Wrong cost estimates in state-funded projects lead to waste, corruption: experts

By Dinh Son, Thanh Nien News

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Laborers of a state-owned bridge building company works at a construction site of a bridge in Hanoi April 1, 2015. Photo: Reuters Laborers of a state-owned bridge building company works at a construction site of a bridge in Hanoi April 1, 2015. Photo: Reuters

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Experts have warned that construction costs estimated by the government are often much higher than market prices, creating opportunities for contractors and managers to work together and pocket the extra money.
Nguyen Thanh Liem, a veteran construction engineer, said cost studies by government agencies are usually based on outdated pricing frameworks and technologies.
As a result, the cost estimates for many government-funded projects are not realistic and the government ends up paying more than it should.
Nguyen Van Duc, director of Ho Chi Minh City-based New Construction Consultant Company, agreed. 
Duc said while the labor cost for a construction project is typically equal to around 40 percent of the cost for materials, the government is willing to pay the same amount for both. 
"For example the government pegs the average labor cost at VND2.96 million ($131) per square meter. The actual labor cost is just VND1.18 million ($52),” he said.
"Wrong estimates will lead to waste and corruption."
A director of a construction company, who spoke on the condition of anonymity, said his firm prefers building and upgrading roads and bridges. Such projects certainly bring in big profits after cooperating with the local authorities to magnify construction costs, he said. 
“For instance, a small road costs only VND1 billion ($44,480) to build. But as the expense estimated by the government is VND2 billion, we can raise the bill to VND1.5 billion,” he said.
To curb such practices, Duc urged the Ministry of Construction to re-study construction costs and seek advice from consultants, investors and contractors.
Meanwhile, construction engineer Liem suggested that the government should let prestigious construction consultant organizations to set cost estimates, like in developed countries.

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