The consultancy firm in charge of the construction of the new Defence Headquarters Complex at Akuregoda was suspended by Cabinet on Tuesday for having charged Rs. 600 million in excess as consultancy fees.
Co-Cabinet spokesperson, Minister Rajitha Senaratne who addressed the Cabinet briefing at the Government Information Department yesterday explained that the four member Committee appointed to review the project had recommended that the firm be removed from the project.
President Maithripala Sirisena abiding by the Committee’s recommendation had submitted a Cabinet Paper requesting that the “services of the selected private firm be suspended and to review the payments made for the said firm”.
“Muditha Jayakody Associates Pvt Ltd (MPAPL) had been appointed lead consultants of the project without following competitive bidding”, said Minister Senaratne.
According to the minister, in 2011, a Cabinet Paper was submitted to seek approval to appoint MPAPL as the consultants of the project and to give them 5.5 percent of the project cost as consultancy fees.
The total cost for Stage 1 of the project was estimated to be Rs.40 billion and this would have given MJAPL Rs 2.2 billion as fees rather than the usual Rs 1.6 billion.
In terms of procurement guidelines 431 and 432, however, a firm can only be granted four percent of the direct cost of the project as fees.
“All UDA projects too have been given to this consultancy,”Minister Senaratne said.
The UDA in turn had selected MPAPL as a consultant for the project in 2003 without Cabinet approval. Cabinet approval to appoint MPAPL to build defence services school was only sought in 2006, said the minister.
The Committee report also noted that MJAPL had only registered with the registrar of companies as a limited liability company in 2010 and with the Institute of Architects in 2011.
“The Committee also said that the Cabinet memorandum submitted for approval for MJAPL had inaccurate information and it was submitted as a UDA project and not as a Ministry of Defence project,”the minister added.
The consultancy company, the Committee observed, had a narrow shareholding base and a single director, “This single person has to bear the entire liability of the consultancy services and given the complexity and scale of the project, the risk given to MJAPL could not be accepted by the Committee”, said Minister Senaratne.
Discrepancies in the tripartite agreement which granted the project to the Consultancy was also noted as the agreement was signed on October 1, 2011 even though Cabinet approval for the agreement itself was given on 10 July 2014.
The Committee has recommended that MJAPL should not be considered for the project, their payments reviewed and the consultancy given to the Central Engineering Consultancy Bureau (CECB) in the meantime.
In March this year, the construction of the Defence Complex project was suspended due to a lack of funds. In 2011 the government at the time sought Parliamentary approval for Rs.20 billion for the project and they expected it to be concluded by 2013.
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