Contract awarded on build–operate–transfer basis while NHA gave whopping Rs18b in advance
ISLAMABAD: Lahore-Sialkot Motorway, a Rs 43 billion project, fell prey to the gross negligence of the National Highway Authority (NHA) as there were multiple discrepancies, lags and failures in the awarding of contract which resulted into a loss of billions to the public exchequer, the audit report said.
According to details, the NHA awarded the contract for the construction of Lahore-Sialkot Motorway on build-operate-transfer (BOT) basis to Lahore-Sialkot Motorway Infrastructure Management (LSMIM) (Pvt) Ltd with the estimated project cost of Rs43.8 billion, which includes civil work, escalation, consultancy, insurance, among others.
The project was awarded to the contractor for 25 years wherein a period of two years was fixed for the construction work while the other 23 years were given to recoupment of the cost through toll and other commercial activities.
The audit further noted that as per the agreement, an amount of Rs 18 billion was fixed to be paid to the contractor as Viable Gap Funding (VGF)/subsidy by the authority. Besides, the amount of VGF, Rs 5 billion was to be paid to the contractor as a loan which was recoverable in installments from 12th to 25th year together with interest.
Five major irregularities have been pointed out in the audit report. Firstly, in the feasibility study, it was decided that 25pc amount (Rs 10 billion) will be provided to the contractor, however, the contractor was paid Rs 18 billion which gave a financial benefit of Rs 7 billion to the contractor.
Secondly, the NHA ignored the revenue sharing at 20% of the income from the contractor despite paying a whopping Rs 18 billion in advance while the contractor was given full authority and liberty on the revenue of the project against their investment. Thirdly, the contractor was responsible to provide vehicles amounting to Rs 25 million which were not provided.
Fourthly, the contractor failed to provide the construction performance bond amounting to Rs 1.7 billion along with the insurance coverage for the project, as per the agreement. Fifthly, the contractor was to provide training to five officials of the NHA in the field of public-private partnership from a foreign country but as per the agreement, no such clause was given.
The audit concluded that the award of work on build-operate-transfer basis indicates that the interest of the government/NHA was not kept in view and an undue favour was extended to the contractor. Action should be taken against those responsible, it recommended.
