Cost_Estimate_Review_report-_Bhasha.pdf

IQC 391 – I – 11 – 00003

AID – 391 – 14 – 00001

COST ESTIMATES REVIEW REPORT

Data Collection, Review and Preparation of International Tender document for the Diamer Bhasha Dam Project

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Disclaimer:

This Project is made possible by the support of the American people through the United

States Agency for International Development (USAID). The opinion expressed herein are those of the author(s) and do not necessarily reflect the views of USAID, A. A. Associates or

Techno-Consult International.

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Data Collection, Review and Preparation of International Tender document for the Diamer Bhasha Dam Project

Prepared by : Zehra Jabeen

Revised by : -

Approved by : Azher uddin Khan

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Data Collection, Review and Preparation of International Tender document for the Diamer Bhasha Dam Project

Table of Content

1.0 EXECUTIVE SUMMARY

2.0 SUMMARY OF FINDINGS

2.1 ASSESSMENT FACTORS

2.1.1 BASIS OF ESTIMATE

2.1.2 ESTIMATING METHODOLOGY AND PROCEDURES

2.1.3 ESTIMATE DOCUMENTATION

2.2 BRIEF REVIEW ON PREVIOUS ESTIMATES

2.2.1 CAPITAL COST ESTIMATE (1984)

2.2.2 CAPITAL COST ESTIMATE (2004)

2.2.3 CAPITAL COST ESTIMATE (2008)

2.2.4 COST ESTIMATE (JUNE 2009)

3.0 ESTIMATE VALIDATION

3.1 INDICATOR -1 INFLATION

3.2 INDICATOR-2: DOLLAR PAK RUPEE EXCHANGE VARIATION

3.3 INDICATOR-3: CONSTRUCTION COST VARIATION

4.0 CONCLUSION AND RECOMMENDATIONS

4.1 UPDATED COST -2013

4.1.1 Estimate Basis

4.1.2 Updated Indirect Costs

4.1.3 Updated Direct Cost

4.1.4 Updated Incidental Costs

4.1.5 Overall Updated Cost Estimate

5.0 BIBILOGRAPHY OF AVAILABLE DOCUMENTS

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ANNEXURES

ANNEXURE A – LAND ACQUISITION AND RESETTLEMENT

ANNEXURE B –KKH RELOCATION FROM SHATIAL TO RAIKOT

ANNEXURE C – WAPDA COLONY IN THOR VALLEY

ANNEXURE D – DUTY AND TAXES

ANNEXURE E – ESCALATION DURING CONSTRUCTION

ANNEXURE F – INTEREST DURING CONSTRUCTION (IDC)

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1.0 EXECUTIVE SUMMARY

The Diamer Basha Dam is located on upper Indus River some 315 km upstream from

Tarbela dam and about 40 km downstream of Chilas Town in Northern Areas, now Gilgit

Baltistan. Geographically, the proposed Project is located between Longitude 73 to 75 E and Latitude 35 to 36 N and bounded by districts of Kohistan, Diamer, Gilgit and Chitral lying in south, east, north and west, respectively. In its finally proposed configuration, it envisages the construction of a Roller Compacted Concrete (RCC) gravity dam and the allied appurtenant structures on the Indus River. The proposed dam will impound 15% of the annual river flow. The DBDP will provide 7.9 billion cubic meters (BCM) or 6.4 million acre feet (MAF) of utilizable storage and an installed capacity of 4,500 MW yielding about

18,100 GW h annually. An additional annual energy of about 1100 GWh will also be generated at Tarbela due to its conjunctive operation with Diamer Basha reservoir.

USAID is obliged by its policies to conduct a review of the Diamer Basha Dam engineering design and cost estimates and to ensure the environmental effects of the construction are addressed in accordance with 22 CFR216 and host country environmental regulations, including environmental and social soundness of the project and its approach. For this purpose USAID has engaged AA Associates to carry out the required studies.

This report is prepared as a part of this study and the Scope of work (SOW), dealt under this report is specific to Review of Cost Estimates. The Estimate Review carried out is typically concentrated and precise as defined by the project scope documents. We have focused on structuring an estimate review process for the estimates that were been prepared previously in the following studies to ensure that estimates are well documented, consistent, reliable and appropriate for their intended use.

Feasibility Report MONENCO, 1984

Feasibility Report NEAC, 2004

Design Report by Diamer Bhasha Contractors (DBC), 2008

As per SOW the basis of review analysis should be the Cost Estimates, prepared by DBC in the year 2008 but the Contractors were officially refused by WAPDA to provide the

Engineers Estimate -2008. However the project PC-1 prepared in Year 2009 was provided.

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With the consent of USAID, it is assumed that the Estimate presented in PC-1 are valid up to year 2009 and are further validated to year 2013 w.r.t Inflation, dollar-Rupee exchange variations and in general w.r.t construction items cost variation.

This report is divided into four main sections. Section-1 ‘ Summary of Findings’ comprehends the review of estimates prepared by others , accomplished by a critical assessment of the estimate and its documentation, and evaluating the level of diligence used in preparing the estimate etc. This section also elucidates a brief summary of all cost estimates reports collected. Section- 2 ‘Estimate Validation’ covers the analysis done for the Cost Estimates validation w.r.t three main Indicators: namely Inflation, Dollar rupee exchange rate variation and Construction cost variation, in line with requirement of the SOW. Section-3 “Conclusion & Recommendations” presents the conclusions inferred from the review process and the recommendations thereof.

Whereas Section -4 ‘Bibliography of collected documents with short summary’, will contain a Bibliography of all collected documents w.r.t cost estimates.

For the fulfilment of objectives, findings are presented in the report that covers almost every major aspect concerning Cost Estimates and their validity as of today is discussed in detail. Major Conclusions are as follows:

The estimates prepared in PC-1 (2009) are assumed to be valid, reliable and appropriate for further use.

The Updated overall cost estimate (Year 2013) amounted to US$ 13.32 Billion.

The core project cost is estimated as US$ 12.10 Billion.

Cost are converted in US$ at the prevailing exchange rate of Rs. 110.

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2.0 SUMMARY OF FINDINGS

As per SOW the basis of review analysis should be the Cost Estimates, prepared by DBC in the year 2008. For the fulfilment of review tasks i.e. To check the detailed Basis of estimate, estimating methodology & procedures and to evaluate their validity, a detailed rate analysis was required therefore the Contractor requested WAPDA to provide the

“Detailed Engineers Estimate Prepared by DBC in 2008” and the BOQ of the 5 project

Lots. The contractor is provided with Project PC-1 prepared in Year 2009.

We started our work with the Estimate presented in PC-1 as valid up to year 2009 and we have further validate it to year 2013 w.r.t Inflation, dollar-Rupee exchange variations and in general w.r.t construction items cost variation. As no information on the item wise cost is available therefore we have not commented on impact of construction cost variation of individual construction items on overall project cost. Further, we are not in a position to comment on the validity of the cost estimate prepared by DBC Consultant in

2008.

2.1 ASSESSMENT FACTORS

2.1.1 BASIS OF ESTIMATE

We have assessed the MONENCO, 1984 and NEAC, 2004 reports on the basis of following:

criteria:

1. Have all engineering deliverables used in developing the estimate been identified?

2. Have all scope assumptions been acknowledged?

3. Whether the methods had simulated each construction activity in such a way as to fit it into the available time span in the proposed construction schedule?

4. Is the planning basis, which includes the schedule, resource plan, and construction plan reasonable?

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After comprehensive assessment, we have come to the findings detailed below:

Each and every Engineering component of the dam has been identified and quantified in developing the estimates.

Both the reports are comprehensive and acknowledge all scope assumptions.

In both the reports (1984 and 2004) Construction Methodology is adopted keeping in mind the terrain, access to site, remoteness of site and seasonal variation in river flow so that all the activities are completed in the desired time frame.

Each and every planning basis has been clearly identified for both the reports. A realistic approach has been adopted to evaluate the amount of material, labor

(skilled and un-skilled) and equipment. All the constraints (availability of resource, transportation, weather etc.) related to labor, equipment, materials and consumables have been focused which makes the schedule, resource plan etc.

reasonably practical.

2.1.2 ESTIMATING METHODOLOGY AND PROCEDURES

The estimating methods, techniques and procedures that were used in preparing the estimates, were evaluated on following criteria:

1. Are they appropriate for the level of information available and project type?

2. Is the level of detail in the estimate sufficient for the purpose of the estimate?

3. What adjustments were made to the estimate for location, complexity, etc?

The assessment has yielded the results out lined below:

The Pre-Feasibility Report 1984 and Feasibility Report 2004 both have provided appropriate level of information regarding the estimate techniques and procedures. All the assumptions made for the estimates have been reported. Similarly, the procedure adopted for establishing the unit rates and different factors applied to these unit rates have been clearly specified.

The level of detail provided in both the estimate are sufficient for the purpose of the estimate The 1984 report at pre-feasibility stage has excluded price escalation during construction, duties and taxes on imported

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Page 10 of 39 AAA-TCI construction item, installed plant and interest during construction. All these costs have been estimated for the report 2004 being at feasibility stage.

In the pre-feasibility study of Bhasha Dam (1984), it is stated that adjustments for escalation and local conditions were applied to civil works.

Temporary camps and offices were priced on the basis of local housing cost in

Chillas, adjusted for type and quality of buildings required in Bhasha Dam.

Overtime, leaves and holidays were patterned on those developed by Indus

River Contractors at Tarbela with modifications for Bhasha.

For the Feasibility report 2004 wage rates for Chilas & other areas of country were obtained for skilled and unskilled labour. Work Hours, leaves, overtime

& holidays were patterned on Ghazi Brotha Hydro Project &Mangla Raising

Project with minor modifications reflecting the remoteness and climatological conditions of site. However no information is provided in both the reports about the factor by which the data were modified.

2.1.3 ESTIMATE DOCUMENTATION

The effectiveness of an estimate review relies on the information that is presented, and the manner in which it is presented. It is found that for both the estimates:

The estimate summary and detail pages are well organized and presented at an appropriate level of detail for both the estimates.

Every cost appearing on the estimate summary traceable to the estimate detail and other estimate backup.

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2.2 BRIEF REVIEW ON PREVIOUS ESTIMATES

2.2.1 CAPITAL COST ESTIMATE (1984)

2.2.1.1 Estimate Basis

The cost estimate (October 1984) was based on price level of January 1982.

2.2.1.2 Indirect Costs (Preliminary Works)

Indirect costs were estimated in rupees and then converted in US$ at the prevailing exchange rate of Rs. 10.00. These covered: -

i. Temporary camps and other facilities: Temporary camps and offices were priced on the basis of local housing cost in Chillas, adjusted for type and quality of buildings required.

Following assumptions were made:

Running cost for WAPDA and consulting Engineers camp and vehicles (400) were estimated on the assumption that peak staff will be present for a total duration of 80 months.

Running costs for contractor’s camp will be covered by their jobsite overheads.

Electric power will be provided by diesel generators having total capacity of

15MW.

Allowance for renovation of temporary camps into permanent villages is also included.

Peak Engineering Man power is estimated at about 200 (supervising and ancillary personal included) with a total man-months of 16,800 at assumed average unit cost of US$5000.

Project Management expatriate team has 100 members with total man-months of 10,400 at average unit cost of US$9000.

Cost and model/material testing and outside consultants = US$10Million.

Allowance for renovation of temporary camps into permanent villages is also included.

ii. Engineering and Project management

Peak Engineering Man power is estimated at about 200 (supervising and ancillary personal included) with a total man-months of 16,800 at assumed average unit cost of US$5000.

Project Management expatriate team has 100 members with total man-months of 10,400 at average unit cost of US$9000.

Cost and model/material testing and outside consultants = US$10Million.

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iii. Owner s expenses:

Peak WAPDA Staff = 1300 persons with 111,260 man-months.

Major classification ratio for Peak WAPDA staff is same as Tarbela, estimates includes allowances for travel, equipment and consumable items.

iv. Physical Contingencies: Following values were adopted:

Low level outlets civil works 5% Dam embankment, spillway mechanical equipment etc. 10% Spillway and switchyard civil works, switchyard elec. Equipment 15% Upstream & downstream cofferdams, Karakoram

Highway Upgrading 20% Land & Water tights, preliminary works 25% Dam cut-off walls, foundation treatment 30%

2.2.1.3 Direct Cost

Direct cost for the core project were computed in US$ for the foreign component while local component was converted to US$ at the prevailing exchange rate of Rs. 10.00.

2.2.1.4 Incidental Costs

These included:

i. Engineering and Management at 9.89 % of Direct Cost.

ii. Physical contingencies varies from 5-30% of Direct Cost

iii. Duty and Taxes US $ 100 Million.

iv. Allowances vary form 0-10% of the corresponding section subtotal depending upon the item involved.

v. Interest during Construction (IDC) is not included.

2.2.1.5 Overall Cost Estimate

The resultant overall cost estimate amounted to US$ 3.25 Billion as summarized in

Table-2.1.

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Local Foreign Total

A. Base Cost

1. Indirect Costs 206,795 21,265 228,060

2. Direct Costs 1,036,187 1,579,165 2,615,352

3. Compensation & Resettlement 46,906 - 46,906

4.

Temp. Facilities running cost &

Power Supply 53,728 2,856 56,584

5.

Engineering and Project

Management 117,986 140,738 258,724

6.

Owner s staff and administration 40,295 1,304 41,599

B. Grand Total A (1+2+3+4+5+6) 1,501,897 1,745,328 3,247,225

C. Breakdown Adjustment -7,727 7,732 5

Total Project Cost 1,494,170 1,753,060 3,247,230

1.494 1.753 3.247

Note:

a) January 1982 Price Level

Estimated Cost

(US$ thousand)Description

Say (US$ Billion)

Indirect Costs converted to US$ at the conversion rate of 10.00 as on .

Table-2.1: Summary of Overall Project Cost Estimate (1984)

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2.2.2 CAPITAL COST ESTIMATE (2004)

2.2.2.1 Estimate Basis

The cost estimate (August 2004) was based on price level of March 2004.

2.2.2.2 Indirect Costs

Indirect costs were estimated in rupees and then converted in US$ at the prevailing exchange rate of Rs. 58.00. These covered: -

i. Relocation & Up gradation of KKH 110 km of KKH will have to be relocated at higher level to avoid submergence.

Bridge across Indus River at Thahkot will have to be re-constructed on strengthened.

The client has hired a separate consulting group to design the up gradation and rehabilitation of KKH from Hasanabdal to Sazin, relocate Sazin to Raikot Bridge and prepare cost estimates, which is used in this feasibility report.

ii. Temporary Facilities:

About 400 utility vehicles will be needed for WAPDA staff, whose cost is included in engineering component.

Peak staff will be present for a total duration of 66 months.

Power will be provided by diesel generators with a total capacity of 25MW.

An allowance for renovation of temporary facilities to permanent facilities has been included in the estimates.

iii. Engineering and administration Cost:

Preparation of detailed design and Contract Documents will require 580 man months of expatriate staff and 4,200 man-months of local staff.

Construction phase require 1,524 man-months of expatriate staff and 27,600 man-months of local staff.

Project Management expatriate team = 20 members at peak total man-months = 1,524 at an average unit cost of US $ 25,000/ man-months Project Management local team = 230 members at peak Total man-months =15,120 at average unit cost of US $ 2070/ man-month.

WAPDA staff required at peak = 300, this no. divided into major classes in the same ratios as Tarbela, GBHP as well as Kalabagh estimates.

Total man-months for WAPDA staff = 28,400.

2.2.2.3 Direct Cost

Direct cost for the core project were computed in US$ for the foreign component while local component was converted to US$ at the prevailing exchange rate of Rs. 58.00.

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2.2.2.4 Incidental Costs

These included:

i. Engineering and Management at 6.9 % of Direct Cost.

ii. Physical contingencies at 10% of Direct Cost

iii. Duty and Taxes: Cost related to duties and taxes on imported equipment and installed plants have been excluded from the base cost of the project. However, they have been estimated and included in the capital cost summary. It is taken as 10.69% on local and at 0% of foreign costs of Direct Cost plus incidental costs.

iv. Escalation during construction assumed at 18.79% on local and at 13.17% of foreign costs of Direct Cost plus incidental costs.

v. Interest during Construction assumed at 24.95% on local and at 14.13% of foreign costs of Direct Cost plus incidental costs.

2.2.2.5 Overall Cost Estimate

The resultant overall cost estimate amounted to US$ 4.609 Billion summarized in Table-

2.2.

Table-2.2: Summary of Overall Project Cost Estimate (2004)

1. Indirect Costs 498,580 73,667 572,247

2. Direct Costs 1,417,777 1,966,582 3,384,359

3.

Engineering and Project

Management 154,901 78,666 233,567

4. Sub Total A(1+2+3) 2,071,258 2,118,915 4,190,173

5. Physical Contingency @ 10% 207,126 211,892 419,017

6. Total B (4+5) 2,278,384 2,330,807 4,609,190

2.2784 2.3308 4.609

Note:

a) March 2008 Price Level

Estimated Cost

(US$ Thousand)Description

Indirect Costs converted to US$ at the conversion rate of 58.00 as on March 2004

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2.2.3 CAPITAL COST ESTIMATE (2008)

2.2.3.1 Estimate Basis

For the purpose of PC-I Proforma (December 2008), the cost estimate was based on price level of March 2008.

2.2.3.2 Indirect Costs (Preliminary Works)

Indirect costs were estimated in rupees and then converted in US$ at the prevailing exchange rate of Rs. 62.75. These covered: -

Land Acquisition and Resettlement: As per PC-I Proforma (Part-1) “Acquisition of Land and Resettlement for Diamer Basha Dam Project” approved by ECNEC on 06 November 2008 for Rs. 60.00 Billion. This covered all costs except interest during construction.

KKH Relocation from Shatial to Raikot comprising the following two parts

- Shatial to Thor Nullah

It was estimated to be around 35 km including link from Thor Nullah to existing KKH.

The cost was based on PC-I Proforma for ‘Construction of By-pass Shatial – Thor

Nullah – Existing Karakoram Highway (KKH) submitted by WAPDA to GoP in August

2008 and included all costs. It was US$ 63 million.

- Thor Nullah to Raikot

Cost for this portion for relocated KKH was worked on proportionate basis of length of Shatial – Thor Nullah portion as at (a) above. Cost was estimated to be US$ 228 million.

WAPDA Colony in Thor Valley: As per estimate based on preliminary design and included all costs. Total cost was estimated as US$ 65 million.

2.2.3.3 Direct Cost

Direct cost for the core project Lots 1 to 5 were computed in US$ for the foreign component while local component was converted to US$ at the prevailing exchange rate of Rs. 62.75.

2.2.3.4 Incidental Costs

These included:

i. Engineering and Management at 6% of Direct Cost.

ii. Physical contingencies at 3% of Direct Cost

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iii. Duty and Taxes at 5% on foreign component of electrical and mechanical equipment and machinery in respect of Lot 1 to 5 and shown as local cost.

iv. Escalation during construction assumed at 6.5% on local and at 2% of foreign costs of Direct Cost plus incidental costs as per i, ii and iii above.

v. Interest During Construction (IDC) assumed at 10.21% on both local and foreign components of sum of Direct Cost and incidental costs from (i) to (iv) above and shown as local cost.

2.2.3.5 Overall Cost Estimate

The resultant overall cost estimate amounted to US$ 11.34 Billion as summarized in

Table-2.3.

Table-2.3: Summary of Overall Project Cost Estimate (2008)

1. Indirect Costs 1249 64 1313

2. Direct Costs 1862 3165 5027

3.

Engineering and Project

Management 112 190 302

4. Physical Contingency 56 95 151

5. Total A (1+2+3+4) 3279 3514 6793

B. Duties and Taxes 86 0 86

C. Escalation During

Construction 937 457 1394

D. Interest During

Construction 3066 0 3066

E. Total Financial Cost

(A+B+C+D) 7368 3971 11339

7.37 3.97 11.34

Note:

a) March 2008 Price Level

Estimated Cost

(US$ Million)Description

Indirect Costs converted to US$ at the conversion rate of 62.75 as on 31 March 2008

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2.2.4 COST ESTIMATE (JUNE 2009)

2.2.4.1 Necessity

As part of ‘Project Scrutiny’ by the Planning and Development (P&D) Division of GoP, it was desired that:

i. Clarification in respect of following is provided for the various cost estimates covering Lot 1 to 5.

a. Cost estimate of tunnels including unit cost

b. Basis of each cost estimate when prepared

c. Brief description of survey, drawing and their activities for design of each tunnel

d. Details of each lot.

ii. US$ cost be converted into Pak Rupees on the basis of prevailing exchange rate

(assumed at Rs. 80.00)

iii. The interest during construction (IDC) is taken at 9.96% on local cost and 12% on foreign cost.

iv. WAPDA authorities should discuss the demand of vehicles and manpower with the Finance Division (Development Wing) as per proceedings of special CDWP meeting held in the Planning Commission on 17 July 2009.

v. Cost of PC-I be updated to the price level of June 2009.

2.2.4.2 Direct Costs

These cover the costs for implementation of core project through lots 1 to 5. DBC had estimated the cost for individual lots based on March 2008 prices. It is considered that these costs are still valid and can be adopted as representative of current (June 2009 prices) due to the following reasons:-

i. Foreign Component: it is based on March 2008 prices and reflective of the international prices of: labour; crude oil; copper; steel; and aluminium. A little later, these prices somewhat soared but have now dropped to March 2008 level or even below. Similarly, the parity rate between US$ and Euro has improved from 1.471 to 1.339 during the first half of 2009.

ii. Furthermore, there is no inflation in the international market due to downturn of the global economy over the last year or so. In fact, it is very likely that there might be some recession in the developed economies. Therefore, the cost estimates of foreign components of March 2008 can be assumed to reflect the current (June 2009) prices.

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iii. The costs of locally available labour and materials (aggregate, sand, steel, cement, and slag) have significantly increased since March 2008 due to inflation of well over 20%.

However, these are more than compensated by over 27% (80 ÷ 62.75) devaluation of rupees against US$. Therefore, these increases will be automatically accounted for by converting the US$ equivalent of local currency in March 2008 estimate by applying the rate of Rs. 80 for conversion to the current (June 2009) rupees. Therefore, the local component of local direct costs by converting March 2008 US$ to the current rupees, can also be assumed to reflect June 2009 prices.

2.2.4.3 Indirect Costs

The previous estimates in Pak Rupees have been updated on the following basis:-

i. Land Acquisition and Resettlement: No change in the cost as per approved PC-I of November 2008.

ii. KKH Relocation: Updation on the basis of per km cost according to the latest (April 2009) PC-I for the first segment of By-pass from Shatial to Thor Nullah.

iii. WAPDA Colony in Thor Valley: As per Engineer’s Estimate (June 2009) based on the tender design.

2.2.4.4 Summary of Overall Costs

By adopting the basis described above, the overall project costs have been updated to the June 2009 prices including conversion to Pak Rupees with a summary in Table-2.4:-

1 Indirect Costs (Preliminary Works) 1091 4.49 1096

2 Direct Costs (Lots 1 to 5) 1862 3165 5027

Incidental Costs (Eng. & Admin /

Physical Contingency) 168 285 453

4 Total Base Cost (1+2+3) 3121 3454 6576

5 Other Costs (Duties, Escalation, IDC) 4145 457 4603

6 Total Financial Cost (US$) 7266 3912 11178

Say (US$ Billion) 7.266 3.912 11.178

Estimated Cost

(US$ Million)Sr.No. Item

Table-2.4: Summary of Overall Project Cost Estimate (2009)

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2.2.4.5 Reduction in Costs over estimate of 2008

It can be seen the Cost as updated for year 2009 is less than that of year 2008. It is due to reason that indirect cost are reduced to US $ 1096 as compared to US $ 1313,in the estimates of 2009.They have updated the cost for Relocation of KKH on the basis of per km cost according to the PC-I (April 2009), for the first segment of By-pass from Shatial to Thor Nullah and the cost for the section Thor Nullah to Raikot has been worked on proportionate basis. Also the cost for WAPDA Colony is updated as per Engineer’s

Estimate (June 2009) based on the tender design. These resulted in reduction of cost over 2008 estimate.

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Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total

1. Indirect Costs 207 21 228 499 74 573 1249 64 1313 1091 4 1096

2. Direct Costs 1036 1579 2615 1418 1967 3385 1862 3165 5027 1862 3165 5027

Compensation and

Resetlement 47 - 47 - - - - - - - - -

Temp. Facilities running cost & Power Supply 54 3 57 - - - - - - - - -

Engineering and Project

Management 118 141 259 155 79 234 112 190 302

6 Physical Contingency - - - 207 212 419 56 95 151

Owner's Staff and

Administration 40 1 42 - - - - - - - - -

B. Total A (1+2+3+4) 1502 1745 3247 2278 2331 4609 3279 3514 6793 3121 3454 6576

C. Breakdown Adjustment -8 8 5 - - - - - - - - -

D. Duties and Taxes - - - - - - 86 0 86

E. Escalation During

Construction

- - - - - - 937 457 1394

F. Interest During

Construction

- - - - - - 3066 0 3066

G. Total Financial Cost

(A+B+C+D) 1494 1753 3247 2278 2331 4609 7368 3971 11339 7266 3911 11178

1.49 1.75 3.25 2.28 2.33 4.61 7.37 3.97 11.34 7.27 3.91 11.18Say (US$ Billion)

Estimated Cost

Estimated Cost

Cost in Million US$

Estimated Cost

2009Description

Estimated Cost

285 453

4145 457 4602

Table-2.5: Comparative Summary of Cost Estimates (1984-2009)

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3.0 ESTIMATE VALIDATION

3.1 Indicator -1 Inflation

A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI in Pakistan is defined by the Bureau of Statistics as "a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services. It is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. It is one of several price indices and the annual percentage change in a CPI is used as a measure of inflation.

Price inflation, is the persistent rise in general price level in a country, may be described as creeping, running or galloping depending on its pace of rise in a country. Inflation in

Pakistan has entered into the regime of running inflation intimating to the managers of the economy the seriousness of unmanageable feature of macro-economic variables in the country. Several studies have been conducted to explore the causes of inflation during the

2000’s. Generally, monetary growth, public policy, administered prices, rise in the prices of imported goods, inflationary expectations and output growth are termed as the determinants of inflation in Pakistan.

For evaluating the effect of inflation on estimate of 2009, we have taken the real time historical data from Pakistan Bureau of statistics for local cost, which is presented in the form of Bar chart. It is evident that the prices in 2013 are increased by 54% as compared to year 2009.Hence the Local cost of 2009 estimate are being increased by this rate to reach at 2013 price level.

0.00%

50.00%

100.00%

150.00%

200.00%

2009 2010 2011 2012 2013

Pakistan Comsumer Price Index

CPI

http://en.wikipedia.org/wiki/Market_basket http://en.wikipedia.org/wiki/Market_basket http://en.wikipedia.org/wiki/Final_goods http://en.wikipedia.org/wiki/Consumer_Services http://en.wikipedia.org/wiki/Bureau_of_Labor_Statistics http://en.wikipedia.org/wiki/Market_basket http://en.wikipedia.org/wiki/Price_index http://en.wikipedia.org/wiki/Inflation

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94.00%

96.00%

98.00%

100.00%

102.00%

104.00%

106.00%

108.00%

110.00%

2009 2010 2011 2012 2013

Dollar Escalation

Dollar escalation

For foreign component of cost, the escalation in dollar is being considered and real time data is derived from US Bureau of Statistics. As compared to Year 2009 prices the dollar has escalated by 8.67% .Therefore the foreign component of cost is being increased.

3.2 Indicator-2: Dollar Pak Rupee Exchange Variation

Real exchange rate being a measure of international competitiveness helps to identity currency effects and inflation and relative cost or price expressed in common currency. The exchange rate has played a critical role in the trade regime and the process of industrialization in Pakistan.

The effect of Dollar rupee exchange rate variation on cost estimates of 2009 is assessed .An analysis is done on the historical data over the period 2009 to 2013 and its effect on overall cost is evaluated to validate the estimates as of year 2013 and are presented in the incoming section ‘conclusion and recommendations’.

The exchange rate at which the Cost estimate of 2009 was prepared was rupee 80 to a dollar, whereas Pak rupee is assumed as 110 to a dollar for this estimate, It is worthwhile to mention that the basis of our estimate (PC-1 2009) was in Pak rupee therefore as a result of devaluation of Pak rupee against dollar, the cost are converted in dollars by accommodating these variation in exchange rates over the year 2009 to year 2013.

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3.3 Indicator-3: Construction Cost Variation

The goal is to check that selected areas of estimate that can withstand further scrutiny.

Major construction items are identified as Steel (reinforcement, structural steel, rock bolts etc.), Cement ( all types used)and Aggregate (coarse & fine).The estimated cost of these construction items is required to be established as of today to present a picture of cost variation over the study period. But as no information on the item wise cost is made available to contractor therefore we have not commented on impact of construction cost variation of individual construction items on overall project cost, however we have generally analysed the PC-1, construction cost of materials and come up with a cost of

Rs. 188.00 Billion as indicated in Table 2.5 below, as. Compared to Rs. 120.00 Billion in

PC-1 of year 2009.

It is specifically noted that in PC-1, for Pozzolan, local moraine deposits were considered suitable and its cost was taken as 50% of ordinary port land cement (OPC).Whereas the real picture is that the Pozzalon are not manufactured in Pakistan and are exported from other countries for use in construction and are more than double the cost of OPC, as can be seen from the table below.

S.No DESCRIPTION OF MATERIAL UNIT RATE QUANTITY

COST RS.

(BILLION)

1 STEEL

I Reinforcement Tonne 85,000 596,606 51

II Structurat steel Tonne 160,000 22,400 4

III Rockbolt m 1,800 3,009,962 5

IV Tendons m 8,000 613,430 5

2 CEMENT - 0

I Ordinary Portland Cement Tonne 11,500 2,000,000 23

II Pozzolan Tonne 27,000 2,000,000 54

3 AGGREGATE

I Coarse Aggregate cu.m 1,600.00 20,000,000 32

II Fine Aggregate cu.m 1,400.00 10,000,000 14

SUB TOTAL ( 1 )

SUB TOTAL ( 2 )

SUB TOTAL ( 3 )

TOTAL ( 1 - 3 )

Table-3.1: Estimated Cost of Construction Materials Item (2013)

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4.0 CONCLUSION AND RECOMMENDATIONS

4.1 Updated Cost -2013

As already discussed, it is assumed that the Estimate presented in PC-1 are valid up to year 2009 and they are further validated to year 2013 w.r.t Inflation, dollar-Rupee exchange variations and in general w.r.t construction items cost variation which are summarised in this section.

4.1.1 Estimate Basis

For the purpose updating the cost, the estimate is based on price level of December

2013 (US $ 110).

4.1.2 Updated Indirect Costs

Indirect costs are estimated in rupees and then converted in US$ at the prevailing exchange rate of Rs. 110. These covered: -

Land Acquisition and Resettlement: As per PC-I Proforma (Part-1) “Acquisition of Land and Resettlement for Diamer Basha Dam Project” approved by ECNEC on 06 November 2008 are escalated to 2013 level. This covered all costs except interest during construction. (Refer Annex. A-1 to Annex. A-3.)

KKH Relocation from Shatial to Raikot comprising the following two parts

- Shatial to Thor Nullah

Updation on the basis of per km cost according to the (April 2009) PC-I for the first segment of By-pass from Shatial to Thor Nullah to PKR 8.605 Billions at 2013 price level. (Refer Annex. B-1)

- Thor Nullah to Raikot

Cost for this portion for relocated KKH is worked on proportionate basis of length of

Shatial – Thor Nullah portion to come at price level of 2013 as PKR 26.78 Billions.

(Refer Annex. B-2)

WAPDA Colony in Thor Valley: As per estimate based on tender design 2009 and included all costs. Total cost is estimated as PKR 7,145 Millions. (Refer Annex. C)

4.1.3 Updated Direct Cost

These cover the costs for implementation of core project through lots 1 to 5. DBC had estimated the cost for individual lots based on March 2008 prices which were adopted in

PC-1 of 2009 and are validated to year 2013.

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4.1.4 Updated Incidental Costs

The incidental costs are estimated on the basis of percentages assumed in the PC-1.These included:

I. Engineering and Management at 6% of Direct Cost.

II. Physical contingencies at 3% of Direct Cost

III. Duty and Taxes at 5% on foreign component of electrical and mechanical equipment and machinery in respect of Lot 1 to 5 and shown as local cost. (Refer Annex. D)

IV. Escalation during construction assumed at 6.5% on local and at 2% of foreign costs of Direct Cost plus incidental costs as per i, ii and iii above. (Refer Annex. E)

V. Interest During Construction (IDC) assumed at 9.96% PA on local and 12% PA on foreign components of sum of Direct Cost and incidental costs from (i) to (iv) above and shown as local cost. (Refer Annex. F)

4.1.5 Overall Updated Cost Estimate

The resultant overall cost estimate amounted to US$ 13.32 Billion as summarized below in

Table-4.1 and Table-4.2. The Core Project Cost is also produced for quick reference in Table-4.3.

Local Foreign Total

A. Base Cost

1. Indirect Costs 1223 5 1228

2. Direct Costs 2088 3439 50

3.

Engineering and Project

Management 125 206 331

4. Physical Contingency 63 103 166

5. Total A (1+2+3+4) 3499 3754 1776

B. Duties and Taxes 196 - 196

C. Escalation During

Construction 1032 497 1529

D. Interest During

Construction 4347 - 4347

E. Total Financial Cost

(A+B+C+D) 9074 4251 7847

9.07 4.25 13.32

Description

Estimated Cost

(US$ Million)

Table-4.1: Summary of Updated Capital Cost (2013)

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A. Indirect Costs

I Land Acquisition and Resettlement 92,596 - 92,596

II KKH Relocation from Shatial to Raikot 35,387 - 35,387

III WAPDA Colony in Thor Valley 6,543 602 7,145

Sub-Total (A) 134,527 602 135,128

B. Direct Costs

IV

Concrete Dam & Related Structures Including

Diversion Tunnels & Permanent Access Bridge 135,203 87,382 222,585

V Construction of Underground Works & Related

Structures 63,160 20,680 83,840

VI

Hydraulic Streel Structure & Hydro-Mechanical

Equipment 5,181 45,424 50,605

VII Power Plant Generation Equipment 12,706 110,811 123,517

VIII

Electrical HV Equipment and Power Plant

Electrical Equipment 13,446 114,038 127,484

Sub-Total (B) 229,696 378,335 608,031

C. Incidental Costs

IX

Engineering & Project Management including

Authority's Overheads (6% of sub total B) 13,782 22,700 36,482

X Physical Contingency (3% of sub total B) 6,891 11,350 18,241

Sub-Total (C) 20,673 34,050 54,723

D. Total Base Cost (A+B+C) 384,896 412,987 797,882

E. Other Costs

XI Duties & Taxes ( 5% of equip. cost) 21,561 - 21,561

XII

Escalation During Construction( 6.5% PA on local & 2% PA on Foreign cost Items) 113,515 54,670 168,185

XIII

Interest During Construction (IDC)(9.96% PA on local & 12% PA on Foreign cost Items) 478,129 - 478,129

Sub-Total (E) 613,205 54,670 667,875

F. Total Financial Cost (A to E): -

i. Rs. Million 998,101 467,657 1,465,758

ii. US$ Million c) 9,074 4,251 13,325

Say 13.33 a) b)

c) At the assumed conversion rate of Rs. 110 ( Dec-13 )

Cost Break-up as per Annexures to the report.

Sr. No. Description Estimated Cost (Rs. Million)

Costs are provided in Pak. Rs. (Price Level of Dec' 2013) b)

Table-4.2: Summary of Updated Capital Cost (PKR)

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Core Project Cost

Concrete Dam & Related Structures Including

Diversion Tunnels & Permanent Access Bridge 1,229 794 2,024

Construction of Underground Works & Related

Structures 574 188 762

Hydraulic Streel Structure & Hydro-Mechanical

Equipment 47 413 460

Power Plant Generation Equipment 116 1,007 1,123

Electrical HV Equipment and Power Plant

Electrical Equipment 122 1,037 1,159

Sub-Total (A) 2,088.15 3,439.41 50.25

Incidental Costs

Engineering & Project Management including

Authority's Overheads (6% of sub total A) 125 206 331

Physical Contingency (3% of sub total A) 63 103 166

Sub-Total (B) 188 309 497

Total Base Cost (A+B) 2,276 3,748 6,025

Other Costs

Duties & Taxes ( 5% of equip. cost) 196 - 196

Escalation During Construction( 6.5% PA on local & 2% PA on Foreign cost Items) 1,032 497 1,529

Interest During Construction (IDC)(9.96% PA on local & 12% PA on Foreign cost Items) 4,347 - 4,347

Sub-Total (D) 5,575 497 6,072

Total Financial Cost (A to D):

i. US$ Million a) 7,851 4,245 12,096

ii. US$ Billion 7.85 4.25 12.10

At the assumed conversion rate of Rs. 110 ( Dec-13 )

Description Estimated Cost (US $. Million)

Table-4.3: Summary of Core Project Cost (2013)

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5.0 BIBILOGRAPHY OF AVAILABLE DOCUMENTS

The documents which are made available to us with respect to Cost Estimation of Diamer

Bhasha Dam are compiled in the following bibliography:

Sr.

No.

Description Year

1 MONENCO” Bhasha Storage and Power Project Feasibility Study (11 Volumes) 1984

Volume 10

APPENDIX E- CONSTRUCTION PLANNING

APPENDIX F- COST ESTIMATES

Annex XIV- Supplementary Cost Estimates

2 NEAC Feasibility Report 2004

Volume X - Cost Estimates

3 Lahmayer NDC - Design and Tender Documents 2009

Bidding Docs (Lot-1 to Lot-5)

Bidding document lot 1 CONCRETE DAM AND RELATED STRUCTURES INCLUDING DIVERSION TUNNELS AND PERMANENT ACCESS BRIDGE, volume 2- “Bill of Quantities (BoQ) “

Bidding document Lot 2 UNDERGROUND WORKS AND RELATED STRUCTURES (LEFT AND RIGHT BANK), Volume 2 – Bill of Quantities (BoQ)

4 PC-1 FINAL 2009

ANNEXURES

Annex. A1

Land Acquisition

(All Purposes) 40,774 - 40,774

Compensation of Properties, Trees and Infrastructure including Livelihood

Restoration 10,891 - 10,891

3 Socio-economic Development 2,348 154 2,502

4a Infrastructure Development

Linking 9 Nos. Model Villages 2,324 - 2,324

4b Infrastructure within Model

Villages 2,524 409 2,933

Construction of Right Bank

Periphery Road 7,744 740 8,484

6a Environmental Monitoring 205 - 205

6b Environmental Research 177 - 177

Mitigation, Documentation &

Compensation for Rock

Carvings 248 46 294

Environmental Management &

Monitoring Cell 621 190 811

Pay & Allowances for Project

Organization 1,195 - 1,195

Exgracia Grants & Inducements to Affectees for Resettlement

(Lump Sum) 611 - 611

11 Sub-Total (1 to 10) 69,662 1,539 71,201

12 Contengency @ 3% of item 11 2,136 - 2,136

Authority Overheads @ 2.25% of item 11 1,602 - 1,602

14 Sub-Total (11 to 13) 73,400 1,539 74,939

Escalation @ 6.5% per year for

8 years on item 14 17,656 - 17,656

16 Grand Total (14+15) 91,056 1,539 92,595

DIAMER BASHA DAM PROJECT

Cost in Million Rs.

Sr. No. Item Description TOTAL COST

ACQUSITION OF LAND RESETTLEMENT

COST ESTIMATE

PROVISION

FOR WORK /

CONSULTANCY

COST

Annex. A2

YEAR-1 YEAR-2 YEAR-3 YEAR-4 YEAR-5 YEAR-6 YEAR-7 YEAR-8

Local Local Local Local Local Local Local Local Local

Land Acquisition

(All Purposes) 7,502 13,173 10,049 10,049 - - - - 40,773

Compensation of Properties, Trees and

Infrastructure including Livelihood

Restoration 2,217 3,981 2,685 2,008 - - - - 10,891

3 Socio-economic Development - 77 466 466 456 296 253 489 2,503

4a Infrastructure Development Linking 9 Nos.

Model Villages 478 675 456 390 324 - - - 2,323

4b Infrastructure within Model Villages 433 669 399 393 413 426 199 - 2,932

5 Construction of Right Bank Periphery Road

- - - - 1,599 1,823 2,643 2,419 8,484

6a Environmental Monitoring 19 34 25 25 26 31 25 22 207

6b Environmental Research 15 29 22 22 23 26 20 20 177

Mitigation, Documentation &

Compensation for Rock Carvings 34 63 48 48 51 51 - - 295

Environmental Management & Monitoring

Cell 210 120 79 79 83 94 74 72 811

9 Pay & Allowances for Project Organization 97 225 214 76 145 165 130 143 1,195

Exgracia Grants & Inducements to

Affectees for Resettlement

(Lump Sum) - 123 94 94 99 113 88 - 611

11 Sub-Total (1 to 10) 11,005 19,169 14,537 13,650 3,219 3,025 3,432 3,165 71,202

12 Contengency @ 3% of item 11 330 575 436 410 97 91 103 95 2,137

13 Authority Overheads @ 2.25% of item 11 248 431 327 307 72 68 77 71 1,601

14 Sub-Total (11 to 13) 11,583 20,175 15,300 14,367 3,388 3,184 3,612 3,331 74,940

Escalation @ 6.5% per year for 8 years on item 14 753 2,707 3,181 4,116 1,254 1,462 2,001 2,182 17,656

16 Grand Total (14+15) 12,336 22,882 18,481 18,483 4,642 4,646 5,613 5,513 92,596

DIAMER BASHA DAM PROJECT

ACQUSITION OF LAND RESETTLEMENT

Year-wise/Component-wise Financial Phasing of Capital Cost

Cost in Million Rs.

Sr.

No.

Item Description

Total

Annex. A3

2013 ESCALATION

YEAR 1 2 3 4 5 6 7 8 TOTAL

TOTAL COST 11,583 20,175 15,300 14,367 3,388 3,184 3,612 3,331 74,940

1.0650 1.1342 1.2079 1.2865 1.3701 1.4591 1.5540 1.6550

1 753 2,707 3,181 4,116 1,254 1,462 2,001 2,182 17,656.00

TOTAL IN PRs. 753 2,707 3,181 4,116 1,254 1,462 2,001 2,182 17,656

BASHA DIAMER DAM PROJECT

ESCALATION

ACQUSITION OF LAND RESETTLEMENT

@ Rate of 6.5% Per Annum

Annex. B1

Cost First Year Cost

(2009-10)

Second Year Cost

(2010-11)

(Rs.) (Rs.) (Rs.)

A. Civil Works

1 Earth Work 2,014,151,549 918,939,495 1,095,212,054

2 Sub-Base / Base 536,202,113 216,679,471 319,522,642

3 Surface Courses and Pavement 388,533,052 151,941,161 236,591,891

4 Retaining Structures 493,017,151 208,868,341 284,148,810

5 Culverts and Causeways 1,340,175,276 567,769,282 772,405,994

6 Drainage and Erosion 100,281,987 39,216,459 61,065,528

7 Ancillary Works (Precast Kerb, Guard-rails

Traffic Road Signals, Kilometer Post, Sign

Boards, etc.) 113,593,031 29,614,355 83,978,676

8 General Items (Provision of instruments, Office Accommodation for Employer & Eng.

Rep, Material Testing Lab. Vehicles, Training of Employers Staff, etc. 63,179,595 24,706,771 38,472,824

9 Drainage Structures (Bridges) 1,141,279,800 483,506,160 657,773,640

Sub-Total (A) 6,190,413,554 2,641,241,495 3,549,172,059

B. Environmental Mitigation Measures 11,520,345 4,915,344 6,605,001

C. Sports Complex 30,952,068 13,206,208 17,745,860

D. Afforestation 30,952,068 13,206,208 17,745,860

E. Sub-Total (A+B+C+D) 6,263,838,035 2,672,569,254 3,591,268,781

F. Engineering and Project Management

1 Construction Supervision (3% of E) 187,915,141 80,177,078 107,738,063

2 Difficult Area Allowance (3% of E) 187,915,141 80,177,078 107,738,063

Detailed Redesign / Thirty Party Validation

Charges (2% of E) 125,276,761 53,451,385 71,825,376

Engineering and Administration cost for NHA

Departmental Charges (2% of E) 125,276,761 53,451,385 71,825,376

5 Security Cost (0.5% of E) 31,319,190 13,362,846 17,956,344

6 Insurance 395,750,544 168,853,462 226,897,082

7 Authority's Overhead Charges (2.25% of E) 140,936,356 60,132,808 80,803,548

Sub-Total (F) 1,194,389,893 509,606,042 684,783,852

G. Physical Contingencies at 3% of E 187,915,141 80,177,078 107,738,063

H. Sub-Total (E+F+G) 7,646,143,070 3,262,352,373 4,383,790,696

I. Price Escalation at 6.5% on Item H 789,167,918 135,576,908 653,591,010

J. Sub-Total (H+I) 8,435,310,988 3,397,929,281 5,037,381,706

K Interest During Construction (IDC) 170,582,979 110,624,500 0

L. Total Cost (J+K) 8,605,893,967 3,508,553,781 5,097,340,185

DIAMER BASHA DAM PROJECT

COST ESTIMATE FOR CONSTRUCTION OF RELOCATED KKH

BYPASS FROM SHATIAL TO THOR NULLAH INCLUDING 2.94 KM

LINK ROAD TO EXISTING KKH

Sr. No. Description

Annex. B2

(Rs.)

A. Civil Works

1 Earth Work 4,117,563,638 1,004,194,524 860,403,832 880,014,882 538,629,365 457,771,633 142,944,396 5,816,159 227,788,846

2 Sub-Base / Base 1,096,166,932 267,334,018 229,054,439 234,275,241 143,392,489 121,866,757 38,054,280 1,548,363 60,641,346

3 Surface Course and Pavement 794,284,605 193,710,728 165,973,274 169,756,277 103,902,465 88,304,880 27,574,202 1,121,946 43,940,832

4 Retaining Structures 1,007,883,193 245,803,313 210,606,717 215,407,043 131,843,860 112,051,780 34,989,442 1,423,660 55,757,377

5 Culverts and Causeways 2,739,742,691 668,170,513 572,495,125 585,543,917 358,392,971 304,591,889 95,112,280 3,869,953 151,566,043

6 Drainage and Erosion 205,008,140 49,997,540 42,838,388 43,814,797 26,817,656 22,791,854 7,117,016 289,579 11,341,311

Ancillary Works (Precast Kerb, Guard-rails Traffic Road Signals, Kilometer

Post, Sign Boards, etc.)

232,220,129 56,634,020 48,524,590 49,630,604 30,377,328 25,817,157 8,061,701 328,017 12,846,712

General Items (Provision of instruments, Office Accommodation for Employer & Eng. Rep, Material

Testing Lab. Vehicles, Training of

Employers Staff, etc.

129,159,101 31,499,419 26,989,015 27,604,171 16,895,643 14,359,310 4,483,858 182,440 7,145,245

9 Drainage Structures (Bridges) 2,333,137,349 569,007,296 487,531,096 498,643,316 305,203,854 259,387,392 80,996,662 3,295,613 129,072,119

Sub-Total (A) 12,655,165,780 3,086,351,372 2,644,416,476 2,704,690,248 1,655,455,631 1,406,942,652 439,333,837 17,875,730 700,099,832

B. Environmental Mitigation Measures 23,551,234 5,743,693 4,921,253 5,033,422 3,080,799 2,618,317 817,599 33,267 1,302,884

C. Sports Complex 63,275,829 15,431,757 13,222,082 13,523,451 8,277,278 7,034,713 2,196,669 89,379 3,500,499

D. Afforestation 63,275,829 15,431,757 13,222,082 13,523,451 8,277,278 7,034,713 2,196,669 89,379 3,500,499

E. Sub-Total (A+B+C+D) 12,805,268,672 3,122,958,578 2,675,781,894 2,736,770,573 1,675,090,987 1,423,630,396 444,544,775 18,087,754 708,403,715

F.

Engineering and Project

Management

1 Construction Supervision (3% of E) 384,158,060 93,688,757 80,273,457 82,103,117 50,252,730 42,708,912 13,336,343 542,633 21,252,111

2 Difficult Area Allowance (3% of E) 384,158,060 93,688,757 80,273,457 82,103,117 50,252,730 42,708,912 13,336,343 542,633 21,252,111

Detailed Redesign / Thirty Party

Validation Charges (2% of E) 256,105,373 62,459,171 53,515,638 54,735,411 33,501,820 28,472,608 8,890,895 361,755 14,168,074

Engineering and Administration cost for NHA Departmental Charges (2% of

E)

256,105,373 62,459,171 53,515,638 54,735,411 33,501,820 28,472,608 8,890,895 361,755 14,168,074

5 Security Cost (0.5% of E) 64,026,343 15,614,793 13,378,909 13,683,853 8,375,455 7,118,152 2,222,724 90,439…