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Thursday, May 23, 2024

Exposé: Mega corruption in 100,000 km road reconstruction under Gota; 30 Billion lost!

most of these contracts have been given to parties who are working hand-in-glove with politicians. 
 private roads have been rehabilitated under this programme and  payments have been made to unfinished work
commissions were paid handsomely to politicians by these contractors. 

BY Nirmala Kannagara.

The national coffers are reported to have incurred huge losses when implementing Gotabaya Rajapaksa’s rehabilitation/improvements of the 100,000 km road programme, which was initiated in 2020, it is learnt.  Under this programme, national, provincial and rural roads were to be rehabilitated to facilitate travelling and enhancement of economic development of  the country.

Up to April 2021, the loss incurred was around Rs. 30,000 million (30 billion) due to the inaccurate estimates prepared by Engineers attached to the Road Development Authority (RDA).

The objective of this programme was to re-surface the entire road network and modernize it to match international standards, facilitate a higher level of access to main highways and expressways, construct bypass roads and improvement of junctions and connect unreached rural areas with the urbanized centres of each district of the country.

However, these proposed objectives were never fulfilled, instead, it is alleged that out of the finished work, most of the rural roads which were rehabilitated lead to politicians and their supporters’ properties.

Although this was a five-year plan, the programme had to be temporarily stalled in mid-2022 by the Government due to the current economic crisis.

Up to April 2021, the loss incurred was around Rs. 30,000 million (30 billion) due to the inaccurate estimates prepared by Engineers attached to the Road Development Authority (RDA).

Although the Highway Standard Rates (HSR) have to be used when preparing estimates, HSR 2020/2021 rates have not been taken into consideration to prepare them, instead, a common estimate has been prepared to suit the entire country.

Questions raised are why the general practice of the ‘measure and pay’ system was ignored and the ‘lump sum’ payment system was introduced by the Ministry of Highways for the 100,000km project.

“If payments were to be made under the ‘measure and pay’ system, the contractors were paid only for the actual work done. However, under the ‘lump sum’ system, the contracts are given based on the Engineer’s estimate, where there were many flaws.

“Even for the materials that are used to rehabilitate these roads and the transportation cost are paid as per the engineer’s estimate, not considering the actual rates,” reliable RDA sources told this newspaper.

RDA is alleged to have failed to prepare the estimates with accurate rates and the then Secretary of Ministry of Highways R.W.R. Pemasiri, who was the Chief Accounting Officer and his team are accused of neglecting their duties by not verifying the accuracy of the given rates and for granting approvals to the said inaccurate estimate.

“Before estimates were prepared, it is the responsibility of the Provincial Directors and Engineers to select the roads that have to be rehabilitated and the necessary work that has to be carried out on each road.

The source alleged that the reason to give priority to rehabilitating ‘E’ Grade roads was to benefit the politicians and their supporters.  

“They had to visit the sites physically and as per their evaluation, their responsibility was to make the respective estimates. Instead of doing so, they used inaccurate rates to suit the entire country which cannot be accepted.

“Had they followed the HSR 2020/ 2021 rates, they shouldn’t have prepared such estimates. What these Engineers have done was feed the figures to the computer and take the standard estimate. This was the sole reason for the reported losses from this project.

“It is a known fact that most of these contracts have been given to parties who are working hand-in-glove with politicians in their respective areas but not by selecting through a Tender process nor by considering their performance records.

“That is why commissions were paid handsomely to politicians by these contractors. We have proof to prove how known politicians in Parliament and local bodies benefitted from these projects. In order to facilitate this fraud, it is alleged that estimates were prepared with higher rates by the RDA Engineers,” sources alleged.

“Rehabilitation/Improvement of Roads under the implementation of 100, 000 km alternative road system under the Government’s policy statement of ‘Vistas of Prosperity and Splendour.  

Under this programme, the initial plan was to rehabilitate the needy ‘A’ and ‘B’ Grade roads managed by the RDA, ‘C’ and ‘D’ Grade roads managed by the Provincial Councils and ‘E’ Grade roads in rural areas which are more than two-kilo metres in length.

In case there was an urgent need to rehabilitate rural roads which are shorter than two kilometres, approval had to be obtained from the Ministry of Highways.

However, despite this initial plan, the audit queries issued by the National Audit Office to the Ministry of Highways, shows that preferences had been given to rehabilitate ‘E’ Grade roads than that of A, B, C and D Grade roads.

The source alleged that the reason to give priority to rehabilitating ‘E’ Grade roads was to benefit the politicians and their supporters.

“This programme was initiated by Gotabaya Rajapaksa under his policy statement ‘Vistas of Prosperity and Splendour’. From the inception, the intention behind the initiative of this programme was not to re-surface the entire road network and modernize it to match international standards and facilitate a higher level of access to main highways and expressways, but to help out politicians and their stooges to get the roads that lead to their properties rehabilitated, in the guise of development work in the country.

“The audit officers have unearthed that most of the completed work has been carried out to rehabilitate the ‘E’ Grade roads but rarely any ‘A’ ‘B’ ‘C’ and ‘D’ Grade roads,” sources added.

This newspaper is in possession of audit queries, addressed to the Secretary Ministry of Highways questioning how private roads have been rehabilitated under this programme and how payments have been made to unfinished work.

“According to the audit queries sent to our Ministry Secretary, it has given clear details of how payments have been made to unfinished work amounting to several million rupees. The audit office has attached even photographs to show that most of these rehabilitated roads do not connect to any other road network but end at a private property where the owners have put up iron gates. Although permission has to be obtained from the Highways Ministry if any road under 2 km length has to be rehabilitated, this permission has not been sought from the Ministry for most of the roads,” a source from the Highways Ministry said.

According to him, the audit queries have highlighted what action the Highways Ministry would take against the severe hardships the people are undergoing due to the abrupt stoppage of the road rehabilitation programme.

“Just because of the prevailing economic crisis, they cannot stop the work by putting the villagers in a miserable situation. Those who are living by the sides of these unfinished roads have fallen sick due to the dust which is also an environmental issue. According to the audit reports, there are many places where pieces of metal are piled up along rural roads making it difficult for vehicular traffic and also for pedestrians.

The pieces of metal are strewn all over. This is public money. If this programme starts again, funds have to be reallocated once again to buy metal, sand and other materials which are strewn all over. The narrow road shoulders have become death traps not only for pedestrians but for motorists as well,” sources said.

Although Ministry Secretary Pemasiri failed to re-check the accuracy of the given rates, after the audit officials brought to his (Pemasiri’s) notice that the Engineer’s Estimates have to be amended as there were many flaws, Pemasiri by letter dated April 27, 2021, instructed Director General (DG), RDA to amend the estimates rates, under the heading- ‘Correction of Rates in Engineer’s Estimates’.

Pemasiri has instructed the DG to make amendments not only to the Engineer’s Estimates but also to the rates promised in all contracts the RDA has already entered into.
The letter further states:

“As per the discussions held with officials of the Auditor General’s Department, we found out that there are some corrections to be made for rates in Engineer’s Estimates prepared for the above programme. The applicable rates with corrections are attached herewith.

“You are requested to use amended rates for preparations of estimates in the future. Also, you are instructed to effect amendments to all estimates already prepared for the programme and also make amendments to all contracts signed based on the amended rates.

“You are also instructed to adhere to the following-
1. The transport distance for the supply of materials such as gravel, earth, sand aggregate and Asphalt is to be measured with accuracy when preparing estimates.  
2. Properly estimate mobilization cost.  
3. Do not include items such as the provision of offices for the employer, hire of vehicles, hire of labour and staff, etc. in the estimates.  
4. When preparing estimates for contracts to be given to Maga Neguma Road Construction and Equipment Company, include mobilization of machinery and equipment for each road considering the type of machinery to be used.

“You are requested to issue instructions to all Provincial Directors, Chief Engineers, Executive Engineers and other Engineers to adhere to these instructions’.

“Pemasiri accepted that the rates in the Engineer’s Estimate are inaccurate. That was why he instructed the DG, RDA to amend the estimates already prepared and also to amend the rates in every contract they have signed,” sources said.

However,one-and-a-half years after the given instructions, Pemasiri reversed the given order and instructed the DG, RDA by letter dated October 3, 2022, only to amend the rates, the contracts signed after the issuance of his first letter but not the rates RDA entered into agreements before he issued his letter on April 27, 2021.
The letter further states-

“Rehabilitation/Improvement of Roads under the implementation of 100, 000 km alternative road system under the Government’s policy statement of ‘Vistas of Prosperity and Splendour.

“Disputes have arisen regarding the deductions proposed to be made to the contract sum. As you are aware, under 100, 000km programme, RDA awarded contracts as “Lump Sum” contracts. In the procurement process, we invited bids from eligible bidders requesting them to provide a discount to the Engineers’ estimates and the bidders who had submitted the maximum discount were selected as the lowest evaluated substantially responsive bidders. When inviting bids RDA gave only the total estimated figures, not the rates.

“Subsequently as per my letter No: MOR&H/ SEC/GEN/2021 dated 27.04.2021 we requested Engineers for the contract or the Engineer’s representative of the contract to deduct rates of some items which will ultimately reduce the agreed contract sum between RDA and the respective bidder.

Now, several contractors who won bids from the competitive bidding process and signed contracts with RDA dispute this situation and request not to make any deduction of the contract sum.

The contractual situation is once a contract is signed between two parties one party has no authority to make changes to the contract without the consent of the other party. Therefore the contractors have merit. After considering this position, please follow the below instructions.

1. The contract sum agreed before 27/04/2021 between the RDA and the contractors remains the same.  
2. The contract sum agreed for the lowest evaluated substantially responsive bids, finalized and awarded to bidders before 27/04/2021 and subsequently agreements signed will remain the same.

“We believe the relevant officers who prepared the engineer’s estimate for 100, 000 km programme after 27/04/2021 have considered and taken into account the contents of my circular on 27/04/ 2021 and prepared estimates accordingly.

“However, once work is done and certify the milestones payments, the Engineer for the contract or Engineer’s Representative for the contract shall certify payments based on the work done, comparing with the Employer’s requirement (ER) agreed in the contract. The Engineer or his representative is authorized to make changes (plus or minus) based on the actual work done compared to ER proportionately.

“You are requested to issue an instruction to all Provincial Directors, Chief Engineers, Executive Engineers and other Engineers to adhere to these instructions’.
“Although the loss incurred up to April 2021, was Rs.30, 000 million, if not for the Audit Officials’ intervention, the loss would have been more than doubled the amount by the time the programme into a halt in mid-2022,” sources added.

RDA was given the task to carry out the work using direct labour if not to offer contracts by following government procurement guidelines. As a result, Maga Neguma Road Construct Equipment Company has been entrusted with more projects as the RDA could not handle the workload. Instead of carrying out this work by themselves (Maga Neguma), subcontracts have been given not by following procurement procedure but by their wish.

According to RDA sources, the Audit Officials have found out how money has been paid to projects that have not even been carried out.

“More than 80% of these projects in Kurunegala district have been awarded to Maga Neguma and they have sub-contracted the work without following the competitive procurement process but as per the Engineer’s Estimate. Unlike using direct labour, when offering contracts a 20% profit factor is added to the estimate which is the standard rate. However Maga Neguma was allowed to keep a 25% profit by the Engineer’s Estimate which is a huge loss,” RDA sources added.

In the Kurunegala District alone, during the first phase, 357 projects worth Rs.12, 880.69 million have been given to Maga Neguma and out of this the loss incurred to the government was Rs.2, 576 million because of the overestimated rates.

It is learnt how the rates have been prepared to purchase items needed for construction from faraway places although there are instances that the same items could have been purchased and transported from nearby locations.

As per Section 21 of the HSR 2020, these items should be brought from neighbouring locations in order to save money. However, the Engineer’s estimate has been made to benefit the contractors, not the country. The auditors have obtained statements from people who have revealed that certain materials have been brought within a radius of 30km, although claims have been made as per the estimate rates to show that these items have been transported from a distance of 40- 60km.

It has been observed, that contracts undertaken by the RDA the Executive Engineer’s Office Kurunegala under the direct labour category were able to save 50% of the estimated cost.
“Why couldn’t the Highways Ministry/RDA get this programme implemented under the direct labour category at a time the country was facing a severe financial crisis? Instead, contracts were given to private parties and even to Maga Neguma giving them a 25% profit factor although the standard rate should be 20%. This was not a project started to uplift the road standards in the country but to benefit contractors and politicians,” RDA sources further said.

In the Kurunegala District alone, during the first phase, 357 projects worth Rs.12, 880.69 million have been given to Maga Neguma and out of this the loss incurred to the government was Rs.2, 576 million because of the overestimated rates. Those who prepared the estimates have failed to identify the roads that had to be renovated. Out of these 357 projects, most have been given on sub-contacts. “There are many reported instances where the width of the roads has been reduced ignoring the given instructions. Certain roads that did not need any renovation but could have been used for a few more years too have been renovated. For all this work, the payments have been made,” sources added.

In most of the projects, there were no project offices although it was in the estimates. For each road rehabilitation project, it was estimated a cost of Rs.320, 000 for a site office provided with telephone, electricity and water. When the auditors physically inspected these sites they discovered how claims have been made for these site officers but none of them were existing.

“It was the same with the name board that erupts when projects start. For each name board, the estimated cost was Rs. 39, 220 and for 26 roads in the Kurunegala district, the estimated cost was Rs.1.019 million. But when checked, other than in one place, none of the remaining 25 roads had name boards but the payments have been made. In addition, the audit officers have also unearthed how substandard materials have been used for most of these rehabilitation work but payments have been made for the standard materials,” sources added.

“Although there were many places to bring earth within a radius of 20km for the said 26 road projects in Kandy, it had been observed as per the Engineer’s estimate, payments have been made to transport earth from 50km distance at the cost of Rs.32.003 million. Had the same stock transported as per auditor’s evaluation from a distance of 20km the cost would have been Rs.15.36 million,” sources added.

It was the same with the selected 18 roads that have been concreted in the Kandy district. “Although ready mix concrete mixture was used to concrete the roads, the contractors have claimed higher rates by claiming that they have concreted the roads mixing cement, sand and metal manually,” sources alleged

When contacted General Manager Maga neguma, Darshana Herath Lankathilaka to find out whether sub-contracts were offered following procurement guidelines, Lankathilake said that the contracts were given to the ICTAD registered contractors.

“We do not call them sub-contractors but service providers. We do not follow the procurement process, instead offer the contract to our registered service providers,” General Manager said.

General Manager further said that Maga Neguma could not finish all the projects as they had to finish the work within a stipulated time period.

“As we had to accelerate the work, we entered into agreements with our service providers and offered the contracts,” Lankathilake said.

When asked whether Maga Neguma was selected by the Highways Ministry/ RDA by following the procurement process and how much they were allowed to claim profit, Lankathilake said priority was always given to them by the RDA and they were allowed to keep a 25% profit.

“The Engineer’s estimate has given us fixed rates and we cannot carry out the work for less than the given amounts. We were given a profit margin of 25%, and the Maga Neguma Board was given the authority to decide what profit percentage should be given to the service providers,” Lankathilake said.

Meanwhile, Director General RDA, L.V.S. Weerakoon told Daily Mirror that it was they who implemented this project but added that they had different estimates for different districts but not a common estimate as stated in the audit queries.

The cabinet has approved to allow Maga Neguma to keep 28% profit out of these projects

When asked why they decided to go for a lump sum payment instead of the measure and pay system which would have given many benefits to the State, Weerakoon said that the lump sum system is the most viable method as once fixed prices were given even if the material and transport cost goes up, the contractors had to absorb the losses.

“Lump sum system is a package. The contractors had to take a risk under this system. Initially, the Highways Ministry wanted to go for the measure and payment system as our field Engineers are familiar with it. But later it was changed to a lump-sum system,” Weerakoon said.

Weerakoon too confirmed that it is profitable for the country if they could carry out the projects with direct labour, but added that this project was aimed to finish within five years and they could not handle it only by themselves.

“We couldn’t handle this project by ourselves as we had to finish this within five years. Although we rarely award contracts, we had no other option but to offer most of the projects to Maga Neguma – a company that has major shares with the government. They offered sub-contracts for ICTAD-registered companies. The cabinet has approved to allow Maga Neguma to keep 28% profit out of these projects,” Weerakoon claimed.

When asked why the Engineers have not considered the HSR 2020/2021 rates when preparing the estimates which was brought to the notice of the Secretary of the Highways Ministry by the National Audit Officers, Weerakoon said that there wasn’t a big difference between the two rates.

“Former Ministry Secretary issued instructions to amend the rates. But the contractors who have signed agreements before this decision was taken did not agree to amend the rates. Hence it was decided to amend the rates for the agreements that were signed after the April 2021, decision. Under the lump sum system, the contractors faced huge losses as prices of all construction materials went up,” he added.

When questioned Weerakoon why preferences have been given to rehabilitate ‘E’ Grade roads and many roads that lead to private properties to have been rehabilitated, Weerakoon said that he has to check with Area Engineers if there’s any truth to the allegation levelled.

All attempts to contact former Secretary Ministry of Highways R.W.R. Pemasiri failed as his mobile phone was switched off continuously.

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