China’s burgeoning road and rail construction market, part of the country’s US$483bn (4,000bn yuan) infrastructure building boom, coupled with China’s rugged terrain, is offering ample opportunities for the international tunnelling community, whether contractors, consultants or equipment suppliers.
Recent awards for tunnelling related work to international firms such as Italian construction company CMC and British engineering consultant, Halcrow, shows that foreign expertise is needed despite the experience and knowledge of domestic contractors and consultants. CMC won a US$35.6M contract earlier this year for the construction of 21.8km of tunnels as part of a water supply scheme in Kunming, the Yunnan provincial capital in south-west China. CMC is the only foreign tunnelling contractor to win work on the scheme, which involves the construction of nearly 98km of tunnel.
Halcrow, meanwhile, is celebrating after scooping deals to advise and plan work on two highways both of which involve extensive tunnelling. The first involves advising on the 138km Panzhihua expressway, part of the southern Sichuan road development project, that includes 20 separate sections of tunnel totalling 25km. The estimated cost of tunnelling is a significant US$75,500 per metre. The expressway will be built in Sichuan province in western China, one of the country’s high-profile, government-sponsored development areas. The second scheme is even more ambitious calling for 20 separate tunnels with 70 simultaneous tunnel drives in complicated geological conditions as part of the 117km Chongzun expressway in western China.
While foreign firms have widely been able to work in China since 1994, the country’s recent accession to the World Trade Organisation (WTO) coupled with a national tendering law introduced two years ago, is making the process easier.
International tendering
What has yet to happen though is for China to sign up to the WTO’s government procurement agreement (GPA), which provides increased transparency in the award of consultancy and construction contracts and includes a disputes procedure for disaffected firms. Hong Kong, a special administration region of the People’s Republic, was a GPA signatory when it was still a British colony.
While China’s tendering law does not include a disputes procedure or require details of winning bids to be publicised, the tendering law is aimed at regulating project procurement activities and minimise corruption. As such, it is seen as a key milestone in China’s transition to a market-orientated economy. Specifically, it insists on foreign participation for all infrastructure and other projects, including tunnelling works, partially or wholly funded by foreign organisations including banks and international bodies such as the World Bank.
The regulation also allows foreign firms to bid for: projects financed by a joint venture between Chinese and foreign investors when local contractors do not have the technical expertise; and all infrastructure projects developed under build-operate-transfer (BOT) concessions. For the first time, the law covers consultancy work such as geotechnical surveys, design and supervision plus the procurement of equipment and materials.
The regulation requires that foreign contractors must obtain a qualification certificate, valid for five years, before they will be allowed to bid for projects. Applications for these certificates are fairly straightforward, requiring the submission of technical and financial references, plus details of local offices, partners and staff and business registration, that are normally required by national and international agencies elsewhere in the world. Foreign contractors who have operations in more than two provinces, autonomous regions, or cities under the direct control of the central government have to apply to China’s Ministry of Construction.
Overseas construction companies planning to bid for construction contracts in the four special economic zones, including Shenzhen near Hong Kong, and the 12 cities open to foreigners, must apply to the respective local authorities for their qualification certificate. Firms just planning to work in one province have to apply to the respective provincial construction authority. Once qualified, contractors can bid for projects that are partially or wholly financed internationally. They can only tender for domestically financed schemes in joint venture with a local partner.
One of the advantages for foreign bidders is that the law requires they must be given at least 20 days to prepare their bids. They must also be told of any clarifications or modifications to the original tendering documents at least 15 days before the tender closing date. The tendering law also allows foreign firms to bid for either of China’s two accepted procurement systems – open competitive tendering and selective competitive bidding. The former requires that all key state or local projects should be put out for prequalification or open tender through media approved by the State Planning Development Commission (SPDC).
This includes China Daily, the mainland’s largest English-language daily newspaper and www.chinabidding.com.cn, where tender details are available online, although the system has yet to progress to the electronic submission of bids.
Open competitive bidding requires clients to receive official approval before tenders can be invited. There are also tough conditions on the invitation to bid, which should state the amount and source of project finance, the prequalification of bidders, technical and economic requirements and the evaluation criteria of tenders. If a tender evaluation committee assesses the bids, the group must be composed of at least two-thirds technical and financial experts who meet specified requirements such as having at least eight years of professional experience. Selective competitive bidding can be used, but clients must have the prior approval of the SPDC or provisional planning authorities. Invitations to bid are sent to a restricted number of potential tenderers, although there must be at least three.
For the first time, the tendering law allows clients to appoint a registered tendering agency to organise the invitation of tenders in addition to allowing client organisations to invite bids themselves. The innovative move to allow bidding agencies to invite tenders has been widely adopted by major clients, including state-owned expressway owners.
In essence, the work of these tendering agencies is similar to the use of consulting engineers in other parts of the world. The agencies must have a pool of technical and financial experts and professionals who should be properly qualified with at least eight years of professional experience. So far, only local organisations can set up tendering agencies, although there is a sense that foreign firms, including consulting engineers, accountancy and professional services companies such as PricewaterhouseCoopers, will be able to enter the market at some stage.
While the tendering law appears cumbersome it does establish procedures that should make it easier for foreign contractors, including tunnelling firms, to complete with their mainland counterparts. This is at a time when the mainland tunnelling market is beginning to accelerate as cities and provinces invest in new highways, railways and mass transit systems.
Importing expertise
Japanese tunnel boring machine (TBM) and equipment manufacturers are already beginning to eye China as a production and export centre for the rest of Asia. Komatsu, which recently won its first order in China to provide three TBMs on the Shanghai metro, has signed a contract to build part of one of the machines with a local shipyard and engineering firm. If this deal is successful, equipment manufactured in Shanghai will be incorporated into TBMs to be supplied to neighbouring Taiwan and Singapore. Kawasaki Heavy Industries, which delivered a TBM for use on a metro extension in Tianjin, a port city about 150km from Beijing, together with other rivals such as Mitsubishi Heavy Industries and Ishikawajima-Harima Heavy Industries (IHI), are looking at China’s manufacturing capabilities. Last May, IHI won an order to supply a TBM for the construction of Shanghai’s metro extension after partnering with a Tokyo-based Chinese trading house Chuwa Busan Co. The TBM is due to be delivered in March 2003 when it will bore 3km of rail tunnel.
The raft of projects include the construction of a 18km long dual two-lane road tunnel which passes through the Qingling Mountain in Shaanxi province and will be among the longest in China. Construction of the link started in September and is one of 11 tunnels that will be built as part of a 65km highway, estimated at about US$362.4M, connecting Xi’an, the Shaanxi provincial capital, to Zuoshui county.
The China Railway Tunnel Group, based in Luoyang City, Henan province, has also picked up a contract to build the 11.4km Cangxialou-Qiliqiao tunnel as part of the Ganzhou-Longyan railway project for the Ministry of Railways.
The railways ministry has also given the green light to the construction of a rail tunnel under the Qiantang river in Hangzhou, south of Shanghai, planned by the Hangzhou municipal government recently.
In Shanghai, Hong Kong’s Mass Transit Railway Corporation (MTRC) has formed a joint venture with Shanghai International Group to project manage and oversee the construction of the 12-station, 35km Shensong Line, called R4, which will link Xuijiahui and Songjiang new city. The joint venture company – Shanghai Hong Kong Metro Construction Management Company – is 60% owned by the MTRC. Construction of R4 is due to complete in 2005.
Shanghai’s metro network is owned by five state-run companies including Shanghai Industrial Group, Dazhong Transportation Group and Shanghai Qiangsheng Group, while the operating rights for R1, R2 and R3 belong to Shanghai Metro Operation Company. The latter recently lost its monopoly earlier this year when Shanghai-based Jiu Chuang Company won the right to operate the R3 extension, called the Pearl Line, which is due to open in 2004.
Further north, the Beijing Mass Transit Railway Group Corporation has issued an international call for construction tenders for the city’s US$1.5bn fifth mass transit line. The 27.6km link, between Songjiazhuang station in Fengtai district in the south to Taipingzhuang North in Beijing’s northern Changping district, will include about 17km of tunnel. The scheme has already attracted the interest of Germany’s Bilfinger Berger which formed Beijing Great Wall B+B, also known as Beijing Chang Cheng B+B, in partnership with Beijing Construction Engineering (Group), the city’s largest tunnelling and rail contractor. The Beijing Mass Transit Railway Group Corporation was set up by the Beijing municipal government to finance, design, build and operate the line. Completion of the railway is due by 2007. A feasibility study and business plan was completed about 18 months ago by Canadian company SNC-Lavalin, working in association with mainland partners Beijing Capital Group and the Beijing Subway Company.
The fifth mass transit line is part of Beijing’s ambitious plan to extend the city’s rail network from the existing 50km to more than 200km of mainly underground railway by 2008. The investment is costing about US$11bn over the next six years.
In the west, construction is to start this year on a US$205.4M, 3km road tunnel under the Yangtze River in Wuhan, capital of Hubei province. The project, jointly funded by local investment and a development corporation, is due for completion in four years.
In Harbin, capital of Heilongjiang province in north-east China, the city authorities are planning to build a 1.85km long dual two-lane road tunnel at an estimated cost of US$85M under the Songhua river to link both the northern and southern parts of the city. The three year project could be built as a build-operate-transfer project.
In southern China, ambitious plans have been put forward for the construction of a 30km road tunnel under the Pearl River estuary that would connect Shenzhen and Zhuhai. Guangdong provincial vice-governor Gu Guangyuan, said feasibility studies are currently been carried out to assess if the scheme is technically and financially viable. Mr Gu said: “Although the expressway network in the Pearl Delta region is in place, improvements still need to be made”.
Shenzhen, which was promoted by former Chinese premier Deng Xiaoping as China’s answer to nearby Hong Kong as part of the mainland’s ‘open-door’ policy in 1984, is again being used to pilot change. This time, Shenzhen has been chosen to pioneer the lifting of restrictions on foreign ownership that is required as part of China’s membership of the WTO. Shenzhen will liberalise overseas ownership in 20 sectors including the transport industry, and more specifically the design and manufacture of urban transport equipment, underground trains, the manufacture of tunnel excavators, and metro tunnelling equipment.
This comes as The Shenzhen Metro Corporation is set to complete the first section of the city underground metro line in 2004. On the road front, Shenzhen Expressway Co is completing the construction of the three-lane Xiyong tunnel as part of the Yantian port-Daya Bay expressway, which is expected to open in October 2003.
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