Management & Operations

Turnkey issues discussed in Bangkok study mission

Posted on July 1, 2001

In what could legitimately be called a haven for turnkey project delivery methods, a recent FTA-sponsored delegation came to learn more about how Bangkok does major transit infrastructure projects and compare notes with their Thai counterparts in the industry. The American delegation, led by Washington Metro General Manager Richard White, also visited Hong Kong and Sydney to study infrastructure project delivery methods and technology applications in those cities. “Bangkok is a leader in the design-build process,” said Edward Thomas, associate administrator of the FTA Office for Research, Demonstration and Technology, who hosted the event, the “Bangkok International Design Build Seminar.” Virtually all major public works projects are done using design-build, and most are full “super turnkey” involving multi-decade concession contracts. That is saying a lot, for much of Bangkok appears to be under construction as huge pieces of the ancient city are being rebuilt, despite the financial panic that ended barely two years ago. In the transport sector, a Mass Rapid Transit Master Plan for the city adopted in 1994 envisions 148 miles of rail lines, including two metro lines and several suburban rail routes. The first of the projects is a $2.8 billion, 12-mile underground central section of the Blue Line. It is a 25-year concession type contract, with the civil works being done by Italian-Thai Corp. and the mechanical and electrical parts of the job by a multinational consortium led by Alstom and several Japanese companies. Thai authorities said that the project is playing some catch-up due to the financial crisis and is almost back on schedule as of this past June. One other benefit of turnkey contracting in Asia is that much of the project finance can be negotiated with the concessionaires or other private sector or nongovernmental entities. The scope of the Bangkok Metropolitan Administration’s (BMA) ambitious plan does not include the Skytrain, an elevated 14-mile metro system that opened in December 2000. It was developed under a 30-year concession BMA concluded with Bangkok Transit System Corp. (BTSC). It is the world’s first modern metro system completely financed by the private sector. Skytrain was built under a contract with BTSC by a consortium led by Siemens Transportation Systems (Berlin) and Italian-Thai Corp., a local multinational civil works construction company. Design-build also plays a part in Bangkok’s industrial development through technology transfer and by stimulating innovation, added Mana Noppun, deputy permanent secretary of the BMA, the governing body of the Thai capital’s metropolitan region. “We have also found that design-build reduces [project] costs by a factor of three or four.” Like those experienced with turnkey in the U.S., Mana pointed out that there are several pitfalls that must be avoided. “The rules governing these projects must be precise,” he said. “You also need good consultants and contractors with sufficient experience and good financial status.” Another important consideration is coordination with other local transport services. Lack thereof with public-sector and privately run bus lines that could have provided feeder services early on is one reason why the Skytrain has fallen short of its target 600,000 daily riders. It is not an unimportant point, as BTSC says that fares comprise nearly all of its income in its financial plan. The company says some of those feeder agreements are now in place. Another problem was lack of coordination with fare policies among the bus companies and Skytrain. Observers expect the massive Asian public transport expansion to continue and, because of the financial challenges at play, design-build or turnkey will figure prominently for the foreseeable future. —Cliff Henke

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