Contractors predict hike in costs for eastern expressway in Saudi Arabia

18 April 2008
Transport Ministry estimates come under fire as budget is expected to double.

Contractors are becoming increasingly critical of Riyadh's handling of major infrastructure projects, citing poor cost estimating and a lack of communication.

The latest indication of problems have come on the project to build a 120-kilometre-long expressway linking the towns of Uqair and Salwa, in the Eastern Province, in what is expected to be one of the Transport Ministry's largest road-building contracts this year.

At least 17 contractors were expected to bid for the construction contract by 19 April as MEED went to press.

However, contractors have estimated that the cost of the project could double from the ministry's initial estimates of SR250m ($67m) and say it will need to sign a follow-on contract with additional finance to complete the work.

According to one local contractor bidding for the contract, the bill of quantities prepared by the ministry, which covers the cost of raw materials for a project and provides an indicator of the project value, is being consistently underestimated.

"The money is not enough because the quantities they use are estimates and in most cases are much less than is required," says the contractor. "It is not necessarily inflation related; it is ill-prepared tenders."

The bill of quantities has been repeatedly revised for the project, being reduced from 21 million cubic metres of foundation material for the road, to 7 million, 2 million and finally 1.9 million.

"It means [the ministry] does not know what it is doing," says the contractor. "The problem is, it announced a budget for this project of SR250m and it has now realised it cannot get tenders close to this figure for the quantities required. So it has reduced the bill of quantities and will issue completion packages later."

The cost of the completion package is likely to mean that the contract will be worth at least double the original estimate for the full work, he adds.

The problem is being repeated across the kingdom, with many transport projects running late and over budget.

According to the contractor, 55 per cent of the Transport Ministry's 2008 budget is being spent on projects that should have been completed in 2007.

The Damman ring road project, which was due to be completed in 2007, is one example. Bidding will begin on 21 April for the completion package, after the Transport Ministry downgraded the original work. The intersections, bridges and interchanges had to be removed from the original package and tendered separately. The latest package is worth SR400m.

Another Riyadh-based contractor says the main problem is a lack of communication between the contractors and the government. "The ministry does not consult us on estimates," he says. "It usually takes it from previous projects. But this does not help as we are suffering right now as prices are rising. On one project, between pricing and actual construction, the price of steel rose by 250 per cent."

Another contractor involved on the Uqair-to-Salwa project expects the budget to only allow for 80km of the road to be built, with a completion package to follow.

The Transport Ministry was not available for comment.

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