Awarding projects sans bidding rises

No competition raises cost: economists

Shakahwat Hossain

Awarding projects without bidding rose sharply in the past one year creating scopes for an increase in project costs in the absence of competition.
Economic Relations Division officials said that appointment of contractors was already completed or in final stage for at least seven big projects at a cost of over $24 billion, much higher than the estimated annual development expenditure of $14 billion in the current financial year.
They said that awarding projects without bidding was few before 2015 and those carried small amount of loans.
Major projects awarded without bidding included the construction of the Shahjalal Fertilizer Factory by a Chinese company und the Chinese loan of more than $500 million in 2013-14. During the same period, another Chinese company constructed the Seventh Bangladesh-China Friendship Bridge on the river Arial Khan at a cost of $35 million.
The officials said that Russian and Chinese companies mostly bagged big budget projects in energy and transport infrastructure sectors.
The government was awarding such contracts without bidding under government-to-government deal or direct purchase or the Speedy Supply of Power and Energy (Special Provisions) Act 2010 due to shortage of fund, they said.
Economists opposed government decisions for awarding contracts without bidding saying that the costs of the projects became usually high in absence of competitive biddings.
Former caretaker government adviser Mirza Azizul Islam told New Age on Monday that awarding contracts without bidding was like receiving suppliers’ credits.
The suppliers’ credit is most unfavourable loan as the recipients have no choice to purchase goods. Besides, interest rate and repayment period of such loans are harsh compared to the loans offered by donor agencies, he explained.
Mirza Azizul criticised the government policy of obtaining loans on high interest rate for the implementation of the development projects while $20 billion funds from the donors remained frozen in the pipeline.
Officials said Russia bagged Rooppur Nuclear Power Plant project with the singing of the financial contract on July 26 in Moscow. ROSATOM, the state corporation of Russian Federation, would install the 2,400MW power plant at a cost of $12.65 billion under a government-to-government deal.
Chinese companies were awarded four transport infrastructures projects and an information and communication technology project worth over $10 billion in the past three months.
On July 27, the government appointed China Railway Engineering Corporation to lay the Padma Bridge Rail Link Project at a cost of $4.3 billion to be finance by China Exim Bank. On September 21, China Harbour Engineering Limited was awarded two highway projects – upgrading the 226-kilometre Dhaka-Sylhet Highway into four-lane and constructing Marine Drive at a cost of $4.3 billion.
Projects like the Info-Sarker Phase III at a cost of $150 million and construction of a tunnel in the River Karnaphuli at a cost of over $1 billion were also awarded to Chinese companies without any bidding.
Policy Research Institute executive director Ahsan H Mansur said that projects awarded without bidding was usually attached with conditions of purchasing products or services from the lending countries.
The value of the products was always higher than the market prices, he said.
Centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya said that lending countries got higher dividend than recipient countries in implementing projects without bidding.
The economists noted that the country’s loan burden would increase sharply in near future due to unfavourable condition of such loans. They suggested that the Economic Relations Division should review the debt sustainability because of the rise of suppliers’ credits.
According to the finance ministry officials the country’s debt burden might go up to $65 billion from the existing $24 billion with the completion of Rooppur nuclear power plant in 2024.
Officials said the government was still planning to award contracts without bidding after Sembcorp Industries, a Singapore-based company, was given construction of 410MW power project at a cost of $412.5 million under the 2010 act and appointed the Bangladesh Army’s special works organisation to construct the Dhaka-Mawa four-lane highway at a cost of more than $700 million under direct purchase in August.

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