The Government has decided to award a project to construct 65,000 houses for war-affected families in the North and East to local builders, abandoning earlier moves to give the lucrative deal to a foreign company. The Major Constructors of Sri Lanka (MCSL), an industry association, was notified on Friday by the Department of National Planning [...]


Foreign company out; local builders get contract for 65,000 houses in NE


The Government has decided to award a project to construct 65,000 houses for war-affected families in the North and East to local builders, abandoning earlier moves to give the lucrative deal to a foreign company.

The Major Constructors of Sri Lanka (MCSL), an industry association, was notified on Friday by the Department of National Planning that the project could be implemented absorbing local contractors and local materials to give more benefits to the local construction industry and to reduce the construction cost.

The Department has instructed the MCSL to develop a suitable project proposal in cooperation with the relevant line agencies. A meeting will be held with the Director General of National Planning on Wednesday.

There was strong pressure by a government faction to award the full project —initially estimated at a massive US$ 1 billion — to ArcelorMittal, a French concern headquartered in Luxembourg. This company was offering prefabricated houses with steel frames. The company even launched a model house in Jaffna on Friday morning with the attendance of Resettlement and Rehabilitation Minister D.M. Swaminathan.

But the contract is now likely to be carved up into ten packages of 6,500 houses each and distributed among large construction companies in Sri Lanka, six of which have already expressed interest. This was decided at a meeting of the construction industry with R. Paskaralingam, Senior Adviser to the Ministry of National Policies and Economic Affairs. Minister Swaminathan’s office was informed of the decision on Friday.

The Sunday Times learns that the money-spinning project had pitted powerful lobbies inside the current administration against each other. For instance, one of the other bidders was an Indian joint venture called EPI-OCPL Consortium, of which the construction company owned by Primary Industries Minister Daya Gamage was a partner. While it qualified after the technical evaluation, the Consortium’s financial proposal was not considered.

ArcelorMittal has its own influential, if questionable, backers. Construction industry sources confirmed this week that the company’s local agent is Ravi Wettasinghe who was ignominiously arrested last year while attempting to leave the country. He is being tried for alleged criminal fraud.

Mr. Wettasinghe touted strong connections within previous United National Party regimes. In 1993, he acquired the Ceylon Transport Board’s Werahera, Kahagolla and Keppetipola workshops and formed two companies named Wesco and Kesco. The following year, with the defeat of the UNP, he fled the country leaving the incoming Government to settle millions of rupees in dues to workers.

Official sources said Mr Wettasinghe was “now back in action” and was involved in having the model house erected in Jaffna. “He has friends in certain state agencies that are actively supporting ArcelorMittal’s bid for the housing project,” one source said.
The proposal had generated controversy from the beginning. Civil society groups, many of them working in the North and East, questioned the “fast-track” process by which a contractor was selected out of several bidders. Only ArcelorMittal was found to have met the necessary technical and financial specifications.

The Construction Association later complained that the ‘Request for Proposals”– issued by the Ministry to prequalified bidders — included several exclusionary conditions that the local industry deemed to be “completely disproportionate to the complexity of the work” which was basic housing.

“They appear to have been deliberately done to favour one contractor and block out several capable contractors,” a senior construction industry source said at the time. Among these conditions was a minimum single job of Rs. 25 billion completed in the last five years; a bid bond of Rs. 650 million; and a contractor funding letter of more than US$ 1 billion.

Another criticism was that the houses, valued by ArcelorMittal at Rs. 2.1 million each, were highly overpriced. This was flagged, too, by Housing and Construction Minister Sajith Premadasa who objected to the cost at a recent Cabinet meeting. A Cabinet subcommittee was consequently appointed to reevaluate the recommendation that the contract be awarded to ArcelorMittal.

Civil society groups also protested that the basis for costing was unclear and that the amount quoted was four times the amount in the Indian housing project and significantly more than all other housing programmes completed or currently underway.

A consultant for ArcelorMittal maintained this week that the price was “realistic”. He said the cost of construction was high in the North and East when compared with the rest of the country. There was a scarcity of skilled labour and raw materials were more expensive. He said ArcelorMittal was providing a solar panel for lighting, toilet, septic tank, overhead tank, electrical wiring and fittings, television, gas cooker and fan.

The consultant added that a tube well was included but could not say whether ArcelorMittal had intended to sink 65,000 tube wells across the region to match the number of houses. The furniture, meanwhile, was to have been provided on the company’s account as part of its corporate social responsibility initiatives. If awarded the contract, ArcelorMittal had planned to hire Chinese subcontractors.

It is still not known what price Sri Lankan builders will provide houses at. A spokesman for one of the companies that had expressed interest in the project said the cost would be lower but he would not commit to a figure. “We already have an indication now what others would charge,” he said. “It could be around 15 to 20 percent less. We can even do a house for Rs. 1.5 million. It depends on the system we use.”

“We are also suggesting some kind of lightweight concrete panels, better than the steel frame,” the spokesman said. He vowed that local labour would be used wherever possible. “Everyone will be involved,” he asserted.

In the meantime, civil society representatives urged the Government to “get it right this time”. “Reviewing the project is an opportunity to ensure that it is designed, developed and implemented in consultation and with full participation of the community and having flexibility required to meet the specific needs of the affected families,” said Raga Alphonsus, who has worked in the sphere of permanent housing in the North and East for over 15 years.

“Housing is not merely about building shelters but building homes and communities,” he said. “It needs a partnership involving the communities, government, industry and experts to ensure a successful and sustainable solution to the housing crisis in the north and east and indeed elsewhere in the country.”

“There is a need to ensure equity in the support to all those who have been assisted so far recently and those yet to be assisted through other housing initiatives as well,” Mr Alphonsus explained. “Avoiding regional disparities and inconsistency in housing policy which can negatively impact the peace building initiatives currently pursued by the State needs to be carefully considered.”
“The key point I would like to stress,” he said, “is that the house is a home and every family has its specific needs. I do understand that, when you do a mass project, you can’t have too many options, but there must be space and some consultation. That needs to happen.”

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