NTA Metropolitan Mass Transit System Ltd. can obtain bids at least NIS 1 billion lower than those it has received in the Tel Aviv area light rail Red Line tender, sources inform "Globes."
The sources said that the high bids submitted to NTA reflected risks that NTA refused to reduce before closing the tender, despite dozens of requests by the bidders in various matters. "This is at a level that the French didn't want to bid," one source said. "They asked them for crazy things - NIS 300 million in guarantees, demands involving materials, performance guarantees, and times. It's really like asking someone for the moon, without asking how much it costs. Then they get bids, and ask whether the bidders are crazy."
"Globes": If that is the case, why did the groups enter the tender in the first place?
"Because they begged them to bid, and the groups thought that NTA would listen to them in the negotiations, but they didn't listen. I know that the company sent letters with lists of problems, some of which were described as barriers that could kill the deal. For example, they argued that the model of 350 milestones for payment on the completion of particular segments of the project was illogical, because the cash flow will be negative for a long time, while work is being carried out at the same time. This makes the contract a financing contract."
Alstom and the French partners, who submitted a bid with Shafir Civil and Marine Engineering, are currently preparing their response to a letter they received from NTA on Sunday seeking clarifications of their price bids within a week.
The tender is for laying the Red Line tracks and installing all the electrical and electronic elements: a signals system that will be the light rail's operating system, electrical infrastructure, ticketing systems, and information systems. The tender also includes responsibility for integrating all the light rail elements, including the physical tunnels infrastructure, sidewalks, and railways stations, in the Chinese railway carriages supplied by Chinese company CNR.
PB, which is advising NTA, estimated the tender at NIS 2.4 billion, an assessment confirmed by Aegis, the company supervising the project on behalf of the Ministry of Finance Accountant General Department. Alstom's actual bid was NIS 4.3 billion, while the other group's bid was nearly NIS 6 billion. Industry sources asserted that PB had not taken the risks in the project into account, and that Aegis's supervision of the pricing was too general.
After the bids were submitted, sources in the sector claimed that the main reasons for the high prices were risks in installing European technological systems in Chinese railway carriages, concern about a negative cash flow for a prolonged period, integrating the railway at 70 junctions, dependence on regulators such as the police and firefighting forces, and challenging timetables that will be very costly if they are not met.
"We won't allow a deviation from the budget"
NTA said in response, "NTA will not allow a deviation from the budget established by the state. Taxpayers' money is involved. The estimate was made by the world's largest railway engineering company and confirmed by the Ministry of Finance oversight company. The estimate reflects the global prices of the technology systems, according to the risks in the tender. If someone thinks that Israelis will pay much more for exactly the same systems, they are wrong, and are misleading people."
It was recently reported that NTA had halted another tender that had been issued for selecting an operator for the Red Line. In the past few days, it was reported that the tender would probably be reopened in January, after NTA decided to grant a request by several foreign companies to reduce their share in the operating group partnership, which has been 51% up until now. The logic in the request is that operating the light rail involves day-to-day work in an Israeli environment, with drivers, cleaning teams, guarding, etc. Due to this situation, actual operation will be performed by Israeli companies, including Egged and Dan, who have made agreements with the foreign operators.
Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2016
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