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CEP Stage III : Driving off the lane due to funding issues?

04 Sep 2022

By Maheesha Mudugamuwa   The long-delayed Central Expressway Project Section III (CEP III) will likely be suspended due to the inability to secure necessary foreign funds given the country’s present financial instability, The Sunday Morning learns. It is reliably learnt that the project has until now been unable to attract a viable foreign funding agency suitable to the country’s present financial requirements and therefore discussions are currently ongoing as to whether the project should be suspended. Discussions regarding the project’s possible suspension have been taking place in the backdrop of higher-level discussions to explore the possibilities of continuing with the project using funds from the controversial Chinese contractor – the Metallurgical Corporation of China (MCC). MCC was one of the bidders for the CEP III, as it submitted bids for the tender called by the Highways Ministry from local and international companies interested in constructing the third stage of the Central Expressway last year. The tender process was mired in controversy when it was revealed that the proposal submitted by MCC had not been considered by the Government on technical grounds and that only the proposal submitted by a recently formed local consortium named Lanka Infrastructure Development Consortium (LIDC) had been opened and considered, despite LIDC’s bidding price being $ 822 million (56%) higher at $ 1.87 billion compared to MCC’s bid of $ 1.05 billion.   Continued delays   The 34 km-long CEP III from Pothuhera to Galagedara was initially scheduled to be constructed by a Japanese contractor at an estimated cost of approximately Rs. 135 billion with a loan obtained from Japan’s Tokyo Mitsubishi Bank (TMB). However, after the new Government came into power this year, Japan was removed from the CEP III and the project once again shifted into a competitive bidding process by calling tenders for construction. The project has drawn controversy since its inception, especially since it was delayed for years due to the inability of the two parties, Sri Lanka and Japan, to come to an agreement regarding the loan conditions. Further, the Highways Ministry had not followed the competitive bidding process, instead proceeding with it as a Government-to-Government project as per the instructions given by the Cabinet of Ministers at the time.   Multiple controversies    Once Japan was removed from the CEP III, the Ministry of Highways called for fresh tenders and the tender process was also mired in controversy, later leading to its cancellation. It was alleged that the tender process was also corrupt, as the Highways Ministry had allegedly attempted to award the construction contract of the CEP III to a local consortium that had offered higher rates than MCC. The criticism came to light as MCC’s parent company – MCC International Incorporation Ltd. (MCCI)– last year decided to appeal to then President Gotabaya Rajapaksa regarding irregularities in the manner in which LIDC had been selected for the project. The allegations that arrangements were being made to award the project to LIDC, despite its bid being priced higher than that of MCC, were denied by both officials involved with the bidding process as well as LIDC. In its response to the allegations levelled by the MCCI, LIDC in a letter to Voice Against Corruption Convener Wasantha Samarasinghe has highlighted the reasons for MCCI’s disqualification. The LIDC, formed by five leading construction companies in Sri Lanka, namely Access, MAGA, International Construction Consortium (ICC), K.D.A. Weerasinghe & Co. (Pvt) Ltd., and NEM Construction (Pvt) Ltd., alleged that the tenders submitted by MCC and China State Construction Engineering Corporation Ltd. (CSCEC) had failed to qualify due to technical errors when tenders were opened on 3 February 2022, as both companies had failed to follow the Government-approved procurement process. Furthermore, it is alleged that the MCCI had also failed to submit a bid security in the proper manner, as the lender’s commitment had addressed MCC instead of the bidder MCCI. Later, the LIDC had refused to go ahead with the project at a time when Sri Lanka was facing one of the worst economic crises in its history and the tender was cancelled in July this year.     Denial   Despite high-level discussions on finding a new developer, which The Sunday Morning learns were aimed at exploring the possibility of going ahead with MCC, an official from the Highways Ministry vehemently denied that such discussions had taken place, instead claiming that they were currently discussing whether the project should continue. The official told The Sunday Morning that there had been no such discussions regarding the continuation of CEP III with MCC. “We don’t know how information about such discussions came to light as there were no such plans for the CEP III. It is the CEP I that is currently going ahead with Chinese funds and discussions were held at a recent meeting regarding the CEP I alone,” he asserted. Further, CEP III Project Director A. Hettiarachchi said that they were not aware of such discussions as they had not yet reached the ground-level. “Perhaps the higher offices are discussing this, but nothing was discussed at our level,” he said. Commenting on the current situation, the Project Director said out of 17 packages of the project, construction work of three packages was still going on with Government funds. Meanwhile, attempts made by The Sunday Morning to contact Transport and Highways Minister Dr. Bandula Gunawardena and Secretary Ranjith Premasiri regarding the  project and its possible suspension proved futile.   


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