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Why foreign contractors abandon projects midway
30 October, 2023, 12:00 am
Last modified: 30 October, 2023, 12:00 am
Foreign contractors have abandoned three infrastructure projects in the power and railway sectors midway, citing late payment of bills, delayed delivery of the site, and failure to provide bank guarantees against advance bills.
The results are delay in implementation, increase in costs and public hardship as happened in Rooppur Nuclear Power Plant transmission line, Dhaka-Narayanganj dual-gauge double line and Kulaura-Shahbazpur railway line rehabilitation projects when the Russian, Chinese, and Indian companies have all departed.
While the Indian contractor for Shahbazpur-Kulaura railway project left the work half-done under the pretext of Covid-19, the Chinese firm cited delay in transfer of site for leaving Dhaka-Narayanganj rail line work. The Russian company engaged in Rooppur transmission line work had payment complications due to international restrictions.
Experts and officials say project directors are supposed to settle the land and payment issues to run the project work smoothly. There are provisions to hold foreign contractors responsible for leaving work halfway through, but any action is hardly taken against them.
Abul Kashem Md Mohiuddin, secretary to the Implementation Monitoring and Evaluation Division, said development projects have been affected by contractors who arrive late, leave projects mid-way, or do not join work.
"While local contractors are penalised for such behaviour, foreign contractors are often exempt," he deplored.
"The government is taking this matter seriously. To address it, the government has decided to blacklist contractors who do not come to the site on time or leave in the middle. A new guideline is being drafted for the government procurement process, which is expected to be completed within the year," he told The Business Standard.
Transmission line development for the Rooppur Nuclear Power Plant
According to Power Division sources, a Russian company was appointed in January 2021 to undertake frequency control and frequency drop protection work as part of the transmission infrastructure development project for power evacuation from the Rooppur Nuclear Power Plant.
JSC Energosetproject Institute was initially tasked with completing the work design, bill of quantities, tender documents, bid evaluation, and project implementation supervision within a 34-month timeframe, as recorded in the minutes of the project's steering committee meeting on 20 June. However, the company did not fulfil any of these obligations, leading the Power Grid Company of Bangladesh (PGCB) to withhold payment.
The company cited multiple reasons for its inability to provide consultancy services, including the international communication shutdown resulting from the coronavirus pandemic, failure to provide a bank guarantee for advance payments, delays in insurance acceptance, and international restrictions on accepting bills through letters of credit. Unfortunately, the company declared bankruptcy in December 2022 due to insolvency and pre-bankruptcy issues.
Project delays and escalating costs are driven by frequent revisions and lack of good governance
PGCB officials have indicated that, according to the terms of the contract, only Russian consultants are eligible for this role. However, various challenges, including international sanctions on Russia and the internal commitments of Russian banks, have made it impossible to appoint a new consultant for almost two years. In light of these circumstances, the process of selecting a new Russian contractor through a limited tender is currently in progress.
While the transmission infrastructure development project was initially slated for completion by December 2023, PGCB sources have indicated that the Russian consultant will require a two-year extension to finalise the work. The project, which commenced in 2018, encompasses the construction of several transmission lines, including Aminbazar-Kaliakair 400 kV, Rooppur-Dhaka (Aminbazar-Kaliakair) 400 kV, 400 kV Rooppur-Gopalganj, 400 kV Rooppur-Bogura, and 230 kV Rooppur-Dhamrai, in addition to a 20-kilometre crossing over the Jamuna and Padma rivers. This is part of package 8 of the Tk1,616 crore project.
Dual-gauge Dhaka-Narayanganj railway line construction
The construction of a dual-gauge rail line parallel to the Dhaka-Narayanganj metre-gauge railway line is underway, and the project is divided into several packages.
In June 2017, Bangladesh Railways signed a contract with the Chinese contractor Power Construction Corporation of China for Package 1. However, the company unilaterally terminated the contract on 15 March 2023.
Project Director Md Salim Rauf explained that the railway faced significant space constraints within a portion of the Narayanganj City Corporation area, making it infeasible to acquire new land and transfer the site to the contractor. Furthermore, the contract had expired in 2022, resulting in a delay in processing the bill.
The contractor also experienced financial difficulties during this period. Ultimately, the contractor requested a revision of the rate schedule due to the escalating total construction costs since the contract's signing in 2017. Due to these factors, the contractor abandoned the project, he added.
The sanctioned cost of this project, according to railway sources, is Tk348.16 crore. Out of this amount, Tk159.35 crore has already been disbursed to the contractor, while outstanding bills total Tk17.40 crore.
Bangladesh Railway initially planned to take legal action against the Chinese contractor but later reversed its decision. As a result, the authorities have begun preparing to issue new tenders for the project, with the retendering process expected to take four to six months. Railway officials have acknowledged that this will delay project implementation.
Rehabilitation of Shahbazpur-Kulaura railway
Meanwhile, an Indian contractor has yet to return to work on a railway project after the Covid-19 pandemic halted operations. This has stalled physical progress at 25.82%, casting uncertainty over whether the project will be completed at all.
In November 2017, Bangladesh Railway entered into an agreement with Kalindee Rail Nirman, a division of Texmaco Rail and Engineering Limited, for the rehabilitation of the railway line from Kulaura in Moulvibazar to Shahbazpur in Brahmanbaria. The contract specified that the contractor was to complete the work by May 2020. However, the Indian contractor experienced delays in arriving at the project site and later departed from Bangladesh, citing the pandemic as the reason for their departure.
Despite numerous efforts and initiatives, the railways have been unsuccessful in bringing the contractor back. In April 2021, railway officials reported that their attempts to communicate with the Indian embassy in Dhaka had yielded limited results.
Project Director Md Sultan Ali mentioned that a few individuals from the contractor company have been present at the project site since last August. However, progress has been hampered by heavy rains. At this point, it is uncertain when the work will return to full-scale operation.
Of the Tk678.50 crore project, to date, Tk140 crore has been expended. However, the specific amount paid to the contractor remains undisclosed.
Former Planning Commission secretary Md Mamun-Al-Rashid said project directors are responsible for paying bills to contractors and consultants on time and taking appropriate action when necessary. All these problems could have been avoided if arrangements had been made to obtain instalments from development partners on time. Project directors often lack knowledge of the contracts they oversee.
He said it is also possible to expedite the release of funds for government-funded projects by writing to the ministry and the Finance Division. However, project directors often neglect to do this.
"Project directors should be held accountable for the departure of contractors, and contractors should be penalised for delaying projects," he added.
He also said it is possible to easily solve the problem of not being able to hand over the site in the project by taking proactive measures in land acquisition.
Mamun Al-Rashid mentioned that Indian-funded projects encounter challenges because they come with an obligation to execute the work through Indian contractors. This issue is prevalent in nearly all Indian debt schemes, where contractors often fail to arrive at the project site in a timely manner.
Delays in project commencement, often attributed to the pretext of the Covid-19 pandemic, have led to prolonged interruptions in the implementation of several projects. In light of this, he believes it is essential to enhance the dialogue and cooperation between the two countries.
Indian contractors have delayed coming to the site or stopped work on the main route Khulna-Mongla rail line development and Akhaura-Agartala rail line projects, according to railway sources.
www.tbsnews.net
INFRASTRUCTURE
Saifuddin Saif30 October, 2023, 12:00 am
Last modified: 30 October, 2023, 12:00 am
There are provisions to hold foreign contractors responsible for leaving work halfway through, but any action is hardly taken against them.
Foreign contractors have abandoned three infrastructure projects in the power and railway sectors midway, citing late payment of bills, delayed delivery of the site, and failure to provide bank guarantees against advance bills.
The results are delay in implementation, increase in costs and public hardship as happened in Rooppur Nuclear Power Plant transmission line, Dhaka-Narayanganj dual-gauge double line and Kulaura-Shahbazpur railway line rehabilitation projects when the Russian, Chinese, and Indian companies have all departed.
While the Indian contractor for Shahbazpur-Kulaura railway project left the work half-done under the pretext of Covid-19, the Chinese firm cited delay in transfer of site for leaving Dhaka-Narayanganj rail line work. The Russian company engaged in Rooppur transmission line work had payment complications due to international restrictions.
Experts and officials say project directors are supposed to settle the land and payment issues to run the project work smoothly. There are provisions to hold foreign contractors responsible for leaving work halfway through, but any action is hardly taken against them.
Abul Kashem Md Mohiuddin, secretary to the Implementation Monitoring and Evaluation Division, said development projects have been affected by contractors who arrive late, leave projects mid-way, or do not join work.
"While local contractors are penalised for such behaviour, foreign contractors are often exempt," he deplored.
"The government is taking this matter seriously. To address it, the government has decided to blacklist contractors who do not come to the site on time or leave in the middle. A new guideline is being drafted for the government procurement process, which is expected to be completed within the year," he told The Business Standard.
Transmission line development for the Rooppur Nuclear Power Plant
According to Power Division sources, a Russian company was appointed in January 2021 to undertake frequency control and frequency drop protection work as part of the transmission infrastructure development project for power evacuation from the Rooppur Nuclear Power Plant.
JSC Energosetproject Institute was initially tasked with completing the work design, bill of quantities, tender documents, bid evaluation, and project implementation supervision within a 34-month timeframe, as recorded in the minutes of the project's steering committee meeting on 20 June. However, the company did not fulfil any of these obligations, leading the Power Grid Company of Bangladesh (PGCB) to withhold payment.
The company cited multiple reasons for its inability to provide consultancy services, including the international communication shutdown resulting from the coronavirus pandemic, failure to provide a bank guarantee for advance payments, delays in insurance acceptance, and international restrictions on accepting bills through letters of credit. Unfortunately, the company declared bankruptcy in December 2022 due to insolvency and pre-bankruptcy issues.
Project delays and escalating costs are driven by frequent revisions and lack of good governance
PGCB officials have indicated that, according to the terms of the contract, only Russian consultants are eligible for this role. However, various challenges, including international sanctions on Russia and the internal commitments of Russian banks, have made it impossible to appoint a new consultant for almost two years. In light of these circumstances, the process of selecting a new Russian contractor through a limited tender is currently in progress.
While the transmission infrastructure development project was initially slated for completion by December 2023, PGCB sources have indicated that the Russian consultant will require a two-year extension to finalise the work. The project, which commenced in 2018, encompasses the construction of several transmission lines, including Aminbazar-Kaliakair 400 kV, Rooppur-Dhaka (Aminbazar-Kaliakair) 400 kV, 400 kV Rooppur-Gopalganj, 400 kV Rooppur-Bogura, and 230 kV Rooppur-Dhamrai, in addition to a 20-kilometre crossing over the Jamuna and Padma rivers. This is part of package 8 of the Tk1,616 crore project.
Dual-gauge Dhaka-Narayanganj railway line construction
The construction of a dual-gauge rail line parallel to the Dhaka-Narayanganj metre-gauge railway line is underway, and the project is divided into several packages.
In June 2017, Bangladesh Railways signed a contract with the Chinese contractor Power Construction Corporation of China for Package 1. However, the company unilaterally terminated the contract on 15 March 2023.
Project Director Md Salim Rauf explained that the railway faced significant space constraints within a portion of the Narayanganj City Corporation area, making it infeasible to acquire new land and transfer the site to the contractor. Furthermore, the contract had expired in 2022, resulting in a delay in processing the bill.
The contractor also experienced financial difficulties during this period. Ultimately, the contractor requested a revision of the rate schedule due to the escalating total construction costs since the contract's signing in 2017. Due to these factors, the contractor abandoned the project, he added.
The sanctioned cost of this project, according to railway sources, is Tk348.16 crore. Out of this amount, Tk159.35 crore has already been disbursed to the contractor, while outstanding bills total Tk17.40 crore.
Bangladesh Railway initially planned to take legal action against the Chinese contractor but later reversed its decision. As a result, the authorities have begun preparing to issue new tenders for the project, with the retendering process expected to take four to six months. Railway officials have acknowledged that this will delay project implementation.
Rehabilitation of Shahbazpur-Kulaura railway
Meanwhile, an Indian contractor has yet to return to work on a railway project after the Covid-19 pandemic halted operations. This has stalled physical progress at 25.82%, casting uncertainty over whether the project will be completed at all.
In November 2017, Bangladesh Railway entered into an agreement with Kalindee Rail Nirman, a division of Texmaco Rail and Engineering Limited, for the rehabilitation of the railway line from Kulaura in Moulvibazar to Shahbazpur in Brahmanbaria. The contract specified that the contractor was to complete the work by May 2020. However, the Indian contractor experienced delays in arriving at the project site and later departed from Bangladesh, citing the pandemic as the reason for their departure.
Despite numerous efforts and initiatives, the railways have been unsuccessful in bringing the contractor back. In April 2021, railway officials reported that their attempts to communicate with the Indian embassy in Dhaka had yielded limited results.
Project Director Md Sultan Ali mentioned that a few individuals from the contractor company have been present at the project site since last August. However, progress has been hampered by heavy rains. At this point, it is uncertain when the work will return to full-scale operation.
Of the Tk678.50 crore project, to date, Tk140 crore has been expended. However, the specific amount paid to the contractor remains undisclosed.
Former Planning Commission secretary Md Mamun-Al-Rashid said project directors are responsible for paying bills to contractors and consultants on time and taking appropriate action when necessary. All these problems could have been avoided if arrangements had been made to obtain instalments from development partners on time. Project directors often lack knowledge of the contracts they oversee.
He said it is also possible to expedite the release of funds for government-funded projects by writing to the ministry and the Finance Division. However, project directors often neglect to do this.
"Project directors should be held accountable for the departure of contractors, and contractors should be penalised for delaying projects," he added.
He also said it is possible to easily solve the problem of not being able to hand over the site in the project by taking proactive measures in land acquisition.
Mamun Al-Rashid mentioned that Indian-funded projects encounter challenges because they come with an obligation to execute the work through Indian contractors. This issue is prevalent in nearly all Indian debt schemes, where contractors often fail to arrive at the project site in a timely manner.
Delays in project commencement, often attributed to the pretext of the Covid-19 pandemic, have led to prolonged interruptions in the implementation of several projects. In light of this, he believes it is essential to enhance the dialogue and cooperation between the two countries.
Indian contractors have delayed coming to the site or stopped work on the main route Khulna-Mongla rail line development and Akhaura-Agartala rail line projects, according to railway sources.
Why foreign contractors abandon projects midway
There are provisions to hold foreign contractors responsible for leaving work halfway through, but any action is hardly taken against them.
