for planning”. Many decisions were made informally while they were also changed frequently.