The Government Inspectorate (TTCP) has recently released Document No. 375/KL-TTCP, detailing the inspection findings on projects facing challenges within the Ministry of Construction. The report highlights several violations in the Bac Giang – Lang Son BOT transportation project.
Incorrect Cost Calculation Increases Total Investment by Nearly VND 310 Billion
According to the inspection findings, the Bac Giang – Lang Son BOT project was approved by the Ministry of Transport (now the Ministry of Construction) in 2015, with a total investment of nearly VND 12,189 billion. The project operates under a Build-Operate-Transfer (BOT) contract, allowing the investor to recover capital through toll stations.
Regarding project approval, the TTCP determined that the Ministry of Transport issued Decision No. 1249/QĐ-BGTVT on April 9, 2015, without updating the environmental impact assessment report, which violates regulations. Additionally, the decision was made before the Ministry of Finance provided input on the toll station location on National Highway 1, contradicting the Prime Minister’s directives.
The timeline for the construction phase (2015–2017) was also deemed unrealistic.
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In terms of total investment calculation, the TTCP found that the project’s budget included incorrect estimates for construction costs, such as the volume of adhesive asphalt, incorrect unit prices for asphalt concrete, and improper application of bored pile standards. These errors inflated the total investment by nearly VND 310 billion (excluding loan interest and land clearance costs), which is non-compliant with regulations.
The TEDI – VECC design consulting consortium inaccurately forecasted traffic volume, predicting a drastic increase of 131–186% from 2019 to 2020. The TTCP identified this inaccurate traffic prediction as a significant factor contributing to the project’s challenges.
Regarding investor selection, negotiations, and contract signing, the TTCP noted that the Ministry of Transport signed the project contract with the investor, including terms inconsistent with the request for proposal, proposal documents, negotiation results, and the approved investor selection decision. The Ministry signed the contract before the investor met the financial requirements (insufficient charter capital contribution), violating the Law on Bidding.
Insufficient Capital Contribution and Lack of Land Clearance Funding
The project investors are a consortium comprising UDIC Investment Corporation, Phuong Thanh Transportation Joint Stock Company, Investment Company 468, Transportation Construction Joint Stock Company No. 1, and My Da Construction LLC. This consortium established the project company, Bac Giang – Lang Son BOT Joint Stock Company.
On May 25, 2018, the Ministry of Transport transferred the project’s state authority to the People’s Committee of Lang Son Province. Subsequently, Lang Son Province, along with the investors and project company, signed six contract addendums related to the Bac Giang – Lang Son BOT project. The inspection revealed that the People’s Committee of Lang Son Province did not fully comply with the project adjustment procedures outlined in Government Decree No. 150/2015 when signing the contract.
During the initial project phase (2015–2018), the project company and investors failed to contribute capital as stipulated in the approved investment decision. The investors did not meet the charter capital contribution deadline.
“The primary cause was internal instability among the investors within the project company, with frequent changes in capital contribution ratios and consortium members, leading to project delays,” the report stated.
During the BOT contract implementation, the consortium investors could not secure credit agreements with banks that had initially committed to funding the project. The investors had to renegotiate financing with Vietinbank. This renegotiation caused delays in capital mobilization and project progress.
According to the Lang Son People’s Committee, the Bac Giang – Lang Son BOT Joint Stock Company submitted an investment capital settlement report totaling VND 8,387 billion; however, after review, the province approved only VND 8,161 billion.
The inspection uncovered incorrect completion estimates, resulting in an unjustified increase of nearly VND 80 billion. The project company miscalculated several items, leading to a deduction of over VND 93 billion from the investment capital settlement.
The TTCP also noted that the project has not received land allocation from the People’s Committees of Bac Giang and Lang Son Provinces. Although compensation plans have been approved for some land clearance areas, the investor has not allocated funds for payment.
“The project has not met its initial goals, with low efficiency. As of the inspection date, revenue has fallen short of the financial plan outlined in the BOT contract and its addendums, resulting in insufficient toll revenue to cover bank loan interest and principal repayments,” the inspection concluded.
Recommended Actions
The Government Inspectorate recommends that the People’s Committee of Lang Son Province, the investor, and the Bac Giang – Lang Son BOT Joint Stock Company deduct nearly VND 99 billion from the investment capital settlement.
Lang Son Province must review and settle the project’s investment capital in accordance with regulations for certain items. Interest expenses during construction must be deducted proportionally to the incorrectly settled construction costs.
The People’s Committee of Lang Son Province should instruct the Bac Giang – Lang Son BOT Joint Stock Company to consult with the Institute of Economics (Ministry of Construction) to clarify the application of standards issued in 2020 by the province.
Lang Son Province must submit proposals to competent authorities to address the project’s challenges, coordinate with investors and the project company to complete land allocation procedures, and arrange funds for compensation payments in accordance with the law and the signed BOT contract.
The Government Inspectorate recommends that the Prime Minister direct the Ministry of Construction, Ministry of Finance, and the People’s Committee of Lang Son Province to hold accountable and impose strict penalties (including compensation for damages if applicable) on leaders of relevant agencies across different periods.
“If criminal violations or state asset losses are discovered during the implementation of the inspection findings, the information, case files, and related documents should be transferred to investigative agencies for handling in accordance with the law,” the Government Inspectorate stated.
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