Irregularities in Karakoram Highway project lose Rs 29.4 billion to national exchequer

ISLAMABAD: A staggering increase in costs has uncovered major irregularities in the Karakoram Highway One project, also known as KKH-01, following a drastic design change. The relocation project has uncovered several changes, resulting in an unjustified cost increase of Rs. 29,413.545 million, according to an audit report.

The audit report issued by the Procurement Management highlights unjustified increases in the cost of the construction and the actual cost being used by changing the work scope through variation order in violence of Public Procurement Regulatory Authority (PPRA) Rule 20, 2004.

Initially approved by Executive  Committee of the National Economic Council (ECNEC) in 2014 with a budget of 14.53 billion, the project’s civil work contract ballooned to 115 billion rupees. The original purpose of KKH-01 was to serve as a bypass for diverted traffic on the Karakoram Highway.

Later on, the relocation of Karakoram Highway (KKH)-01 was awarded to M/s China Civil Engineering Construction Corporation in March 2015 at a constant price of Rs 14,538.852 million. However, a Variation Order (VO) issued in 2017 proposed a re-alignment incorporating seven tunnels and three bridges costing Rs.29,413.545 million, exceeding the original contract value by 202%.

The audit report, a copy of which is available with Daily Ausaf, deemed this unjustified due to non-competitive rates and violation of Public Procurement Regulatory Authority (PPRA) Rule 20, 2004.

The audit findings highlighted poor planning, significant scope changes, and non-competitive rates. Management’s response, citing site requirements and World Bank approval, was deemed unacceptable.

The audit recommended an inquiry at a higher level to determine responsibility for awarding the redesigned project. Additionally, an audit of the Mangla Refurbishment Project revealed a loss of Rs. 3,176 million due to delayed bid proposal finalization.

In another section of the audit report, the contract, awarded to M/s GE Hydro France on January 2023at a constant price of Rs. 11,922.908, was processed through direct contracting, but WAPDA failed to finalize the proposal within the bid validity period, resulting in a higher contract price.

In addition, The Principal Accounting Officer was requested to schedule a Departmental Accounts Committee meeting to address these issues, but no meeting was convened despite reminders.

It is essential to determine responsibility and address these irregularities to ensure transparency and accountability in Pakistan’s infrastructure projects.

The Auditor General has called for a high-level inquiry committee to identify those responsible for the losses. This development raises concerns about transparency and accountability in Pakistan’s infrastructure projects.

The Auditor General’s findings highlight the need for stricter oversight and adherence to regulations to prevent such losses in the future.