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No loss to the country through the construction of expressways: RDA
Road development and its costs have become the focus of intense discussion, particularly in the political arena, R.W.R. Pemasiri, the Road Development Authority’s (RDA) Acting Chairman admitted this week. He was reacting to an article in the Sunday Times by transport and logistics expert Prof. Amal S. Kumarage titled ‘Road Building or rip-off?’ Below are excerpts from Mr. Pemasiri’s response, edited for reasons of space.
The construction cost of expressways and highways depends on topographical and geographical considerations including good or poor sub-soil conditions; volume of rock excavations; the number of bridges, culverts, overpasses, underpasses; and the cost of materials, machinery and labour.
Cost is affected by design standards, the cross-section, number of interchanges and the thickness of road pavement. It is also dependent upon whether construction is in densely-populated urban areas or sparsely-populated rural areas and upon efforts to minimise adverse social and environmental impacts.
To reduce displacement due to expressway construction, road traces have been shifted to marshy areas in several locations. To mitigate environment impact from building in marshy areas, long viaducts are introduced to the design. Sri Lanka has a large number of rivers and tributaries. Therefore, the number of bridges and culverts required is high. Road density is high and this requires a higher number of overpasses and underpasses. Frequent underpasses result in more embankment construction. All these contribute to the increase in cost of expressways and highways in Sri Lanka.
Thus, a realistic comparison in construction costs within and outside the country should take into account all such factors, making allowance also for escalation of prices that may have occurred.
The Government initiated an accelerated infrastructure development programme to facilitate rapid economic and social development. The mobilisation of funds through conventional lending agencies is a long process. As a middle income country, Sri Lanka is no longer eligible for concessionary loans.
With expansion of bilateral lending arrangements via export credit agencies of emerging economies—where each lender has its own procurement systems and where lending governments or agencies nominate their contractors—implementing large-scale infrastructure projects through stand alone proposals became a viable alternative. The Government in 2011 introduced procurement guidelines to cater to stand alone proposals through an expeditious and transparent process, with due review by high-level committees. These were large-scale projects that were exceptionally beneficial to the country. All stand alone expressway projects were procured in accordance with these guidelines.
Competitive bidding can only be adopted when funds are readily available or when a firm pledge for funds is made through conventional lending agencies. Due to the Government’s commitment to implement the accelerated infrastructure development programme coupled with an ineligibility to obtain concessionary funding from conventional lending agencies, getting funding from lending governments or agencies that nominate their contractors was resorted to.
Feasibility studies evaluating costs and benefits are always done for all large-scale projects such as expressways. Projects are selected for implementation only if these show that potential economic rates of return exceed minimum accepted threshold values. The RDA in the recent past has carried out these feasibility studies using in-house resources to expedite the work.
The Southern Expressway was intended to be a four-lane divided highway (with centre median) from Kottawa to Dodangoda and a two-lane undivided highway from Dodangoda to Godagama. Three contracts were originally awarded in the following chronological order: an Asian Development Bank-funded contract for a two-lane undivided highway from Kurundugahahetekma to Godagama in April 2003; a Japan International Cooperation Agency (JICA) funded contract for a four-lane divided highway (with centre median) from Kottawa to Dodangoda in September 2005; and a JICA-funded contract for a two-lane undivided highway from Dodangoda to Kurundugahahetekma in April 2006.
The first contract, due to its width being limited to two lanes, carried the lowest contract price on a cost per km basis. Due to the post-tsunami construction boom, costs increased at a higher rate than before. Taking into consideration the difference in the basic scope of the respective contracts, and this increase in post-tsunami construction rates, the costs of the two JICA-funded contracts were initially higher than the ADB-funded contract on a per km basis.In 2007, it was decided to make the entire Southern Expressway an access-controlled four-lane divided highway with centre median. All three contracts were modified to meet the new upgraded standards based on technical considerations. The ADB-funded contract was truncated at Pinnaduwa due to funding constraints. A separate contract was then awarded for Pinnaduwa to Godagama with funding from the Exim Bank of China.
People who were adversely affected by land acquisition held protests, some resorting to litigation. All these also caused a delay in completion of respective contracts. Those who raised issues regarding the alleged wide disparity of highway construction costs then and now seem to agree that the Southern Expressway is reasonable and compares well with the construction cost of other expressways elsewhere in the world. They use the Southern Expressway construction cost as the basis to compare the construction cost of other expressways.
With the experience gained and the lessons learnt from the construction of the Southern Expressway, estimates prepared for the extension of the Southern Expressway in the year 2013 were more comprehensive. They included many additional items to add value to the project, to mitigate the hardships caused by land acquisition and to address environmental issues more effectively.
Some factors have increased the cost of the Godagama-Beliatta section in the extension of the Southern Expressway Project (ESEP) when compared with the original Southern Expressway Project (SEP). For instance, the full initial hydrological, geotechnical and land surveys, all ground investigations and the design of the SEP were done by consultants. In the case of the ESEP, this cost is included in the civil works contract.
Since the platform width of the SEP was 20.2 metres whereas the platform width of the ESEP is 24.4 metres, the quantities of most items of work (such as asphalt wearing and binder courses, aggregate base course, embankment fill, soft ground treatment, number of bridges and other structures) are more in the ESEP when compared with the SEP. Costs related to resettlement of the displaced; toll booths construction; design office construction for the RDA; provision of CCTV monitoring system, emergency telephones, fire hydrants, electronic and manual toll systems, and vehicles for operations are additions included in the ESEP and not in the SEP. The project also envisages the construction of 6.3 km viaducts for drainage.
By and large, the cost of construction of the Outer Circular Highway is the highest among the expressways in Sri Lanka. The major portion of the road trace falls on low lying or marshland and the extent of ground improvement is higher when compared with he Southern Expressway. The entire road trace lies in a suburban area and the costs of relocation of utility services, compensation for land acquisition and social impact mitigation measures are higher. The total bridges and viaducts are much higher than in other expressways. The centre median and shoulder widths are more. Enhanced environmental safety features have been introduced and structure foundations have been built to accommodate a six-lane width.
The Colombo-Katunayake Expressway (CKE) was to have been built on high ground via Ragama towards Katunayake. This had to be abandoned due to public protest as many houses on high ground would have had to be relocated. So it was shifted to the Muthurajawela marshes to avoid large-scale removal of houses. Construction cost on marshes is much higher than on high ground. In fact, 90% of the CKE’s total length is on marshland.
No contract has been awarded to date for the Northern Expressway section from Enderamulla to Ambepussa as stated in the aforementioned article. A contract has been signed only for the Veyangoda-Mirigama section of this expressway.
The majority of roads selected for widening and improvement under the Provincial Roads Project 3 (Phase 2) are very narrow and located in hilly terrain of the wet zone. The cost of rehabilitation must not be compared with the rehabilitation cost of roads in flat terrain. The average cost of rehabilitation of roads in PRP3 Phase 2 is comparable with the cost of roads rehabilitated in similar terrain procured under the competitive bidding procedure.
The factors that need to be taken into consideration when comparing costs of construction of expressways and highways are many and varied. Prof Kumarage, too, in his article has correctly stated that comparison of cost per km can be misleading and should be done carefully.
Prof Kumarage stated, “The most reasonable estimate for non-urban expressway construction in Sri Lanka should average around 7-10 million US$ per km and at most another 50% for more difficult soil conditions and frequent structures and interchanges.” He has also stated that, “There is also evidence that expressway construction in urban areas costs around 4-5 times more than in rural areas.”
Accordingly, the cost of expressway construction up to US$ 15 million in rural Sri Lanka under difficult soil conditions and frequent structures and interchanges, as well as cost of expressway construction up to US$ 60-75 million in urban Sri Lanka are considered reasonable by the author. The cost of all expressways constructed in Sri Lanka is well within this range.
There is, therefore, no loss to the country through the construction of expressways in Sri Lanka contrary to deductions made in the table titled ‘Estimated Loss from award of Road Contracts without Competitive Bidding’ that appeared in Prof. Kumarage’s article.
| Non-competitive road contracts 135% costlier: Prof. Kumarage responds The main conclusion of my article was that, on the basis of scientific study, road contracts awarded in 2014 without competitive bidding were exceptionally costlier than other roads projects both in Sri Lanka or overseas. Mr. Pemasiri agrees that the procurement of contractors is linked to the lending arrangement and does not deny my assertion that a large component of the road contracts awarded in 2014 has been funded by China and awarded on non-competitive procurement for which he uses the term ‘stand alone’. My calculation that contracts so awarded are 135% costlier than when competitive bids are called appears not to be contested. The method by which the above conclusion was reached was three-fold. In the first instance, the cost was compared with similar projects in Sri Lanka in previous years, adjusted for inflation. In the second instance, the cost for these highways was compared with international values. In the third instance, costs between competitively bid projects and those without were compared. My article provides conclusive proof that projects with Chinese loan arrangements awarded to Chinese contractors without a competitive bidding process stand out as outliers. I have specifically mentioned that widespread criticism that all road projects are over-priced is not substantiated. In this regard the response from the RDA does not set out any logical explanation to some key questions. For instance, how does Matara-Beliatte section of the Southern Highway awarded this year cost five to six times more per km than the Galle-Matara section completed this year, when both have similar features and are mostly in the same district. The marginal design features such as 20% wider road width cannot be used to justify such a huge variation. Mr. Pemasiri states that the Katunayake Expressway had 90% of its length on bad soil conditions. While this is not disputed, it is noted that this expressway completed in 2013 cost only US $ 15 million per km while the Kadawatha to Kerawelapitiya Section of the Outer Circular highway which is in the same district and in much better terrain costs four to five times more. I am relieved to know from Mr. Pemasiri that no contract has been awarded for the construction of the entire Northern Highway, but only 26 km from Veyangoda to Mirigama. What we also know from media reports is that this project is to be on loan arrangement from China and the rate of construction indicates that it, too, will be awarded on the same basis. If not awarded, this is perhaps one project that should be reconsidered urgently. The longer online version of my original article provided by the Sunday Times clearly gives an analysis based on road projects from around the world including countries such as Norway, Poland, Vietnam, Pakistan, Malaysia and China which have mountains, rivers and terrain more hostile than Sri Lanka. Thus, stating that Sri Lanka has exceptional circumstances in not justifiable. It is technically incorrect to say that the Outer Circular Highway which is a suburban highway is an urban highway. Urban highways are those that are in the centre of cities usually involving elevated or underground constructions and complex interchanges. Thus, stating that US$ 70 million per km is justifiable is faulty reasoning. Thus, nothing in the response from the RDA compels me to retract or change anything I have stated in my article and its conclusion that the country stands to lose Rs. 200 billion from the road contracts awarded in 2014 (or to be awarded) from Chinese loans and to Chinese contractors. |