March, 22 2005	Tuesday	11 Safar 1426

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LAHORE, March 21: Water and Power Development Authority (Wapda), contrary to its previous decision, has decided to pay $20.67 million claims to one of the contractors of Chashma Hydropower Project. Wapda and Hyundai /Hidco-Hakas (a joint venture) inked a deal for civil works for Chashma Power Project on Dec 24, 1994. However, order to commence work was issued w.e.f July 5, 1994 and schedule date for completion was Oct 6, 1997 — a duration of 1190 days.

But the project got delayed because the government could not arrange funds in time and Wapda, due to its financial crunch, could not meet its fiscal obligations. The contractor served notices on authority in 96-97, 97-98 and 98-99.

The authority, on its part, allowed four different extensions of 1,129 days to the contractor. Two extensions were given without any condition (meaning thereby that Wapda would bear additional cost as per terms of the contract) and for other two extensions, Wapda clearly said it would not pay any additional cost. The new date for the finalisation of the project was Nov 8, 2000.

According to the critics, the contractor accepted the new terms and conditions and recommenced the works. If it had any objections to the new arrangement, it should not have restarted the works. But, it completed the works and then came up with huge claims of $36 million.

However, Wapda stuck to its earlier decision. A dispute arose between Wapda and the contractor and both opted for arbitration. Arbitration proceedings were about to begin when Wapda suddenly changed its stance and formed a committee to look contractor’s claims. The committee submitted its report and conceded legality of the claims and recommended payment. However, some of the members differed with report and refused to sign it, saying that Wapda has a strong case and should fight it out rather than pre-empting proceedings and making the payment.

Nevertheless, the authority, in its meeting on Dec 14, 2004, decide to approach the contractor with an offer of $21 million. It also tried to influence arbitrators and asked them to announce a consent award of the same amount. The arbitrators, on their part, took it as a dictation and refused to oblige. The authority, failing on one account, changed the word of consent award with “out of court settlement” and offered the payment.

A Wapda spokesman maintains that the previous decision of authority (about not bearing an financial cost of the delay) was “totally illegal and could not have stood the scrutiny of arbitration proceedings. “Once a contract is signed, terms of the contract become supreme. According to those terms, Wapda is only one of three players i.e employer, consultant and contractor. It cannot make arbitrary decision like the one it made in this case. Once Wapda realised its legal vulnerability, it opted for out of court settlement. Otherwise, it could have ended up paying full amount ($33 million) of claims and interest on it also. The total amount could have hit around $40 million, he said.

The critics, however, maintain that previous decision of Wapda that provided basis of contractor’s subsequent work and claims, could have been maintained in any judicial proceedings. The authority, as an employer, was entitled to take such a decision, as it happened in so many other cases. The contractor also did not choose to dispute it then and restarted civil works under the new arrangements. The authority, they insist, has played in the hands of vested interest in offering the payment and causing the nation a huge loss of Rs1.25 billion.