News Features

Port project makes waves before setting sail

The largest infrastructure development project in Sri Lanka, since the conclusion of the Mahaweli scheme, has got off to a stormy start, even before the commencement of work.
The expansion of the Colombo Port has been cited by the Government and the private sector, as the flagship development venture for the next decade, to give Colombo a competitive edge over other regional ports.

The project is now at a crucial stage. Two contractors, each tasked to build a 5-km breakwater and the first of four container terminals, is to be selected in the near future. However, The Nation reliably learns of irregularities within the Tender evaluation process, raising questions regarding the transparency and the credibility of the whole project. It is learnt that influential and interested parties are manipulating the Technical Evaluation Committee (TEC) tasked with assessing the bidders of the first phase of this mammoth venture.

Mega Development Project
The proposed Colombo South Harbour will be located west of the present south west breakwater in an area of approximately 600 hectares. The proposed harbour will have four terminals of over 1,200m in length each, to accommodate three berths alongside depths of 18 metres and provision to deepen to 23 metres, to accommodate deeper draft vessels in the future. As the first phase of the development, first of the four terminals will be awarded on a 35-year lease, to a party on a build-own-operate basis. The choice of successful bidder would be crucial to determining the future prospects of the Colombo Port.
Construction of the new harbour is critical, to prevent Colombo losing its hub status within the South Asian region. The existing Port is expected to reach its maximum capacity by 2009, and even a minor delay in the construction of the new harbour, would be disastrous to the shipping industry and the economy as a whole.

In addition to a container terminal, the first phase of the US$ 1.2 billion venture, will have a 5-km long breakwater built. For both these projects, the Asian Development Bank (ADB) will provide a majority of the funds. The Government envisages a public/ private partnership to build the first terminal.

Construction of the breakwater and the first terminal is scheduled to be completed within 39 months and commissioned in 2010. Tender documents for the construction of the breakwater and Terminal 1 were issued in December 2006.

Irregular appointments
Last year, in November, two TECís were appointed to assess both the terminal and breakwater construction bids. A Cabinet Approved Procurement Committee (CAPC) was appointed to decide on the bidder for the breakwater project, while a Cabinet Approved Negotiating Committee (CANC) was appointed to negotiate the terms and regulations of building and leasing the first terminal. Both committees would act on the recommendations of the respective TECs.

All four abovementioned committees were appointed on November 10, 2006, by the National Procurement Agency. However, within a matter of days, on November 14, the composition of all four committees were changed. The CAPC for the breakwater project, appointed on the 10th, comprised of the Deputy Secretary to the Treasury, Sunith Abeysinghe, Secretary, Ministry of Enterprises Development, Thosapala Hewage, and Secretary, Ministry of Ports & Aviation, Tilak Collure. All these individuals were nominated for the CANC of the terminal project on November 14, 2006, with the inclusion of the Chairman, Ports Authority Saliya Wickramasooriya. Meanwhile, Secretary, Ministry of Power & Energy, M.M.C. Fedinando, Secretary, Ministry of Highways, S. Amarasekara, and Tilak Collure were named as members of the CAPC for the breakwater project.
Changes were made to the two TECís as well. U. Bopitiya, earlier named Chairman, TEC of terminal project, was replaced by Shirani Wanniarchchi, while K.A Ansar was replaced as Chairman, TEC of the breakwater project by D. Godage. It is the TEC chaired by Godage, which is due to make its commendations to the CAPC this week.

Ambiguous TEC recommendations
Breakwater project TEC has now completed its work and is due to present its report to the CAPC within this week. However, The Nation having gained access to the TECís report, discovered serious ambiguities in the standards applied in the evaluation process.
As of normal Government Tender procedure, every bidder presented two bids, a technical proposal and a financial proposal. For the breakwater project over 30 companies obtained Tender applications but, only four eventually submitted proposals. The technical proposals were handed over to the TEC for evaluation, while the financial proposals were sealed, to be opened at a later date. According to accepted Government Tender procedure, once a TEC evaluates and selects a number of bidders, it will be the task of a Tender Board or, a CAPC, as in this case, to select the best, depending on the optimum financial proposal. In other words, it is the duty of a TEC, comprising of relevant experts, to determine the bidders technically suited for the work. Once they have cleared the bidders through the technical evaluation process, all remaining parties are considered equals by the CAPC, who will only evaluate the bidders on their financial proposals.

In the case of the breakwater project TEC, it is learned that one of the four bidders had not satisfied the basic requirements stipulated to be eligible for consideration. In a surprising move, however, the TEC has recommended that this party be considered for financial evaluation, rather than reject them on technical incompetence. The bidding document, as per the criteria set for prospective bidders, clearly states that an applicant company or, a joint venture, needs to demonstrate having carried out a project of similar nature and scope. As per the specifications, such a project needs to exceed US $ 200 million in monetary terms. Also, this project refers to a 5-km breakwater with depths in excess of 15 metres, dredging and reclamation of a volume of 13 million cubic metres extent.

One of four bidders evaluated by the TEC, is drastically short of these requirements. This bidder has tendered a proposal, as a joint venture of several companies. In such a case, the Tender document is specific in that, the leading partner of the joint venture needs to demonstrate characteristics required to demonstrate it is capable of handling a project of this magnitude. It needs to be shown that the bidder has handled a project similar in size, complexity, methods, technology and other relevant characteristics.
In the case of this joint venture applicant, the leading partner has cited a bridge built in Europe as its ďsimilar projectĒ to the breakwater be built at the Colombo Port. In that project too, the company has been one of the constituent partners of a joint venture. Meanwhile, it has cited a coastal development project in Sri Lanka, with less than 200,000 cubic metres of sand filling and beach nourishment, as the equivalent project to the 13 million cubic metre breakwater to be built.

Though the TEC has observed that one of the four bidders have not fulfilled the minimum technical criteria required to qualify consideration, it has, surprisingly, recommended that the bidder not be disqualified from the process. Shipping industry sources associated with the project, told The Nation that there is a connection between the changing of the composition of the TEC and the CAPC, within four days of being appointed, and the eventual recommendations made by the TEC. They say that a high rankling official of the Ports Authority, with vested interest, had been pressurising the Chairman and members of the TEC, to recommend this particular bidder, despite not fulfilling the basic requirements of the Tender document. If the CAPC accepts the report presented by the TEC, then all bidders will be considered equal, when their financial proposals are being assessed, with the successful bidder chosen, depending on financial considerations, rather than technical qualifications.

High risk game
With hundreds of millions of dollars at stake, bidding for the breakwater and terminal projects, have become a very high risk game for the many international and local companies in the fray. Among the local partners of the four bidders vying for the breakwater project, are some big names in the local business arena, including a notorious arms dealer, who had recently diversified into real estate. One of the companies heavily favoured to have an advantage in the terminal contract, has recently been taken to the Supreme Court, over its dubious dealings in privatising of Lanka Marine Services, that provides marine fuel at the Port of Colombo. It is of paramount importance for the economy, that the Colombo South Harbour project is completed on time. Delay in completing the project, by even a few months, could result in a loss of revenue running into billions of rupees and Sri Lanka losing its competitive edge to Indian ports. It is hoped that this crucial development project, on which the future of the Sri Lankan economy is very much dependent on, is carried out in a transparent and efficient manner.