Over 130 crore wastage due to design delays and cost overruns in two projects of (DESCO) and (DPDC)

Two projects to construct two crucial underground grid substations in the capital are likely to be cancelled after spending over Tk130 crore, in what appears to be colossal waste of public money, due to design delays and cost escalation.

The projects, initiated by the Dhaka Electric Supply Company Limited (DESCO) and Dhaka Power Distribution Company (DPDC) aimed at ensuring uninterrupted power supply at Gulshan and Karwan Bazar, started in 2018 with a total cost of Tk1,900 crore and were expected to be completed by December 2023.

However, the work has now come to a complete halt and the Planning Commission has recommended termination of the projects as the designs remained incomplete even after five years when revised proposals were made with significantly higher costs than the originally sanctioned budgets.

The Planning Commission's Implementation, Monitoring and Evaluation Division (IMED) has recently conducted a site visit and submitted a report recommending termination of both projects due to the high costs associated with the revised estimates.

The IMED has proposed extending the project duration by six months until June 2024 without extending additional costs.

This implies leaving the approved work unfinished and settling payments based on the work completed under the existing contracts.

According to IMED sources, the project “Construction of 132/33/11 KV Underground Grid Substation in Gulshan, Dhaka” was approved by the Executive Committee of National Economic Council (ECNEC) on 3 July 2018 with an allocated budget of Tk950.97 crore, spanning the period from 1 July 2018 to 31 December 2023.

As of November last, the cumulative financial expenditure for the project amounted to Tk71.9 crore, equivalent to 7.56% of the estimated total cost with a recorded physical progress of 9.80%.

Simultaneously, the construction project for the geo-geographic sub-centre in Karwan Bazar, Dhaka under the DPDC received approval for implementation from July 2018 to December 2023 with a sanctioned budget of Tk950.39 crore.

The financial outlay for the project until November last stood at Tk58.18 crore, representing 6.12% of the total project cost accompanied by a recorded physical progress of 8.37%.

Explaining the decision to halt the project midway, Engineer Shariful Islam, the project director of the 132/33/11 KV underground grid substation in Gulshan, said, "The project's cost has significantly exceeded the estimated cost. Contractors are demanding more than the cost estimated by Bangladesh University of Engineering Technology. They’re charging higher rates due to an increase in the dollar rate and the impact of the Ukraine-Russia conflict. As a result, the decision has been made to terminate the project."

The Power Division has decided to abandon the project, and both the Planning Commission and IMED have agreed with the decision, he said, adding that the Economic Relations Division (ERD) will now communicate this decision with Japan International Cooperation Agency (JICA).

A special meeting held on 26 September 2023 with representatives from the Power Division, DPDC, DESCO, Planning Commission, ERD and IMED resulted in the decision to conclude the projects without fulfilling the originally approved work.

DPDC and DESCO were advised to take necessary measures to wrap up the underground substation projects.

The original project under JICA funding involved an international consulting firm, adhering to JICA guidelines. However, financial evaluation reports indicated that costs significantly exceeded estimates, which leads to the decision to terminate the projects.

An IMED official acknowledged prolonged considerations regarding project implementation, citing excessive costs compared to the approved budget. The collective decision to terminate both projects without completion aligns with the consensus of all stakeholders involved.

The abandonment of the two underground grid substation projects highlights challenges in executing complex infrastructure endeavours, emphasising the importance of stringent planning and cost management to avoid disruptions in critical public projects.