News
Highways Ministry speeding ahead with controversial bid to local consortium
Central Expressway third section
The Highways Ministry is barreling through the controversial bid to award part of the Central Expressway Project’s (CEP III) third section to a local consortium at a price higher by US$ 822mn (Rs 238.5bn) than its competing bid.
The details are so guarded that meetings of the Cabinet Appointed Negotiating Committee (CANC)—at which stage the project now is, following appraisal by the Technical Evaluation Committee (TEC)—are oddly held at the Ministry of Labour and not at the Highways Ministry. And not all members are invited. The last such discussion was held on Friday. The Labour Ministry Secretary heads the CANC.
The offer from a recently formed local consortium named LIDC to build the CEP III stretch from Rambukkana to Galagedara has the backing of Highways Minister Johnston Fernando, construction industry sources said. But the bid is priced at US$ 1.87bn (Rs 542.6bn) which is significantly higher than the offer made by China’s Metallurgical Corporation of China (MCC) at US$ 1.05bn (Rs 304.6bn).
The Meerigama to Kurunegala section of the Central Expressway was opened in January this year
The price difference is 56.17 percent, more than half what MCC has offered. The LIDC is led by Access International (Pvt) Ltd. The values have exploded since the Sunday Times last reported this story on March 6, 2022—the rupee was fully floated against the dollar four days later.
The process is so murky that China, which religiously avoids commenting on Sri Lanka’s internal matters, raised the matter at the highest levels in private and, this week, in public.
At a packed press conference in Kingsbury Hotel, Chinese Ambassador in Colombo, Qi Zhenhong, said (through an interpreter) that, “As for building of the third phase of the Central Expressway by the Chinese company, I believe that, as long as the Sri Lankan Government adopts a method that is open and equitable, and treats all the bidders the same way, I believe that this issue could be solved in a very proper way.”
Mr Qi also referred to suspension of a Chinese proposal to build three hybrid power plants on islands in the North, amidst widespread uncontested reports that it was blocked by security concerns raised by neighbouring India. He said “there are Chinese companies here that complain to me we have got unfair treatment in Sri Lanka”.
“All the procedures are in accordance with international bidding procedures (but) the project, for some unknown reasons, is interrupted,” he continued. “I have already raised these kinds of issues to our Sri Lankan friends because we feel this is not good for Sri Lanka to attract international investment and this is not good for you to show a good business environment.”
In the past, however, Chinese companies got preferential treatment, clinching multiple projects through ‘unsolicited proposals’ with competitive bidding suspended in their favour. This was most common under the presidency of Mahinda Rajapaksa where proposals were only brought to cabinet for ritual rubber-stamping. There were no price evaluations against competing bids and no room for objection. Currently, there are complaints that China Harbour Engineering Company (CHEC) has been handpicked for the proposed elevated highway from Rajagiriya to Athurugiriya.
The process related to CEP III is, however, so blatantly skewed, that it has become impossible to ignore the implications–particularly in terms of national debt. It is a non-urgent, capital-intensive mega project.
On March 4, tweeting about the Central Bank of Sri Lanka’s (CBSL) eight point policy package, even Governor Ajith Nivard Cabraal called for a postponement of non-essential and non-urgent capital projects. But in addition to Minister Fernando’s backing, the project is being pushed at higher levels, the Sunday Times learns. The objective is for it to be finalised before any International Monetary Fund (IMF) programme is entered into.
In keeping with a complete lack of transparency, the Government has not explained why the financial proposal from MCC was not opened. This was questioned by MCC’s parent company, MCC International Incorporation Ltd, which wrote to President Gotabaya Rajapaksa alleging there were irregularities in the manner LIDC was selected.
It said there had been just two bids of which MCC’s was the only foreign offer. “We MCCI have now reliably understood that when it came to opening of the Financial Proposals, only the Financial Proposal of the Local Consortium, LIDC was opened,” the letter said.
“It is customary in a democratic procurement evaluation either open both offers or reject the single offer as examination of just one offer does not facilitate price comparison,” it adds, hinting strongly at bid-rigging.
The Highways Ministry called tenders on July 2021 from local and international companies. The bidding format was ‘single state two-envelope’ with the second envelope containing the financial proposal.
On January 16, Minister Fernando presented a Cabinet paper in which he recommended that the original tender process should be “terminated and canceled” on the basis that finalization of foreign concession agreements and financing will get delayed. The same memo states that the relevant section of CEP III can be built with Rs 82bn.
But 10 days later, on January 17, he presented another Cabinet paper recommending that the original tender process be proceeded with. He makes no reference to his earlier Cabinet memo and calls for the awarding of the bid to be accelerated.
Highways Ministry sources said the Minister has also pressurised the CANC to have meetings “one after the other” so that the contract can speedily be awarded. The LIDC will finance the project through local banks.
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