Metro rail: 'Favouring Japanese contractors' raises concerns over inflated cost

A dispute has arisen over whether contractors from outside Japan will be allowed to work on one of the packages of Dhaka’s MRT Line-1 metro rail project.

It is alleged that attempts are being made to exclude a Chinese contractor that bid for a part of the project (Package-8) through unreasonable conditions. This could limit competition and increase costs.

The Dhaka Mass Transit Company Limited (DMTCL) is responsible for the construction and operation of Dhaka’s metro rail. Tender processes are underway for two new metro lines—MRT Line-1, which will run from Kamalapur to the airport and from Kuril to Purbachal, and MRT Line-5 (North Route), from Hemayetpur in Savar to Bhatara via Gabtoli, Mirpur, and Gulshan.

During the tender process for these two projects, DMTCL has found that its initial cost estimates are likely to double after contractor selection. The total cost for implementing both projects may reach about Tk 2 trillion. Both are funded by the Japan International Cooperation Agency (JICA).

According to DMTCL sources, MRT Line-1 will be implemented in 12 packages. For eight of these, prequalification assessments have been carried out, with the same six Japanese contractors repeatedly participating.

In one package—Package-8—bidders include contractors of Japan, and joint ventures of China-Bangladesh and India-Japan contractors. This package has sparked the current dispute.

DMTCL Managing Director (MD) Faruk Ahmed confirmed receiving complaints regarding Package-8 but assured that no party would be treated unfairly.

Sources said that in Package-8’s prequalification stage, six Japanese contractors and one each from China and India were deemed eligible. Final bids were submitted by Kajima Corporation of Japan (partnered with Bangladesh’s Spectra Construction), Taisei Corporation of Japan (partnered with Samsung of South Korea), and China Civil Engineering Construction Corporation (CCECC), partnered with Bangladesh’s Abdul Monem Ltd and China Railway Bridge Construction Bureau.

In April, all three bidders submitted technical and financial proposals. Technical evaluation is now underway; only after that will the financial bids be opened, with the lowest bidder expected to win.

However, allegations have surfaced that efforts are being made to declare the Chinese bidder technically unqualified before the financial bids are opened, restricting competition to the two Japanese bidders. This could drive up construction costs.

In four major work packages of MRT Line-1 where contractor selection is nearly complete, all bids came from two or three Japanese contractors, whose offers exceeded estimates by 125 per cent, or Tk 190 billion. The loan agreements, contract terms, and contractor selection process for Japanese firms began during the previous Awami League government. The interim government has suspended contractor appointments upon seeing the cost overruns.

A DMTCL official, on condition of anonymity, told Prothom Alo that only in Package-8 has a Chinese contractor participated. If both Japanese and Chinese bids were opened, it would become clear whether Japanese contractors are indeed overpricing. Japanese consulting firm Nippon Koei plays a central role in preparing and evaluating tender documents.

According to the Ministry of Road Transport, Japanese contractors and consultants gain an advantage due to loan conditions. Tender documents also include methods and technologies that are almost impossible for non-Japanese firms to meet—for example, requiring tunnel construction using the “one pass joint” method, which favors Japanese contractors.

From Kamalapur to the airport, MRT Line-1 will have around 20 km of underground tracks and 14 stations. All tenders for underground work so far have attracted only Japanese bidders. The elevated section from Kuril to Purbachal—about 11.25 km with seven stations—will be built under two packages. Contractor selection for Package-8 is ongoing; the other has yet to start.

Package-8 includes construction of 6 km of elevated tracks and four stations from the Balu River in Purbachal to the Pitolganj depot, plus a 172-meter steel bridge over the Balu River.

DMTCL sources say the tender requires using a special type of Japanese steel for the bridge, produced by only three Japanese companies. Using equivalent steel from other countries would require prior approval from the Japan Road Association.

One such manufacturer is Japan’s Kobe Steel Mill. Chinese contractor CCECC submitted certification from Japanese supplier Shincho Corporation, but during technical evaluation was asked to produce certification directly from Kobe Steel, despite tender documents stating that supplier certification was sufficient.

A DMTCL official noted that the bridge accounts for only 10 per cent of Package-8’s work and is not particularly complex. The additional mid-process requirement may be aimed at preventing non-Japanese contractors from winning.

On 31 July, CCECC lodged complaints with various government offices, including the project director, DMTCL MD, and the Road Division secretary.
MRT Line-1 project director Abul Kashem told Prothom Alo that he had sought the opinion of the government’s Central Procurement Technical Unit (CPTU) after receiving the Chinese company’s complaint, promising fairness and competition.

Dhaka plans six metro lines. The first, MRT Line-6 from Uttara to Motijheel, is operational, with the extension to Kamalapur under construction. Line-6 has cost Tk 15 billion per km for elevated sections. By comparison, similar elevated metro lines in India cost about Tk 1.5 billion per km, and underground lines about Tk 4.5 billion per km. Other Asian countries also have lower costs than Bangladesh.

For MRT Lines 1 and 5, DMTCL’s cost analysis after receiving bids shows total costs exceeding Tk 30 billion per km. The current interim government is negotiating with JICA to relax loan conditions and reduce costs.