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Chinese-contracted railway project in Hanoi suffers 57% cost overrun

Chinese-contracted railway project in Hanoi suffers 57% cost overrun

Tuesday, October 27, 2015, 14:51 GMT+7

A Chinese-sponsored railway project in Hanoi, whose construction is infamous for causing a series of accidents, has been hit by yet another scandal as it is expected to cost 57 percent more than first thought.

The Railway Project Management Unit is seeking approval from the Ministry of Transport to increase the total investment in the Cat Linh – Ha Dong urban rail project to US$868.04 million from the previous estimate of $552.86 million.

The $315.18 million cost overrun is calculated by Transport Engineering Design Inc. and assessed by the Institute of Construction Economics under the Ministry of Construction, according to the project management unit.

The total investment must be hiked because the actual construction of many units under the project is different from their design, and there are many extra components, the management unit said.

For instance, while the project is designed to have two-story terminals, three-story ones have actually been built, which led to higher construction costs, it elaborated.

The Cat Linh – Ha Dong urban railway project broke ground in October 2011, with $419 million of the initial investment estimate covered by China’s official development assistance (ODA) loans.

China will add $250.62 million to cover part of the $315.18 million cost overrun, whereas the Vietnamese side will increase its capital contribution to $198.42 million from the previous $133.86 million.

Vietnam will thus have to take a massive $669.62 million ODA loan from China for the project.

The Vietnam Railway Authority, under the transport ministry, is the project developer, whereas China Railway Sixth Group, a subsidiary of construction conglomerate China Railway Group, is the EPC (engineering, procurement, and construction) contractor.

Under an EPC contract, the contractor designs the installation, procures the necessary materials, and implement the project.

The Railway Project Management Unit said the project has so far had construction work worth VND5.9 trillion ($263.39 million) completed, or 66 percent of the initial investment estimate.

Construction of infrastructure for the project will likely finish by the end of this year and it may officially go on stream in March 2016.

The Chinese-contracted Cat Linh – Ha Dong urban railway project has been hit by several scandals since groundbreaking.

The project will use 13 trains provided by China’s Beijing Rolling Stock Equipment Co. under a $63.2 million supply contract, which has met with strong objection by local members of the public as well as experts in the field.

Minister of Transport Dinh La Thang has said it was “force majeure,” or an unavoidable circumstance, because Vietnam is required to buy trains made by Chinese companies as per the contract signed with China.

Also in June, the project was blasted as locals noticed its rails were ‘wave-like’ and comparable to those of a roller coaster.

The wavy parts of the railway can easily be seen with the naked eye, raising safety concerns among local experts and members of the public.

In August the EPC contractor of the project was admonished by the Railway Project Management Unit for “causing many accidents related to labor safety.”

The warning came two days after a bar of steel fell from a construction site of the project onto a four-seat car traveling below, almost killing the driver.

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