Money

Ousted Spanish contractor seeks Rs2.91b compensation

- Post Report, Kathmandu

Jul 2, 2017-Ousted Spanish contractor for the Tribhuvan International Airport (TIA) improvement project has filed a Rs2.91-billion compensation claim arguing that it had been ‘wrongfully’ fired.

The Civil Aviation Authority of Nepal (Caan), the executing agency for the $92-million project, dismissed Constructora Sanjose citing nonperformance last December.

The Spanish company filed the claim with the dispute settlement board, an independent arbitrator chosen by both sides. Caan said it had also filed a separate compensation claim with the board. The amount of the claim has not been disclosed. 

On June 18, the dispute settlement board under independent arbitrator Khem Dallakoti issued a decision stating that the termination of Constructora Sanjose was ‘wrongful’ because its project completion deadline had not expired, said an official of Constructora Sanjose. Sanjose and Caan had signed the project contract in December

2012 with the completion deadline set for March 2016. Construction works were severely affected by the 2015 earthquakes and subsequent trade embargo that caused fuel shortages. The project’s completion deadline was extended by 595 days to 2018. 

“The contract was breached although Sanjose still had 457 days remaining,” the Sanjose official claimed. “Following the decision regarding the project’s time extension, we filed the compensation claim on Monday.” Caan said adios to the Spanish company by officially issuing a ‘notice of termination’ on December 9, 2016 for delays. The dispute settlement board was formed on February 29, 2017. 

“We gave the contractor a number of opportunities to improve performance, but there was no improvement,” said Babu Ram Poudel, chief of the project, “As it did not show any interest in working, we were forced to terminate the contract,” he added. 

“We did so after analyzing the project’s progress from multiple angles,” he said. In four years, the physical progress of the project was a meagre 17 percent. “And there was no reason to wait for the extended deadline to end as the contractor did not listen to our repeated warnings to improve performance.”

With regard to claiming damages, Poudel said both parties had the right to do so. “The hearing will begin and a final verdict will be issued over the compensation amount,” Poudel said, adding that if either party was not satisfied with the verdict, it could go to the Singapore International Arbitration Centre as stated in the contract. 

The Asian Development Bank (ADB) has provided $80 million in loan and grant and the government has put up $12 million for the TIA scheme which has since been renamed as air transport capacity enhancement project. After the completion of the project, TIA will be able to handle more than 5.85 million passengers annually and accommodate bigger aircraft.

Caan has already invited fresh tenders to resume the stalled project by breaking it up into different packages like runway and taxiway extension, terminal building, soil filling works and so forth. 

Published: 02-07-2017 09:28

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