Construction costs rise on late contracts

Firms feel the heat as cement, steel prices shoot up

Private companies shortlisted for developing six stretches in the third phase of the national highway programme are finding their cost calculations going awry because of a steep increase in the prices of steel and cement.

Despite the bidding process being completed in April 2004, contracts are yet to be awarded to these companies. This is causing problems for the companies as costs have gone up because of the long gestation period.

"There has been a 20-30 per cent increase in costs in the last nine months and this should be taken into consideration while awarding the contract," said Rumneek Bawa, director, DS Constructions.

Five construction companies "" Srei, Nagarjuna, Gammon, DS Constructions and Ircon "" had bagged a section each of the project, which is yet to be cleared by the public investment board.

"The cost considerations have changed radically since we first bid for the projects. The inordinate delay has resulted in a lot of uncertainty," Hemant Kanoria, vice-president and managing director of Srei, said.

Some companies are even hoping that they are allowed to revise their bids. "We hope the companies will be allowed to revise their price bids so that present cost considerations are taken into account," an official of a private company said.

Companies are, however, waiting for the project to be approved by the government before they start negotiating on this matter.

President of the National Highway Builders' Association (NHAI) IG Mamtani agreed the increase in steel prices had led to a 15-20 per cent jump in costs.

The NHAI officials, however, said the companies might not be allowed to change their bids. "There is no provision to allow more subsidy once the bidding has already taken place. If the bids have to be revised, the whole tendering process has to be repeated," an official said.

They pointed out that the companies could have withdrawn before the expiry of the bid guarantee date, which was to end six months from April 2004.

They added that all companies had agreed to extend the bid-guarantee date till February this year, indicating their interest had not waned as yet.

The Phase III of the programme involves widening of 10,000 kilometers of stretches, to be carried out on a build-operate-transfer basis.