North-South Expressway project will avoid BOT mistakes

BOT transportation: Need a comprehensive view

Eight investment projects in the form of public - private partnership of the North - South Expressway Project in the 2017-2020 period will be implemented for internationalbidding to select investors. Photo: Internet

Choice of contractor

Despite being an effective form of investment, BOT transport projects in the past have encountered many problems from investor selection and project approval to project supervision. The openness and transparency of the project and the level of investment have made many BOT projects expensive and delayed.In some BOT projects, the transport fee and toll roads are still unreasonable, leading to complaints and protests at BOT toll stations across the country. As an important national project, selecting investors for the North-South Expressway Project will attract public interest to avoid faults from contractors of previous projects.

Therefore, for component projects under the North-South Expressway construction project invested in the form of public-private partnership, in order to ensure strict management of construction investment costs, minimizing the adjustment of design, and generating volume affecting construction progress, the Ministry of Transport has coordinated with concerned ministries and branches to organize the formulation, evaluation and approval of designs,techniques and cost estimates before selecting investors. At the same time, creatingthe prequalification and bidding documents with strict regulations on capacity, technical experience, financial capacity and includingdetails on full sanctions ifthe investor violates the schedule and quality of work.

According to the law, the selection of contractors for PPP projects is under the authority and responsibilities of investors and project enterprises. However, the Ministry of Transport will direct relevant agencies to closely manage and supervise the selection of contractors by investors to ensure that contractors participating in the implementation of projects are capable according to the law. There should also besanctions to require additional investors or replace contractors with weak capacity or if construction progress falls behind schedule.

Mr. Nguyen Viet Huy, Deputy Director of the Public-Private Partnership Department (Ministry of Transport) said that the North-South Expressway project will overcome the limitations of toll collection at BOT stations,whileeight investment projects in the form of public - private partnerships will be conducted internationally for tenders to select investors. At the same time, ensuring the compliance with Vietnamese laws and international practices, the Ministry of Transport mobilized two international transaction consultants, Deloitte and Ernst & Young. These are the leading consultants helping to support the Ministry of Transport to review the financial structure of the project, build a prequalification document, a bidding document and a draft contract.

Standard selection

According to Deputy Minister of Transport Nguyen Nhat, the North-South Expressway project will ensure openness, transparency and overcome all shortcomings of BOT projects that have been implemented previously. Accordingly, in the preparation of the pre-feasibility study report for submission to the Politburo and the National Assembly for consideration of investment policy decisions, the Ministry of Transport has requested agencies to comply with the order and procedures prescribed by law. Especially, it is necessary to study the shortcomings and limitations in BOT projects pointed out by the State Inspection and Audit agencies and the Supervisory Report of the Standing Committee of the National Assembly.

Regarding the bidding mechanism in the North-South expressway project, all component projects are publicly and transparently open for bidding to ensure competitiveness and efficiency. Regarding equity, the North-South expressway project also requires an investor's equity ratio of 20 percent of the total investment capital of each project. This ensures the selection of qualified investors,said Deputy Minister Nguyen Nhat.

Regarding theprevious shortcomings of BOT transport projects, talking to Customs Newspaper, Prof. Dr. Dang Dinh Dao, former Director of the Institute of Economic and Development Research, said that it is necessary to "filter”investors in the North - South Expressway project. Accordingly, we must exclude investors whose projects are behind schedule, even for investors who are involved in unfinished, long-term projects and the capital team. We should take resolute measures not to let these bidders participate in the bidding. It is also necessary to filter how contractors coming from the same country because this will easily lead to the contractors dealing with each other.

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“In particular, it is necessary to identify the contractor according to the quality of the project, not the winning value. It means that if selecting a contractor with a cheap bidding, at the beginning it might be the cheapest but then the project will last for decades, pushing costs up and resulting in the total implementation cost will be higher. At the same time, drawing experience from previous traffic projects, there was a situation where the winning investor then left the workto subcontractors, but the state management agency did not have binding sanctions. This leads to slow progress and high capital expenditure. This time, for the North-South expressway, we need to build a strict legal corridor in the management and implementation of component projects, in which the core parts are clearly defined. For most of the bidding package, which is crucial to the quality and durability of the work, the general contractor must take care and responsibility, while other less important parts and other contractors have more advantages, the general contractor can let subcontractors do the work,” Prof. Dr. Dang Dinh Dao said.