FIJI CANCELS ROAD CONTRACT WITH CHINESE CONTRACTOR

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SUVA, Fiji (Fiji Times, March 7) - The Fiji government will call for new tenders to complete a FJ$57 million [US$32.9 million] upgrade of the Kings Road after terminating a contract with a Chinese company.

The new deadline for the completion of the road project is 2008.

The Ministry of Works had awarded the Kings Road and Lodoni Road contracts to the China National Overseas Engineering Corporation in February.

Ministry of Works chief executive Anasa Vocea said the ministry was extremely disappointed with the Engineering Corporation's performance.

"The contract was supposed to be completed in a four-year period, starting from February 2001, at a cost of FJ$57 million [US$32.9 million]," he said in a statement.

"The time for the completion was extended to July 17 last year and by that time, China National Overseas Engineering Corporation had only completed an estimated 35 percent of the work. The Government claimed liquidated damages of FJ$8,000 [US$4,626] per day from the company for the delay in the completion but the contractor stopped work altogether with no progress being made since August last year," said the chief executive.

Vocea said China National Overseas Engineering Corporation had successfully completed similar work in Papua New Guinea.

The contract involved 50 kilometers [31 miles] of new road and 16 new bridges along the Kings Road in Tailevu.

[PIR editor’s note: Kings Road runs around eastern and northern Viti Levu island from Suva to Lautoka.]

Vocea said the Engineering Corporation had not provided enough equipment and organizational ability to make good progress.

"China National Overseas Engineering Corporation did not engage local sub-contractors to help with the work, even though this would have improved their progress," he said. "China National Overseas Engineering Corporation frequently complained about the weather but this was normal in Tailevu. Five months extension of the contract period was given in case of wet weather," he said.

A Government sub-committee was appointed to consider the Engineering Corporation's situation and decided that they should be given an opportunity to continue.

He said this was because the Engineering Corporation was a Chinese state-owned enterprise.

He said there was a desire to maintain the best possible relations with the Peoples Republic of China.

"However, this opportunity was conditional on China National Overseas Engineering Corporation agreeing to provide considerably increased performance (and) security sufficient to cover Government's additional costs if they failed to make good progress," said Vocea.

He said China National Overseas Engineering Corporation had declined to accept the conditions, leaving the termination of the contract the best way forward, to complete the project.

He said the poor rate of progress and subsequent refusal to continue with the work was a fundamental breach of the contract - entitling the Government to terminate it.

"Under the company's contract with the Government, it is liable to pay any additional cost incurred by the Government in completing the project, over and above what it would have cost if China National Overseas Engineering Corporation had completed the work themselves," he said. "China National Overseas Engineering Corporation will forfeit a bond of FJ$5.7 million [US$3.2 million] and this will be set against the additional cost of completion."

Vocea said the contract also allowed the Government to use all the equipment brought to Fiji by the company for the purpose of completing the work.

He said the Public Works Department was also working on the section of the Kings Road between Naibita and Nayavu to complete the upgrade of the stretch within the next two years.

A China National Overseas Engineering Corporation representative declined to comment on the Government's decision.

[PIR editor’s note: A recent Fiji Times editorial suggested that the Fiji government should be investing in new capital and equipment instead of spending government funds on uncertain projects (read the story).]

March 8, 2006

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