Tk 2,215 crore contract awarded without market price assessment in Tk 6,000 crore grid project

A contract worth more than Tk 2,214.61 crore was awarded without conducting any market price assessment in the nearly Tk 5,950 crore Dhaka and Western Region Grid Transmission Project. The contracts, covering seven international procurement packages, were signed without any official cost estimates.

According to the government's Public Procurement Rules (PPR), an official cost estimate must be prepared before inviting tenders. However, this requirement was ignored in the project, according to a close monitoring report by the Implementation Monitoring and Evaluation Division (IMED) under the Ministry of Planning.

The mega project is also facing a severe manpower shortage. Of the approved 87 positions, 52 remain vacant. Notably, 59 percent of engineering and accounts officer positions are unfilled.

As a result, field-level supervision has largely stalled, while financial management has fallen into serious disarray.

The IMED report also states that the contractor's failures are causing the government to incur losses amounting to hundreds of crores of taka, while exposing the national power grid to significant technical risks.

Funding and Project Timeline

The project is being implemented by Power Grid Bangladesh PLC (PGCB), an organization under the Ministry of Power, Energy and Mineral Resources.

The total project cost stands at Tk 5,949.95 crore. Of this, the government is contributing Tk 1,415 crore from its own funds.

The remaining financing includes Tk 4,212.30 crore in loans from the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB), while PGCB is contributing Tk 321.68 crore from its own resources.

The project was originally scheduled to run from October 2019 to June 2024, but as work could not be completed on time, the implementation period has been extended until December 31, 2027.

Major Contracts Awarded Without Cost Estimates

According to the IMED report, the most significant irregularity occurred during procurement.

Under the Public Procurement Rules (PPR)-2008, official cost estimates based on market price verification are mandatory before issuing tenders. However, contracts worth Tk 2,214.61 crore under seven international procurement packages were awarded without preparing such estimates.

Awarding contracts without official estimates constitutes a direct violation of the procurement rules. IMED questioned whether the government may have paid above-market prices because no benchmark estimates existed.

Government Faces Additional Tk 548 Crore Loss

One of the project's key components was Package-8, involving the construction of substations.

The package, initially valued at Tk 523.57 crore, was awarded to the Energypac-CSEPDI Consortium. However, due to the contractor's failure, PGCB was forced to terminate the contract.

When the package was re-tendered, the estimated cost increased by 104.73 percent, reaching Tk 1,071.93 crore.

As a result, poor project management has increased government expenditure by an additional Tk 548.36 crore for this package alone.

Because Package-8 has been delayed, transmission lines built under Package-4 cannot be commissioned. The report warns that leaving transmission lines unenergized for extended periods makes it difficult to ensure the safety of installed equipment.

Tk 46 Crore Paid Without Mandatory Equipment Testing

Since power transmission equipment is highly sensitive, Factory Acceptance Tests (FAT) are mandatory to ensure technical quality.

However, IMED found that Tk 46.37 crore was paid to contractors for electrical equipment without conducting the required tests.

The report warns that installing untested equipment into the national grid could lead to mechanical failures or even fires, potentially causing widespread grid failures.

The use of substandard or adulterated transformer oil could also result in transformer explosions.

Drones Purchased Without Flight Authorization

The project purchased drones worth Tk 2.13 crore, but they cannot legally be used.

Under existing regulations, drones must be registered and receive flight authorization before operation. These requirements were ignored during procurement, creating legal complications.

Additionally, materials exceeding the quantities specified in the contracts were imported, resulting in another Tk 8.63 crore in financial irregularities.

Audit Objections Worth Over Tk 2,538 Crore

Between the 2020-21 and 2024-25 fiscal years, auditors raised 25 audit objections involving more than Tk 2,538 crore.

Of these, 12 major objections remain unresolved.

The report also identified a discrepancy of Tk 83.69 crore between actual project expenditures and figures shown in the Loan Financial Information System.

Other financial irregularities include:

Tk 56.92 crore disbursed without supporting documentation.

Tk 38.62 crore in accrued interest not deposited into the government treasury.

Tk 25.10 crore spent beyond approved allocations.

Tk 20.43 crore spent without required variation orders.

Tk 13.10 crore lost due to poor coordination in land acquisition.

Tk 12.36 crore involving the import of transformer oil and payment of bills without mandatory testing.

Contractors and Project Challenges

The Rampura-Bashundhara underground cable line is being constructed by Chinese company TBEA.

Transmission line construction is being carried out by India's Larsen & Toubro and Transrail Lighting Limited.

Following the cancellation of the Energypac consortium's contract, the remaining work is now being re-tendered for a new contractor.

Land acquisition for the Domar Substation in Nilphamari has been delayed due to litigation filed by local residents.

Construction of transmission lines has also been hindered by Right-of-Way (RoW) disputes in several locations.

The report further found evidence of substandard bricks and sand being used in the construction of substation boundary walls.

Project Director Changed Four Times; Timeline Extended

Since the project's launch, the Project Director (PD) has been changed four times.

The current Project Director, Mohammad Faizul Kabir, is the fourth person to hold the position.

According to IMED, the frequent changes in project leadership have disrupted continuity and weakened accountability.

The project, which began in October 2019, was originally scheduled for completion by June 2024, but has now been extended until December 2027, increasing its implementation period by 73.68 percent.

As of May this year, physical progress was expected to reach 78 percent, but actual progress stood at only 61.25 percent.

Meanwhile, only 55.24 percent of the total allocated budget has been spent.

Recommendations and Responses

IMED has recommended identifying those responsible for the project's abnormal cost escalation and delays and taking strict action against them.

It also called for accountability over contracts awarded without official cost estimates and payments made without mandatory technical testing.

The report recommends the prompt settlement of the 12 unresolved audit objections and strict adherence to government procurement and financial regulations in future projects.

Asked about the allegation that contracts had been awarded without official cost estimates, Project Director Mohammad Faizul Kabir told Asia Post, "Nothing of that sort happened." He declined to comment further.

Repeated attempts to contact PGCB Managing Director Abdur Rashid Khan for comment were unsuccessful.