BEYOND THE SCOPE – Failed FSC project - Voice of Asia - Telling Stories from Asia to the World!

A leaked internal document from the Fiji Sugar Corporation (FSC) dated October 2018 has revealed the negative financial impact on FSC caused by the factory upgrade project undertaken by the Sugar Technology Mission (STM) of New Delhi. The document, signed by then-FSC CEO Graham Clarke and CFO Manoj Kumar, explicitly states that "the STM project failed to achieve its stated objectives." This revelation underscores the challenges and potential pitfalls of relying on cost-cutting measures without due diligence.

The document indicates that in 2003, the Fiji Sugar Corporation's executive team submitted a detailed proposal to upgrade the four sugar mills in Lautoka, Rarawai, Labasa, and Penang, with a total investment of $220 million. However, FSC ultimately opted for an alternative proposal from the New Delhi Indian Sugar Technology Mission (STM), which promised to upgrade the Lautoka, Rarawai, and Labasa mills for $115 million (approximately $50.4 million), half the cost of the original plan. On August 18, 2005, FSC Chairman Ross McDonald authorized STM head J.J. Bhagat to issue and receive tenders on behalf of the company for the technical upgrades and process modifications of the Lautoka, Rarawai, and Labasa sugar mills.

The document further points out that the tendering, bidding, evaluation, approval, and appointment of suppliers were all the responsibility of J.J. Bhagat, head of the Sugar Technology Mission Project Limited (STMPL), with funding support from the Export-Import Bank of India. However, the document clearly states: "The STM project failed to achieve its objectives. It was impossible to complete all the scope of work in the original FSC $220 million proposal for three factories at half the cost ($110 million)." This resulted in some suppliers providing equipment and materials of inferior quality, ultimately compromising the project's overall success.

The document also criticizes the inadequate supervision of equipment installation and the substandard workmanship provided by subcontractors. These issues were not addressed due to poor project management. Furthermore, the retrofitting and conversion of existing equipment or vessels to accommodate new Indian energy efficiency technologies (through steam extraction and maximum venting) were costly and not fully installed. FSC subsequently improved operations in these areas for many years after the STM project ended, but at a very high cost. J.J Bhagat, the head of the Sugar Technology Mission, established a company called STMPL (Sugar Technology Mission Project Limited) and was granted sole approval to issue and receive tenders and appoint successful bidders on behalf of FSC. Mr. Bhagat was also appointed as the engineering consultant and project manager for the STM project, creating a potential conflict of interest.

The document concludes that the project management was inefficient and a complete failure. One person had complete control of the project, lacking transparency and checks and balances. As mentioned in the systems consultant's report, it is surprising that most of the Indian complete sugar plant manufacturers, known for their quality and workmanship, did not participate in the bidding. The lessons learned are that for future projects, project cost and budget should not be the only considerations. Engineering and quality standards should be a priority for all project work, following a thorough technical study of plant operations. Sound project and contract management are prerequisites, and tender and bid evaluations are now managed and handled by a tender committee appointed by FSC and engineering consultants also appointed by FSC.