Melamchhi Board shortlists two companies to complete project

Melamchi Water Supply Development Board has shortlisted two companies to complete the remaining works of the much-talked project – that has become a national shame – that has been stalled for months now.
“Sinohydro Corporation and High Himalaya Hydro Construction Pvt Ltd have been shortlisted for the remaining works of the major water supply project,” the board said, adding that few companies had initially shown interests but only the two companies actually bid for the project.
“Four months after the works came to a halt at the project site, the government had announced a fresh bidding for completing the project,” according to deputy executive director at the Board Ram Prasad Kharel. “The contract between Italian contractor Cooperativa Muratori e Cementisti di Ravenna (CMC) and the government was terminated after a ‘financial dispute’ that has been dubbed as suspicious as the lawmakers in the parliamentary committee blamed the minister for asking bribe.
The government has decided to divide the remaining works into small packages and distribute them among various contractors, he said, adding that it will help expedite the project. “The remaining works were broken down into two big packages – headworks and tunnel finishing – and eight other small packages, which will be assigned to local vendors and suppliers who have earlier worked with the CMC.”
“We have a total of four biddings, two each from both interested builders for completing headworks and tunnel,” Kharel added.
After selection, the companies will have 15 months to complete the headworks and 12 months for the tunnel portion abandoned by the Italian contractors last December, which means the completion of the projects has been delayed by a minimum of one-and-a-half years.
The first phase of the much-talked about water supply project will bring in 170 million litres of water from Melamchi River to Kathmandu Valley.
The technical proposals of bidders have been opened, he said, adding that technical details are currently under evaluation. “Once the technical proposal is evaluated, we will forward our observations to the main development partner of the project Asian Development Bank.”
The approval of ADB is key to move ahead before the board finally selects the contractor.

Tanahu Hydropower terminates CMC contract

Tanahu Hydropower – the developer of 140-MW Tanahu Hydropower Project located in central Nepal – has terminated the contract signed with Cooperativa Muratori e Cementisti di Ravenna (CMC) that was appointed to execute one of the important components of the power plant.
The storage type project – the wholly owned subsidiary of Nepal Electricity Authority (NEA) – today dispatched the termination letter to the Italian contractor – though it will delay the project – after it failed to mobilise the work force despite repeated directions from the employer.
The NEA in October had selected two contractors – one CMC and another Chinese – for the $550 million hydropower plant. The project appointed CMC and asked it to start work by February 11. But CMC asked for advance payment before it starts the work. According to the managing director of the project Pradeep Kumar Thike, the project couldn’t release the advance payment because the Italian contractor didn’t submit the full bank guarantee to qualify for such payment. "Therefore, we had no other option but to send the contract termination letter to the CMC,” Thike, said, adding that the project will initiate a new process to appoint another contractor. "But it will delay the project by at least six months."
Though, the Chinese contractor – Sinohydro Corporation hired to execute hydromechanical and electromechanical works under the second package of the project – has started work at the site, the construction of the entire project will be affected as the tasks of the two contractors are interrelated.
Earlier, Melamchi Water Supply Development Board has also terminated the contract with the Italian contractor after it failed to come back after the warning notice.
The reservoir-type project – with an estimated annual energy generation capacity of 587.7 gigawatt hours in the first 10 years of operation – can generate energy for six hours daily during the dry season. The project is being developed with credit facility extended jointly by the Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and European Investment Bank (EIB). 

Government formally cancels contract with CMC

Though, the Ministry of Water Supply is still trying to negotiate, the board of Melamchi Water Supply Project has formally cancelled the contract of the project with the Italian contractor today as the contractor failed to resume construction works within the deadline of the government notice.
According to executive director of the project Surya Kandel, the deadline of the ‘notice to contract termination’ that was issued to Co-operativa Muratori e Cementisti (CMC) di Ravenna (CMC) had expired today. The Melamchi Water Supply Development Board had sent a final letter to CMC to resume the remaining works on January 21 but the CMC has not replied yet. "The deadline is over and the contract with CMC has been formally terminated," he said, adding that the project has made multiple efforts to establish communication with the CMC officials but the contractor did not respond.
The contract – which had a legal provision – reads that the agreement would be automatically terminated, if the contractor did not resume construction activities within two weeks of receiving ‘notice to contract termination’.
Earlier, CMC had – from its side – terminated its contract with the project citing its bankruptcy. But the government did not accepted termination letter of CMC – as the project was in the final stage of completion – and asked the contractor to continue the work.
The project is preparing to assign the remaining works to local contractors, he said, adding that the project is preparing legal documents to assign the remaining works to local contractors.
The termination of the contract with CMC is, however, going to delay the construction of the Melamchi Water Supply Project, which was expected to be completed within a couple of months.

ADB green signal to appoint new contractor for Melamchhi

Asian Development Bank (ADB) has given green signal to the Melamchi Water Supply Project to appoint a new contractor to complete the remaining works of the much-awaited water project.
During the consultation with the multilateral development partner, the project has sought a way out to expedite the works of Melamchhi, according to spokesperson of the project Rajendra Prasad Panta. "The project is preparing to scrap the contract with the Italian construction company Co-operativa Muratori e Cementisti (CMC) di Ravenna," he said, adding that the project has also recommended entrusting the responsibilities to carry on the project’s remaining work to the subsidiary construction companies as it would take a while to call for tender.
The project would wait for 14 days for a response to the letter from the Italian construction company CMC di Ravenna for scrapping the contract, according to the agreement between the government and the contractor. According to the contract – the government has signed with CMC – the government must send a ‘termination letter’ notice to contractor giving it a 14-day ultimatum to resume the project works. In case CMC fails to resume construction works within 14-day ultimatum period, the contract will be terminated automatically, as per the legal provision.
The project work would be forwarded from February 2.
According to the Project, of the complete tunnel measuring 27.5-km – from Ambathan of Sindhupalchok to Sundarjal of Kathmandu – still some 410-metre of tunnel's finishing works is yet to be completed.
Similarly, some 885 metres of tunnel await reinforced cement concrete works and two of three ventilators are yet to be rebuilt. Ventilation has been made in the tunnel – stretching from Gyalthum to Ambathan – while drilling needs to be done for ventilation from tunnel spanning Sundarijal to Sindhu and Sindhu to Gyalthum.
Likewise, installation of big galvanised iron (GI) pipes to bring water from the outlet of the tunnel at Sundarijal to water processing centre is also left to be carried out. Apart from that a regular monitoring system has also to be put in place.

Government still claims Melamchhi water will come on time

The government is terminating the contract with the Italian contractor of Melamchhi Water Supply Project – Cooperativa Muratorie Cementisti (CMC) di Ravenna – claiming that the already delayed project will complete on time. As less than five per cent work remains to bring the Melamchi water to Kathmandu, it is still possible to meet the deadline, claimed the project official.
The project has vowed to complete the remaining work of the Melamchi – even by awarding a new contract through a fast-track process – on time. But the cabinet has to decide on awarding the new contract as a special arrangement allowed by the Public Procurement Act (PPA). If the cabinet decides to award the contract for the remaining work to a new contractor, MWSP officials say, they can bring water to Kathmandu by mid-April. However, the Prime Minister has left for Davos yesterday – to take part in rich-nations club – for a week.
There are only five things remain to be done – fitting ventilation shafts in the tunnel, fixing three gates in the tunnel, finishing work in around a 500-meter stretch of the tunnel, some tunnel maintenance work, and construction of temporary coffer dams to divert the water to the tunnel, according to the consultant for the melamchi – EPTISA Engineering Services – has already did an assessment of the project site, evaluated the amount of remaining work and calculated the estimated costs, according to the ministry.
But it will take some more time to complete permanent construction of the dam and also complete the second phase of water treatment plant at Sundarijal. But water can be brought to Kathmandu even without completing the permanent construction works, the ministry claimed.
Secretary of the Ministry of Water Supply Gajendra Thakur today claimed that the Ministry of Water Supply will table a proposal at the cabinet for the purpose immediately after the process to end the contract with CMC di Ravenna is formalised. The Public Procurement Act 2007 has a provision to allow fast-track procurement by the cabinet, but the decision has to be appropriately justified.
The project has today formally started the process to terminate the contract with the CMC di Ravenna, which left the project site over a month ago, after the government did not pay compensation it had asked. The project office has sent a ‘notice of termination’ to the contractor and the notice, according to the procurement law, allows the contractor to correct its course within the 14 days. 
The contract between the project and the contractor – signed in 2013 – for tunnel works and building a dam will be terminated after 14 days, if the contractor fails to turn up at the project site. The project board meeting last Tuesday had decided to wait until Friday for the Italian contractor to return to the project site, which was almost unlikely.
After the termination of the contract, the government will seize all the equipment and construction materials of the Italian firm from the project site. The government will also seize two separate bank guarantees of Rs 1.34 billion and Rs 1.21 billion from Standard Chartered Bank and Nepal Investment Bank. But the Italian contractor owes Rs 1.3 billion to the local sub-contractors and suppliers. The government is claiming that it can pay the local sub-contractors and suppliers from the bank guarantee.

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.