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Central Expressway Part 1 contract: Committee favours settling MCC’s claims and awarding it the job
View(s):By Namini Wijedasa
A committee appointed to analyse financial claims from the Metallurgical Corporation of China Ltd. (MCC), contractor of the long-delayed Central Expressway Part 1 (CEP1) from Kadawatha to Mirigama, has recommended settling its multibillion-rupee payments and negotiating with the same party to complete the remainder of the road.
The report was finalised and handed over this week. The Highways Ministry appointed the seven-member committee in May. The China Exim Bank-funded project is stalled at a mere 36.38 per cent physical progress since construction started in September 2020.
Recent delays are largely attributed to Sri Lanka’s economic crisis, which caused the suspension of loan disbursements from the Exim Bank and a lengthy debt restructuring process.
Earlier this year, five of Sri Lanka’s largest construction companies urged President Anura Kumara Dissanayake to cancel the 2015-16 direct contract granted to MCC and to call for fresh, competitive, open tenders. However, the committee does not recommend appointing a new contractor.
“The committee observed that if the balance work is not completed under the existing contractor/MCC, there is a possibility that MCC may pursue legal action against the employer and make serious claims,” says the report seen by the Sunday Times.
“Furthermore, RDA [Road Development Authority] will need to select a new contractor through bidding, which will take a long time. As a result, the project’s overall duration and expense will increase,” it holds.
The committee suggests that the bills of quantities (BOQ) for the balance work should be negotiated with MCC and that payment currencies, exchange rates and local-to-domestic bill ratios be renegotiated to mitigate financial losses to Sri Lanka.
Initially, the outstanding amount of bills in hand was around US$189 million (Rs. 57 billion), but according to calculations presented by the committee, the total amount for bills in hand is US$237.4 million (Rs. 71.3 billion), which is the principal amounts of the bills and accumulated interest up to May 31, 2025.
In more detail, the committee recommends applying exchange rates for the submission of bills that are acceptable to both parties for the foreign component of already submitted interim payment certificates (IPCs); and that the value of bills in hand and associated interest be calculated and settled immediately.
Instead of paying the contractor in US dollars, it is also proposed that the possibility of settling both the foreign and local components of the bills, including interest, using Sri Lankan rupees be explored.
The contractor should be prevented from submitting any further claims on these matters in the future. It is also proposed that the Ministry of Transport, Highways, Ports and Aviation appoint an expert committee to evaluate these claims and provide their recommendations.
This week, President Dissanayake said China Exim had agreed to provide a new concessionary loan in Chinese yuan for the resumption of CEP 1. China Exim has not independently confirmed this.
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