Pakistan: TIP Accuses KPT of Letting Dredging Irregularities Slide

Transparency International Pakistan (TIP) has complained that the Karachi Port Trust (KPT) is not taking action against dredging contractor to deduct liquidated damages for irregularities, causing a potential loss of Rs18.5 billion to the national exchequer.

In a letter addressed to Shipping and Ports Minister Kamran Michael, TIP has highlighted that KPT is not taking action against the dredging contractor, MIs China International Water and Electric Co Ltd (CWE), adding that another complaint was filed with Chairman KPT on August 16, 2012 in this regard.

KPT’s consultants in January 2013 had imposed liquidated damages on account of default by CWE with effect from March 2013 for delaying the works by many years, and advised KPT to deduct 10% damages in monthly bills, totalling Rs1.9 billion.

KPT, however, did not act on the consultant’s recommendations and violated the conditions of the contract.

In addition to the principal amount, KPT could have also earned interest on this amount, equal to Rs18 million per month, at 12% bank rate.

The completion date of the project was originally scheduled to be February 2011. Due to the delays caused by the CWE, main contractors of Deep Water Port have made claims of over Rs10 billion.

Another contractor, M/s CHEC which is carrying out work on two contracts worth Rs 30 billion, have also filed claims against KPT for delaying their works due to the delay caused by CWE. Moreover, KPT has also lost out on the opportunity to earn millions had the project been operational on time. As per conditions of the contract, contractor’s equipment in KPT’s custody is not allowed to be released and to be used for adjustment of the extra cost which may be incurred by KPT. Disregarding these conditions and contrary to the advice of the consultants, Chairman KPT allowed CWE to release two dredgers under the pretext that the KPT board had approved the move.

In addition to this, CWE is asking for more money for dredging hard soil, whereas, the tender clearly stated that the bids were for both hard and soft soil and that it was the contractor’s responsibility to verify quantities of hard and soft soil before bidding. The contractor has recently demanded Rs8.5b as additional cost of degrading hard soil. Secretary Ministry of Ports and Shipping had also initiated an inquiry into this case.

CWE were awarded the contract for dredging and reclamation works by KPT on November 26, 2008 for a total dredging quantity of 33 million cubic meters (MCM) to be completed in 30 months times. The contractors have however failed to do so, although KPT has reduced the scope of work by 7.5 MCM to 25.5 MCM.

Press Release, August 7, 2013

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