By Namini Wijedasa The Government is in talks with China’s Exim Bank to fund the first section of the Central Expressway which the contractor, Metallurgical Construction Company (MCC) of China, has now priced at Rs. 158 billion–or Rs 12 billion more than originally stated. The increase in cost is both due to the inclusion of [...]


Central Expressway cost increases by Rs. 12 billion


By Namini Wijedasa
The Government is in talks with China’s Exim Bank to fund the first section of the Central Expressway which the contractor, Metallurgical Construction Company (MCC) of China, has now priced at Rs. 158 billion–or Rs 12 billion more than originally stated.
The increase in cost is both due to the inclusion of a 12km viaduct in the road design and a failure of the Government to negotiate sufficient savings from another project carried out by MCC, as earlier planned.

The relevant section runs 37.1 kilometres from Kadawatha to Mirigama. At the current price, this translates to nearly Rs. 4.3 billion per kilometre. The contract was given to MCC without tender. The loan agreement with Exim is yet to be signed. The contractor had initially fixed the cost of a 32.5 km stretch from Kossinna to Mirigama at Rs. 145.8 billion. The remaining five kilometres from Kadawatha to Kossinna were to be completed from savings negotiated by an official committee in the third phase of the Outer Circular Highway (OCH) being built by MCC.

The Government claimed last year that it had shaved more than 30 percent–around Rs. 24 billion–off the cost of the OCH by reducing the scope of the project. This money would be diverted to other work, it vowed.

But in December 2015, the Cabinet decided to obtain technological and financial proposals from MCC to construct the section from Kadawatha to Kossinna. This was to have been built with the OCH savings. As a result, the total cost of the project rose to Rs. 158 billion or US$ 1.1 billion.
The amount that was saved from OCH was not conclusively revealed. “It kept changing,” confirmed Prof. Saman Bandara, who was Road Development Authority (RDA) Chairman at the time. “There were a number of different alternatives. The basic shift that was made in the design was to change the highway from six lanes to four lanes.”

In reality, however, it was only the OCH’s substructure (the underlying supporting structure comprising the foundation, columns and abutments) that was changed from six lanes to four, Prof Bandara said. “The decision was that the substructure will also be designed for four lanes,” he explained. “That was the saving. There was no other saving from the top, which was already designed for four lanes. The savings anticipated reduced a lot. Cost went up and savings went down.”

The money that was left over from OCH can now only fund one interchange and 500 meters, or 0.5 km, of road on the Central Expressway; not the five kilometers earlier announced. But interchanges, Prof Bandara defended, are expensive.

The selection of MCC for the Kadawatha -Mirigama leg is also problematic. It happened for two reasons, Prof Bandara said: “It was a Government decision. MCC had already signed a contract with the previous Government for the Northern Expressway. Secondly, it was logical that it would do the first section to take advantage of the savings from OCH.”

Senior engineers, speaking on grounds of anonymity, contest this rationale. “The OCH savings were a pittance,” said one, who has closely studied the projects. “Do you award a US$ 1.1 billion contract to a company on that? Why not give MCC just the interchange and 500m of road and go for tenders for the rest? The Government used half a kilometer of road and an interchange to give MCC the remaining 36.5kms as well!”
Highways Minister Lakhsman Kiriella said the contract was awarded to MCC by Cabinet decision. He also pointed out that he was not the subject minister at the time. “The first section was given to the Chinese,” he said. “I was not the minister then. The second section was given to local contractors.”

Engineers also question the costs. The Central Expressway was earlier called the Northern Expressway. On that road, a 54km stretch from Enderamulla to Ambepussa was priced at Rs. 2.7 billion a kilometer. The total cost of the project was to have been US$ 1 billion.
After the change in administration, the RDA shifted the starting point of the expressway from Enderamulla to Kadawatha, a difference of five kilometers. It was renamed the Central Expressway. The first section fell to 37kms from Kadawatha to Mirigama. But the cost per kilometer ballooned to Rs. 4.3 billion a kilometer!

Minister Kiriella said all rates were negotiated before the contract was given out. “The Government was keen to start it (expressway) as fast as possible,” he explained, adding that the road will benefit five districts.

This section would have been significantly cheaper if not for a 12 kilometer viaduct which was added to the design under the former regime. Authoritative sources said this was arbitrarily done; and that the shifting of the original trace, which had required only a four kilometer viaduct, had taken the road into a flood plain.

“It was a purely political decision,” one official maintained. “The RDA had a good trace, produced by a reputed consultant. It was not an engineering decision to change that.” “Either it is a design blunder or it was intentionally put there to increase the cost,” said the engineer earlier quoted. “The embankment has also been made unnecessarily larger for the same purpose.” Still, even with this viaduct, the RDA Engineer’s estimate for the first section of the Central Expressway had been Rs 129 billion. The price of the contractor, MCC, is Rs 29 billion higher than this.

But the Government–which had once railed against the previous regime’s penchant for exorbitant, unsolicited proposals–is steaming ahead. A team of officials from Exim was in Sri Lanka this week to verify documents related to the Central Expressway, including a new feasibility study reflecting a change in trace and the inclusion of the longer viaduct.

The bank had insisted on a fresh feasibility study being conducted, authoritative sources said, because there wasn’t one in existence for the new Kadawatha-Mirigama trace. The RDA has formulated one in-house and handed it over to Exim for examination. The foundation stone for the first section was laid several months ago. The foundation stone for the next section was also laid recently. Both were done before basic studies and land acquisitions were completed. And engineers are now pushing hard for a critical evaluation of the costs before any more public funds are put to waste.

Minister Kiriella maintained that acquisitions are proceeding smoothly. “We have published Section 38 notices,” he said, adding that this allows entry into the respective lands. “Except for a few, around five per cent, the vast majority of people have been very generous and given up their lands willingly.”

Where it started and where it is now
The Central Expressway was earlier called the Northern Expressway. It had a patchy start. In 2012, the Government awarded to the Australian company SMEC Engineering the feasibility study for this road. The consultants were chosen without tender, on the strength of a Cabinet paper; the contract was priced at a massive Rs 1 billion. Another Rs 400 million claim from the company is awaiting approval.
Design work on the Northern Expressway began even before this feasibility study was completed. The Government soon announced that the first 54 km from Enderamulla to Ambepussa would be built at US$1 billion with Chinese funds. This worked out to an estimated US$19 million–or Rs 2.7 billion at prevailing rates–per kilometer.

In 2013, discussions were held with China Merchant Holdings which built the Colombo South Harbour. It now manages the jetty in collaboration with the Sri Lanka Ports Authority. But these negotiations failed. The Government then divided the road into four and chose to award one part to MCC which was, by then, constructing the OCH at significant cost. It had also built the Colombo-Katunayake Expressway.
The other three sections were to be awarded to local contractors. In keeping with the usual practice of the former regime, there was no question of open or competitive bidding.

After the presidential election, the Road Development Authority (RDA) shifted the starting point of the road from Enderamulla to Kadawatha, a distance of five kilometers. It was renamed the Central Expressway. And the Government soon awarded the first section, without tender, to the Metallurgical Construction Company of China.

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