The National Accountability Bureau (NAB) Khyber Pakhtunkhwa has recovered Rs168.5 billion in the Bus Rapid Transit (BRT) Peshawar project. The bureau also helped the Khyber Pakhtunkhwa government avoid a Rs31.5 billion claim lodged by contractors in the International Court of Arbitration (ICA).
NAB launched an inquiry in 2018 into the illegal awarding of contracts, misuse of government funds, and submission of fraudulent performance guarantees by contractors involved in the BRT project. After a period of stagnation, the investigation gained momentum, resulting in significant financial recovery.
The inquiry revealed that six major civil work contracts were awarded to four joint ventures (JVs), consisting of two Pakistani and three international firms, for different segments of the project, known as Reach-I to Reach-III and Lot 1 to Lot 3. These JVs, however, existed largely on paper, with the local firms exploiting the reputation and financial standing of the international firms to fraudulently secure contracts.
Once the contracts were secured, supplementary agreements allowed the local firms to carry out the actual work, while the international firms received 2% of the total tender value as compensation for the use of their names and financial capabilities. These international firms, despite receiving payments totaling around Rs1 billion, did not contribute to the project.
NAB broadened the investigation by analyzing over 400 bank accounts connected to the firms, corroborating the flow of funds between local and international firms as stipulated in the supplementary agreements.
The inquiry revealed that the Peshawar Development Authority (PDA) had paid a 20% premium on schedule rates to ensure the involvement of international firms, their technology, and their resources in completing the project within six months. However, the project was delayed, and the international firms never sent personnel or equipment to Pakistan for the project.
Further investigation revealed that contractors had submitted fake local bank guarantees worth Rs2 billion and eight foreign bank guarantees amounting to Rs6.5 billion in violation of agreements. NAB confirmed through the Securities and Exchange Commission of Pakistan (SECP) and chartered accountants that audit reports submitted by the contractors were also falsified.
NAB’s investigation unearthed that the supposed staff from international firms had visited Pakistan for just 8 to 10 days over the course of five years. Embassies representing the foreign firms cooperated with NAB in calling the firms to account. A claim of Rs11.653 billion, covering retention money and claims approved by the Dispute Resolution Board, was pending with the PDA. Additionally, contractors filed claims worth Rs55 billion for cost escalation and interest on delayed payments.
Through NAB’s intervention, the project cost was retained, preventing an escalation, and an additional Rs9 billion was saved. Contractors had also filed claims amounting to Rs31.8 billion for Reach-I before the International Court of Arbitration, with further claims for the remaining five packages totaling Rs168.5 billion.
To avoid costly international litigation, NAB placed key individuals on the Exit Control List and issued a red warrant for one contractor through Interpol. As pressure mounted, the contractors sought an out-of-court settlement, which NAB supervised. The settlement resulted in the withdrawal of all claims, including those before the ICA, and the PDA only paid Rs2.6 billion to the contractors.
