Multi-specialty block at LNJP hospital: Probe sought as project cost doubles

What led to the cost escalation?

As per the officials privy to the matter, the initial proposal for the expansion — which began in 2021 — was to add 1,570 beds by constructing 22 floors and a double basement for establishing the new multi-speciality block at the hospital. However, the minutes of the meeting held recently by the Finance department’s Expenditure Finance Committee (EFC) highlight that a dispute with the contractor led to a cost escalation.

“The work was progressing smoothly until a dispute cropped up with respect to the contractual conditions and the amount payable towards the item of structural steel work, which in this building was/is a significant item. The contractor invoked dispute redressal mechanism under Clause 25 of the contract. The dispute was decided by an arbitral tribunal, and the arbitration award was granted in favour of the contractor on 29.05.2023…,” read the minutes.  Officials said that the Administrative department submitted that an expenditure of Rs 586.09 crore was incurred with nearly 55% of the project having been completed.

An official explained, “Seeing the likely expenditure for the completion of work exceeding the original A/A (administrative approval) & E/S (expenditure sanction) due to arbitration award, revision in GST rates from 12% to 18%, escalation in the material and labour cost, Covid… the revised preliminary estimate is received amounting to Rs 1,268.85 crore with Rs.682.75 crore set to cover the remaining work.”

Last year, PWD minister Parvesh Sahib Singh had said that the government sent a file to the Lieutenant Governor, requesting for a probe in the matter, claiming the project’s budget was inflated by Rs 650 crore during AAP leader Satyendar Jain’s tenure as the Health Minister.  “There is a difference between the budget sanctioned for the construction of a new block at LNJP Hospital earlier and today.  The amount has increased by Rs 650 crore. AAP leader Satyender Jain was both PWD and Health Minister. He would go on inspection and rounds in the hospital and suggest changes in the going project to benefit the contractors, which led to cost escalation. There was a scam of Rs 650 crore. We sent a file  to LG on this matter. He will forward it to either ACB Or CBI for inquiry in the matter,” Singh had said.

The AAP and Jain have not yet responded to the matter.

Lens on possible lapses

Among the major factors leading to the revision of the project cost was the payment of the arbitration award to the contractor amounting to Rs 94.61 crore, comprising Rs.82.44 crore towards the award amount and Rs.12.17 crore towards interest. “In view of the substantial financial implications involved, the Administrative department was directed to submit a comprehensive report on the arbitration award to the competent authority within a stipulated time frame. The report shall, inter alia, cover the background of the dispute, chronology of events, opinion of the Law department, basis of the award, financial implications, and the approvals at various stages,” the EFC said, as per the minutes.

Stressing on the arbitration award amount, it said, “…Considering the vigilance angle involved, it was directed that a specific vigilance enquiry be initiated to examine the decision-making process…and any lapses or irregularities, if found, the proceedings for fixation of responsibilities against the defaulter(s) may also be initiated after following the due procedure,” the minutes read.

Contractor under scanner

The government also directed the Health department to examine if any FIR had been registered against the previous contractor engaged for the construction of the hospital block.  “In the event that an FIR has been registered and the facts so warrant under the applicable procurement rules and guidelines, the Administrative department shall examine the feasibility of incorporating appropriate eligibility/restrictive conditions in the forthcoming tender documents so as to ensure that such contractor is not permitted to participate in the fresh bidding process for completion of the balance construction work, subject to the extant legal and contractual provisions,” the minutes read.

Officials said that EFC was informed that certain hospital projects are already under investigation by the Vigilance department or the Anti-Corruption Branch (ACB). “Following which, it was asked to obtain the latest status reports of such investigations through the Vigilance department from the Anti-Corruption Branch (ACB) and place the same before the competent authority for information and further appropriate action,” explained an official.

Estimates revised for two other projects

Apart from this, the government has also approved the revised cost for completing two other incomplete hospital projects at Madipur and Jwalapuri in West Delhi. The original cost of the Madipur hospital project was Rs 320.07 crore and an expenditure of Rs.262.90 crore has already been incurred. Physical progress of the work is 65%. To complete the remaining work, the department would need an additional amount of Rs 203.60 crore, said officials.

Similarly, the Jwalapuri hospital project’s original cost was Rs 319.65, of which Rs 260.51 crore has been incurred with a physical progress work 65%. To complete the project, an additional amount Rs.223.53 crore is required, said officials.

The expenditure went up in both the projects as former “Health Minister and AAP leader Satyender Jain convened a meeting and decided to add two additional floors, each to the hospital at Jwalapuri, Madipur and Hastsal,” as per the minutes of the meeting, “However, approval of the competent authority was not obtained by the Public Works Department before carrying out the construction of two additional floors (9th & 10th) at Jwalapuri and Madipur Hospital project,” read the minutes.

This was one of the reasons that led to cost escalation and non-approval of the revised preliminary estimate led the authorities to take action against the projects on February 19 this year to avoid creating financial liabilities without sanctioned funds.