A Push For Public Investment Disbursement (Part 1)
Within the context of Covid-19 pandemic spreading unpredictably that influences directly all fields and industries in the country, a need of effective measures to stabilize and develop the national society and economy becomes more and more urgent and decisive, especially in boosting the State-invested national mega projects is considered to be the most important action as well as a strong lever in contribution to hold fast to the national growth pace and minimize the impact of coronavirus spreading.
Gas pipeline installation in the Revised Nam Con Son 2 Project site
Part 1: Existing difficulties unresolved
For the first two months of the year 2020, the State budget disbursement for public sector investment was rated nearly 4% the year plan which was approved by the National Congress. Generally,the Government always shows their consideration and takes action on holding fast to that matter butit seems not to create many positive changes as expected due to the co-existence of both the incompletely settling previous difficulties and new arising.
Constraints in current mechanism
Regarding the Song Hau 1 TPPP, the total schedule has so far reached over 82% and all resources in the project site are focusing with the greatest efforts on the most important milestone of setting fire for the first time by the end of June 2020. According to the Manager of Song Hau 1 Lilama PMB Vu Trong Thiet, a number of the project items are following the critical path such as the water intake, the FGD system, … Human resource of Song Hau 1 contractors are mobilized maximally and even working continuously overtime up to 20 hours per day. However, the previously difficult matters are still unresolved and prevents the schedule of completion from boosting, from one of which is the deferment of the final payment activity in Song Hau 1 TPPP despite a new mode of payment in the EPC Contract have been revised and approved, the diffidence in carrying out for each particular package starts to be shown.
At present, the payment of completed bill of quantity for Song Hau 1 TPPP construction and installation is made temporarily equal to 80% of the total contract value for each package’s real volume after performing under a strict supervision and receiving acceptance (the remaining 20% is unpaid for standby until a final unit price agreed and paid all afterward). Besides, many constructional phases and stages were not regulated or slowly updated into the current norm causing difficulties in the taking-over documentary fulfillment. To settle this, the involving parties agreed to hire the Institute of Constructional Economy (a unit of MOC) - a professional and authoritative agency - as the consultant in charge of recording practical data as well as setting up a new set of full and suitable estimated norms, which is waiting for reviewing and approved. As the matter of fact, the Owner’s attitude was cautious while the contractors were unable to join any other packages due to lack of finance… According to the project disbursement in 2019, there was approximate VND 3,074 billion funded equivalent to 60.5%; and VND 3,378.20 billion invested equal to 66.8% of the total year plan.
Considering as ‘a vessel’ to overcome the ocean, after completion, the Thai Binh 2 TPPP should have produced an electricity of kW7.2 billion per hour for the national power network and created a revenue of VND 1,000 billion for the State budget. Unfortunately, the incomplete project might not be put into operation on schedule because of seriously suspending and so far has suffered a lot of financial abundant up to tens of VND billions per month mainly for making payments on such items as salary for labourers, guarantee fees, materials and equipment maintenance. Until now the total schedule reached 85%, but completion of the remaining 15% cannot be sure since problems existing in disbursement and mechanism. Particularly, from the beginning of year 2019 to now, the investment has been disbursed again little by little only for making payment of the packages’ bill of quantity completed before and since 2018 as well as urgent and necessary situations, the quantity performance in 2019 particularly has been ceased in the time waiting for PVN to request and submit the authorities of different levels for permission of using its own capital to refund for its resumption, but so far no response received. Besides, the weak financial capability of PetroVietnam Construction JSC as EPC Contractor and the serious deficit caused by the advance amount being used for wrong purposes over the past time were also main reasons causing the project delay.
The situation of transportation projects is more optimistic. Particularly, Mai Dich – Nam Thang Long Viaduct Bridge Project owned by Thang Long Management Board Unit (PMU) as the Owner’s representative, was commenced in May 2018 in Hanoi and expected to be completed in September this year, with the total investment value of VND 5,343 billion composing of Japanese ODA and the domestic counterpart fund. According to Mr. Duong Viet Roan - the Project Manager, the project was comprised of two large packages, in which the package No.1 (Mai Dich – Co Nhue passage) was awarded to Sumitomo Corp. - Cienco 4 Join-venture and the package No.2 to Tokyu – Taisei Joint-venture with the total values of VND 1,450 billion and over VND 1,210 billion respectively. However, the process of disbursement is slower than that of the plan due to changes in engineering revision of the Mai Dich overpass bridge suitable to the practical condition; and the replacement of bored piles with rotary screw piles for reducing cost of over VND 200 billion leading to the longer procedure. Although the land clearance was advantageous thanking to great efforts of the Hanoi authorities, the total schedule was still influenced by series of matters such as the 04-month delay of the site handing over, overlapping in construction sites between works of the overpass bridge and the belt road III extension; 2-month delay in certificate application for oversized and heavy-lifted transportation means… By the end of 2019, the disbursement reached VND 113.5 billion from the counterpart fund gaining 100% and over VND 863 billion from Japan ODA – 14.7% less than the plan. Other two projects in Hanoi mentioned are the intersection bridges built: Nguyen Van Huyen - Hoang Quoc Viet (as Package No.1); and Western Thang Long – Hoang Quoc Viet (as Package No.2) steel structured overpass bridge, from which the first was fulfilled with the fabrication of 72 segmental beams (gaining 100% the plan) and installation of 73 ones; the last 76 ones and installed 68 ones by the end of February 2020. In fact, the production value in this February totally amounted respectively VND 38 billion for the Package No.1 (higher than the plan of VND 36.82 billion) and VND 28.73 billion for the Package No.2 on the total plan of VND 43.94 billion.
Particularly in the Song Hau 1 TPPP, all importing equipment of the EPC contract for the plant construction should have been tax free upon the issued List of tax exemption during the planned time and schedule performance approved by the authorities of levels. In fact, due to delay in the project schedule in terms of both subjective and objective reasons, many listed items shall be out of date as the year of 2020 coming, which causes a lot of importing equipment for plant systems just arrived at the port suspending for waiting custom clearance. According to Mr. Vu Trong Thiet – Song Hau 1 TPPP LILAMA Project Manager, some of the most ultimately urgent plant system equipment had to be delivered by airway instead in order to meet the schedule requirement of installation in site, of which tax costs was paid up to VND 4.5 billion. Lilama also submitted the authorities of levels for proposal on extension of current importing tax exemption, nevertheless, it would be late to wait until a new mechanism on this issued. Therefore, the only choice at this time is to ‘bite the bullet’ for tax payment in advance to accomplish the plan rather than bearing too much cost for storage fee. Moreover, importing tax for the remaining equipment is temporarily estimated about VND 60 billion which means a big problem to the contractors in case the extension would not be applied. After meeting with the provincial authorities and relating agencies about this, all involving parties of the Song Hau 1 EPC contract were guided and consulted to extend the time limitation of Investment License until the end of the year 2021, but situation seemed to stay the same when the Owner showed embarrassment in response. Until now, 08 imported consignments by Lilama have arrived and stored at Sai Gon Port which cost a storage fee of about USD 3,000 per day. Besides, other 30 partial consignments of FGD system shall be arrived in the coming time of which an amount needed paying is more multiple than that. At present, as the Covid-19 disease are widely spreading, the project schedule in general and the commissioning and testing stage of the plant in particular have been affected deeply by unpredictably situational matters such as: a large number of labourers giving up their jobs before and after the Tet Holiday period; many Doosan experts’ unability to attend the project site in Vietnam because of the epidemic outbreak in their country also while this party is responsible for arranging capital and supplied a volume of 80% materials and equipment for the project.
Another project facing specific difficulties is the Revised Nam Con Son 2 Gas Pipe Project (NCS2), of which the owner is PV GAS JSC and the EPC-3 Contractor the joint-venture of VietsoPetro - Lilama - NAGECO. All pipelines and stations of the project shall be completed for testing and commissioning operation and receiving the first gas flows from upstream Sao Vang – Dai Nguyet field by September 30th 2020. According to Lilama NCS2 PMB Manager Nguyen Anh Tuan, the installation of the first sampling 400m pipelines of the total project 39km onshore has been carried out, human resource and materials & equipment mobilized in preparation for execution. At present, most of the stages are still following the critical path. This project is very a large and important one which contents a huge volume of work scope, now also meeting difficulties during the implementation that is unable to promote the schedule such as executing under a topographic and geological complexity of different lands, multi-parties negotiations about the working conditions and requirements. More particularly, NCS2 pipelines are constructed in parallel and within the safety corridor with the existing ones managed by other 03 owners (including Rosneft, Perenco, PV Gas), therefore its engineering designs and materials for performance shall be also considered and agreed for approval by these owners aiming at the safety protection of the operating ones in case any bad impaction or violation occurs, which certainly and consequently shall be taken much time. Regarding the regulation on violations, all project insurances for which the new constructing work may damage the existing pipelines shall be bought by PV Gas as the role of the Owner of the Revised NCS2 Project.
Coming back the Package No.1 & No.2 of Mai Dich – Nam Thang Long Project, facing unpredictable difficulties is also not exceptional. According to Mr. Pham Anh Tu - Head of Project Management Site Office No.1 of PMU Thang Long, the PMU has already requested the Ministry of Transportation (MOT) to review and revise the design of soundproof wall distribution suitable to the factual site condition, on which the instruction of the two packages shall be based and followed to. However, there has been any answer from the MOT yet, so that the plan of molding parapets of bridges was defer, and the matter of the sound data and its affect calculation is also not stated in the consulting contract on supervision at the same time. Generally to say, the project completion is expected to be in August 2020 and those above factors shall be the main reasons impacting on the whole schedule. Therefore, the PMU has requested the MOT to consider and approved with the following proposals on: soundproof location revision, designs and estimation for relocation of public utilities within the package No.2 which shall be the basis of making payment for contractors; at the same time looks forward to the MOT’s comments soon on building two additional urban sub-bridges along two sides of Mai Dich – Nam Thang Long viaduct bridge, as well as on using residual capital of the project investment…
Posted and Pictured by Correspondents on Economic issues