May 26, 2019

Single-bid contracts: Hungarians to build two flyovers Featured

Single-bid contracts–this time for two flyovers funded through a Hungarian loan of 52mn Euros (Rs 10.2bn)–have crept back into the Road Development Authority (RDA).

The Cabinet this week approved the construction of two flyovers at the Kohuwala and Getambe junctions “as a remedial measure” for heavy traffic congestion. The proposal was submitted by Highways and Road Development Minister Kabir Hashim to enter into the loan agreements for the required funds from the Government of Hungary, and to award the contract for designing and building the structures to Betonutepito Plc of Hungary.  The projects were not advertised and no bids were called. This means that a competitive process that could have ensured better prices–provided the flyovers were deemed necessary–was not followed.

And in a sign of more highways-related expenditure to come, the Department of Public Enterprises of the Ministry of Finance in February notified the Secretary to the Highways and Road Development Ministry that the RDA’s borrowing limit has been raised to a maximum of Rs 245bn.

The contract for the flyovers was finalised by the RDA, a spokesman for the Finance Ministry’s External Resources Department said. The ERD will now negotiate the lending terms. This was a single-bid initiative for which there will be a Government-to-Government concessional loan. The company, Betonutepito Plc, was recommended by the Hungarian Government.

The RDA is going ahead with the project despite concerns expressed by the National Planning Department (NPD) of the Ministry of National Policies. On May14, NPD Director General S.S. Mudalige wrote to the Highways and Road Development Ministry Secretary recommending a detailed feasibility study “comprising all the engineering and economic analysis before finalising the flyover option”.

This was in relation to the Getambe flyover. However, there was no such study done. What is available, however, is a preliminary appraisal commissioned by the Hungarian company of its own project. This finds the project to be beneficial on multiple fronts.

The Kohuwala flyover will be constructed in 22 months and the Getambe flyover in 28 months. The Governments of Hungary and Sri Lanka have entered into a framework agreement for infrastructure financing covering transport and highways. The flyovers fall within this agreement and qualify for concessional financing with repayment over 21.5 years (including a grace period of 3 years), zero interest and no other financing charges or fees.