AGP Finds Irregularities Worth Rs. 70 billion in NHA’s CPEC Projects

The auditor general of Pakistan (AGP) has found irregularities worth around Rs. 70 billion in the various road projects of the National Highway Authority (NHA), including certain projects initiated under the China-Pakistan Economic Corridor (CPEC).

The report on NHA’s accounts for the audit year 2019-20 found 110 cases, involving an amount of around Rs. 70 billion, where unauthentic/unjustified payment, payment of foreign currency without required proof, the irregular award of contracts, violations of Public Procurement Regulatory Authority (PPRA) rules, and unauthorized expenditures were observed.

The Sukkur-Multan motorway and Thakot-Havelian section under CPEC were also found to contain irregularities by the auditors.

The report found overpayment due to non-deduction on account of reduced quantities of grouted Rip Rap to the tune of Rs. 2.27 billion in Sukkur-Multan motorway.

PPRA Rule-4 provides that procuring agencies while engaging in procurement shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical.

The audit noted that NHA prepared a PC-I for the construction of the Peshawar Karachi Motorway Section-II Multan-Sukkur section (392 KM). The PC-1 was approved by the ECNEC on 3rd July 2014 with the cost of Rs. 259,353.10 million. Bids were invited for the project with an estimated cost of Rs. 240,158.390 million. Three Chinese films participated and M/s China State Construction Engineering Corporation Limited submitted the lowest bid of Rs. 406,332.270 million which was reduced to Rs. 294,352.00 million after negotiations.

Audit observed that besides variation in other items against which the cost was rationalized, quantities of grouted Rip Rap Class A were reduced from 944,155 Cu.m to 575,015 Cu.m (as provided in Schedule O) but cost effect on account of such decrease was not recovered from the contractor at the time of rationalization or at a later stage.

The audit pointed out that issue during August-September 2019. P&CA section replied that the bidding process of the said project was done in accordance with rules and regulations including PPRA rule-4.

The reply was not accepted because when the contractor quoted his bid for Rs. 406.332 billion it includes the quantity of ground rip rap as 944 155 Cu.m. Later on when negations were held and rationalization was done the quantities of ground Rip Rap were decreased to 57.015 Cu.m without considering the financial aspect which is unjustified as all the other items were reduced with financial effect.

The report observed non-crediting the saving by making downward adjustments due to economizing the detailed design and overpayment due to the inclusion of a higher percentage in construction cost to the tune of Rs. 2.228 billion.

The audit noted that NHA awarded the EPC contract for construction of Havelian- Thakot Section (118 km) KKH Ph-II to M/s CCCC at a cost of Rs. 133.980 billion on 22nd December 2015 with the date of completion 29th February 2020. The contractor submitted a preliminary design that was reviewed by AER and afterward details design was submitted by the Contractor Company.

Auditor observed during the review of the comparison sheet of CBR and compaction test prepared by the AER consultant that sub-grade CBR in the cut area was achieved 18 percent to 75 percent on sub-grade in the cut area and in fell area 22 percent to 62 percent. As the pavement design was assumed on the basis of sub-grade CBR 8 percent and contractor quoted cost based on the layer thickness of the sub-base and asphalt concrete as per this pavement design therefore higher ratio of CBR on sub-grade than assumed was required to be readjusted proportionally which was not done.

Non-adjusting the thickness of pavement quantities as per higher CBR resulted in the superfluous heavy cost of Rs. 2,228.436 million.

The audit pointed out the matter in November 2019. The Authority replied that the bid price by the EPC contractor was quoted keeping in view the prevalent CBR values in the area, whereas detail design was done by the contractor after the signing’ of the contract agreement. During this phase, they conducted a thorough investigation of soils found frequent variations in the CBR values.

At this stage, any change in the method of construction which eventually changes the bid price, cannot be imposed upon the contractor to effect any savings in the cost to the Employer. Even if due to high CBR value, the Employer asks the contractor to reduce the thickness of asphalt layers, this shall not lead to change the lump sum price of the contract. The reply was not accepted, as, non-provision of saving credit to the employer during execution and detail design.