MRT-1, MRT-5 face re-tender as bids far exceed approved costs

Highlights:

• DMTCL halted metro procurements after bids nearly doubled estimates
• MRT-1 and MRT-5 costs rose 90–100% above approvals
• Limited competition, mainly Japanese firms, drove unusually high bids
• Jica-funded consultancy rules restricted open international tendering
• Government will revise DPPs and re-tender competitively
• Experts urge local capacity building to reduce future metro costs

The Dhaka Mass Transit Company Limited (DMTCL) has halted the procurement process for two major metro rail lines, initiating a total revision of project proposals to curb "abnormal" cost escalations that have seen bids come in nearly double the original estimates.

Following the approval of revised Development Project Proformas (DPP), DMTCL plans to float fresh international competitive tenders for MRT Line-1 (Airport–Kamalapur) and MRT Line-5 (Northern).

Skyrocketing costs

The decision follows sharp cost escalations during the tendering phase. MRT Line-1, approved at Tk52,561 crore, has drawn bid proposals of nearly Tk96,000 crore—around 90% higher than the original estimate. For MRT Line-5 (Northern), tunnel packages that were budgeted at Tk3,000–4,000 crore in the DPP have received bids ranging from Tk11,000 crore to Tk15,000 crore.

As a result, the overall costs of the two metro rail projects are now estimated to be 90–100% higher than the figures approved by the government.

Infograph: TBS

Fresh cost assessment, open tendering

DMTCL officials said international firms would be engaged—subject to ministry approval—to reassess project designs, constructability and costs for both MRT-1 and MRT-5 (Northern). Based on these assessments, revised project costs will be submitted for government approval.

The revised DPPs will also prioritise genuinely open tendering, smart financing mechanisms, life-cycle cost–based planning, stronger local industry participation, and improved project governance and risk management, officials said.

Managing Director Faruque Ahmed said excessive engineering and contractual constraints had restricted competition in large infrastructure projects, discouraging capable international contractors from participating.

"When competition is limited, prices are set by a small group of bidders rather than real market dynamics," he said. "This pushes bid values far above regional and global benchmarks. Similar metro projects in neighbouring countries are delivered at significantly lower costs."

Jica funding, restricted competition

Officials pointed to structural issues in Japan International Cooperation Agency (Jica)-funded contracts, under which consultants must be appointed from Japan. These consultants prepare tender documents that effectively limit participation by contractors from other countries, resulting in bids from only a handful of Japanese firms.

"As a result, both consultants' estimates and contractors' bids come in far higher than the original project costs," a senior DMTCL official said.

The MRT-1 project was approved in 2019 under the previous government. After the interim government took office, tender processes were halted and a comprehensive review of costs and bid evaluations was launched.

According to DMTCL's evaluation report, Japanese consultants and contractors later proposed Tk96,422.70 crore for MRT Line-1, against the approved Tk52,561.43 crore. Major contract packages—including depots, tunnels, stations, rolling stock, and electrical and mechanical works—were initially estimated at Tk37,655.66 crore but later proposed at Tk80,099.79 crore.

MRT-5 tunnel packages

For MRT Line-5 (Northern), only two Japanese consortia participated in the bidding for key tunnel packages—Taisei–Samsung JV and SLTM JV, led by Shimizu Corporation.

Package 5, covering a 3.5-kilometre tunnel with three underground stations, was initially estimated at Tk3,442.71 crore in the DPP. Consultants later revised this to Tk5,212.60 crore. In the tender, SLTM JV submitted the lowest bid at Tk11,177.67 crore, while Taisei–Samsung JV bid Tk14,258 crore.

Package 6, covering a 5.49-kilometre tunnel with three underground stations, was originally estimated at Tk4,364.75 crore and later revised to Tk6,126.30 crore. The lowest bid—Tk15,527.02 crore—came from Taisei–Samsung JV, while SLTM JV bid Tk16,430.49 crore.

'Overpricing begins at feasibility stage'

Dr Md Shamsul Hoque, professor of civil engineering at Buet, said cost escalation in mega projects often begins at the feasibility study stage.

"Although international norms require DPPs and engineering designs to be based on feasibility studies, in practice the process is handled within a closed circle," he said. "The DPP becomes ineffective as a benchmark, while consultants' estimates dominate decision-making. This allows 40–50% or even higher cost escalations to appear 'normal'."

He added that Jica-funded projects lacked genuine competition despite being labelled as open tenders.

"Bid documents are structured so that only a few companies qualify. Costs then rise further through variations and scope expansions during construction, turning additional approvals into an institutional routine," he said.

Re-tendering 'only viable option'

DMTCL MD Faruque Ahmed said bid prices depend on factors such as constructability, contract structure, risk allocation and procurement methods, but bids exceeding approved DPP costs by 90–100% were neither prudent nor legally defensible.

"In such cases, revising the DPP, obtaining fresh approval and re-tendering through a genuinely competitive process is the only viable option," he said.

He also stressed the need for smart financing models that optimise both capital and long-term operation and maintenance costs, as well as stronger local industry participation to reduce foreign dependence and create jobs.

Local capacity, smart borrowing

Officials said foreign loan negotiations often focus narrowly on interest rates and grace periods, while restrictive conditions on bidding, local content and re-tendering flexibility receive little scrutiny.

"These micro-level conditions are accepted under the guise of 'soft loans'," one official said, adding that the government was now discussing "smart" foreign borrowing and exploring private-sector participation in metro rail financing.

DMTCL is also considering measures to cut costs by using local equipment and manpower, including initiatives to manufacture metro coaches, bogies and components domestically.

Experts noted that countries such as Indonesia, Malaysia and Vietnam invested heavily in developing domestic human resources before rolling out metro systems—an approach Bangladesh failed to adopt.

"The biggest opportunity to reduce metro costs lies in local manufacturing and engineering capacity," Dr Shamsul Hoque said. "Bangladesh has built infrastructure without building its own capacity. Unless that changes, financial and foreign exchange pressures could become a serious crisis."