Vietnam metro rail project under scanner over $339mn cost overrun
The Cat Linh – Ha Dong rapid transit railway project was originally expected to require an investment of US$552 million, according to its management board. China would contribute $419 million of the sum via ODA loans, while Vietnam would cover the remaining $133 million.
The Vietnam Railway Authority is the project’s investor while China Railway 6th Bureau Group Co Ltd has been assigned to be its EPC contractor.
Under an EPC (engineering, procurement and construction) contract, the contractor designs the installation, procures the necessary materials, and develops the project, either directly or by subcontracting part of the work.
The subcontractors of the project are Vietnamese firms that were selected by the Chinese contractor and approved by the investor Vietnam Railway Authority, the project management board said.
On December 23, China Railway 6th Bureau Group Co Ltd submitted a document to the Vietnamese Ministry of Transport, asking to adjust the investment estimates for the project.
The Chinese contractor said the development would need $891 million, or a $339 million overrun from the already approved estimates, according to the transport ministry.
Vietnamese Deputy Prime Minister Hoang Trung Hai ordered in a directive released last week that the transport ministry and the Hanoi People’s Committee look into the case and determine the organizations and individuals that should be held responsible for the 61.4 percent cost overrun.
Meanwhile, Deputy Minister of Transport Nguyen Hong Truong told Tuoi Tre on Monday that the proposed extra cost will be funded by additional ODA loans from the Chinese side.
As for the request to name those responsible for the cost overrun, Truong said the transport ministry is reviewing the case and will release an official answer once the situation is settled.
Troubled site clearance task
The Cat Linh – Ha Dong project aims at building 13km of elevated railways that enable trains to travel at speeds ranging from 35km per hour to 80km per hour. The whole journey from Cat Linh to Ha Dong stations is expected to take 24 minutes.
There will be 12 overhead stations and a fleet of 13 trains, each having four cars collectively capable of carrying 1,200 passengers a time. The trains will be designed to come every two minutes and be able to transport 1.02 million passengers a day.
The project was scheduled to get started in November 2008 and reach completion five years later, but it only broke ground in the capital city in October 2011.
It was then due for completion in June next year, but only if the site clearance task was finished last year, a condition that was eventually not fulfilled.
Site clearance has not been completed since the ground-breaking ceremony two years ago, according to the project management board.
The area where 2.8km of the elevated railways will be erected is still not cleared as the contractor faces difficulty in relocating houses, power lines, water pipes and even a cemetery, the board said.
This is estimated to cost the investor an expense overrun of $25.06 million.
In its document to the Vietnamese Ministry of Transport, the Chinese contractor attributed the largest overrun to the construction expense.
While the initial cost of this category was approved at $223.67 million, China Railway 6th Bureau Group Co Ltd wanted to increase it to $444.44 million, or a massive $220.77 million disparity.
It suggested hiking the costs to buy equipment and machinery, and pay taxes and fees by $21.24 million and $46.56 million, respectively.
The remaining $26.66 million includes train purchases, provision expenses, and other expenditures.
The Chinese firm also proposed lowering the fees for project management and consultancy to $37.27 million from $38.48 million.
