ISLAMABAD: The National Accountability Bureau (NAB), Khyber Pakhtunkhwa, made an indirect recovery of Rs168.5 billion in a single project in its 25 years of existence and also rescued the KP government from the contractor’s claim of Rs31.5 billion in the International Court of Arbitration (ICA).
In 2018, the NAB initiated an inquiry into the allegations of illegal award of contract, misappropriation of government funds and submission of bogus performance guarantees by the contractors in Bus Rapid Transit (BRT) Project Peshawar.
The progress in the case remained stationary for a few years; however, the investigation was paced up and Rs168.5 billion was saved.
The NAB investigation revealed that six contracts of civil works were illegally awarded to four joint ventures (JVs), consisting of 2 Pakistani firms and 3 international firms for three road contracts (Reach-I to Reach-III) and 3 contracts of Buildings (Lot 1 to Lot 3).
According to the record submitted by contractors to the Peshawar Development Authority (PDA), three international firms had 60 to 70 percent shares in the ventures. However, the NAB investigation revealed that the JVs between local and international firms were merely on paper in order to grab the mega contract fraudulently by the local contractors through leveraging the goodwill and financial capacity of international firms.
After winning these contracts illegally, the local and international firms made supplementary contract agreements, according to which the actual work was carried out by the local firms while the international firms were paid 2% of the total tender value in return for leveraging their names and financial capabilities.
In this way, these three foreign firms not only played their part in cheating a government agency (PDA) but also received about one billion rupees without doing any work. Hence, the NAB widened the scope of investigation and thoroughly analyzed more than 400 bank accounts related to the firms wherein it was corroborated that the local firms had transferred the amount to the bank accounts of international firms on the same dates as mentioned in the supplementary contract agreements.
It is pertinent to mention that the PDA paid 20 percent premium on the schedule rate to contractors in order to complete the contract as per international standards within a period of six months so that better resources, modern technology and machinery of international firms be utilized in completion of the project. However, in violation of these agreements, the contractor neither completed the project in six months nor the international firms ever visited Pakistan for completion of the project.
The investigation also revealed that the contractor had submitted two bogus local bank guarantees worth Rs2 billion to the PDA. In addition to the above, 08x foreign bank guarantees amounting to Rs6.5 billion were also submitted in violation of the agreement. The local contractors had also submitted audit reports which were proved bogus by the NAB through the SECP and chartered accountant of these firms.
It was also proved that the staff of the international firms, claiming to work on the project, had visited Pakistan for eight to ten days only in the last five years.
The respective embassies of the international firms fully cooperated with the NAB in calling up of these firms. The NAB Khyber Pakhtunkhwa in collaboration with their anti-corruption agency enforced the foreign firms to cooperate in the investigation.
As per PDA record, a claim of Rs11.653 billion payable to the contractors on account of retention money, pending IPCs and claims/bills decided by the Dispute Resolution Board in favour of the contractors was pending with the PDA. Additionally, a claim of Rs55 billion on account of cost escalation, variation orders and interest on delayed payments was also submitted by the contractors with PDA.
Moreover, the project cost was also escalated through revised PC-I. However, the effective NAB investigation resulted in the retention of original project cost and a huge sum of Rs9 billion of the exchequer was saved. Moreover, the contractors had also filed a claim of 31.8 billion rupees (to the extent of Reach-I) before the International Court of Arbitration on account of increase in project cost, change in scope of work and interest on delayed payments.
Apart from this, further claims in respect of the remaining five packages were also prepared to be filed with the ICA, thus the total claim of the contractor for all the six packages would come to Rs168.5 billion. Moreover, an estimated cost of Rs2.9 billion was expected to be spent by the PDA on these cases in the International Court of Arbitration.
During the investigation, the NAB KP made effective efforts by placing all the persons concerned on the Exit Control List and also issued a red warrant of owner of one of these firms to bring him back to Pakistan through Interpol.
The tireless efforts and best strategy of investigation team of the Bureau resulted into increase in pressure on the contractors, hence they approached the PDA and requested for an out of court settlement.
The NAB KP not only supported the negotiations between the contractors and PDA but also supervised and facilitated the entire process of negotiation which resulted into a settlement agreement between them. According to this agreement, the contractors withdrew all their claims including the case filed with the ICA, while the PDA paid only Rs2.6 billion rupees to the contractors.