Budapest opens controversial Metro Line 4 20 May 2014
Armand van Wijck, TunnelTalk Europe Correspondent
After nine long years Phase 1 of Budapest’s Metro Line 4 is finally inaugurated. But construction of the Hungarian capital’s fourth metro line has been overshadowed by endless failed deadlines, disputes with contractors, and allegations of corruption. TunnelTalk European Correspondent Armand van Wijck examines the project’s troubled history.
Construction of Budapest Metro Line 4 started in 2006 when the Hungarian State and City Governments approved funding for the US$2.05 billion Phase 1 section. The project received $820 million in subsidies from the European Union Cohesion Fund, with the remaining $880 million and $350 million being financed by the Hungarian State and the Municipality of Budapest respectively.
Budapest Metro Line 4 alignment under the Danube

Fig 1. Budapest Metro Line 4 alignment under the Danube

Following concept design by Hungarian firms Fomterv and Uvaterv, and in association with Mott MacDonald of the UK, Phase 1 was divided into 11 contracts. The first and largest of these was awarded to Bamco, a consortium comprising Vinci of France, Strabag of Austria and local partner Hidepito Zrt. The $295 million design-build contract covered construction of the 7.3km of running tunnels from Kelenföldi Station on the Buda side of the city, under the river Danube to the Keleti main railway station on the Pest side (Fig 1). Bamco also excavated Gellért tér Station. The other nine underground Phase 1 stations were awarded as separate open-cut and top-down box excavation contracts.
In April 2009 a standoff was reached when Bamco brought its two EPB TBMs to a standstill on the west side of the Danube saying it would not continue without immediate settlement of $160 million in claims and presentation of proof that Budapest had sufficient funding in place to complete the project. Bamco complained that project owner BKV and its project management company, Metro DBR, had interfered in the design-build contract ever since it was awarded in 2006. Bamco has lodged claims worth $160 million for increases in costs arising from a number of issues. Project owner BKV stood its ground and gave Bamco a two-week deadline to resume tunnelling; an agreement was then struck, termination was avoided, and Bamco resumed work. John Larke, Contracts Manager for DBR, told TunnelTalk at the time that “a series of high level talks between all stakeholders had found agreement to enable work previously suspended, to resume with the utmost dispatch.”
Construction of Gellért tér station in December 2010

Construction of Gellért tér station in December 2010

Metro station construction site at the Keleti station

Metro station construction site at the Keleti station

Breakthrough at Rákóczi tér Station on 3 January 2010

Breakthrough at Rákóczi tér Station on 3 January 2010

To complete the 7.3km of bored twin tunnels for Phase 1, the consortium procured two 6.05m diameter Herrenknecht EPBMs. These were launched at Kelenföldi Station on the Buda side of the Danube, finishing their drives in 2010 at Keleti Station on the Pest side.
The original aim for completion of the first phase of the project was 2007-2009, but deadline rescheduling became routine as a result of payment disputes and construction delays. Mayor István Tarlós, who took over office from Gábor Demszky in 2010, claimed that contracts signed under the watch of previous city councils was the major reason behind the spiralling costs. According to local media, by 2014 the total cost of construction had reached $2.04 billion, $410 million more than the budget drawn up at the tender stage in 2002. Tarlós said the largest contributory factor had been the decision to use 17 subcontractors instead of a general contractor.

Advice ignored

Another problem, it is claimed, was the use of FIDIC contracts throughout the project. FIDIC (The International Federation of Consulting Engineers) is well-known for its work drafting the standard form Conditions of Contract for the worldwide construction industry, particularly in the context of higher value international construction projects, and is endorsed by many multinational development banks. But complaints were made by contractors that FIDIC contracts were poorly understood in Hungary, and that many clauses contained in them were at odds with local public procurement law. This made them impossible to manage well.
The client’s engineer, Eurometro, would have been tasked with making decisions on contracts and contract strategy. But a source close to the project told TunnelTalk: “Eurometro, which included Louis Berger and a group of experienced expatriates to add international expertise, used to complain that the locals kept them sidelined and ignored advice.
“Contractual problems were highlighted, notably with interfaces. Some interfaces overlapped both physically and in time. However their comments were ignored. You can guess where lots of claims arose.”
During the inauguration ceremony of the long-awaited Phase 1 at the end of March (2014), Mayor Tarlós emphasised that the new municipal leadership (post-2010) had found it a challenge to correct the contract situation it inherited from the previous administration – and “revive, practically save and complete” what was then only a half-built project. He also noted that the international contracts concluded at the start of the project in 2005 and 2006 did not allow for any reconsideration of the continuation of the project beyond 2010. A general termination of the 16 outstanding metro contracts, without justification, would have resulted in indemnity lawsuits that would have surely bankrupted the city. Terminating the project was therefore not an option. “By renegotiating the contracts the new city leadership of 2010 regained tens of millions of dollars for the city,” said Mayor Tarlós. “Instead of politicising the metro we engaged in building it.”
Mayor István Tarlós inaugurates Phase 1

Mayor István Tarlós inaugurates Phase 1

The long-running saga appears to lend credence to the perception of Hungary as a difficult and corruption-prone construction environment. The TunnelTalk source said: “There are many stories about corruption on the Metro. Some of them may have been politically motivated but corruption is rife within the publicly-funded construction sector, as well as elsewhere.”
That is why Hungary ranks 20th out of the 27 EU countries, according to Transparency International’s Corruption Perceptions Index. While hard evidence is difficult to find, since there are many people with an interest in keeping this hidden, it is fair to conclude that there is no smoke without fire and corruption has contributed to the delays and cost overruns.
Budapest will now continue with Phase 2 and 3 of the M4 line. Phase 2 is planned to run from Keleti to Bosnyak tér and will include a further 3.2km of twin running tunnels and four extra stations. Phase 3 adds an extra 2.1km of twin running tunnels, running from Kelenföldi to Madárhegy. Both phases are estimated for completion in 2017, but uncertainty remains; Phase 2 is still awaiting railway authority and environmental approval, and no final decisions have yet been made about Phase 3. Failure to complete all three phases could mean Budapest losing its $820 million worth of European Union subsidies.
References
Budapest Metro standoff resolvedTunnelTalk, May 2009
Budapest Metro waiting for a green lightTunnelTalk, June 2001

           

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