Govt plans foreign expert review to cut soaring metro project costs

The government plans to resume work on the long-stalled MRT
Line-1 and MRT Line-5 Northern metro rail projects with Japanese financing,
while also appointing international experts to review what officials described
as unusually high cost proposals submitted by Japanese contractors.
The
decision was taken yesterday (20 May) at a meeting chaired by Finance and
Planning Minister Amir Khosru Mahmud Chowdhury at the Secretariat, where
officials reviewed progress, challenges and future plans for Dhaka's mass rapid
transit projects.
Work
on MRT Line-1, connecting Airport and Kamalapur, and MRT Line-5 Northern,
linking Hemayetpur, Gulshan and Bhatara, has remained effectively stalled for
around one and a half years because of disputes over project costs.
Officials attending the meeting told The Business Standard that the government
would hold further discussions with the Japan International Cooperation Agency
(Jica) and contractors to reduce costs and seek detailed explanations for the
high estimates.
The
government also plans to compare Bangladesh's proposed metro construction costs
with similar projects in other countries and appoint professional negotiators
or technical experts to strengthen negotiations.
"Discussions
are ongoing. They will have to justify why the costs are higher. At the same
time, they will also be informed about how other countries are implementing
similar projects," Khosru said.
"We
will appoint professional negotiators so that the negotiations are handled
properly and our interests are fully protected," he added.
Officials said project implementation agency Dhaka Mass Transit Company Limited
(DMTCL) would continue negotiations with contractors, while the Economic
Relations Division would engage with Jica.
However, an official present at the meeting said that the timeline for starting
implementation of the two projects has not yet been finalised. No specific
deadline has been set at this stage.
However,
policy-level approval has been obtained from the minister, and several more
meetings are expected to be held in the coming days. At the same time, all
development project proposals (DPPs) will also need to be revised.
Discussions at the meeting noted that contractors had proposed higher costs
after factoring in additional risks, as Bangladesh has never before implemented
an underground metro rail system.
Concerns
over Dhaka's soil conditions, densely populated urban environment, vibration
risks and the possibility of structural damage to nearby buildings also
contributed to the higher cost estimates.
"Since
Bangladesh has never had an underground metro line before, contractors are
concerned about potential risks and the soil structure," the official said.
"If
tunnel excavation causes damage to buildings or vibration impacts nearby areas
in the future, contractors may face compensation liabilities. Risks related to
the defect liability period are also being considered."
MRT
Line-1 and MRT Line-5 Northern were approved during the Awami League government
in 2019 with Japanese financing. But work stalled after Japanese consultants
and contractors proposed costs 90-100% higher than those approved in the
original DPPs.
According
to a DMTCL evaluation report, the original combined project cost approved by
the government was Tk52,561.43 crore. Japanese consultants and contractors
later proposed revising the cost to Tk96,422.70 crore – an increase of around
83%.
DMTCL
officials said the estimated cost for three underground construction packages
from Aminbazar to Bhatara was initially set at Tk13,966.2 crore, but contractor
bids later raised the projected cost to Tk30,865 crore.
The
original DPP estimated Tk37,655.66 crore for depot construction, underground
and elevated tunnel stations, electrical and mechanical works, and rolling
stock. That figure has now been proposed at Tk80,099.79 crore.
Stakeholders
said the structure of Japanese loan conditions effectively limits competition
because consultants must be appointed from Japan, and those consultants prepare
tender documents in ways that often favour Japanese contractors.
Although
the tenders are formally open, officials said the same two or three companies
repeatedly dominate the bidding process, reducing opportunities for broader
international competition.
Tensions
between DMTCL and Jica over the issue have continued for months. Bangladesh's
side favours cancelling the current tenders and inviting fresh international
competitive bids, while Jica maintains that the tender evaluation process
followed its procurement guidelines and that higher costs reflect global
inflation and underground construction risks.
In
a letter sent to the Planning Commission on 28 January this year, DMTCL
proposed several reforms aimed at increasing international competition and
controlling project costs for MRT Line-1.
The
recommendations included opening existing tax exemptions and duty benefits
currently enjoyed by Japanese contractors, suppliers and workers to all
international firms.
DMTCL
also proposed using a "One Stage Two Envelope without
Prequalification" bidding system to allow greater participation by
qualified international contractors.
The
letter further recommended state-level discussions with development partners to
identify practical solutions for keeping project costs within acceptable
levels, while considering revisions to project scope based on expert advice
without undermining core project objectives.
Meanwhile,
an official attending yesterday's meeting said the government was also moving
ahead with other metro projects backed by different development partners.
The
13.1km MRT Line-5 Southern project from Gabtoli to Aftabnagar will be financed
by the Asian Development Bank and South Korea, while MRT Line-2 connecting
Gabtoli, Old Dhaka and Demra will receive World Bank financing.
The
official said greater competition among international lenders and contractors
could help Bangladesh compare costs, quality and implementation efficiency
across metro rail projects.
"There
should be a competitive environment among international financing agencies in
metro rail projects," he said. "That would create opportunities to
compare project costs, quality and implementation capability."
















