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Hospital debacle was coming, says official
Officials suspected that a Korean-aided hospital reconstruction project was doomed to failure, an expert said in the wake of last week’s emergency evacuation of the main block of Negombo Hospital. An assessment by the Health Ministry revealed that the seven-storey building was unsafe and the evacuation was carried out hastily on Saturday last week, the authorities not waiting to repair the damage in stages while hospital business continued. The assessment had been prompted by complaints for years of cracks, weak concrete slabs and water seepage.
How the Sunday Times in an exclusive dated September 27, 1998, reported on the transfer of Mr. Passaperuma
This week, the former deputy director of external resources of the Ministry of Finance, Mr. Buddhi Passaperuma spoke out about the controversy surrounding the Korean-aided Hospitals Rehabilitation and Reconstruction Project.“We were aware from the initial stage that this project was going to fail,” Mr. Passaperuma said. “The Health Ministry hierarchy officials were not concerned about doing a quality job and the continuous interference by the then minister of health and deviations from procedure due to the fact that they wanted to make a commission is the result for the poor-quality structure of the Negombo Hospital building today,” Mr. Passaperuma alleged.
In June 1995, the Department of External Resources initiated work to prepare project proposals for seven projects. They were to receive funding from the Economic Development Cooperation fund (EDCF) set up by the Korean Government in 1987 to promote economic cooperation between Korea and developing countries.
It normally took at least two years to complete EDCF loan agreements but these loan agreements were all completed in almost half that time – by early August 1996. At the time, the Republic of Korea was a new donor and the Ministry of Finance and Planning had limited experience in dealing with Korean Development assistance. The ministry was required to handle two loan packages amounting to $US100 million for seven projects simultaneously, a letter from Mr. Passaperuma dated September 13, 1996 to the former ambassador of Sri Lanka to Korea, Mr. G.D.I.G Seneviratne, shows.
Among the projects to be completed with the loans was the Hospital Rehabilitation and Reconstruction Project (NO.SRI-2). This particular project was to be divided into three parts: the base hospital in Negombo, the base hospital in Gampaha and the Kalubowila Hospital in Colombo south.
A separate bid was to be invited for each part of the project but the Korean Government’s EDCF Department strongly recommended that the Department of External Resources invite one bid for the project in order to ensure its prompt and efficient implementation. Furthermore, the Korean Government included a term in the loan contract that stipulated that construction and completion was to be handed to a Korean company.
In a letter dated August 18, 1997 the Director of the EDCF Department, Mr. Jung Jun Kim included a short list of Korean contractors who “seemed qualified and eligible” for the project. The companies listed included Kabool Engineering & Constructions Co. Ltd, Keangnam Enterprises Ltd and Pumyang Engineering and Construction Co. Ltd.
Adhering to the stipulation in the contract and going by the list submitted, tenders were called for by the Project Manager, M.A.G.D. Hemachandra from the Ministry of Health and Indigenous Medicine. Kabool Engineering & Constructions submitted a tender bid of 12,391,135,000 Won in total for the Negombo, Gampaha and Kalubowila hospitals, while Keangnam Enterprises Ltd submitted a total bid of 14,027,700,000 Won and Pumyang Engineering & Construction Co Ltd a total bid of 16,587,140,000 Won.
The contract was awarded to the lowest bidder, Kabool Engineering. “Despite Kabool Engineering being the lowest bidder I urged the Health Ministry to reconsider this. I had several reasons for my advice,” the now retired Mr. Passaperuma told The Sunday Times.
“To begin with, the only company operated by Kabool in Sri Lanka at the time was a garment firm. Kabool’s construction company was based in Korea. Thus to contract with them was not practical because they would have to bring in their machinery all the way from Korea, not to mention the fact that the heavy cost of this would have to borne by us,” he said.
“I recommended that they accept the tender submitted by Keangnam because I had worked with Keangnam on several projects previously. For example, a part of the Galle Road construction project was done by them. I had faith in their experience and knew that they would do a better job than Kabool. Despite my warnings, however, the contract was awarded to Kabool,” Mr. Passaperuma said.
The foundation ceremony was fixed for August 21, 1998. By this time, however, the Ministry of External Resources received a letter from the EDCF Department telling them that Kabool Engineering & Construction CO. Ltd had been declared insolvent by the Korean Government.
Prior to the commencement of construction on the project it was brought to light that Rs. 24 million had already been spent from the ministry’s budget. Furthermore, there had been six successive appointments to the post of project director, with one officer being appointed twice.
“It was all these unnecessary problems that caused the unnecessary delay in the handling the project by the ministry,” Mr. Passaperuma said. An official letter dated July 24, 1998 by Mr. Passaperuma states that, “There has been confusion and unnecessary delays from the initial stage of making the loan application to this project. When Mrs. Kiruga Fernando was appointed as the additional secretary of health, she was not able to find the relevant files ccarrying the previous documents/ correspondence to expedite the work.
“The situation of the contractor going bankrupt could have been avoided and all three hospital projects would have been completed with the loan if the officers concerned at the Ministry of Health followed my instructions and took timely action,” the letter said.
“The Minister of Health at the time aimed to make money out of this project. The minister kept on interfering in the project and finally appointed a man close to him as project manager,” Mr. Passaperuma this week told The Sunday Times. “There was a hunt for commissions. A telephone conversation with the Keangnam Chairman revealed that $US2.5 million had been asked as a commission. The company, however, had refused it,” Mr. Passaperuma added.
“It was the responsibility of the tender evaluation committee of the health authority to check on the reliability of the company, their background etc. If this had been done properly they would not have given it to Kabool. I personally questioned them as to why they did not want to evaluate these companies and they told me that the order had come directly from the minister of health,” he said.
The Cabinet appointed the tender board, headed by Mr. Siril Gunapala, then additional secretary to the president. He decided who would handle the project. “The Negombo Hospital designs were flawed from start. It was the ministry that selected the designing company and instead of choosing a firm based on experience it chose another firm due to the unnecessary influence by the minister,” Mr. Passaperuma said.
Following Kabool’s bankruptcy, the Health Ministry decided to hand the contract over to Keangnam. “By this time, however, Keangnam had raised its prices for the project because it was the second-lowest bidder, this was a tight loan and it knew that we were desperate, Mr. Passaperuma said.
“Due to the urgency of the project”, Keangnam decided to go with the designs that we already had,” he added.
Due to the then-president Chandrika Bandaranaike’s keen interest in completing the Gampaha and Negombo hospitals and the urgency of the project, the Sri Lankan Government arrived at a decision to reduce the scope of the project, and as a result the Kalubowila hospital was taken out of the plan.
And around the same time, Mr. Passaperuma received a letter from the office of the Sri Lanka Planning Service Board stating that he was transferred to the Ministry of Parliamentary Affairs with immediate effect.
The Sunday Times in an exclusive dated September 27, 1998, reported on the transfer of Mr. Passaperuma following the bankruptcy of Kabool and the collapse of the tender. This week, Mr. Passaperuma for the first time decided to speak out about the circumstances of his transfer.