Central Expressway Stage III: Rush to award contract, no rush to answer questions


by Rajan Philips

The Minister of Higher Education and Highways (still the world’s oddest ministerial pairing) Lakshman Kiriella has announced that the government will go ahead and sign the contract with the Japanese company Taisei Corporation as early as next week, for the construction of Stage III of the Central Expressway. The government’s contention is that unlike the previous government "awhich gave contracts on building expressways without following tender procedures", the present government has "followed tender procedures and ensured transparency in all matters pertaining to the Central Expressway." According to the Minister, Taisei’s bid "received approval of the Economic Committee, headed by Prime Minister Ranil Wickremesinghe and also the approval of the Cabinet, led by President Maithripala Sirisena. So, there is no shady business in this contract as professed by certain parties with malicious intents." Therein is the rub, in the convenient confusion over what the tender procedures are and what the role of the cabinet is in approving tenders.

‘Everything was done with cabinet approval’ was the mantra that was heard over and over again when the Rajapaksas were in power. And the present power-holders hammered the Rajapaksas over and over again during the 2015 presidential election for giving sole-sourced contracts straight from the cabinet table. Now, contracts are seemingly being offered, if not straight from the cabinet table, but from some convenient sub-committee somewhere in the cabinet room. Not every government contract in the country needs cabinet approval, but every government contract must follow the tender procedure, except for contracts involving amounts lower than a prescribed limit and in emergency situations. To be clear, cabinet approval is not part of the tender procedure, but comes after the tender requirements have been fulfilled by technocrats and bureaucrats. Only contracts involving large sums of money and significant socio-economic considerations come up for cabinet approval.

But every contract requiring cabinet approval must go through layers of review and a hierarchy of recommendations before reaching the cabinet for the final stamp of authority. The trouble is when the process is reversed and contracts start with the stamp of cabinet approval and the bureaucrats and technocrats are ordered to do the paper work ‘after the fact’ to keep up the appearance of ‘tender procedures’. The Rajapaksas were past masters at breaking every government rule when it came to spending government money and awarding contracts. The present government has not done enough to prove that it is managing government money and awarding contracts differently, and properly. We cannot take the government’s word for it, just because the Prime Minister says so in Parliament.

On March 30, 2015, still within 100 days of January 8, 2015, Prime Minister Wickremesinghe reportedly circulated a note to cabinet that categorically stated that "unsolicited proposals in general should not be accepted as a matter of policy. In the future, all proposals should follow the Guidelines on Government Tender Procedure issued in 1998." Alas, and as was reported at that time, the cabinet also decided not to terminate the by-now time-honoured practice of entertaining unsolicited proposals by allowing the Cabinet Sub-Committee on Economic Affairs, to keep reviewing about "35 unsolicited proposals already in the pipeline." Was one of those 35 addressed to the Central Expressway project? How many of those 35 are still left? To digress a little on terminology, what we are talking about here are really not unsolicited proposals, but sole-sourced contracts. No one prepares, let alone submit, an unsolicited tender for a multi-billion rupee contract. And multi-billion rupee government contracts should not be awarded on sole-sourced tenders. Not even invited tenders, as is the case with the Central Expressway.

These four stages of the Central Expressway constitute Phase 1 in the broad scheme of Sri Lankan expressway planning. Phase 2 will involve new expressway connections from Dambulla going north and going east. These will add to the already completed expressway, namely, the Southern Expressway, the Colombo-Katunayake Expressway, and the Colombo Outer Circular Highway which will connect to the Central Expressway at Kadawatha. The new expressways are expensive by-passes to the much congested old roadways radiating from Colombo to Galle, Kandy and Negombo. There is a case for by-pass routes for faster travel, but the economic and cost-benefit questions are about the timing and the cost of other lost or delayed public investment opportunities. In the Sri Lankan situation, the increase in public debt and the diversion of foreign exchange reserves are bigger worries than the cost of lost opportunities.

From the standpoint of traffic management, how successful are the already built Southern Expressway and the Colombo-Katunayake Expressway in diverting traffic from the old Galle Road and the Negombo Road? With their toll revenues, the expressways have become cash cows to the government and an attraction for soliciting suitors looking for privatization of public infrastructure. The government is denying highway privatization allegations, but you can bet your last rupee that unsolicited proposals have entered the pipeline and are waiting for political stars to come into right configuration for review by a Cabinet sub-committee. Privatization-suitors are like barnacles, who cannot be scrubbed off easily even through elections and government changes. And toll revenues are not the full measure of the economic efficiency of a highway.

How much traffic is there on the Southern Expressway, or the Katunayake Expressway, relative to their capacities? It is fair to say that for the most part of the day you could fire a cannon down either of the roads without hurting anyone – as the saying goes to describe what is known as the empty-road syndrome. And there is no easing of the congestion on the old roads. The fact of the matter is that many vehicle owners cannot afford the toll charges, and most travelers are in buses and vans that still ply the old roads. Will it be any different with the new expressway to Kandy, which takes somewhat of a detour from Colombo – going as far as Kurunegala before diverting off Pothuhera to Galagedara (Stage III of the Central Expressway). And god speed from Galagedera to Kandy, just as it is god speed now from any of the expressways into Colombo. And places like Kegalle and Kadugannawa are left on no man’s route, and the Ambepussa link will not bring much relief to them. One is also curious about the circuitousness of going from Colombo to Dambulla to go to Jaffna. Whatever happened to the old Colombo-Puttalam-Anuradhapura route?

These are questions at the highway planning stage, and these questions were quite pertinently asked when the government started rushing Stage III of the Central Expressway contract for construction from Pothuhera to Galagedara, especially given the tortuous terrain and construction challenges. Characteristically cavalierly, the Prime Minister dismissed these questions in parliament, insisting that "All alternatives, including the construction of an airport in Kandy were looked at by the government, but it is not possible to change the plans to construct the central expressway." Economically, it might make more sense to build an airport for small planes or helipads for helicopters in Kandy to save time for travelling ministers and bureaucrats, than building a new expressway. And for the travelling public, selected improvements such as flyovers at bottle-neck locations might bring greater benefit than out-of-the-way expressways. The entire Colombo-Kandy Road could benefit from flyovers such as the so called "Spanish Flyovers", three of which are in progress at Rajagiriya, Ganemulla and Polgahawala with funding and technical support from Spain. And expressways, or one-way roads, will not solve the urban transportation problems within Colombo or Kandy. They require mass public transportation (buses and trains) and active private (walking and cycling) transportation solutions befitting a wise, healthy and even wealthy society in the age of the internet and climate change.

Central Expressway Contracts

With all due apologies for the rather long middle (or muddle) section in this article, let me turn to awarding of the contract for Central Expressway Stage III. In fact, not only Stage III, but also Stage I and Stage II have stirred up questions and controversy. There was already a 2013 contract for a section of Stage I given to the Chinese contractor, Metallurgical Construction Corporation (MCC), as an extension, courtesy of course the Rajapaksas, of their ongoing of their contract for a section of the Colombo Outer Circular Highway. The shenanigans involving these earlier awards received much exposure and criticisms from the Common Opposition during the 2014/15 presidential election. But just as it has done in the case of the Port City and Hambantota, the new (now old enough) government awarded the contract for the whole of Stage I to MCC by another handsome extension. This was in August 2015, before the parliamentary election but not long after the PM’s March 30 cabinet note disavowing ‘unsolicited proposals’, or sole-sourced contracts. As I noted earlier, entertaining unsolicited proposals is as bad as awarding sole-sourced contracts.

Stage II contracts are equally interesting, but with a local touch. The Stage II section was divided into four parts, and each part was given to a different consortium of local contractors, in November 2016. There was no competitive bidding and concerns over award prices exceeding estimates were brushed aside. And the Cabinet paper recommending the award(s), as was reported in the media, is classic cover-your-backside material: "The Cabinet Appointed Negotiating Committee after having considered the recommendations of the Procurement Committee and the outcome of the negotiations with the bidders decided to recommend for the approval of the Cabinet that the respective contract packages be awarded to the respective consortium of contractors which has submitted the bid for the relevant package at the corresponding negotiated bid price."

It will not be too cynical to speculate that practically every local contractor capable (hopefully so) of handling highway construction was given a piece of the (Stage II) pie through sweet heart negotiations without the sweat of competition. I am still a pupil of the old Darwin-Engels school that considers free competition and the struggle for survival are part of the animal world, but sweet heart deals are neither here (in socialism) nor there (in free market), and they should have no place in the school of good governance. More so, when one comes across this gem in the government’s Vision 2025: "We will stamp out corruption by encouraging competition and enabling transparency to give all Sri Lankans an equal chance at prosperity."

And now to Stage III.There has been plenty of media coverage on this in recent weeks and it is enough here to highlight some key discrepancies in the government’s narrative. Anonymous RDA officials have been quoted as saying that the government insisted on "rushing it through." The Sunday Observer of December 25, 2016, named and quoted an RDA official as saying that there were bids from four contractors and three consultants for Stage III of the Central Expressway, and that a decision would be made by mid-January 2017. This reporting is at odds what was going on with regard to tender solicitations involving Japanese companies. There is nothing transparent about the solicitation process despite the Prime Minister’s statement in parliament. There are still unanswered questions. The feasibility study and the Environmental Impact Assessment were carried out by two Sri Lankan universities. Without questioning the technical capabilities of individuals, it is fair to ask whether universities meet the requirements of professional liability in undertaking significant engineering projects. It would also seem that the two studies were still under review when the solicitation for Japanese contractors got under way.

It is also puzzling that only one response was received (from Taisei) out of the three firms from which prices were originally solicited in June 2016. All three firms were recommended by the Japanese Embassy in Colombo. And government officials rejected Taisei’s bid because Taisei did not submit a bid bond. This is again curious – to expect a bid bond from an ‘invited’ bidder. Then the names of three Japanese individuals enter the picture in canvassing for Fujita Corporation to be included in the solicitation. A second request for quotes went out on 3 November 2016, and another one later to include Fujita Corporation and extending the deadline for submission by two weeks. Only two quotations were received on the second round – from Taisei and Fujita. And the government made, or thinks it has, everyone happy by tacking on Fujita to Taisei and persuading the latter to drop its price from Rs. 159 Billion to Rs. 132 Billion.

There are other questions as well: Fujita’s lack of qualifications to be a bidder, and the shift from the Japanese International Co-operation Agency to the private Bank of Tokyo-Mitsubishi UFJ Ltd (BTMU). The government might argue that it has no option but to select contractors from a donor country when the latter is the sole donor for a specific project. Even so, there could be and there should be competitive bidding involving qualified firms from the donor country. The Japanese Ambassador in Colombo said as much, according to the Prime Minister’s statement in parliament. When open and competitive bidding is avoided even in single donor projects, questions about transparency and corruption are bound to arise not in one country, but two.




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