Saturday, January 19, 2019

Government finally decides to terminate contract with CMC

The government is scrapping the contract with Co-operativa Muratori e Cementisti (CMC) di Ravenna, the Italian contractor of the Melamchi Water Supply Project, pushing the national pride project into further uncertainty.
Scrapping the contract with CMC will delay the construction of the Melamchi Water Supply Project – that was expected to be completed by the next few months – the termination of contract with CMC also means that the government has to follow a lengthy process to hire a new contractor for the project. A regular process to hire a new contractor would mean the project will be pushed at least a year further. First of all, there should be a global tender which requires at least 45 days of notice. Then following the guidelines of the Asian Development Bank (ADB), the development partner, would require at least eight-nine months. The ADB needs to seek consent from its headquarters for any project above Rs1 billion and then more time will be required for correspondence, selection and evaluation of the contractor.
Less than 5 percent of work remains on the project, which will divert 170 million litres of water every day to Kathmandu from the Melamchi river in Sindhupalchok.
But the meeting of the Water Supply Development Board yesterday decided to terminate the contract with the Italian contractor and publish a ‘termination letter’ notice giving CMC a final chance to resume works.
According to the contract – the government has signed with CMC – the government must send a ‘termination letter’ notice to contractor giving a 14-day ultimatum to resume the project works. In case CMC fails to resume construction works within 14-day, the contract will be terminated automatically.
According to executive director of Melamchi Water Supply Development Board Surya Kandel, the government however cannot ‘legally’ terminate the contract with CMC before February 10 – the project contract period of CMC – as the dispute resolution committee of the water project had earlier made a decision that the government cannot scrap the contract with CMC till that time.
“The government formally dispatched a letter of termination to the Italian contractor CMC di Ravenna after it failed to come up with any concrete decision regarding resuming works,” Kadel said, adding that the project has decided to terminate the contract with the existing builder after it did not turn up to resume works even a month after abandoning the project."
In its previous letter sent last Tuesday, the government had set a Friday deadline for the CMC to make it clear whether it was interested to resume works and how it would want to resolve the dispute.
According to Kadel, the Italian builder did respond but sought at least one more week. “We received a meaningless correspondence which had not even come from the proper channel…..and it just sought more time," he added.
However, CMC official claimed that they had said a meeting was possible at a suitable time-around January 27 or so and "we had also sought diplomatic assurances."
But the government has decided to begin the process to scrap the contract with CMC after officials of the Italian company – who had left for their countries to celebrate Christmas – failed to return to complete the project. They have also not tried contacting the government since they left the country.
"We will soon send the notice of ‘termination letter’ to the CMC office in Italy,” said secretary at the Ministry of Water Supply Gajendra Kumar Thakur.
Earlier, CMC had terminated its contract with the project citing the company’s bankruptcy. However, the government had not accepted the termination letter of CMC as the project was in the final stage of completion. The government let the CMC officials go home to celebrate Christmas after their commitment to return. The Italian embassy in India and the Consulate General of Italy in Kathmandu had assured the government of their return. But the officials' failure to return has forced the government to begin the contract termination process with CMC.
Police on the night of December 16 had apprehended Italian staffers of the contracting company, accusing them of abandoning the project and trying to flee the country.
The CMC official said that the government cannot terminate the project which it had already scrapped after the government failed to pay the dues. "Melamchi project remains terminated by the CMC," the CMC official said, adding that the employer (Nepal government) cannot terminate something which is not in place."
The Italian contractor had first submitted the project termination letter to the government in the third week of December, saying the government had failed to pay Rs 350 million that it owed to the builder as per a decision by the Dispute Adjudication Board (DAB).
Since then the CMC has maintained that as the Nepal government had not paid the amount decided by the DAB within the deadline, they reserved the right of terminating the project. But government officials have refuted the CMC claim.
But in an interesting turn of events, the CMC had withdrawn the termination letter after its staffers were allowed to leave the country. They had subsequently flown out of the country. 

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