“Shoot first and ask questions later”: Many serious mistakes at BOT and BT projects

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Set up the project before Government approval

According to the final report of the State Audit, the audit results of nine BOT projects in 2019 show that the Ministry of Transport allowed the preparation of BOT projects before the Government approved the project guidelines, not implementing the process of making, approving and announcing the list of BOT projects; approving projects before having an EIA report.

In addition, this Ministry did not publish the list of projects and did not organize open bidding to select investors but appointed contractors.

Notably, the State Audit Office discovered there wasa project using the BOT fee-collecting capital to return capital for non-project items, such as the An Suong - An Lac BOT Project.

This project uses BOT capital collection to pay back capital for Tan Ky Tan Quy bridge which is not on the project route with a total investment of VND312 billion (by December 31, 2018, the investment costs paid for this item were VND91 billion, total payment capital was VND103 billion).

The State Audit stated that the acceptance and payment at BOT projects were still wrong. Audit results of BOT projects in 2019 have reduced by VND665.8 billionof the investment costs, including: the wrong amount of VND74 billion, wrong unit price of VND186 billion, and other incorrectexpenses of VND404 billion.

Finally, the audit results suggest handling of VND925 billion, including large-scale treatment projects; reducing payback period of seven of nine projects to 56.4 years compared to the original plan.

Under construction and then appoint investors

In addition to BOT projects, with Build-Transfer (BT) projects, the audit results of 29 BT projects in localities also show many errors.

Most projects are direct contracting; there are projects that appoint investors after project execution. The projects are mainly proposed by investors and included in the portfolio, such as Bac Ninh with 72 of 83 projects proposed by investors.

In Hanoi, most projects determine the total initial investment is much larger than the actual value of implementation.

Specifically, the project of constructing a road from Ngoc Thuy dyke to Thuong Thanh new urban area, Long Bien district reduced byVND69 billion of the estimate, the cost of site clearance compensation reduced byVND754 billion; while the road project of Dam Hong - 1A road is reduced byVND251 billion.

In addition, the approval of some content adjustment is not in compliance with the regulations and still contains errors. Typically, the project to build a road connecting Phu My bridge. This project has less than VND226 billion of a total incorrect adjusted investment increase, of which there are reasons for wronglycalculating the cost of raw materials, fuels and materials; and incorrect settlement unit price of completed volume.

Also according to the State Audit, some localities have approved the area and land price temporarily that exceeds the value of BT project. The case of Thanh Hoa is one example. This locality approved the area and price of provisional land exceeding VND875 billion of a BT project value. By the time of the audit, the investor must pay VND735 billion ofthe land use fee according to the actual land area exceeding BT project value.

Along with that, there are localities that have signed contracts not in accordance with regulations, not ensuring the principle of price parity.

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In Khanh Hoa Province, the project of branch road system (phase 2) in the northern tourist area of Cam Ranh peninsula decided to allocate land fund to pay back the capital to investors with the value of VND1,100 billion (calculated according to the unit price of VND459,000 per m2) to pay for BT contract with a value of VND312 billion,not ensuring the principle of parity as prescribed in Clause 3, Article 3, Decision No. 23/2015/QD-TTg.