Project delays: The Sinohydro case
Trusting a company with a power plant construction, whose previous record was already bad, results into project delay
Inefficient, negligent, slow–these are three words among at least a dozen epithets the Power Division used about Sinohydro Corporation while extending the deadline of a power plant project by the Chinese firm for the sixth time.
Prior to the extension, the Power Division visited the 150MW power plant in Chattogram's Mirsharai upazila in March and found the Chinese contractor did not follow the design evident by the rusting equipment and parts. This meant an extensive replacement, though the project then lodged around 98% progress.
The power division said it requested the Chinese state-owned Sinohydro to speed up the work and not to deviate from the specifications as there had been multiple meetings in this regard between the division, Chinese Embassy in Bangladesh and the contractor Sinohydro in the last one year but to no avail.
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This has put the commissioning of the Tk1,068 crore power plant in doubt even after the latest deadline extension to June 2023.
According to the contract, the project began in 2017 and was supposed to be completed in 2019. With government expenditure, the B-R Powergen Ltd is the implementing agency of the plant.
Sinohydro already had a track record of missing deadlines, violating specifications and causing cost overruns in major projects such as widening Dhaka-Chattogram highway and river protection work for the Padma Bridge. This, however, did not prevent the firm from winning the bid for the power plant.
In 2014, the World Bank temporarily blacklisted Sinohydro in Africa for project irregularities.
Muscling out the German supplier
According to a Power Division report released in April this year, Sinohydro was awarded the work in 2018 as an engineering, procurement, and construction contractor. The firm was supposed to complete the work within 15 months.
Sinohydro signed a deal with German company MAN Energy Solutions to supply equipment to the power plant. But the Chinese firm later flouted the MAN guidelines for the plant, got into a dispute with the supplier and threw them out from the construction site multiple times.
Besides, the construction work has been lacking adequate and skilled workforce, supervision and quality control process from the very beginning, according to the Power Division report. The report notes that the project violated the design and specifications.
According to the report, the German supplier has so far given a total of 444 item-wise punch lists, including high-priority red, mid-priority orange and low-priority yellow, to Sinohydro. The Chinese firm has been able to complete only 187 of the issues.
Rectification of high and medium-priority items must be completed before commissioning of power engines. Otherwise, the production will be stopped on the first day, putting the plant in serious trouble.
Works that are still unfinished as per the MAN guidelines include preparing gas pipelines, fire fighting system commissioning, rust replacements and readjusting pipeline diameter for an engine.
Officials at the BR-Powergen Ltd said the German supplier and the Chinese contractor had disagreements on several issues, as MAN's commissioning team left the project area multiple times.
Two meetings were held on 6 May 2021 and 6 March 2022 with the participation of the power secretary, Chinese ambassador to Dhaka, other embassy officials, Sinohydro representatives, MAN officials and BR-Powergen to determine the action plan for completion of the project.
In those meetings, according to the Power Division report, the Chinese contractor was instructed to complete the project promptly but the work did not gain momentum.
Action recommended as contractor cannot spend
In the revised development budget for the 2021-2022 fiscal year, the plant had Tk39 crore allocated, of which Tk25.50 crore has been disbursed. But the spending hovers around Tk13 crore thanks to the sluggish physical progress.
The poor progress holds back the contractor from collecting bills. Besides, unavailability of some parts deters the firm spending the allocation.
A meeting of the project steering committee chaired by Power Secretary Mohammad Habibur Rahman recently came up with recommendations to take action against the contractor. The meeting also expressed doubts whether the Chinese firm would complete the project anytime soon. The meeting also talked about appointing a new contractor if required.
The Business Standard sent an email to Sinohydro Corporation seeking its comment about the power plant project, but got no response.
Md Fakhruzzaman, Managing Director of B-R Powergen Ltd, said the MAN team returned to the project site on 18 May. The contractor will have to replace the items that the German supplier had marked. Sinohydro is also working.
"The project is expected to be completed within the next one year if any fresh disagreement between the Chinese and German firms does not crop up," he added.
A poor track record
According to the Roads and Highways Department, Sinohydro earlier did the widening of Dhaka-Chattogram highway half-heartedly.
The Chinese firm was responsible for most of the work on a total 192km patch.
The project began in 2010, and was supposed to be completed in just three years. But the Chinese firm took an additional five years, prompting huge sufferings to people.
The then Road Transport Minister Obaidul Quader and Secretary MAN Siddique had expressed discontent against the firm multiple times.
For the four-lane work, Sinohydro charged Bangladesh Tk511 crore more than the initial contract. It suspended the work for around four months to realise the amount. The work resumed subsequently as a high-level meeting was held to mediate the situation.
According to the contract, Sinohydro was also supposed to repair the old road, but the contractor skipped it.
By leveraging the Dhaka-Chattogram highway project, Roads and Highways officials said, the firm bargained for the river training work under the Padma Bridge construction. The firm said it would complete the four-lane work faster if the government awarded it the river training work.
Subsequently, the company won the river management work under the Padma Bridge project as the lowest bidder. This work is yet to be completed despite having missed the initial 2018-deadline.
Shamsul Haque, a transportation expert and professor at the Bangladesh University of Engineering and Technology (BUET), said foreign contractors are exploiting our lack of project capacity.
"The contractors often offer illegal benefits to project officials to allow the substandard works. To stop this, we have to change our system first. If we can be strict and sincere, the contractors will not be able to show such insolence," he added.
