GTX-B Unable to Find Construction Company, Schedule Delays Unavoidable

Private Section, Priority Negotiation Candidate to be Selected in January Next Year After Reannouncement
Financial Section, Failed 3 Times, to Switch to Comprehensive Evaluation Bidding System

[Image source=Yonhap News]

[Asia Economy Reporter Cha Wanyong] The selection of contractors for the 수도권광역급행철도 (GTX)-B line project has failed in both the publicly funded and privately funded sections. The Ministry of Land, Infrastructure and Transport and the Korea Rail Network Authority plan to speed up the process by changing the bidding method to designate a preferred negotiator and adopt a comprehensive evaluation bidding system, but schedule delays are inevitable.

According to the Ministry of Land and the Rail Network Authority on the 15th, the GTX-B line project, originally scheduled to complete contractor selection this year, failed to attract participants for both the publicly funded and privately funded sections.

First, the GTX-B privately funded section failed as Daewoo Consortium was the sole bidder after the submission of project applications on the 1st. Accordingly, the Ministry of Land plans to conduct one more competitive bidding as specified in the Private Investment Facility Project Basic Plan (RFP), and if contractor selection fails again, to select a preferred negotiator by January next year.

However, it is uncertain whether competitive bidding will be successful through re-announcement. The GTX-B line has low profitability, and major competitors such as Daewoo Construction, POSCO Construction, Hyundai Construction, and DL E&C have formed a consortium, making it difficult for any rival to emerge.

The publicly funded section also failed three consecutive times due to insufficient bidders. On the 10th, the Rail Network Authority held a policy review committee and decided to change the bidding method for sections 1 to 3 of the GTX-B publicly funded section from turnkey to comprehensive evaluation bidding. The comprehensive evaluation bidding system assesses companies’ social responsibility in public projects above a certain scale.

Previously, in August, the Rail Network Authority issued turnkey bids for sections 1 to 4 of the GTX-B publicly funded section. Except for section 4, which progressed with participation from Hanwha Construction and KCC Construction, sections 1 to 3 failed due to sole participation despite four bidding attempts.

For section 1, with a project cost of 438 billion KRW, Daewoo Construction was the sole bidder; for section 2 (344.2 billion KRW) and section 3 (636.6 billion KRW), DL E&C and Hyundai Construction respectively participated alone.

Due to the delays caused by the failed bids in the publicly funded section, the Ministry of Land and the Rail Network Authority considered direct contracts with sole bidders. However, since direct contract cases for large railway construction projects are rare and to maintain fairness with the recently changed bidding method from turnkey to comprehensive evaluation for the Southern Inland Railway (sections 1 and 9), they ultimately decided to proceed with the comprehensive evaluation bidding system.

With the failure to select contractors, the GTX-B line plan, which aimed to finalize contractors within this year and start construction in the second half of next year, has been disrupted. An industry insider said, “There are only about 10 construction companies in Korea with the civil engineering capacity for mega railway projects, and the profitability of the B line is not high. Even if the contractor is selected by changing the bidding method to preferred negotiator or comprehensive evaluation bidding, the schedule has already been delayed, so starting construction in the first half of 2024 seems difficult.”

In response, the Ministry of Land stated, “We will actively negotiate after selecting the contractor to ensure that construction starts smoothly in 2024.”