Karachi: Shershah bridge insurer defaults, Rs 1bn may be recovered from contractors

[Naveed Yaseen]

IQBAL MIRZA
KARACHI (September 09 2009): An mount of approximately Rs 1 billion may be recovered from the contractors of the Shershah bridge for defaulting in taking out 'Contractor All Risk' (CAR) insurance policies.

Transparency International Pakistan (TIP) Chairman Syed Adil Gilani has written a letter to the Auditor General of Pakistan suggesting to conduct a thorough audit of all the past and current contracts of National Highway Authority (NHA) for CAR policies on Northern Bypass and Coastal Road and recovery from contractors the cost of CAR policies if they were not taken out on contracts.

And, in case of any damage, caused to the projects due to accidents/rains/flood, etc, all expenditure on reconstruction, such cost shall also be paid by the contractors or deducted from their bills. This will give a recovery of approximately Rs one billion.

TIP had been requesting NHA to be transparent in the Shershah bridge disaster, and confirm that the cost of reconstruction and third-party claims (reported to be approximately over Rs 240 million) have been claimed and paid by the insurance company and not by government exchequer.

The same issue was also brought to the knowledge of the Chairman of Public Accounts Committee (PAC) to ensure that no loss is incurred to the government of Pakistan (GoP) due to failure of the contractor or the client. TIP Chairman has written in his letter on August 27 informing the Auditor General that no positive response had been received from NHA even after the passage of three months.

According to the Standard Contract Agreement (SCA) on all contracts in Pakistan, a provision of all cost for the loss to project are to be paid under CAR insurance policy. This insurance policy covers cost of all damages due to any cause, and incidental to the reconstruction of the damaged works, including professional fees and the cost of demolishing and removing any part of the works.

Under Public Procurement Regulatory Authority (PPRA) regulations, procuring agencies, when engaged in procurement of works, NHA and all procuring agencies shall use the standard form of bidding documents prescribed by the Pakistan Engineering Council, constituted under the Pakistan Engineering Council Act, which includes responsibility of the contractor to take out CAR policy.

According to Adil's letter on this contract of Northern Bypass, National Logistic Cell (NLC) is reported to have defaulted to take out the CAR insurance policy, and NHA also did not comply with the contract provisions, which require that in case of contractor's failure to take out CAR policy, or even pay the annual premium of the CAR policy, NHA should have taken out CAR insurance policy itself, and deducted the cost of premium from contractor's bill.

TIP also has information that NHA did not seek CAR policy from Frontier Works Organisation (FWO) on coastal highway contract. The result is that all the cost of reconstruction, two times, over Rs 430 million was made by GoP, due to the failure of the contractors and wilful default of NHA.

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