The Delhi Government’s Expenditure Finance Committee (EFC), chaired by Chief Minister Rekha Gupta, has ordered a vigilance inquiry into a ₹94 crore arbitration award linked to the Lok Nayak Jai Prakash (LNJP) Hospital project. The committee has also approved a proposal to revise the project’s estimated cost from ₹533.91 crore to ₹1,268.85 crore, with the proposal now set to be placed before the Council of Ministers for approval.
Vigilance Inquiry Ordered Into Arbitration Award
During its recent meeting, the Expenditure Finance Committee directed a vigilance inquiry into the handling of the arbitration award, identifying it as one of the major factors contributing to the escalation in the project’s cost.
The Health Department has been instructed to submit a detailed report explaining how the dispute arose, the sequence of events, the opinion of the Law Department, the basis of the arbitration award, its financial implications, and the approvals granted at various stages.
The committee also directed that the inquiry examine whether prescribed procedures were followed while accepting the arbitration award and releasing the payment, and to fix responsibility if any irregularities are found.
Cost of LNJP Hospital Project Revised
According to official records, the LNJP Hospital expansion project was approved in 2019 at an estimated cost of ₹533.91 crore for the construction of a double-basement, 22-storey hospital block.
The proposed facility is designed to provide medicine, maternity, and advanced paediatric services while adding 1,570 beds to the hospital.
The Health Department informed the committee that ₹586.09 crore has already been spent and that approximately 55% of the project has been completed.
The revised project cost of ₹1,268.85 crore includes ₹682.75 crore required for the remaining work.
Department Explains Reasons for Cost Escalation
According to the Health Department, construction progressed until a contractual dispute arose regarding payment for structural steel work.
The contractor invoked the dispute resolution mechanism under the contract and subsequently received an arbitration award. Thereafter, the contractor 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 for recovery.
The department stated that the revised project cost reflects the impact of the arbitration award, the increase in GST from 12% to 18%, higher material and labour costs, and modifications made to hospital services after the COVID-19 pandemic.
The committee noted that the arbitration award of ₹94.61 crore, comprising ₹82.44 crore as the award amount and ₹12.17 crore as interest, was one of the principal contributors to the cost escalation.
Department Asked to Review Contractor’s Status
The committee also directed the Health Department to examine whether any FIR had been registered against the previous contractor.
If an FIR exists and procurement rules permit, the department has been asked to evaluate whether the contractor can be barred from participating in future tenders for the remaining work on the project.
The revised proposal estimates that the remaining construction will require 30 months, including six months for planning and 24 months for execution.
Revised Estimates Approved for Madipur and Jwalapuri Hospitals
During the same meeting, the EFC approved revised project estimates for two other hospital projects.
The committee sanctioned a revised estimate of ₹466.50 crore for the 691-bed Madipur Hospital project, including ₹203.60 crore for the remaining work. The Health Department stated that the project is 65% complete and attributed the increase in cost to the addition of two floors, higher GST, rising material and labour costs, and post-pandemic design modifications.
The EFC also approved a revised estimate of ₹484.04 crore for the Jwalapuri Hospital project, including ₹223.53 crore required to complete the remaining work. The department reported that this project is also 65% complete and cited similar reasons for the revised cost.
Important Highlights
- The Delhi Government has ordered a vigilance inquiry into the ₹94.61 crore arbitration award linked to the LNJP Hospital project.
- The estimated cost of the LNJP Hospital expansion has been revised from ₹533.91 crore to ₹1,268.85 crore.
- The Health Department has been directed to submit a detailed report on the arbitration award and related approvals.
- The committee has sought details of any FIR against the previous contractor and asked whether the contractor can be barred from future tenders, if permitted under procurement rules.
- Revised project estimates have also been approved for the Madipur and Jwalapuri hospital projects.
