Foreign firm named in contract over runs

28-Oct-2004 Intellasia | 22/Oct/2004 Thoi Bao Kinh Te Vietnam page 10 | 1:22 PM Print This Post

Under the first calculation approved by the HCM City People’s Committee, the Phu Tho sports Competition Centre Construction Project was to cost 66.627 billion dong. However, after two times of design change and cost increases, total spending more than doubled to 145.181 billion dong.
It is obvious that the contractor in charge of designing the project has seriously violated the signed designing contract. It was told that many bidding packages are resold by contractors to earn billions of dong in profits illegally.
The Phu Tho Sports Centre at Ly Thuong Kiet Street, District 11 HCM City, was to be a modern centre to enable Vietnamese athletes to improve themselves and to host international sports competitions.
However, right after the project was broken ground, many criticisms were voiced about the methods of construction, wastage, and bad quality building work by the investor and contractors.
Later investigations by the State Inspectorate found the criticisms were factual.
Based on the applications submitted to HCM City People’s Committee by the HCM City Service of Sports—the investor and owner of the Phu Tho Sports Centre Construction Project, the city people’s committee issued Decision 1921/DQ-UB-DA on March 27, 2000 to officially approve the investment to the construction of the Phu Tho Competition House, multi-purpose building and SEA Games preparatory work in the city that would seat 5,000 with an area of 30,000 square metres and built at a cost of 66.627 billion dong. The plan was that construction would start on October 22, 2000 and finish by the end of 2001.
However, on December 10, 2001, the HCM City Service of Sports once again submitted an application to ask the HCM City People’s Committee for an increase in expenditure to 119.429 billion dong for centre which was far from finished even though the initial deadline was a few weeks away. The request for an expenditure increase of nearly double was approved by the HCM City People’s Committee. After another three years of constant delays, on December 2, 2004, the Phu Tho Sports Centre was finally completed and put into operation. However, one month later, on January 12, 2004, HCM City Service of Sports once again requested the HCM City People’s Committee to increase the total expenditure to 145.181 billion dong.
Therefore the total cost of the project jumped 2.2 times over the first investment calculation and later investigations found how easy it was for government contractors to siphon off funds.
After receiving approval on selecting a design contractor by the HCM City People’s Committee on August 5, 1999, the HCM City Service of Sports signed a 1.569 billion dong contract hiring Meinhardt Vietnam—an Australian construction consulting company firm. Accordingly, this company had to design the whole Phu Tho Competition Sports Centre.
However, after having checking the project, the State Inspectorate found that Meinhardt Vietnam did not conform to the commitments of the signed contract. The firm did not make a general cost estimate for the investor owner to forward to the HCM City Service of Construction for consideration and approval. In contrast, this company only made the calculations and estimations for each phase of construction.
Meinhardt Vietnam also did not design in detail technical construction items and it only provided unclear design documents for the HCM City Service of Sports to submit to the HCM City Service of Construction for approval, which led to the situation where contractors in charge of installing and constructing equipment for the project did not receive technical drawings so they resorted to making their own installation and construction designs. This was not only in contravention of government regulations on state construction works but also considerably slowed construction progress causing substantial cost overruns of many billions of dong that the state budget had to bear.
In addition, Saigon Construction Co had signed a contract of checking the designs by consulting firm Meinhardt Vietnam and apparently focused mainly on earning its fees and ignored the incomplete design calculations by Meinhardt Vietnam, the State Inspectorate said.
Therefore, the State Inspectorate concluded that the HCM City Service of Construction and Saigon Construction Co must be further investigated for legal liability for violations and mistakes which caused serious losses to the state.
Phu Tho Competition House Construction Project was divided into 17 bidding packages, of which four bidding packages were to held publicly, two as limited tenders and 11 bid packages by tender selection.
After inspecting the bidding documents, most reports, requests and petitions of bidding consultants should not have been accepted because of the numerous mistakes in the process of evaluating bidding documents. From the results of biddings and tender selections, HCM City Service of Sports had signed 16 commercial contracts totalling 82.629 billion dong with contractors in charge of installing equipment for the project. After inspecting these contractors, the State Inspectorate found that after winning a bid, most contractors appointed subsidiaries to carry out the work or even these subsidiaries often then onsold the contracts to other contractors to earn hefty profits worth billions of dong.
After defining the serious mistakes related to the construction of sports centre by the investor owner and contractors, the State Inspectorate requested the HCM City People’s Committee to immediately deal with all state agencies, SOEs and individuals involved in these serious violations.
Under the request by the State Inspectorate, the HCM City People’s Committee must make the final calculation for all the expenditures on the finished project of the investor owner and request contractors involved to be responsible for pay all emerging expenditures due to their mistakes in designing construction items.
Under the request by the State Inspectorate, the HCM City Service of Sports—investor owner, design consultant Meinhardt Vietnam, the consultant to verify design and supervise the construction of the project Saigon Construction Co, the company in charge of installing equipment for the project Chuong Duong Installation and Investment Joint Stock Co—should be investigated for their liability and if necessary make compensation. The State Inspectorate stated that the Hanoi Construction Corp, the Construction Corp Number one under the Ministry of Construction, Airlines Work Construction Co must investigate their respective responsibilities and punish their subsidiaries and individuals involved in on-selling bidding packages for profit.
The Project Management Unit of Phu Tho Competition House the must be investigated for its responsibility on mistakes in the process of managing the project and return a total of 75.5 billion dong to the State Treasury due to its illegal expenditure.


Category: Legal

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