NAB KP Saves Rs168.5 Billion in BRT Project Scam

According to a press release, in 2018, NAB initiated an inquiry into the allegations of illegal award of contract, misappropriation of government funds and submission of bogus performance guarantees by the contractors in Bus Rapid Transit (BRT) Project Peshawar.

Progress in the case remained stationary for few years; however, the investigation was paced up under the command of the present DG and saved Rs168.5 billion through effective and efficient conclusion of investigation into a large scam of corruption.

Sources claim that this huge success could have been possible due to active collaboration of NAB with the Provincial Cabinet, Provincial Administration and the PDA and their positive role throughout the process of settlement agreement.

NAB investigation revealed that 6 contracts of civil works were illegally and unlawfully awarded to 04x Joint Ventures (JVs), consisting of 2 Pakistani firms and 3 international firms for 3 contracts of Roads (Reach-I to Reach-III) and 3 contracts of Buildings (Lot 1 to Lot 3).

According to the record submitted by contractors to Peshawar Development Authority (PDA), 03x international firms had 60 to 70 percent shares in the 04x JVs. However, NAB investigation revealed that the JVs between local and international firms were merely on paper, in order to grab the mega contract illegally and fraudulently by the local contractors through leveraging the goodwill and financial capacity of the international firms.

After winning these contracts illegally, the local and international firms made supplementary contract agreements, according to which the actual work was carried out by the local firms while the international firms were paid 2% of the total tender value in return for leveraging their names and financial capabilities.

In this way, these 3 foreign firms not only played their part in cheating a government agency (PDA) but also received about one billion rupees without doing any work.

Hence, NAB widened the scope of investigation and thoroughly analyzed more than 400x bank accounts related to the firms wherein it was corroborated that the local firms have transferred the amount to the bank accounts of the international firms on the same dates as mentioned in the supplementary contract agreements.

It is pertinent to mention here that PDA paid a 20 percent premium on the schedule rate to the contractors in order to complete the contract on international standards within a period of 06x months so that the better resources, modern technology and machinery of international firms be utilized in completion of the project.

However, in violation of these agreements, the contractor neither completed the project in 06x months nor the international firms ever visited Pakistan for completion of the project.

The investigation also revealed that the contractor had submitted 02x bogus local bank guarantees worth Rs2 billion to PDA. In addition to the above, 08x foreign bank guarantees amounting to Rs6.5 billion were also submitted in violation of the agreement.

 The local contractors had also submitted audit reports which were proved bogus by NAB through SECP and the Chartered Accountant of these firms.

It was also proved that the staff of the international firms claiming to work on the project, had visited Pakistan for eight to ten days only in the last five years.

The respective Embassies of the international firms fully cooperated with NAB in calling up of these firms. This Bureau in collaboration with their anti-corruption agency enforced the foreign firms to cooperate in the investigation.

As per PDA record, a claim of Rs11.653 billion payable to the contractors on account of retention money, pending IPCs and claims/bills decided by the Dispute Resolution Board in favour of the contractors was pending with the PDA.

Additionally, a claim of Rs55 billion on account of cost escalation, variation orders and interest on delayed payments was also submitted by the contractors with PDA.Moreover, the project cost was also escalated through revised PC-I.

However, the effective NAB investigation resulted in the retention of the original project cost and a huge sum of Rs. 9 billion of the exchequer was saved.

Moreover, the contractors had also filed a claim of 31.8 billion rupees (to the extent of Reach-I) before the International Court of Arbitration on account of increase in project cost, change in scope of work and interest on delayed payments. Apart from this, further claims in respect of the remaining 05x packages was also prepared to be filed with the ICA, thus the total claim of the contractor for all the 6 packages would come to Rs168.5 billion. Moreover, an estimated cost of Rs 2.9 billion was expected to be spent by PDA on these cases in the International Court of Arbitration.

During the investigation, this Bureau made effective efforts by placing all the concerned persons on the Exit Control List and also issued a Red Warrant of owner of one of these firms to bring him back to Pakistan through Interpol.

The tireless efforts and best strategy of investigation team of this Bureau resulted into increase in pressure on contractors, hence they approached the PDA and requested for an out of court settlement of the matter.

NAB KP not only supported the negotiations between the contractors and PDA but also supervised and facilitated the entire process of negotiation which resulted into a settlement agreement between them.

According to this agreement, the contractors withdrew all their claims including the case filed before the ICA, while PDA paid only Rs2.6 billion rupees to the contractors.

After the settlement agreement, in the first week of September, their representatives recorded statements before the Accountability Court Peshawar and submitted the said agreement. Soon thereafter, the contractor requested to withdraw its claim by e-mailing a copy of this agreement to the International Court of Arbitration, upon which the ICA confirmed disposing of the contractor’s claim through e-mail dated September 16, 2024.

Similarly, in the third week of September, all the parties submitted this agreement in the Peshawar High Court, where after, the Peshawar High Court disposed of all the related petitions.

The best efforts and ideal strategy of NAB Khyber Pakhtunkhwa resulted into saving of the provincial treasury from a loss of Rs168.5 billion which can now be spent on other public welfare projects.