Defects In PNG Port Project Admitted, Remediation Plan Underway

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Pacific Islands Development Program, East-West Center With Support From Center for Pacific Islands Studies, University of Hawai‘i

Chinese contractor to bear costs of fixing problems

PORT MORESBY, Papua New Guinea (The National, Feb. 12, 2016) – Kumul Consolidated Holdings (KCH) has admitted that there is a defect in Phase 1 of the Lae Port Basin project, and that an extensive remediation plan is being developed.

KCH said its consultant AECOM had identified the defect concerning the integrity of the sea wall slope protection.

"The defect was identified within the Defects Liability Period and KCH has addressed the matter with the contractor China Harbour Engineering Company (CHEC)," it said in a full-page advertorial in The National today.

It is in response to revelation of major structural defects in Phase 1 of the project, which was completed by CHEC at a cost of K809 million [US$262 million].

The National reported last Friday that the defects were uncovered by Australian engineering company AECOM, which was contracted by the State-owned Independent Public Business Corporation (now Kumul Consolidated Holdings) to perform a siltation study of the Lae Port Basin last year.

[PIR editor’s note: On Jan. 12, 2016 The National reported that ‘Kumul Consolidated Holdings (KCH) says Phase 2 of the Lae Tidal Basin project is on track. ... It has denied that the construction schedule is being delayed by the discovery of defects in Phase 1 of the project, which was completed in 2014.’ Further, The National reported that ‘Kumul Consolidated Holdings (KCH) says it is disappointed with the performance of a contractor which was engaged to review and approve all designs and construction works in Phase 1 of the Lae Tidal Basin project. ... KCH said the contractor, Korea Engineering Consultants Corporation (KECC), was not able to identify major defects in the Phase 1 design and construction.’]

According to a technical report obtained by the newspaper, AECOM noticed settlements of concrete units in the constructed revetments of Lae Port and indicated this to IPBC.

IPBC then engaged AECOM to perform a more in-depth study on the quality of construction and settlements of the revetments armour.

The report said IPBC and AECOM had agreed that an independent international consultancy firm be engaged to lead and perform the remediation works design.

KCH confirmed that an independent international consultant had been engaged and an extensive remediation plan was being developed.

"The remediation works will start soon and are in preparation at present," KCH said.

"The remediation works will not affect the normal port operation. The cost for the remediation works and all other costs related to this matter will be fully borne by CHEC under the Contracts Defects Liability Period.

"Not only in PNG, but also around the world, contract works of a magnitude are regularly subject to remediation works.

"Therefore a defects liability period is always put in place as part of conditions of contract to cater for those issues.

"This provides the client with the instrument to solve contractual matters under the contractor’s obligation to make good any defects and matters identified within the liability period.

"CHEC has accepted full responsibility and is a willing participant in the remediation process."

Prime Minister Peter O’Neill declared the wharf opened in December 2014. The port facility was handed to PNG Ports in April 2015.

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