Cost of Baku-Tbilisi-Kars railway project increased 3.3 times

Cost of Baku-Tbilisi-Kars railway project increased 3.3 times

CESD regional monitoring sparks probe into over-estimation of project costs

Cost of Baku-Tbilisi-Kars railway project increased again in November, 2011. The cost of the project reached $ 1 billion 252 million which initially was $ 420 million. The project cost increased 3.3 times compare starting cost of project, without proofing any severe reasons- announced Center for Economic and Social Development (CESD), Azerbaijan.  CESD regional monitoring is evidence for that there are no needs to severely increasing of railway construction costs: “None state agency in Azerbaijan utters reasons of increasing of costs”. Working with the support of the Partnership for Transparency Fund (PTF), CESD sparks probe into over-estimation of project costs.

“Our monitoring show that costs in the construction over-estimated which causes misusing of oil money. Monitoring show that the requirements to contractors’ qualification indices were not determined and assessed while selecting contractor. And all items of the Article “Conflict of interests at public procurements” of the law were violated. Those bidder, having close links with organizer of tender, was declared the winner. In certain circumstances, amid tender procedures companies close to relevant agencies had entered into a formal consortium with qualified foreign companies, in order take advantage of selection criteria. This is why the performance and technical parameters of SOFAZ-financed projects are unavailable to the public. What is most remarkable is that some projects, nothing else than, have been under implementation for years and their termination or completion still seem impossible. Each project cost went 30-40 percent higher versus the initial contract values. In fact, the additional cost to the large-scale project should not exceed 15 percent in the worldwide practice. If more, the price surge is impacted by no economic, but other factors”- CESD stated.

Reminding that the state credit of Azerbaijan granted to Georgia through agent bank (International Bank of Azerbaijan) in 2011 was increased up to $775 million. The credit is divided in 2 tranches: tranche A has size of $200 million granted for 20–year period under 1% annual rate and tranche B will make $575 million granted for 25 year period under 5% annual rate. Tranche A was allocated as early as in 2007.



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