Chinese contractors fail to meet quality and deadline demand

Photo source Vietnamnet

Vinaconex Water Supply Joint Stock Company (Viwasupco) has decided to cancel the pipeline contract for Song Da Water Project - Phase II with Chinese contractor Xinxing Co., Ltd. (Xinxing) due to concerns over the quality of the ductile iron pipes.

The plan will be submitted for prime ministerial approval. Previously, the PM agreed to the Hanoi People’s Committee’s proposal to suspend signing the contract with Xinxing to reconsider relevant problems.

Previously, Viwasupco planned to invest in Song Da Water Project - Phase II. Chinese pipe-maker Xinxing won the contract by bidding 11.8 per cent under the investor’s asking price. Under the VND588 billion ($26.25 million) contract, Xinxing was to supply ductile iron pipes for the project’s 21-kilometre pipeline.

However, the selection of a Chinese contractor for a crucial water project faced protest from residents. Adding salt to injury, Singaporean Acuatico Pte., Ltd. decided to divest its 43.2 per cent stake, equalling 21.8 million shares, in Viwasupco as a reaction to a Chinese contractor winning the pipeline contract.

Chinese contractors are known for bidding low to win contracts, then asking for more, citing unexpected cost overruns. Most Chinese-contracted projects are likely to reach completion behind schedule, amassing further costs.

The infamous Cat Linh-Ha Dong urban railway project in Hanoi, for instance, is expected to cost 57 per cent more than the initial investment estimate. Notably, China Railway Sixth Group is the engineering, procurement, and construction (EPC) contractor who initially estimated the project to cost $553 million, but the total investment has already risen to $868 million.

In addition, the construction of infrastructure for the project was expected to finish by the end of 2015 so that it may officially go on stream in March 2016. However, as of now, construction has yet to be completed.

Another example is Thai Nguyen Iron and Steel Plant - Phase 2, invested by Thai Nguyen Iron and Steel JSC (TISCO), with Chinese contractor China Metallurgical Group Corporation (MCC).

The plant’s construction was kicked off in 2007 under an EPC contract with the initial investment capital of VND3.8 trillion ($170.4 million). However, in 2009, the project’s expected cost increased to VND8 trillion ($361.4 million).

In 2012, MCC decided to abandon the project and returned to China because the investor had difficulty arranging capital after disbursing more than VND4.5 trillion ($216.35 million). Thus, the project’s construction has been delayed for four years.

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