The Port Access Elevated Highway, an Asian Development Bank (ADB) funded road development project currently under a bidder prequalification stage, last week became more mired in controversy after one bidder made a series of representations to senior government figures, claiming that it should not be penalized for its ability to construct a similar road for less than one fourth the cost estimated by the Road Development Authority for the project.
Larson and Toubro (L&T), ranked 21 in the list of top 250 construction companies in the world, said in a letter copied to Prime Minister, Ranil Wickremesinghe, that a clause in the prequalifying document which specifies the particular project that must be submitted to the RDA for the bidder to be eligible must be more than US$200 million in value, “contradicts a primary requirement in competitive bidding and prevents a bidder who can implement the project at a very competitive rate from participating in the tender” which in turn results in an inflated cost to the country.
L&T is one of the nine bidders who have qualified for the second stage of this elevated corridor, the 6.3km long, 4-lane elevated highway from New Kelani Bridge to Rajagiriya.
While technically the project is one elevated highway, stretching from the Port to New Kelani Bridge, then to Rajagiriya, continuing to Athurugiriya in its third stage, the government decided to parcel this out in three stages and currently L&T is participating in the bidding process for the NKB to Rajagiriya section.
Continuing, the letter states “ADB ́s guidelines on competitive bidding and Sri Lanka ́s National Procurement Commission guidelines specifically state that there should be no restrictive clauses that will limit the ability of otherwise qualified bidder to participate in a tender,” and seeks the intervention of senior government figures to de-couple the requirement of the restrictive clause so that the “The financial viability of a company, its ability to carry out a project and its technical abilities can be judged separately” and not under one limiting clause, as it stands now.
According to the letter, of which a copy is in the possession of the Sunday Observer, L&T’s cost for a project which consists of more than 12.3km elevated Highway is only about US$125 million. According to the company, it meets with every single technical and quality requirement imposed by the prequalification document.
In August 2017, L&T expressed its interest to participate in the first section, from Colombo Port to NKB. Under the prequalification document issued on August 25, 2017, it says to have qualified for all conditions other than clause 4.1 (Contracts of Similar Size and Nature) of the document, which stated that the bidder must have:
“Participation in at least two similar elevated highway projects of not less than 5 km contracts that have been successfully completed within the last ten (10) years and are like the proposed works, where the value of the Applicant’s participation exceeds US$ 240 Million.”
On November 2, 2017, within the stipulated period allowed for requesting deviations and clarifications, L&T wrote to the Project Director, requesting a deviation of the above clause, stating that as the cost structure for civil projects will vary depending on country (Place) and year of award/completion, to uncouple the technical requirement of a four-lane highway of 5-kilometer distance with the financial requirement of the cost of that very project being US$240 million or more.
In a letter issued on Friday (2) signed by the Project Coordinator A. H. M Nizar informs their inability to consider the request made via the above mentioned letter to decouple the technical and financial requirement.
“Preparation of bidding document is the sole responsibility of the employer and the executing agency. The employer decides capacity of the bidder needed and ensuring the fair competitiveness,” the Project Coordinator states in the letter.
In an addendum issued in February 2018, the Project Coordinator revised the requirements, bringing down the average turnover per annum for the past five years from US$200 million per annum to US$150 million per annum.
The Project Coordinator, A.H.M. Nizar, previously told the Sunday Observer that he has followed the ADB procurement guidelines.
The ADB procurement document for this project decouples the requirements in clause 4.1. and allows for evaluation of the bidder’s financial ability to construct a project of comparable size and cost and its technical ability, separately.
According to the procurement guidelines of the ADB for clause 4.1, the participation amount is usually 80% of the estimated value of the subject contract. In case of repetitive and contiguous works, the employer (in this case the government of Sri Lanka) has the option of specifying a value that is between 80 percent and 50 percent of the subject contract value.
Roads and bridges are repetitive and contiguous constructions and qualify under the option of specifying a value between 80 to 50 percent.
This is amply demonstrated in the prequalifying documents of the second stage of this same road, the NKB to Rajagiriya section. There the eligibility criteria are given as US$75 million, for the lengthier 6.3 km elevated highway. Therefore, the difference in construction value between two sections of the same road, both having exact technical specifications cannot differ by as much as 300 percent.
ADB´s guidelines on competitive bidding and Sri Lanka´s National Procurement Commission guidelines specifically state that there should be no restrictive clauses that will limit the ability of otherwise qualified bidder to participate in a tender.
Speaking to the Sunday Observer, Chairman of the Road Development Authority said, this is still at the prequalification stage. “These estimates and numbers were decided by our technical experts. The financial capacity of companies vary depending on the countries and other factors.
We have however taken cognizance of their appeal. At this stage all decisions will be taken by the procurement committee and I am in no way able or authorised to interfere with the procedure. However, we will forward the appeal to the procurement committee,” Sooriyarachchi said.