D. L. & F. De Saram is proud to announce the publishing of its Construction and projects in Sri Lanka: an overview in collaboration with Thomson Reuters Practical Law.
The Q&A is part of the global guide to construction and projects. Areas covered include trends and significant deals, the main parties, procurement arrangements, transaction structures and corporate vehicles, financing projects, security and contractual protections required by funders, standard forms of contract, risk allocation, exclusion of liability, caps and force majeure. Also covered are material delays and variations, appointing and paying contractors, subcontractors, licences and consents, project insurance, labour laws, health and safety, environmental issues, corrupt business practices and bribery, bankruptcy and insolvency, public private partnerships (PPPs), dispute resolution, tax, the main construction organisations, and proposals for reform.
Overview of the construction and projects sector in Sri Lanka
1. What are the main trends in the local construction and projects market? What are the most significant deals?
Main trends
There has been an increase in residential, commercial and mixed development projects undertaken by the private sector. In addition, a significant number of major infrastructure developments have been undertaken, mainly through Public-Private Partnership (PPP) arrangements.
Major projects
The larger current projects include the:
- Colombo Port City project.
- Hambantota Port project and other port-related developments.
- Western Region Light Rail Transit (LRT) PPP project in Colombo.
- Kerawalapitiya Combined Cycle power plant.
- ITC Colombo One Hotel and Residencies.
- Grand Hyatt Colombo.
- Altair Sri Lanka luxury apartments and condominiums.
- Port Access Elevated Highway Project.
- Elevated Highway Project (New Kelani Bridge to Athurugiriya).
- Cinnamon Life (integrated mixed development project).
Procurement arrangements
2. Which are the most common procurement arrangements if the main parties are local? Are these arrangements different if some or all of the main parties are international contractors or consultants?
Private sector construction works are commonly procured through build-only contracts, design and build contracts, turnkey contracts and other similar standard form construction contracts.
The procurement arrangements of the public sector must be carried out in accordance with the 2006 Procurement Guidelines on Goods and Works (2006 Procurement Guidelines), which permits the procuring entity to enter into works contracts for construction, repair, decoration, refurbishment, restoration, maintenance and so on of buildings, infrastructure, civil works structures and other associated activities.
Infrastructure projects based on PPP models, such as Build Own Operate (BOO), Build Operate Transfer (BOT), Build Own Operate Transfer (BOOT), must be undertaken in accordance with the Procurement Guidelines for Private Sector Infrastructure Projects 1998 (1998 Procurement Guidelines). The main contractual document in such PPP projects will be the Concession Agreement.
Public sector development activities will also be subject to Circular No. MF/01/2020 8 March 2021 (MF Circular) issued by the Ministry of Finance (MoF), which provides for simplification of systems and processes to fast-track such development activities. The Circular facilitates, among others, the issuance of Letters of Credit, Letters of Comfort and Letters of Guarantee and matters pertaining to bilateral and multilateral financing agencies within applicable statutory limits.