N-5 highway rehabilitation project: World Bank not worried over extraordinary delay

World Bank is reportedly not worried over extraordinary delay and abnormal increase in physical and price contingencies of N-5 highway rehabilitation project, encompassing four provinces, well-informed sources told Business Recorder.
Official documents reveal that the original cost of the project was Rs 15 billion of which local component was Rs 5.78 billion whereas Foreign Exchange Component (FEC) was estimated at Rs 9.33 billion.
The GoP share to the extent of 10 percent of total cost equivalent to Rs 1.511 billion was to funded out of NHA's toll receipts as per directions of the Executive Committee of the National Economic Council (ECNEC). However, in the revised cost determined in July 2011, GoP share has increased to Rs 7.662 billion (26.4 per cent) while WB contribution will be Rs 21.334 billion.
ECNEC was recently informed that the revised project envisages rehabilitation of 515km (originally 550 km) and resurfacing and pavement strengthening of 368km (originally 306km) of various stretches of the National Highway N-5 in Punjab, Sindh and Khyber Pakhtunkhawa.
Revised cost of the project is Rs 29 billion including Foreign Exchange Component (FEC) of Rs 19.089 billion. GoP contribution would be 26.4 per cent while the remaining 73.6 per cent would be financed by the World Bank (WB). The project is composed of two major components, namely (i) network conservation program (civil works), and (ii) policy support and institutional development. Contracts for civil works are to be awarded on turnkey basis through international/ national competitive bidding.
It was further revealed that (i) the original project was limited to rehabilitation/reconstruction of four sections, ie Basian- Balakot-Thahkot section of N-35- (50 km), and Kohala-Muzzafarabad-Chakhoti section 55km. It was sponsored by Earthquake Reconstruction and Rehabilitation Authority (ERRA) with executing agency as NHA. The project was approved by ECNEC in its meeting held on March 7, 2007 at an estimated cost of Rs 5964 billion under the World Bank financing. The funds were supposed to be provided through block allocation kept for ERRA in the PSDP.
(ii) During execution of project, owing to actual ground conditions, design of major components was revised resulting in change of BOQ quantities besides market rate fluctuations. As a result of change in scope and market fluctuations, cost of project increased from Rs 5.961 to Rs 15.247 billion (156 percent increase). The reported physical progress as per revised scope of work in around 86 percent (average) with financial expenditure of around Rs 11.131 billion (73 percent). Entire balance cost of project would be met through additional financing to be provided by the World Bank under an agreement with the sponsoring agency.
ECNEC was informed that the project was considered by CDWP in its special meeting held on June 14, 2011 which recommended the project for approval of ECNEC, subject to review of scope and cost by the sponsoring agency in consultation with Member (Infrastructure), and Member (Implementation and Monitoring, Planning Commission and Finance).
In compliance with the CDWP decision, cost and scope of the project was reviewed and cost has been brought down to Rs 29 billion from Rs 29.4692 billion. According to NHA, main reasons for increase in cost are change of design of certain sections due to actual ground conditions, addition/deletion of envisioned road sections and structures etc due to actual site conditions and abnormal increase in "physical and price contingencies" due to extraordinary hike in cost of major construction material like cement, sand, steel, bitumen POL and market fluctuations besides labour cost.