Allegations and counter allegations swirl between local and Chinese party

By Nishel Fernando
The local consortium, which emerged as the only successful bidder for Central Expressway (CEP) - Section 3 (Rambukkana to Galagedara ) has denied allegations leveled against them by Metallurgical Corporation of China (MCC) Ltd. on irregularities in the tender process.

The Ministry of Highways on July 22, 2021 called bids on design, build, finance, operate, maintain & transfer basis, for Section 3 of the CEP project from Rambukkana (Ch. 12+890km) to Galagedara (Ch. 32+450km), in order to complete the project via a public-private partnership.

Although three bids were received, Lanka Infrastructure Development Consortium (LIDC) comprising Access Engineering, Maga Engineering, ICC, KDAW and NEM Construction had become the only successful and technically qualified bidder while bids from China State Construction Engineering Corporation (CSCEC) and MCC International Incorporation (MCCI), a unit of MCC were disqualified on technical grounds.

Following the disqualification, MCC in a letter to President Gotabaya Rajapaksa had requested to reconsider their bid for the project while stressing that their bid was rejected without opening the financial proposal.

According to MCC, MCCI quoted a semi annuity payment of US$ 35 million with an upfront payment of US$ 120 million compared to the LIDC quoted price of US$ 62.4 million. Over the 15 years, LIDC’s total cost was Rs.374.4 million (US$ 1.87 billion) while MCC’s total cost including a discount stood at Rs.210 billion (US$1.05) billion.
However, LIDC noted that MCCI requested payments in US dollars despite bidding document clearly stating that annuity payments would only be made in rupees.

LIDC also highlighted some distinct benefits to the country from its proposal by way of saving foreign exchange. “In the event the contractor is a foreign entity, the government will have to make annuity repayments in US$, which will result in the country having to bear the burden of US$ repayment over a period of 15 years, whilst the foreign contractor will require to eventually repatriate these funds from Sri Lanka to overseas. 

This payment in US dollars alone would result in a substantial increase in the real cost of the project. Since the revenue from the highway operation will be in Sri Lankan rupees, this would burden the government to source additional US dollars through export revenue or further borrowing,” LIDC said in a statement to media.

Further, LIDC assured that over 80 percent of the resources to be deployed in designing and building this expressway would be sourced and engaged from within the country, significantly boosting the local economy and regional value-chain in the process, whilst cascading project benefits down to the smallest supply chains, local communities and households.

In contrast to this, LIDC said that such projects undertaken by foreign entities have largely utilised foreign inputs and expertise, in the process of extracting more than 60 percent of the value of projects as outflows from the country. Meanwhile, LIDC also alleged that MCCI had submitted financial details of its parent MCC, without the parent company being a legal part of MCCI’s bid while failing to submit a valid bid security on par with procurement guidelines. “..the bidder had submitted financial details and specific experience of the parent company MCC, without the parent company being a legal part of MCCI’s bid, thereby disqualifying MCCI’s bid as per the bid conditions.  Furthermore, it has come to note that MCCI had not submitted a valid Bid Security, which is the most basic and fundamental prerequisite to qualify for a bid in a public procurement process, thus completely invalidating their bid and any price they have quoted,” the statement said. However, MCC claimed that it had submitted a letter confirming MCC’s full commitment to the project and intentions to enter into a tripartite agreement involving MCC upon the awarding of the bid.

Further, it claimed that Bank of China had submitted a letter reiterating and confirming MCCI’s submitted bid bond is irrevocable and on demand.

Meanwhile, LIDC accused MCCI of carrying out a misinformation campaign to sabotage the project after their disqualification. 

“It is evident that MCCI’s bid has been disqualified for the total violation of the bidding process, including not complying with some fundamental requirements of the government procurement guidelines, thus showing scant disregard for the tender process.  As such, the bid price is not known to the public. In their futile attempt to mislead the evaluation process in order to sabotage the project, MCCI now seems to be quoting any arbitrary price in the public. Therefore, it is evident that MCCI’s agenda is simply to circulate wrongful information in the media to tarnish the image of the project and to tamper with the government procurement process,” the statement said.