Project lands in cost controversy, again for Regional International Airport in Pokhara

THE issue of costing is back again. Earlier, it was the construction cost quoted by the Chinese contractors that put hold on the process of developing the regional international airport in Pokhara. Now, a new study has shown the construction of the airport will cost $264 million. China Airport Construction Company (CACC), a consultant appointed by the lowest bidder China’s CAMC Engineering Co, submitted its detailed feasibility study report to the Civil Aviation Authority of Nepal (CAAN) last Wednesday with the revised estimated cost of $264 million, according to government sources. Moreover, the study has proposed an additional 16 percent of the cost as a price escalation cost. The bidding process for the airport had been put on hold since July 2012 after the lowest bidder CAMC quoted $305 million— 85 percent higher than the government-estimated cost. The project was then halted in suspicion of irregularities. “The combined construction and the price escalation costs as per the detailed feasibility study will hover around $300 million, nearly equal to the cost quoted by the Chinese company,” sources said. The project was given a goahead by the Cabinet after the company showed willingness to develop the project at the government- estimated cost of $166 million or by staying within the CAAN’s bill of quantities (BOQ). BOQ is a document used in the bidding process that details project costs and the terms and conditions of the construction to enable the contractor to develop the project as per the executing agency’s estimated price. After the government’s goahead, CAAN had assigned lowest bidder CMAC to carry out the detailed study. A delegation of Export Import (EXIM) Bank of China is in Kathmandu to discuss the status of two tourism-related projects— the airport in Pokhara and the plan to purchase four Chinese aircraft for Nepal Airlines Corporation (NAC)—as part of its final assessment to fund them. The bank has pledged soft loans worth $145 million for the development of the airport and $35 million for NAC. A meeting between government officials and the EXIM bank delegation on Monday ended without a concrete outcome, according to CAAN sources. “As the airport has to be developed as per the Cabinet’s decision, any new changes have to be approved by the Cabinet. So we did not think it was reasonable to discuss loan aspects with the visiting Chinese team before sorting out the issues,” said a Finance Ministry official. CAAN Director General Ratish Chandra Lal Suman said the CAAN is currently reviewing the study report submitted by CAMC. “The CAAN will also make its own assessment on the cost,” Suman said, adding discussions will be held with the Chinese company after the CAAN’s assessment. “The final assessment report will then be forwarded to the EXIM bank too.”