An $800m construction contract on the North-South minerals railway is to be re-tendered, prompting accusations of political bias by the company originally awarded the work.

Russian Railways says it is suspending its operations in Saudi Arabia until it receives an explanation for the decision by the Finance Ministry to retender the civil works contract on its fourth North-South Railway package, for the 480-kilometre passenger line between Al-Zabirah junction and King Khaled International Airport in Riyadh.

Russia’s state-owned rail group says that after it won the contract in January, the client went quiet about an official award and a timetable to begin work.

Speculation about the possibility of the contract being retendered mounted through the early summer, but the Russian firm only received confirmation from the ministry in July that the contract would be withdrawn.

The ministry could not be reached for comment. However, one source in Riyadh close to the project says: “The decision was taken at a ministerial level that the right people had not qualified and the figures were not right.

“The client went through the [Russian] bid a couple of times and was not convinced.”

The Russian firm accuses the ministry of political bias and is still seeking an explanation from the client as to why its winning bid has been discarded. “We won this tender and it has been cancelled for political reasons,” says a Russian Railways official. “There can be no technical doubts about our ability to build the line. That is why we won the tender. So the only reason to retender the project is political differences.

“We have still received no official reason from Riyadh for cancelling the tender and so we have halted any participation in other rail projects in Saudi Arabia.”

However, industry figures in the kingdom appear unsympathetic with the Russian position.

“It is possible the decision was political,” says another source in Riyadh. “It is up to the Finance Ministry as it is its money.”

The decision by Russian Railways to suspend its other operations in the kingdom will affect the bidding for a high-speed rail link between Mecca and Medina. The Russian group is a member of the Saudi Oger Consortium bidding for the $6bn line between the holy cities. Tenders for the first civil works contract on the line are set to be issued at the end of August (MEED 6:8:08). “We remain part of the consortium and are still interested in rail work in Saudi Arabia, but we have frozen our participation until we get an explanation,” says the Russian official.

The group must also decide whether to re-submit a bid for the North-South contract. Apparently unconcerned by the Russian complaints, the Finance Ministry’s Public Investment Fund (PIF) says it has received new expressions of interest from 18 international rail groups for the work.

PIF officials say it hopes to make a new award on the package by the end of 2008, with construction expected to be completed 40 months later, by mid-2012.

“This delay does mean that the fourth package is almost a year behind, but that is the passenger section of the line,” says the source. “It does not affect the minerals connection between the mines in the north and Ras al-Zour.”