Japanese consortium breaks Central Expressway impasse

The long-drawn impasse in the commencement of the third section of the Central Expressway (CE III) has ended with the Sri Lanka Government’s decision to allow two Japanese companies to form a consortium to carry out construction work.

Considering the recommendation made by the Japanese Government and the Cabinet Committee on Economic Management (CCEM), the government has given the green light to Taisei Corporation and Fujita Corporation to establish this consortium, Highways and Higher Education Minister Lakshman Kiriella told the Business Times this week. He noted that the two Japanese companies have entered into a basic understanding in formulation of this grouping to build the 32.5 km stretch of road from Pothuhera to Galagedara.

The two Japanese companies have sent their letters of intent and proposals to the Highways Ministry, he said. Funding for the project is from the Japanese Government based on a yen loan equivalent of US$1 billion from Tokyo Mitsui Banking Corporation for the tender exclusively for Japanese/Sri Lankan companies (prime/sub-contractors). The Japanese Embassy of Sri Lanka shortlisted and nominated three Japanese companies in June 2016 and requested the Road Development Authority (RDA) to select the best company which is commercially most competitive. The companies were Taisei Corporation, Penta Ocean Construction Co. Ltd and Wakachiku Construction Co. Ltd.

Despite these three companies being nominated, they failed to present their bids on time and the selection process got prolonged and more than four extensions were offered. Finally the RDA refused to extend the deadline and only Taisei Corporation submitted its bid and that too without a bid bond.

Taisei’s bid was Rs. 159 billion as the quoted price for the 32.5 km stretch. There were objections against the tender process and questions were raised about the absence of the bid bond as well as the unrealistic price quoted by the selected bidder. The Japanese Embassy and the Sri Lankan Prime Minister’s office then intervened and cancelled this tender.

This offered an opening to Fujita Corporation, a fully owned subsidiary of Daiwa House Group of Japan. The introduction of Fujita resulted in them quoting a lower figure of Rs. 147 billion for the contract offering a major saving for Sri Lanka. Fujita’s bid is supported by their Indian office and many local construction companies. However only the bid offered by Taisei Corporation was being negotiated without considering Fujita’s offer until the Japanese Government intervened in June this year. Considering a letter submitted by Secretary to the Prime Minister Saman Ekanayake on the Japanese Government’s recommendation, the Highways Ministry and Cabinet Appointed Negotiation Committee (CANC) was directed by the CCEM to re-consider the bid of ‘Fujita Corporation’. As a remedy to the inordinate delay in the commencement of the project, the CCEM has recommended to provide an opportunity to these two companies to form a consortium on terms and conditions agreeable to them as well as the governments of Japan and Sri Lanka.