RAA finds deficiencies in Consultancy Services for Hydro projects

The RAA, in its performance report on procurement of consultancy services by the government has pointed out some deficiencies and shortfalls in consultancy services for Hydro projects, which are impacting the construction of Hydro projects.

During the period 2007-08 to 2011-12, a total of Nu. 1,804.350 million was spent on procurement of consultancy services in the Hydropower Sector.

This was around 39 percent of the total money spent by the government on consultancy.

The RAA reviewed the services provided by consultancy firms for projects like, the Tala Hydropower Project Authority and Punatsangchu–I Hydropower Project Authority. The consultancy services for preparation of Detailed Project Report (DPR) and estimations of pre-construction activities of these Projects were awarded to M/s WAPCOS Ltd.

The report says that were several deficiencies in the design and preparation of estimates mostly attributable to inadequate time and resources in preliminary studies such as geo-tech, topographical studies etc. This, it says, had resulted in huge deviation in actual and estimated quantities necessitating payments at analyzed rate which are usually much higher than the quoted rates.

The report says that major changes in the scope of work had ensued from unrealistic estimates prepared by the consultant. The changes rendered numerous complications related to contract management.

There were time and cost overruns, significant portion of which were on account of inadequacies in the Detailed Project Report.

The RAA says the cost of Punatsangchu Hydropower Project was revised to almost three times the initially projected cost. There were significant changes in the scope of work and construction sites of some of the major works. Many extra items of works had to be executed which the consultants had not provided in the DPR. This entailed additional financial implications.

The Office of the Director (Technical), PHPA I & II responded to RAA on the aboves issues saying that the deviation in actual and estimated quantities at the time of actual construction due to reasons like geological surprises, actual site requirement which may not be assessed by preliminary studies at the time of preparation of Detailed Project Report and long construction period.

He said major changes occur due to site relocation of project component resulting in changes.

In the audit of the Mangdechu Hydroelectric Project Authority (MHPA) there was a case where the items included in the Detailed Project Report prepared by the consultant were later changed. The consultant insisted to maintain the same item as it was cheaper than the alternative item which the management opted. This would entail possible extra financial implication of Nu. 779.89 8 million as the item was treated as extra item to be paid at analyzed rate.

The MHPA responded that extra cost indicated is a theoretical notional cost and the projection of theoretical cost before execution of the job may lead to misunderstanding.

The report says there is no accountability mechanism and penal provisions to hold the consultants responsible for the flawed and deficient DPRs.

The consultant had delayed the preparation and submission of DPR for Hydropower Projects included in the 10,000 MW plan. It was observed that none of the DPRs could be completed as scheduled necessitating repeated extensions of time for completion. This has invariably delayed the implementation of the projects and has posed a serious impediment to realization of national target of 10,000 MW by 2020 besides the likely time and cost over-runs that the project will experience.

The report says that despite considerable experiences of implementation of Hydro Power Projects in Bhutan, it has become a common practice to make payments at analyzed rates for deviated quantities beyond 30%. This is seen to be one of major causes for cost escalation. It says it would have been imperative on the part of the consultant and the project management to anticipate possible variations in the quantities of works and accordingly recognize in the BOQ and tender documents to minimize huge deviations and payments at analyzed rates.

The PHPA Director said that the extent of variation of 30 percent kept in bidding documents is as per norms.

The RAA report says that responses provided attributed most deficiencies and lapses in the consultancy services in hydro power sector to adverse geological conditions and surprises. It says that while the adverse geological conditions contribute largely towards inadequacies in the DPR and resultant subsequent changes, BOQs prepared do not seem to reflect these realities and provide for in their estimates.

It says that as regards observation at MHPA’s overpayment where consultant’s recommendations are not valid, the management should deliberate and identify optimal methodology before flotation of tenders to avoid payments for substituted items at very high rates.

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