Highway projects’ costs down

Update: November, 12/2016 - 09:00
A toll station on the Hà Nội - Hải Phòng Highway built under a Build-Operate-Transfer (BOT) model. - VNA/VNS Photo Huy Hùng
Viet Nam News

HÀ NỘI – Initial assessments indicate that the actual costs of most build-operate-transfer (BOT) projects on National Highway No.1 and Hồ Chí Minh Highway (the section passing through the Central Highlands) were lower than planned, meaning investors will collect their payback from road users faster than anticipated.

Speaking to Báo Giao Thông (Transportation Newspaper), Dương Hồ Minh, Deputy Director of the Hồ Chí Minh Highway’s Project Management Board, said the board has reviewed and submitted the settlement reports of three BOT projects and all were lower compared to the originally approved total investment.

For example, the original total investment for KM1793+600 – KM 1824+00 (Đắk Nông Province) was VNĐ1,023 billion (nearly $46 million). However, after settlement, the cost was VNĐ 634 billion, in other words reduced by a third, as reported by its investors.

Post-settlement balance sheets for two BOT projects on National Highway No.1 have also been submitted by the highway management board to the Ministry of Transportation (MoT) for consideration. The actual cost for the expansion project on KM1642-1692 (Bình Thuận Province) was VNĐ142 billion lower than the original projection VNĐ2,608 billion and the cost for road surface renovation for the Phan Thiết–Đồng Nai section came down by VNĐ414 billion, from the initial estimate VNĐ2,085 billion.

Nguyễn Viết Huy, Deputy Head of the PPP Department under MoT, said initial total investment is just an estimated cost of the project. Based on this figure, project owners make plan how to use the investment throughout the project implementation period.

“Total investment figures always includes contingency expenses to cover depreciation or potential workload increases in actual construction. This contingency cost can only be determined after the project is finished,” Huy said.

By law,  the payback period stated in contracts with BOT investors is determined by the settled costs. The actual payback period will be reviewed and adjusted every three years during the concession period.

According to Đỗ Văn Quốc, head of the MoT’s Finance Department, by the end of October, BOT investors submitted settled balance sheets for 30 projects, while settlement for 23 projects is still under way. – VNS