Caan’s Director General Ratish Chandra Lal Suman and China CAMC Engineering’s Chairman and President Lou Yan signed the $ 215.96 million deal on behalf of their respective governments.

Recurring controversies regarding the price tag have bogged down the project. Suman had said that he was not comfortable signing the agreement under the current circumstances. However, the deal went down after a minister-level decision on Thursday authorised Caan’s director general to change the tender documents prepared under the Bill of Quantity (BOQ) to the Engineering Procurement and Construction (EPC) model, said Birendra Kumar Shrestha, spokesperson of Caan. Under the EPC model, the contractor becomes liable for completing the project according to the tender conditions or it ensures the certainty of cost. “The EPC contract binds the contractor to deliver the project at a stipulated time with predetermined price regardless of any increase in costs that the contractor may incur after the contract is signed,” said Suman.

Following Thursday’s development, Caan is preparing to send a loan request letter to China EXIM Bank through the Finance Ministry. The government plans to borrow $ 145 million or more in soft loans from the bank to build the airport.

Shrestha said that after EXIM Bank sanctioned the loan, the contractor would conduct a detailed drawing and design of the project. “It will take at least one year to complete the design and drawing survey of the project.”

After the completion of the survey, the contractor will submit the survey details to Caan for its approval. “The project is expected to be completed in three years after the survey work,” Shrestha said.

On April 7, a Caan board meeting chaired by Tourism Minister Bhim Acharya approved the project under the revised cost of $ 215.96 million. The price tag had been recommended by a three-member independent panel formed by the government.

Caan had invited bids for the project on Feb 9, 2012. The airport project has been on hold since July 2012 after the lowest bidder China CAMC quoted a price of $ 305 million, which is 85 percent higher than the government’s estimate. The government had expected the project to cost around $ 166 million.

Subsequently, in January 2013, China CAMC wrote to the Tourism Ministry expressing its willingness to build the project at the government-estimated cost.

Things became more complicated after China Airport Construction Company, a consultant appointed by China CAMC, submitted another study report to Caan quoting a price of $ 264 million. Adding 16 percent price escalation and 13 percent VAT, the estimated outlay would come to around $ 300 million, nearly equal to the original cost quoted by China CAMC.

Another three-member independent cost evaluation panel recommended a price of $ 215.96 million. The ministry then tabled the proposal with the latest estimated cost at the Cabinet, but the Khil Raj Regmi-led government put the project on the backburner. The project was revived by Tourism Minister Acharya under the Sushil Koirala-led government. Caan had even forwarded a separate proposal to the Tourism Ministry asking it to request the Chinese government to convert the loan pledged by the Chinese government into a grant.

The government had acquired more than 3,106 ropanis of land in 1975 to build the airport. It has earmarked Rs 1 billion this fiscal for additional land acquisition after a fresh study said that another 500 ropanis would be required for the project. As per the feasibility report, the airport will accommodate medium category jets like the Boeing 757 and Airbus 320.