LAHORE - The cost of Rs200 billion Orange Line Metro Train Project has gone up by Rs15 billion because of a subsequent amendment to the original contract awarded to a Chinese construction company.

This came to light in a report recently submitted by the P&D department to the provincial cabinet. According to sources, the new Punjab chief minister Sardar Usman Buzdar wants the matter to be investigated either by the NAB or the Planning and Development chairman. However, there is no progress on the matter so far.  Planning and Development Department Chairman Habibur Rehman Gilani could not be reached for comments. He also didn’t respond to the queries sent on his cell phone. The original contract was in Engineering, Procurement and Construction (EPC) mode.  It is a form of contracting holding EPC contractor responsible for all activities from design, procurement, construction, commissioning and handover of the project to the owner.

But, later the international tender was cancelled and under the new framework agreement, the project is to be done by the Chinese enterprises in line with the Chinese laws and regulations using Chinese equipment. The Punjab government had claimed that the transparent tendering process of civil works carried out by LDA yielded an additional saving of Rs5.97 billion. But, now officials claim rather that this would increase cost by Rs 15 billion.

The Punjab government had taken back the civil works part of the mega project with “risk” from the Chinese company that added at least Rs15 billion to the cost of the project, sources revealed.

Although the original agreement between the Punjab government and the Chinese company for the construction of the project is yet to be made public, details sources shared with this scribe tell a different story.

They said: “The contract was signed between the Punjab government and the company and the Exim Bank of China was to provide funding. The bank paid money to the Chinese company directly, not to the Punjab government” they claimed.

“Later the agreement was amended and the Punjab government demanded Chinese company to award it civil works that the company did but with ‘risks’. As per the official claims, there is a 26 percent difference between the approved and the revised project cost in the civil works side.

“However, the Chinese bidder company kept the other part of the Electric and Mechanical (E&M) works with it. This increased the cost of the part Punjab government took responsibility for.” The sources added. The sources continued:  “The original cost of the approved cost of civil works was Rs 55.29billion while revised cost became Rs 70.70 billion.”

Iqbal Hussain, a civil engineer, said the amendment of the contract and subletting of the civil works to the Punjab government with risk factor was a blunder.

With a delay or any other factor, the cost of the civil works increases, not the E&M works, he said adding all were equally responsible for this error.

CR-NORINCO emerged as the lowest bidder as its offer was under 2.139 billion dollars. As per the original agreement the company was to complete the project and hand over to the Punjab government. After protracted negotiations, the commercial contract was further split to civil works worth 535.642 dollars and E&M 922.500 dollars. The project is financed through the foreign assistance of 1626.239 million dollars by Exim Bank China.

A supplementary contract was also signed between Punjab Mass Transit Authority (PMA) and CR-NORINCO on August 25, 2015 for subletting of the civil work to PMA. The PMA further nominated LDA as the executive agency on the civil work and further sublet the projects.

The LDA split civil work into four packages and awarded to the contractors. The project was originally approved by PDWP on April 27,2015 at the cost of 1626.239 million dollars.  Subsequently, the scheme was approved by the CDWP on May 4 2015 and then by ECNEC on May 11, 2015. It is to be noted that the increased cost in the civil works was proposed to be funded locally. "Change in design by CR-NORINCO was one of the major reasons for increasing cost of the project,” an official said on anonymity. However, the P&D Chairman constituted a committee to examine technical, economic and legal aspects of the revised PC-1 by the transport department. Member of PSD was its convener while member infrastructure, DG M&E, and legal expert as members.

The committee discussed the revised PC-1 and conveyed observations to the concerned. The transport department submitted replies to the observations on August 31, 2018 and furnished a new revised PC1 on September 3, 2018.

The sources further said pre-PDWP meeting was held on September 4, 2018 to discuss the revised PC1 and on the observation of the P&D, the transport department replies were also discussed. The representative of the sponsoring agency, implementation and executing agencies were unable to satisfy the PDWP.

The project is placed before PDWP and in the light of observations; the instant revision is not supported. The official sources said advance payment to CR-NORINCO was made on May 6, 2016 by the bank.