Delhi Govt orders vigilance inquiry into Rs 94 crore LNJP Hospital arbitration award

The committee also ordered a vigilance enquiry into the handling of the arbitration award in the case of LNJP hospital, which it identified as one of the major reasons for the increase in the project’s cost.

In addition, the EFC approved revised estimates for the Madipur and Jwalapuri hospital projects, according to officials.

The health department has been directed to submit a detailed report on the arbitration award, examine whether any FIR had been registered against the previous contractor and provide the latest status on investigations by the Vigilance Department and the Anti-Corruption Branch (ACB) related to the hospital projects.

The revised proposal for the LNJP Hospital project will now be placed before the Council of Ministers.

According to an official document, the project was approved in 2019 at an estimated cost of Rs 533.91 crore to build a double-basement, 22-storey block for medicine, maternity and advanced paediatric services, adding 1,570 beds to the hospital.

Meanwhile, the health department said construction was progressing until a dispute arose over contractual conditions and payment for structural steel work. The contractor invoked the dispute resolution process under the contract and was later granted an arbitration award.

According to the department, the contractor then approached the Delhi High Court for implementation of the award, following which the amount was released, and the court attached the accounts of the PWD Health Zone to recover it.

The department informed the committee that Rs 586.09 crore had already been spent and the project was 55 per cent complete. It said the revised estimate of Rs 1,268.85 crore, including Rs 682.75 crore needed to complete the remaining work, was due to the arbitration award, the increase in GST from 12 per cent to 18 per cent, higher material and labour costs and changes made to hospital services after the COVID-19 pandemic, reports PTI.

The committee noted that the payment of Rs 94.61 crore arbitration award, including Rs 82.44 crore as the award amount and Rs 12.17 crore as interest, was one of the key reasons that led to cost escalations in medical infrastructure projects. 

It asked the department to submit a detailed report explaining how the dispute arose, the sequence of events, the opinion of the law department, the basis of the award, its financial impact and the approvals given at different stages.

It said the vigilance enquiry should examine how the arbitration award was accepted and the payment released, whether prescribed procedures were followed and whether there were any lapses. The committee said responsibility should be fixed if any irregularities are found.

The committee also asked the health department to examine whether any FIR had been registered against the previous contractor. If one has been registered, and procurement rules allow, the department should evaluate whether the contractor can be barred from participating in new tenders for the remaining work, it said.

The revised proposal estimates that the remaining work on the hospital project will take 30 months to complete, including six months for planning and 24 months for execution.

In the same meeting, the EFC approved and sanctioned a revised estimate of Rs 466.50 crore for the 691-bed Madipur Hospital project, including Rs 203.60 crore for the remaining work.

The health department said the project is 65 per cent complete and the revised cost was due to the addition of two floors, the increase in GST, higher material and labour costs and changes made after the COVID-19 pandemic.

The EFC also approved and sanctioned a revised estimate of Rs 484.04 crore for the Jwalapuri Hospital project, including Rs 223.53 crore for the remaining work. The health department said this project is also 65 per cent complete and cited similar reasons for the revised estimate.