Project delay, cost overrun: Ills lie deep in ERD, Planning Commission

That development projects in Bangladesh are rarely completed on time and within the original budget is well established by now.

But in an extraordinary session yesterday, called to discuss how to establish good governance in foreign-aided projects, a picture emerged of why the phenomenon has been persisting.

Sometimes it is collusion, sometimes it is carelessness. If it isn't ineptitude, it is the lack of resolve to better manage resources. And sometimes, good intentions come undone by the inherent structural loopholes.

For instance, the Economic Relations Division, the government wing that negotiates foreign loans, does not have the resources to thrash out robust international contracts.

The ERD officials negotiate with the foreign lenders and the loan agreement is sent to the law ministry for vetting. No opinion is taken from legal counsel who is well-versed in international contracts.

Subsequently, clauses are slipped in that are not always in Bangladesh's favour or are faithful to the International Federation of Consulting Engineers (commonly known as FIDIC) rules, which are the standard forms of contract for use between employers and contractors on international construction projects.

Unfavourable terms include the lender doing the feasibility study or drawing up the design, the contractor and the consultant being the same and so on.

"This is a conflict of interest," said Cabinet Secretary Khandker Anwarul Islam, who steered many projects such as the Padma Bridge, Karnaphuli tunnel and Dhaka-Ashulia elevated expressway during his time at the bridges division.

As per international contracts and FIDIC rules, whoever proposes the project cannot fund it. Or, if they fund it, they cannot do the feasibility study or be involved in drawing up the design.

If they are the contractor, they cannot be the consultant. The contractor and consultant cannot have any blood, administrative, financial or any form of relationship, according to Khandker.

And yet, many projects have these anomalies.

"Why is this happening time and again in the hands of the ERD? This is a generic issue -- there is no need to be an expert to spot these things."

Khandker went on to cite the Padma Bridge project, where there are no such conflicts.

He had engaged proficient legal counsel, who ensured the terms of the contracts were watertight. And all works were awarded through open tender.

It was the same with the Karnaphuli tunnel, Khandker said.

"For the first time, a project of such scale will be completed largely within the scheduled time and cost."

Besides, the public procurement rules also forbid such conflicts of interest.

"How do we overcome these problems?"

He went on to rap the economic counsellors at Bangladesh missions abroad, whose job it is to ensure that such terms are adhered to at the initial stage.

Khandker also cited the case of the feasibility study for the Dhaka Elevated Expressway. The foreign lender had offered to get it done for $3.8 billion, but he ended up getting the job done through a top global company for $1.5 billion.

He went on to advise the ERD officials to take the help of the Central Procurement Technical Unit, where capable people are being recruited, for contract negotiations.

"When contracts are faulty, nothing can be done," Khandker said, while citing a project that was recently approved by the Executive Committee of the National Economic Council to further his point.

The project was for an extension of a road by 1.1km and the additional cost would be about Tk 8,500 crore, which would come to about $1 billion, he said.

"The Ashulia Expressway is a $1.4 billion project involving four lanes and two service lanes of 27 kilometres in length. ... there would be a 100-year guarantee from the contractor. How can that project for a road extension cost that much?" he said.

In their effort to fix the problem, the ERD officials said they have placed a proposal for a change in the division's organogram with the addition of a law cell and a financial analyst. Until then, such services would be taken from the market.

Also at the workshop, a Planning Commission official said the implementing agency and line ministries are lacking in ownership and knowledge of the development project proposals (DPPs) that were presented.

In the year that it takes to get the project approved by the Ecnec and get the first tranche of the fund disbursed, a request for revision of the project comes in.

"I cannot accept this. If the project's scope has not changed, cost escalation should not happen," Khandker said, adding that some ministries are very clued in and do their homework well when drafting their DPPs.

The DPPs should be robust and must mention open tender; there should not be any element of direct procurement. For exemptions, the projects must be forwarded to the economic affairs committee.

The tender design must be robust and the conditions cannot be changed later on, as is practice, necessitating a revision.

"Return the projects -- call out the violations. It is the Planning Commission's responsibility. The finance ministry manages the funds and the Planning Commission does the allocation. So, the Planning Commission members have a responsibility here."

He went on to cite the BSCIC Chemical Palli project -- later renamed BSCIC Chemical Industrial Park -- that was taken up in 2018 as a case of a project where sound judgement on the part of the Planning Commission was completely missing.

The project was supposed to be completed in 2021 but was later extended to 2023.

"That project will not finish in the next 10 years. It is because a cooperative society is the contractor. Did you check the aptitude of the contractor? Did the cooperative society have prior experience in implementing such projects? I once saw a project proposal from a poultry company to build a power plant."

At the workshop, the Planning Commission officials said many line ministries mount pressure on them to accept some proposals for revisions and they oblige.

"That is not the right approach," Khandker said.

He, however, acknowledged that some contractors wield undue influence on the line ministries' decision-making process.

"Once a contractor came into an Ecnec meeting to get his project approved."

Another worrying development is that many ministries have used up their allocation for the medium term and yet they send in proposals for fresh projects.

With the view to establishing fiscal discipline, enhancing allocative efficiency, and providing advance information on resource availability over the medium-term, every ministry is given a medium-term budgetary framework (MTBF), a multi-year rolling expenditure plan.

In some cases, the MTBF quota would finish before time, meaning no fresh projects could be undertaken for the next 3-4 years, said a ministry official.

"The ministry certifies that it is within the ceiling of the MTBF. This is a big lie. This is cheating. How can you give such a false certificate?"

The people concerned can be penalised and the Anti-Corruption Commission can open a case against the individuals.