The Spanish contractor for the $92-million Tribhuvan International Airport (TIA) improvement project has been given its marching orders for nonperformance.

The Civil Aviation Authority of Nepal (Caan), the executing agency for the Asian Development Bank (ADB) funded project, officially issued a ‘notice of termination’ to Constructora Sanjose on Saturday.

“We have seized the Rs600-million performance bond deposited by the contractor as it failed to perform its obligations under the contract,” said Sanjiv Gautam, director general of the Caan. A performance bond is commonly used in the construction industry as a means of insuring a client against the risk of a contractor failing to fulfill contractual obligations.

The Spanish company had been given two deadline extensions and a number of ‘notice to correct letters’, but it showed no interest in moving the project forward. A Caan board of directors meeting last Friday had recommended that the agreement with Constructora Sanjose be cancelled as the project had achieved only 17 percent physical progress in the last six years.

The decision was forwarded to the ADB for its consent before the deal was cancelled. “The official termination was done after receiving the go-ahead from ADB headquarters,” said Gautam.

The ADB has provided $80 million in loan and grant and the government has put up $12 million for the scheme which has since been renamed as air transport capacity enhancement project. Gautam said that Caan had decided to invite fresh tenders to resume the runway extension and terminal building works within one and a half months. “The project works will not be affected.” He added that the TIA improvement project would be broken up into four to five packages like runway and taxiway extension, terminal building, soil filling works and so forth. “The project will be divided into different packages so that even if one component is halted, it will not affect other components.”

Gautam said the soil filling works would be divided into two packages, apron and

taxiway, and given to a local contactor.

The air transport capacity enhancement project, which has been declared problematic, has the longest duration contract. Originally, the project was expected to be implemented in about 67 months following its launching in December 2010. The project’s completion deadline was extended to 2015 and then to 2016, but after even that looked unachievable, the date was moved forward to 2018.

Recently, Tourism Minister Jeeban Bahadur Shahi said that he didn’t see any indication that the project would be completed by 2020 either, and hinted that there was no alternative but to terminate the contract.

The contractor has claimed Rs1.17 billion in compensation. However, Caan engineers have estimated that the compensation will come to Rs90-100 million if the agreement is terminated.

After the completion of the project, TIA will be able to handle more than 5.85 million passengers annually and accommodate bigger aircraft.