A multimillion dollar water project has been put on hold by the Cabinet on the grounds that the estimate the Israeli company that submitted an unsolicited proposal to implement it was 103% more than the estimate by Sri Lankan engineers. A Cabinet memorandum submitted last week and referred for reconsideration says that the Standing Cabinet [...]

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Water project stalled over Israeli firm’s big bid price

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A multimillion dollar water project has been put on hold by the Cabinet on the grounds that the estimate the Israeli company that submitted an unsolicited proposal to implement it was 103% more than the estimate by Sri Lankan engineers.

A Cabinet memorandum submitted last week and referred for reconsideration says that the Standing Cabinet Appointed Procurement Committee (SCAPC), which includes Treasury officials, had managed to bring down the bid price by more than US$ 132,550,000 (Rs. 17.2 billon). “However the agreed bid price is still 103% higher than the engineer’s estimate of US$ 136.7 million,” the memorandum quotes the SCAPC as saying.

The Israeli company M/s Baran Group Ltd, submitted an Expression of Interest for the implementation of the project. Its initial bid of US$ 410,000,000 (Rs. 534,43,452,916) was reduced to US$ 277,450,000 (Rs. 36,165,575,638) after talks. An additional local funding component of Rs. 5,492,000,000 (US$ 42,132,756) is required. The project is to rehabilitate the existing water supply scheme in Middeniya-Angunukolapelessa, Barawakumbuka-Rote and Weeraketiya (Muruthawela Water Supply Scheme) in Hambantota District. It also envisages the improvement of the Deniyaya, Urubokka water supply schemes and the construction of a new water supply scheme at Morawaka, replacing the existing Pradeshiya Sabha scheme in the Matara district.

However, the SCAPC has said the Cabinet of Ministers may consider awarding the project to M/s Baran for US$ 277.45 million after taking several factors into account. These are that European products were being offered and that there is 100% financing through a foreign loan at low interest rate. It points out that overhead costs have become high because six water supply schemes have been bundled into one project. It also says that price contingencies are included in the contract price so there is no price escalation risk to Sri Lanka. Finally, there are no Treasury funds available for the project.

Alternatively, the Cabinet has the option of calling for proposals from interested parties with funding arrangements, the SCAPC has recommended. It also has the choice of breaking up the project into six components and using local bank funding to implement them.

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