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Cabinet approves Rs.7.9bn payment to Chinese company to settle 10-year claim
View(s):By Namini Wijedasa
The Cabinet has sanctioned the payment of Rs. 7.91 billion in “outstanding dues” to China Harbour Engineering Corporation (CHEC) for the Kottawa-Dodangoda section of the Southern Expressway, which was opened ten years ago.
The move comes despite the company not having followed standard contract administration procedures, including first seeking remedy through the dispute adjudication board (DAB).
Approval was granted just two weeks ago, on August 27, and the settlement agreement was speedily signed on Friday between Highways Ministry Secretary Ranjith Rubasinghe, who is Acting Chairman of the Road Development Authority (RDA), and CHEC. The payment will now be made subject to the availability of funds. The breakdown of this massive payment, which has ballooned owing to rupee depreciation, is not immediately known.
CHEC was the contractor for the 35-km Kottawa-Dodangoda stretch, while the engineers were the Tokyo-headquartered Oriental Consultants Co. Ltd. (OCCL). The section was funded by the Japan Bank for International Cooperation (JBIC) and opened in 2011. A dispute broke out that year between CHEC and OCCL, with the Chinese company demanding payment for work that the consultant said had not been certified.
According to Nimal Chandrasiri, then Director of the Southern Transport Development Project (STDP), and other authoritative RDA sources, payment was turned down at least three times, not only by the consultants but the project office. “We found the claims not to be justified,” he said. There is also wide opposition to it within the RDA.
The contract specified that CHEC must take its case to the DAB within 28 days. But this was not done. If they are unhappy with DAB adjudication, an amicable settlement could be reached, failing which the next step is arbitration. CHEC, however, kept its claim alive for 12 years and engaged in direct negotiations in what critics said was “a shortcut.”
According to RDA sources, a committee appointed by the Highways Ministry’s then Secretary, R.W.R. Premasiri, recommended the payment in 2014, but this was not followed through. With CHEC keeping up the pressure, another Highways Ministry Secretary, M.M.P.K. Mayadunne, appointed a new committee, which suggested in 2023 that the claim be settled based on the previous committee’s recommendation.
This report was forwarded to the Cabinet headed by President Ranil Wickremesinghe, and, after receipt of the Attorney General’s instructions, the payment was approved.
The decision has raised concerns as it was passed just a month before a presidential election. A public interest complaint has now been lodged with the Election Commission by Gratian A. Peiris, an engineer.
Separately, however, a Standing Cabinet Appointed Procurement Committee has requested the RDA Director General to investigate why there had been an “undue delay” by the RDA in resolving the dispute with CHEC, which had submitted its final statement in January 2018.
“Since then, this outstanding payment issue has not been settled by RDA or, if there were any contractual reasons caused to not settle this payment, why RDA did not proceed with dispute resolving mechanism, which is unacceptable omission or negligence,” states the relevant document seen by the Sunday Times.
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