Various projects of NHA: AGP finds irregularities worth around Rs 70 billion

ISLAMABAD: The Auditor General of Pakistan (AGP) has found irregularities worth around Rs70 billion in the various road projects of the National Highways Authority (NHA), including certain projects initiated under the China-Pakistan Economic Corridor (CPEC).

The report on NHA's accounts for the audit year 2019-2020 found 110 cases, involving an amount of around Rs70 billion, where unauthentic/unjustified payment, payment of foreign currency without required proof, irregular award of contracts, violations of the Public Procurement Regulatory Authority (PPRA) rules, and unauthorised expenditures were observed.

The Sukkur-Multan motorway and Thakot-Havelian section under the 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 Rs2.27 billion in Sukkur-Multan motorway.

The 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.

Audit noted that NHA prepared a PC-I for construction of 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 Rs259,353.10 million.

Bids were invited for the project with estimated cost of Rs240,158.390 million. Three Chinese firms participated and M/s China State Construction Engineering Corporation Limited submitted lowest bid of Rs406,332.270 million, which was reduced to Rs294,352.00 million, after negotiations.

Audit observed that besides variation in other items against which the cost was rationalised, 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 rationalisation or at later stage.

Audit pointed that issue during August-September 2019. The P&CA section replied that the bidding process of said project was done in accordance with rules and regulation including the PPRA rule-4. The reply was not accepted because when the contractor quoted his bid for Rs406.332 billion, it include quantity of ground rip rap as 944 155 Cu.m.

Later on, when negotiations were held and rationalisation 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 adjustment due to econonomising the detailed design and overpayment due to inclusion of higher percentage in construction cost to the tune of Rs2.228 billion.

Audit noted that the NHA awarded EPC contract for construction of Havelian- Thakot Section (118 km) KKH Ph-II to M/s CCCC at a cost of Rs133.980 billion on 22nd December, 2015, with date of completion 29th February 2020.

The contractor submitted preliminary design which was reviewed by AER and afterward detailed design was submitted by Contractor Company. Auditor observed during review of the comparison sheet of CBR and compaction test prepared by the AER consultant that sub-grade CBR in cut area was achieved 18 percent to 75 percent on sub-grade in 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 re-adjusted proportionally, which was not done.

Non-adjusting the thickness of pavement quantities as per higher CBR, resulted into superfluous heavy cost of Rs2,228.436 million. 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 contract agreement.

During this phase, they conducted 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 thickness of asphalt layers, this shall not lead to change in the lump sum price of the contract. The reply was not accepted, as, non-provision of saving credit to the employer during execution and detailed design.