KATHMANDU: Civil Aviation Authority of Nepal (CAAN) on Friday decided to terminate a contract with Constructora Sanjose after the Spanish firm failed to complete a multi-million dollar project at the Tribhuvan International Airport within the stipulated deadline.

With the termination of main contractor, uncertainty looms large over the fate of the Asian Development Bank-funded mega project.

A meeting of the CAAN's board of directors chaired by Minister for Culture, Tourism and Civil Aviation Jiban Bahadur Shahi on Friday late evening decided to expel Sanjose from executing the TIA Improvement Project worth USD 80 million, a highly-placed source told THT.

The three-year project has missed its completion deadline in March.

"CAAN will serve a formal notice to Sanjose on Sunday and also invite a new tender within 15 days," the source said, "A three-page justification was presented at the board meeting to terminate Sanjose."

CAAN’s board has come to a conclusion to terminate the contract after Constructora Sanjose SA Spain had laid its financial claim of Rs1.17 billion and extension of time for 897 days, the source added.

The project’s construction supervisor Japan Airport Consultant in association with GEOCE, however, had recommended only 596 days of extension of time to the project setting a new completion deadline for October 31, 2017.

“The employer had also lodged the notice of dissatisfaction at the dispute board against the JAC’s recommendation,” a CAAN official recounted.

According to the latest progress report prepared by TIA-IP, the project under the International Competitive Bidding-01 could make a progress of less than 18 per cent while missing the completion deadline.

After re-inviting tender, the cost of project would exceed by nearly Rs 1 billion, according to a source close to the TIA-IP.

The Spanish firm delayed the project citing several reasons including the nonavailability of raw materials.

Since the funding agency was fully involved in each and every step to award the contract to Sanjose, it was the sole responsibility of the ADB to pay any compensation, if claimed by the party through arbitration or any other means, a senior CAAN director claimed.

“Despite knowing the ground realities, it is also a complete failure in part of the funding agency to properly monitor the project after granting loan to the CAAN,” he added.

The project was expected to upgrade TIA’s capacity to handle more than 5.85 million passengers annually by 2015 with the completion of project components, such as enlargement of the runway, construction of new taxiways, extension of the apron, new lighting in the airfield, reform and expansion of the international terminal, installation of new system of carriage of baggage and several civil works and associated facilities.

Out of ADB’s total assistance in ICB-01, USD 70 million was provided as loan and USD 10 million as grant. "CAAN's board also concluded to penalise the Spanish firm for its 'intentional delay' in executing the project work," a CAAN source added, referring to the decision.

Once all the infrastructure, buildings and engineering work are completed, TIA will allow landing of bigger aircraft and tonnage while its apron will accommodate around 20 Boeing 757 aircraft, according to the project document.