NIS 560 million - this is the sum which Canadian architectural firm IBI Group Inc. is due to be paid for designing ten underground stations for the Tel Aviv light rail's Red Line. An additional NIS 10 million has been budgeted for unforeseen items. Sources inform ''Globes'' that the Ministry of Finance recently gave NTA Metropolitan Mass Transit System Ltd., which is building the line, provisional approval to pay the money to IBI Group. The astronomical amount is four times the size of the original contract, which was awarded without a tender.
IBI Group is one of the world's three largest architectural firms. In 2011, it won the contract to design the Red Line's underground stations with a bid of NIS 165 million. The line will have ten underground and 13 above-ground stations.
The sources said that, while working with IBI Group, NTA decided to expand the work to the point that a new contract had to be signed. IBI Group secured the additional NIS 400 million in work without a tender. The additional contract included supervision of the work for $42 million, changing the design of the Carlebach Street station for $16 million, and increasing the planning of all the stations from 90% to 100% at a cost of $22 million. NTA executives celebrated the closing of the contract at a Tel Aviv restaurant.
The Ministry of Finance was stunned by NTA's demand for the extra budget, but ultimately acquiesced.
The case of IBI Group is just one of reasons for the light railway's cost overrun from NIS 10.8 billion approved by the government in December 2010, to NIS 14 billion today. NTA attributes the additional NIS 3.3 billion in costs to the rise in the CPI, VAT hikes by 2%, and "planning changes".
The Ministry of Finance said in response, "In accordance with the government decision, NTA has been tasked with building the Tel Aviv light rail project. Therefore, the company is moving ahead on planning of the Red Line, and recently drew up a planning concept under which the detailed planning will be carried out by NTA. This concept was examined by the auditor, on behalf of the Ministry of Finance and the Ministry of Transport, which recommended it. The contractual procedures are the responsibility of NTA by law."
IBI Group chairman and CEO Phil Beinhaker told "Globes" in response, "In general, we do not respond to matters related to our customers, but in this case, after obtaining the customer's consent, we can say that there has been no change in the price agreed upon for the present work. The additional price is for two extra pieces of work we were asked to carry out by NTA: detailed planning of the underground stations and related matters, which should be completed by the summer of 2014; and oversight of the contractor which will build the stations, which should take 4-5 years. We note that the additional contracts have been approved in principle, but not yet signed. We are proud that the work will be carried out by companies from Israel and the world, and will employ hundreds of people."
NTA said in response, "The change in the contracts with IBI Group is highly significant, and anyone who says otherwise doesn’t have a clue about the project. Instead of building a station on top of a tunnel boring machine tunnel, as originally planned (which is done nowhere in the world and nearly doubles the risk), all the boxes are first built and then the tunnel is bored through the boxes (the stations), after which the station is built.
"The real cost of the initial contract with IBI Group for the stations was actually almost NIS 500 million: NIS 162 million for the preliminary planning of the stations, to which must be added the cost of the detailed planning and oversight. In this case, due to the high risk, there will be enhanced oversight. Ultimately, the difference from the current contract, which costs NIS 550 million, is not so great.
"Had the project gone ahead as originally planned, we would not have been able to build the stations. For example, at the Carlebach station, it would not have been possible to build, using the old method, the connection to the Green Line, or the separation from street level. The previous method would have required hiring three contractors for three separate projects, which would have complicated the work, made it much more expensive, and completely impossible. The present method will involve one contractor, one planner, and one project.
"The change in the various components was approved by the relevant parties assisting the project, including unequivocal support by the auditor on behalf of the Ministry of Finance and the Ministry of Transport, the support of the Ministry of Finance and the Ministry of Transport officials accompanying the project at the regular weekly meeting, and the support of NTA's board of directors. The directors approved the changes in the contracts, after many discussions and a lengthy presentation of the details of the changes, including the engineering, economic, and legal tests.
"We regret that certain parties, some of them within the company, are continuing to try and harm the Dan Region light rail project, and NTA, which is responsible for it, for improper reasons. It is a pity that "Globes", as a serious and respected newspaper, repeatedly lends its hands to such maliciousness."
Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2013
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