Business

Interim terminal at BIA abandoned?

– Maga lawsuit to drag into 2H of 2019

– Delays necessitate agreement renegotiation


By Madhusha Thavapalakumar

The construction of the much needed interim terminal at the Bandaranaike International Airport (BIA) is likely to be abandoned with a legal battle set to drag into the second half of this year, The Sunday Morning Business learnt.
In October last year, Maga Engineering (Pvt.) Ltd. filed action against the Cabinet decision to award the construction of the terminal to China State Construction Engineering Cooperation, and the next hearing is scheduled for July 2019, with a decision potentially even further into the future.
However, even upon the conclusion of the case, the interim terminal would still face obstacles as the cost of the construction has been escalating from its initially planned amount.
The $ 19 million interim terminal was originally announced in November 2017 to facilitate two million departing passengers as the existing terminal handles approximately 10 million passengers per annum, even though it was designed to handle only six million.
The case was set for hearing for the first time in the Supreme Court on 28 February 2019 but was postponed to July this year due to unknown reasons.
Maga, one of the six companies who bid for the project, scored the highest points in the evaluation and was recommended by the Standing Cabinet Appointed Procurement Committee to be awarded the project.
However, on an appeal by the China State Construction Engineering Cooperation, the Procurement Appeal Board overturned this decision and awarded it to the Chinese company, which was followed by Cabinet approval.
Out of the six companies that bid for the project, only four qualified after the technical evaluation. Interestingly, three of these were Chinese companies; namely, China State Construction Engineering Cooperation, China Aero Technology International Engineering Corporation, and China Harbor Engineering Company, with Maga being the only non-Chinese and Sri Lankan company.
Meanwhile, John Keells Chairman Krishan Balendra recently stated that the airport capacity issue continues to be a major stumbling block to the industry.
He pointed out that if four million arrivals are to be achieved by 2020 there must be a corresponding increase in airport capacity. Balendra added that a new terminal was no longer an option but an urgent necessity.
Balendra is a member of the 14-member Tourism Advisory Committee which has been appointed by Minister of Tourism Development, Wildlife, and Christian Religious Affairs John Amaratunga, with an eye on achieving the targeted three million tourist arrivals this year.
Permanent terminal
The decision to construct an interim terminal was a result of the delay in constructing a permanent terminal, which was deferred as the bids from the Japanese companies were far higher than the engineer estimate.
The permanent terminal was to be built with a funding of $ 800 million from the Japan International Cooperation Agency (JICA) and one of the main conditions of the agreement was that the construction would be given to a Japanese company. However, both the Japanese bidders had quoted far higher than the engineer estimate, with the lowest bid reported to have been 45% higher and the other 96% higher.
As JICA refused to reconsider the funding condition, the subsequent negotiations failed, which compelled the Ministry of Transport and Civil Aviation to resort to building an interim terminal.
The permanent terminal was expected to come into operation by 2020.
The Sunday Morning Business learnt that at the moment, Sri Lanka does not have a proper plan on constructing a permanent terminal as Japanese contractors are not willing to provide the required assistance for the terminal.
Reliable sources stated that if not for the agreement that was signed with JICA, Sri Lanka could have gone for international competitive bidders where the cost is relatively lower.
However, due to the conditionality of the agreement with JICA, only Japanese contractors can bid for the tender therefore Sri Lanka currently looks for a second round of bidding while negotiating with JICA to relax the conditions of its loan.
The Sunday Morning Business reliably learnt that the BIA has more than 170 aircraft movements per day, including an average of more than 60 movements of heavy aircraft per day. The capacity crunch caused by a six-million-passenger terminal handling 10 million passengers, results in hours of delays – particularly as passengers try to collect their baggage.
According to the 2017 Annual Report of the Airport and Aviation Services (Sri Lanka) Ltd., the airport experiences heavy congestion in both arrival and departure zones, as well as vehicular traffic – particularly during peak hours.