The State Comptroller's review of Haifa's Metronit bus rapid transport (BRT) project was intended to solve a billion shekel mystery: how had the project exceeded its budget by more than three-fold, and who was responsible.
In 2007, the Ministry of Transport budgeted NIS 540 million for building the Metronit's infrastructure, but the project's costs ballooned during construction, reaching NIS 1.59 billion by July 2013. The Metronit began operating in August 2013, nine months behind schedule.
The Metronit is Israel's first BRT project - articulated buses with exclusive lanes and priority at traffic lights. The Metronit network is 45 kilometers.
The Metronit was built by Yefe Nof Ltd., a company owned by the Haifa Municipality. The operating franchise was won by Dan Public Transportation Co. Ltd., which later sold 40% of the project to France's state-owned railway company, SNCF and Noy Infrastructure and Energy Investment Fund, keeping a 60% stake.
The State Comptroller found many major flaws and deviations from proper management procedures by the Ministry of Transport, Ministry of Finance, and Haifa Municipality. Yefe Nof was the focus of the investigation, and the State Comptroller views its conduct with "great severity."
The State Comptroller found that Yefe Nof exploited the lack of Ministry of Transport oversight to use Metronit financing for other work unrelated to the project, failed to prepare properly for it, failed to carry out a safety study pursuant to procedures, failed to examine alternatives and feasibility studies, and did not institute proper oversight and control procedures on the private contractors that did the work. State Comptroller Joseph Shapira concluded that these flaws caused the Metronit's massive cost overrun and delay in execution.
The State Comptroller also criticized the Ministry of Transport. For example, important project management and labor relations contracts between the franchisee and the government and relevant municipalities in whose jurisdiction the Metronit passes were only signed in 2011-12, more than four years after the start of work.
As for the cost overrun, the State Comptroller found that, in 2005-12, Yefe Nof frequently raised its cost estimates without proper explanations or controls. The Ministry of Transport did not insist on receiving notification of overruns, failed to thoroughly examine the additions and if they were essential to the Metronit, and did not carry out proper oversight.
No overall budget framework was established for the Metronit before work began, and in practice, the Ministry of Finance budgeted it on the basis of Yefe Nof's needs. Yefe Nof exploited this to carry out work unrelated to the Metronit for which it demanded payment as if the work was part of the project.
The State Comptroller found that Metronit's final official price tag of NIS 1.59 billion did not include other costs, such as infrastructure work carried out before 2007 and work carried out using other budgets.
Published by Globes [online], Israel business news - www.globes-online.com - on January 23, 2014
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