Delay in contract signing caused Rs467b loss
PHOTO: REUTERS
The country’s top auditor has found that the delay in procurement and signing of a contract for a project under the Dasu Hydropower Project cost the Water and Power Development Authority (Wapda) US$3 million per day in lost revenue.
The delay also cost an economic loss of US$2 million per day due to purchase of more expensive fuel.
The Auditor General of Pakistan’s (AGP) report on the Ministry of Water Resources and its entities’ accounts for the financial year 2018-19 has revealed that there was a delay of 600 days from date of bid opening to issuance of letter of acceptance which resulted in total loss of Rs466.9 billion.
The AGP stated that the office of the project director of the Dasu Hydropower Project issued the letter of acceptance for contract for procurement of electro mechanical works to the contractor on October 22, 2019, with a delay of more than two months of the World Bank deadline.
“The World Bank objected that award of contract had been delayed more than 15 months due to non-finalization of bid evaluation report by Wapda,” the AGP noted, adding that the delay in the procurement and signing of the contract would directly affect the commissioning of the project.
“Delay would cost WAPDA US$3 million per day in lost revenue and economic loss of US$2 million per day due to purchase of more expensive fuel imports. There was a delay of 600 days from date of bid opening to issuance of letter of acceptance which resulted in loss of Rs466,950 million.”
The AGP calculated the loss of Rs467 billion by multiplying US$3,000 million with dollar rate of Rs155.56. In the audit para on the loss due to delay in the procurement and signing of contract, the report said the matter was required to be investigated to determine responsibility for the loss but it was not done.
As per Public Procurement Rule 38 titled Acceptance of Bids, “The bidder with the lowest evaluated bid, if not in conflict with any other law, rules, regulations or policy of the federal government, shall be awarded the procurement contract, within the original or extended period of bid validity”.
As per bidding documents, the AGP added, “The bid validity period shall be 120 days”.
The AGP observed that non-adherence to the authority’s instructions resulted in loss of Rs.466,950 million due to delay in award of contract during the Financial Year 2018-19.
The report revealed that the matter was taken up with the management in November 2019 and reported to the water ministry in December, 2019.
“The management replied that there was no such delay in award of contract which may directly affect the commissioning of the project. The work would be commenced by the contractor keeping in view the revised consolidated schedule for civil and E&M works.
“The reply was not tenable because delay in award of contract was not justified and objected by the World Bank,” the AGP noted.
The auditor said the departmental accounts committee (DAC) in its meeting held on January 10-11 directed Wapda GM (M&S) to conduct a fact finding inquiry and submit its report within two months.
“No further progress was intimated till finalization of audit report,” the report concluded, adding that the audit recommended the management to implement DAC’s decision besides fixing responsibility.
The Dasu Hydropower Project is a run-of-river project on the Indus River located seven kilometers upstream of Dasu Town, District Kohistan in Khyber Pakhtunkhwa.
It will have a total installed capacity of 4,320 MW with 12 generating units and is among the priority projects under the National Power Policy 2013 and the Vision 2025 of the government of Pakistan.
The project will be implemented in two stages. The World Bank as well as local and foreign commercial banks had signed financing agreements for the project. The World Bank had approved a credit of $588.4 million in 2014 to support the 2,160 MW Dasu Stage-I hydropower plant.