Time, cost overruns grip Dhaka Bypass Expressway project

If the work progressed as per the plan, the Dhaka Bypass Expressway, the country's first-ever public-private partnership (PPP) road project, would have been readied for traffic movement before the end of this year.

The expressway was planned to give a faster transit to vehicles from Gazipur to Chattagram and Sylhet bypassing capital Dhaka. A consortium was awarded the 25-year contract in December 2018.

But the physical work started only in April this year, events like the pandemic and the Russia-Ukraine war in between, have given the contracting firms enough grounds to ask for more money and time.   

Infographic: TBS

In a letter recently sent to several government agencies concerned, Dhaka Bypass Expressway Development Company Ltd, the private partner of the project, has sought additional investments from government funds, as well as an extension of the contract period, blaming the price hike of all construction materials and the devaluation of the taka against the US dollar. 

The consortium signed a 25-year contract with the government in December 2018 to develop the infrastructure within a two-year period and collect tolls from the expressway for 23 years. 

The 48-km controlled-access expressway from Joydebpur to Madanpur Road via Debhgram and Bhulta was scheduled to be opened to traffic by the end of this year. The actual work of the project began in April this year.

Before the planned expressway, there was a two-lane road here called Dhaka Bypass Road. The project aims to reduce heavy traffic pressure in the capital by upgrading the existing narrow road into a four-lane flyover highway to make a fast transport route from Gazipur to Chattogram and Sylhet.   

Dhaka Bypass Expressway Development Company Ltd – a consortium of Sichuan Road and Bridge (Group) Corporation Ltd of China with Shamim Enterprise (Pvt) Ltd and UDC Construction Ltd of Bangladesh –  sent the cost increase proposal to several agencies including the Roads and Highways Department (RHD), under which the project is being implemented, seeking additional allocation from the viability gap financing (VGF) scheme and extension of the contract period for at least five years.

RHD officials denied making any comment to The Business Standard (TBS) regarding the proposal but the officials of the PPP Authority opined against it.

Public transport experts and economists said acceptance of the proposal would lead to financial loss for the government and disrupt the commitment of the government to implement infrastructure projects through PPP ensuring good governance.

They also said that any extra facility out of the agreement would encourage investors of other PPP projects to seek undue facilities.

In the letter, Xiao Zhiming, director and CEO of the Dhaka Bypass Expressway Development Company Limited, said the rate schedule of 2016-2017 was considered as guidance for construction cost calculation during the submission of the proposal.

However, prices of construction materials went up to an unpredictable level during the lockdowns of the Covid-19 pandemic in Bangladesh and across the globe. Inflation is at its highest level currently, he said.

The letter also mentioned that the government raised the diesel price by 23% last year and another 36.25% in August this year, resulting in higher transportation costs and prices of other construction materials.

In addition to fuel prices, the cost of other imported products has gone up significantly, affecting project construction which is largely dependent on imported materials, Xiao said in the letter.

Quoting the BBS bulletin, the letter mentioned that prices of steel, cement and aggregate had risen drastically. 

As per latest calculations, the cost of the project will increase by 18.26% compared to the cost set at the project readiness financing (PRF) stage, Xiao Zhiming said, hinting that the cost might increase further.

Under the circumstances, it will be very challenging to arrange additional financial resources to mitigate all these additional expenses, Xiao said in the letter.

The project was set to be implemented with a total cost of Tk2,580 crore. With added cost, the amount will reach Tk3,051 crore, he said.

What stakeholders say:

When contacted, AKM Manir Hossain Pathan, chief engineer of the Roads and Highways Department (RHD), declined to comment on the investor consortium's letter. 

He instead asked TBS to contact Abdul Wahid, the project director (PD) and additional chief engineer of the department. However, the PD is out of the country and could not be contacted.

An official of RHD, on condition of anonymity, confirmed that a letter from the investment firm was received recently and said further decisions will be taken after reviewing the contents of the letter. 

If any facility is provided to the firm outside the agreement, the approval of various departments of the government including the PPP Authority, Road Transport and Highways Department, and the Ministry of Finance will be required, the official who is also involved in the project said.

Md Abul Bashar, director general (Programming and Investment Promotion) of the PPP Authority told TBS that even if the construction cost increases, there is no scope for extending the duration of the PPP project contract. 

The cost of government projects may increase in line with the increase in the cost of materials. But if the cost of the PPP project increases, there is no opportunity for the government to provide additional money, he said.

He also mentioned that due to the delay in the support project taken by the government, the land could not be conveyed to the PPP partners on time. Both the government and the partners have some problems commencing the work. 

Abul Bashar, however, thinks that some benefits could have been given on the basis of discussion considering the issues faced by the firm.

Dr Shamsul Hoque, a public transport expert and professor at the Department of Civil Engineering Department of Bangladesh University of Engineering and Technology (Buet), said if any additional benefits are given to the partner institutions due to cost increase, it will be a deviation of the government's commitment to ensure good governance in the implementation of the PPP project. 

Project overview

The Asian Development Bank (ADB) provided the consultation service at the preparation stage of the project and said in its report that, the Dhaka Bypass Road is a strategic corridor for freight movement linking the manufacturing centre to the north of Dhaka with the Centre of shipping activity at the port of Chittagong in the south.

It is estimated that every day around 10,000 motor vehicles use the existing Dhaka Bypass Road and the numbers are continuing to increase. Consequently, the 2-lane road cannot cater for such increased traffic but there is a need to separate out the local traffic from the trans-regional traffic and create a dedicated expressway to cater for the increase in traffic demand and to reduce journey time.

Considering the issue, the Cabinet Committee on Economic Affairs (CCEA) approved, in principle, a project in September 2012 to upgrade the road into a four-lane expressway with a service lane under the PPP arrangement.

After two-stage bidding, conducted by the RHD in 2017, the consortium of Sichuan road and bridge (group) corporation limited (Srbg), Shamim Enterprise Limited (SEL) and UDC construction limited (UDC) was identified as the private investing partner for implementing the project.

At the time of signing of the agreement, the estimated cost of the physical project was Tk3,039 crore. Of the amount, the government was supposed to provide Tk224 crore as viability gap financing.

In April last year, the Dhaka Bypass Expressway Development Company Ltd signed a financing agreement with China Development Bank (CDB) and Bangladesh Infrastructure Finance Fund Ltd (BIFFL). As per the deal, CDB will provide Tk1,614 crore and BIFFL Tk1,075 crore, sources said.

Earlier, Asian Development Bank agreed to provide a credit of $100 million to BIFFL for granting the loan to the private partner.