HSIA third terminal’s costs hiked by Tk902cr despite 99.91% completion rate

Hazrat Shahjalal International Airport’s third terminal could not be opened completely in the last three years despite almost completing the construction with a 99.91% progress rate and finishing up the terminal building.

On the contrary, the authorities have decided to ramp up the construction costs by Tk902 crore despite almost 100% completion rate of the project.

Additionally, the project’s tenure is being extended by one more year, which will take the project costs to Tk22,267.67 crore from Tk13,610 crore, with a six-year project being turned into a 11-year project.

The first phase of HSIA Extension Project was approved in 2017 to make the country’s aviation sector modern and internationally standardised. The third terminal was built under the project with an initial cost of Tk13,610 crore and a timeline till June 2022.

However, the work was not completed according to schedule. The timeline was extended by three years till 2025 in the first revision, and by another year till June 2026 in the second revision, which also failed. As a result, the authorities have proposed another extension of the project timeline till June 2027.

According to project documents, the progress rate of the project has been 99.91% till June 2026, with less than 1% left. However, both the project timeline and costs have been proposed to be extended for this minimal work. The Civil Aviation Authority of Bangladesh (CAAB) has sent the third amendment proposal to the Planning Commission with an additional cost of Tk8,657.19 crore.

Besides time and costs overruns, the opening of the project is also facing a lag. Former prime minister Sheikh Hasina had launched a ‘soft opening’ of the terminal on 7 October 2023. At that time, it was said that the terminal would be opened in phases. Although three years have passed since then, the terminal could not be opened yet. On the contrary, Civil Aviation and Tourism Minister M Rashiduzzaman Millat has laid out a plan to launch another soft opening on 16 December 2026, adding that the government is initiating a process to sign an agreement with a Japanese company for the terminal’s operations.

Even though construction of the terminal building has been completed, prolonged delays in appointing an operator are adding to the government’s costs.

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Under the third revision of the project, Tk667.48 crore has been proposed for maintenance. The money will be spent until an operator is appointed. However, no allocation for maintenance was included in the original development project proposal. As a result, the additional expenditure has been added at the final stage of the project.

Recently, Japanese company Sojitz submitted a proposal to operate and maintain the terminal. Representatives of the company submitted technical and financial proposals at the headquarters of the Civil Aviation Authority of Bangladesh (CAAB) on 25 August. The proposals are now expected to be evaluated, followed by negotiations and discussions toward reaching an agreement.

Meanwhile, the cost of several components of the project is also increasing at the final stage. An additional Tk647.52 crore has been proposed for runway and taxiway-related infrastructure under civil works, while Tk372.94 crore has been proposed as additional expenditure for building works.

In addition, a proposal has been made to extend consultancy services by 359 person-months at an additional cost of Tk41.67 crore. However, at a meeting of the Planning Commission’s Project Evaluation Committee on 20 August, instructions were given to reduce these proposed expenditures.

Dispute over contractor’s claims

Questions have also been raised over the decision to pay a substantial amount to settle claims made by the project contractor, Aviation Dhaka Consortium (ADC).

A dispute arose between ADC and CAAB over various claims by the contractor. A dispute board was formed to resolve the matter, and the board issued its decision on 16 February.

Later, an Amicable/Global Settlement Committee was formed on 7 April to settle the contractor’s outstanding claims. Based on the committee’s recommendations, a decision has been taken to pay the contractor an additional Tk1,522.55 crore.

According to the dispute board’s decision, the payment of Tk1,579.51 crore in outstanding bills, along with Tk47 crore in penalties, also came under consideration.

Officials concerned said allegations of ambiguity and repeated changes regarding the project’s design, scope of work and various products have existed since the beginning. These factors contributed to the increase in project costs at the final stage, they said.

Audit objections and financial concerns

The project’s financial management has also raised several questions. Audit objections have been raised over additional allocations, VAT, customs clearance of goods and transportation costs, among other issues.

There have also been allegations that transportation costs for drying liquid mud were shown twice.

Questions have also been raised over additional payments made against the contractor’s claims concerning VAT payable to the National Board of Revenue (NBR).

An audit also raised the issue of Tk68.72 crore spent on clearing goods at the port being shifted from the contractor to the state.

Technical problems

Apart from financial irregularities, questions have also been raised about the project’s technical aspects.

Defects have reportedly been found in machines used in the Explosive Detection System, an important component of airport security. The machines allegedly take around 20 minutes to restart after a power outage.

Problems have also emerged with the backup power system because the tender documents did not specify the required UPS load calculation and configuration.

Water and mud have reportedly entered the duct bank constructed for electronic systems. Allegations have also been made that some products were supplied without complying with the required specifications.

Amid these irregularities and concerns, 121 audit objections related to the project remain unresolved.

Documents related to the project indicate that the objections stemmed from weaknesses in project supervision and various inconsistencies in financial management. The Implementation Monitoring and Evaluation Division (IMED) has urged authorities to resolve the outstanding audit objections promptly.

Experts say the third terminal is highly important for Bangladesh’s aviation connectivity and economy. Although it was intended to provide modern facilities and international-standard passenger services, the failure to fully launch its operations even after such a long period is disappointing, they said.