Friday, April 18, 2014

EXCLUSIVE: Bi-Courtney faces N30billion fine for abandoning Lagos-Ibadan road, but FG looks away

Published:

It has been sorrow, tears, and blood on the deadly Lagos-Ibadan road

For failing to fix the perilous Lagos-Ibadan expressway three years after securing a lavish concession of the road, Bi-Courtney, the Nigerian consortium now entangled in a festering controversy with federal and state road authorities, should pay fines in excess of at least N30 billion.
For each day the road is left unconstructed, the construction company is to pay a penalty of N100, 000 per kilometre, and same charge applies for a square meter of an undone bridge along the express route, the terms of the contract signed with the federal government states.
With nearly 135 kilometers, and at least half a dozen bridges, the fines tip into several billions for the more than 1,095 days – three years – the contract has been in limbo.

The provisions, a striking component in the concession agreement between the government and Bicourtney, highlight what seems an ambitious effort at averting the violations that have now crippled the road contract for years.

Yet, despite the failure, and a growing public frustration with the delay, the government and Bicourtney have cautiously evaded concerns about stipulated penalties including fines, timeline extensions and refunds.

Bicourtney denies liability for the hitch that has seen the contract not executed, while the federal government rules out exploring punitive measures in an ongoing review of the contract personally been supervised by President Goodluck Jonathan.

What the agreement says

An examination of the contract agreement by PREMIUM TIMES provides an insight into an extensively lucrative deal matched by a nearly equal dose of safeguards against breaches.

Widely presumed a failed concession deal after three years, the details point to likely measures each party is entitled to in the event where the other party is culpable for a breakdown.

Besides monetary fines, the government reserves a revocation right on the project, now one of the nation’s most contentious, the 103-page document says.

But for all such penalties, the agreement signed May, 2009 stipulates, it must be clear Bicourtney bears responsibility for the delay.

Where the government is liable for delay in the execution of the contract, there would be commensurate time extensions, alongside a defraying of the inflationary cost on the initially agreed construction value, the 103-page document adds.

Asked whether it believes delaying the delivery of the job has imposed such responsibilities on the company, or whether the Jonathan administration has raised such concerns with it, Bicourtney said penalties were not as literally stated in the agreement, and more so, it bore no responsibility for the delay.

“People think it’s all Bicourtney’s fault, but it is not,” company spokesperson, Dipo Kehinde, told this website recently. “There are many factors and interests disrupting the flow of our work.”

The company has also made no hints at pressing for a due extension of time if it appeared the government was responsible for the delay, although the administration has reportedly ruled out a rescheduling.

The federal government’s representative in the deal, ministry of works too, said a review of the contract was ongoing; hence, comments on any aspect of the concession could only be expected after the evaluation.

However, officials conversant with government plans, who spoke on condition of anonymity because they had no authority to speak on the matter, say there were no considerations of penalties against the company for the delay.

“No one is looking at that I can tell you in confidence,” one source told PREMIUM TIMES. “The concern is how to get the job on track. Like I said, the entire agreement is being reviewed.”

Such attitude by the two parties, itself a breach, strikes at the heart of the seeming negligence and indifference that have bedeviled the project and its troubled agreement for three years.

Awarded May 8, 2009, the Build, Operate and Transfer contract authorizing Bicourtney to construct the federal road and run it for 25 years, was awarded for N86.5 billion.

A public private partnership novel to the Nigerian infrastructural system, the contract was to allow the company four years to construct the busy expressway and, recoup its investments through a broad range of rights stretching from charging food vendors on the road, to vehicular tolling.

The rewards, amongst some of the most liberal and lucrative, authorize Bicourtney to earn from toll tariffs, all forms of advertising, rental fees on encroaching properties, licensing and charging of providers of all services including hotels, restaurants, termini, fuel stations, trailer and motor parks, fuel depot, telephone and internet services, vehicle repair.

Also, under the arrangement, the company will be entitled to licensing and charging, all for 25 years, the installation of pipes, cables, railway lines, drains underneath and oil, gas, water pipelines, storage facilities.

Each year however, the consortium will remit to government, N100 million annually (or its equivalent reflecting inflation) in addition to five percent of its gross profit, the agreement states.

The document was signed May 26, 2009 with a stipulated start of construction date set at within 90 days later – August 26.

Three years on, the job has yet to fully take off.

Such violation, save for any government-induced delay- which itself is punishable- or a force majeure involving natural disasters like earthquake, would have drawn severe penalties in billions of fines, if the concession agreement is adhered to.

“In the event that due to the fault of the concessionaire,” Article 9.3 of the document states, the concessionaire abandons or is deemed to have abandoned the construction works as provided under Article 9.4, the concessionaire shall pay to grantor by way of liquidated damages.”

The ensuing article 9.4 defines abandonment as failing to commence work within 30 days from the 90 days-commencement date, or failing to complete the job within 30 days after the target completion date-four years(except where extended.)

Both cases are excused only in the event of a natural disaster or the default of the federal government. Even so, failure to resume 21 days after the end of the disaster amounts to the same liability.

Such failure would attract “liquidated damages” of N100 thousand per kilometer of road or meter square of the bridges unconstructed each day.

And where the government is culpable for the delay, adequate extensions of schedule and payment for increase in construction cost are to be effected.

Government not keen on punishing Bicourtney

But amidst an array of blame-trading, the provisions are as breached as the terms of a construction that is meant to provide relief to the road’s thousands of daily users.

Official sources told PREMIUM TIMES the government is concerned more with delivering on the job than collecting fines.

The position rhymed with the position canvassed by the Works minister weeks back. “The government is already engaging the concessionaire in a bid to find the way forward,” the minister, Mike Onolememen, had told the media on the progress of the contract. “What is important is that government is committed more than ever before to delivering that road and doing it quickly considering the economic potential of the road.”

Last Tuesday, Mr. Jonathan called in a few officials including Mr. Onolememen, for deliberation on the prospect of salvaging the contract through an amendment of terms, officials privy to the discussions said.

No political will

It is yet unclear the extent of the reviews, and whether they will extend through the penal provisions of the agreement.

But presidential spokesperson, Reuben Abati, hinted on the president’s posture in an article last week citing Mr. Jonathan’s directive to Bicourtney to “fix the road or get out.”

However, government is yet to demonstrate the political will to invoke stipulated sanctions on Bicourtney for the devastatingly long delay by a company accused of defaulting on a key project, those who spoke to PREMIUM TIMES maintained.

Bicourtney too, has not said it is poising for reparations.

Yet, both sides inherently blame the other for the delay in a complex and costly  wrangling that impacts only on the lost lives and properties that the Lagos-Ibadan expressway, one the nation’s busiest highways, continue to record.

The blame game

While the government faults Bicourtney’s three-year tardiness, the company cite the late approval of its design in 2011 by the federal government, political interference, unresolved right of way, confiscation of its tools by the Ogun state government and an “unbankable” agreement as factors responsible for the delay.

For one, even where the right of way had been resolved, and the design long approved, Bicourtney has made it clear it lacks the funding to fix the road after local banks rebuffed its investment proposals.

The company says it now counts on a South African financier, Rand Merchant Bank, Yolas for funding.

Discussions on the partnership continued with the bank even up till last week, the company said.

One year to go

On another hand, were the company to have resolved its financial troubles earlier, the right of way, involving demolitions and compensations yet unresolved by the federal government, would seem to still have pandered into the hands of a company facing several obstacles in the execution of the job.

Bicourtney has a year to deliver on the project, a mission many believe is impossible, given that construction is yet to begin.

But the company spokesperson, Mr. Kehinde, remains optimistic that the road could be ready for commissioning by August 2013.

“If everyone played their roles, the construction does not take time,” he said.

GTBank SME MarketHub campaign