State mulls issuing new Jerusalem light rail tender

Jerusalem light rail

There is a €45 million gap between Alstom and CityPass's bid for the Red Line extension and what the Israeli government is prepared to pay.

A financial dispute over €45 million between the State and the Jerusalem light rail franchisee CityPass and work contractor Alstom is delaying the extension of the existing line and work on the new line. The sides have been in discussions for more than year on the cost of the work and have been unable to reach agreement. The State claims that the contractors estimate is excessive and is mulling issuing a new tender, while the contractors insist that the State is incorrectly pricing the project.

Sources in the transport sector agree that costs can be lowered but warn that the State is 'focusing on trivial rather than important matters" and is "flexing its muscles at the expense of the public," and there will be a "repeat of the Tel Aviv light rail saga."

Israel's Accountant General will meet this week with the Ministry of Finance budget director and director general of the Ministry of Transport to decide whether to continue working with Jerusalem light rail franchisee CityPass or issue a new tender.

How much does a line cost?

The dispute concerns the extension of the existing line, which currently covers 14 kilometers between Pisgat Ze'ev and Mount Herzl. The plan is to extend the line southwards via Kiryat Yovel to Hadassah Ein Kerem hospital and northwards to Neve Yaakov. This will make the line 22 kilometers in length, adding 8 kilometers.

Alstom has bid €340-355 million for the work (depending on the number of trains) while the government is only prepared to pay €310 million. The government says that Alstom is attempting to narrow the gap and that until a few weeks ago there was €75 million between their bid and what the State is prepared to pay.

If the government does issue a new tender, it will likely link it to the second planned Jerusalem light rail line - the Green Line from Mount Scopus to Gilo. In such a case it would be inconvenient for there to be two operators for the two lines, rather than one, and the government might seek to buy CityPass out of its contract, which lasts until 2038 but has a buyout clause requiring compensation for profits lost.

Published by Globes [online], Israel business news - www.globes-online.com - on May 2, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Jerusalem light rail
Jerusalem light rail
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