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State Audit reports on HCM City metro line cost overruns

Update: December, 27/2018 - 09:00
Construction on Bến Thành-Suối Tiên metro line in HCM City. According the State Audit of Việt Nam, the HCM City People’s Committee made the unauthorised decision in 2011 to approve the project’s cost increase. — VNA/VNS Photo
Viet Nam News

HCM CITY — The State Audit of Việt Nam (SAV) has published a report on a series of violations that have caused major cost overruns for HCM City’s Metro Line No 1 (Bến Thành-Suối Tiên), including unauthorised decisions made by the city’s Management Authority for Urban Railways (MAUR) and People’s Committee.

According to the SAV, the HCM City’s People’s Committee approved a cost increase for the project in 2011 from the initial level of VNĐ17.2 trillion (US$740.4 million) to more than VNĐ47.3 trillion ($2.01 billion). It did so without clarifying where the additional capital would come from or assessing investment efficiency.

The decision was unauthorised because key national projects with total investment of more than VNĐ35 trillion ($1.50 billion) need to be approved by the Prime Minister.

The SAV pointed out the cost approved by the city was not aligned with the estimated cost.

The SAV estimated the project’s adjusted cost should have been only VNĐ29.2 trillion ($1.24 billion) due to escalating prices and other changes. In fact, the project’s cost rose by more than VNĐ18.1 trillion ($770.2 million) compared to SAV’s estimate.

The MAUR blamed the cost increase on changes in construction material prices and minimum wage increases between 2006 and 2009.

Hoàng Như Cương, MAUR’s deputy head, made the unauthorised decision to sign decision No 178 in 2014, approving the expansion of Bến Thành Station from two floors to four floors with each floor area increased from 12,720sq.m to more than 30,000sq.m. The station expansion added over VNĐ3.2 trillion ($136.2 million) to the project’s cost.

Meanwhile, according to the SAV, this expansion and the change of girder design from a T shape to a U shape should have increased the total project cost by roughly VNĐ1.42 trillion ($60.4 million).

The MAUR did not fully report the girder design cost increase to the city’s People’s Committee and ignored the consultation of Việt Nam Railway Authority.

The prices for imported equipment listed in the approved cost adjustment document are far higher than the bidding prices. False calculation has been also discovered in the unit rates and quantity estimates.

The city’s People’s Committee also unilaterally decided to defer the metro line’s deadline from 2017 to 2019, a choice which should have been submitted for approval by the National Assembly. An unauthorised assessment was also made by the city’s Department of Planning and Investment.

The SAV pointed out violations in investment capital management, contractor selection, contract signing, land clearance and compensation.

In its conclusion, the SAV used the phrases “causing losses and waste” or “potentially causing losses and waste” to describe the violations.

The SAV proposed the People’s Committee report on construction progress to the Prime Minister, as well as conduct a review to determine the actual cost of the project, which should be submitted to authorised agencies for approval.

The SAV also asked the People’s Committee to clarify the responsibilities of those involved, punish violators and report to the SAV before March 31.

According to MAUR, 57 per cent of the project has been completed. The date of completion for the line has been pushed back several times, with the most recent being 2020. This year, due to complications related to legal procedures regarding the price adjustment, the Ministry of Planning and Investment stopped granting Official Development Assistance (ODA) loan funds to the project.

Since September 2016, the city’s People’s Committee has paid nearly VNĐ3.3 trillion ($140.4 million) from its coffers.

Since June 2016, MAUR’s head Lê Nguyễn Minh Quang submitted letters of resignation on two occasions. Following the submission, the city’s People’s Committee temporarily suspended Quang’s position.

Hoàng Như Cương, MAUR’s deputy head, was also temporarily suspended from his position as the board’s Party Committee Secretary for going abroad for personal business without permission. Earlier, Cương submitted multiple letters of resignation. — VNS

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