The National Audit Office inspected the implementation of the Ulaanbaatar to Darkhan-Uul Province road project between August and December last year and reached the following conclusion. The inspection revealed several serious violations.
Limited participation of domestic companies in tender
Five Chinese companies were selected to build five sections of the 204.11 km road work. A total 28 companies submitted bids, 26 of which were from China and the remaining two were domestic companies, but the two domestic companies weren’t selected due to higher costs. The National Audit Office considered that the financial requirements for companies were too high, limiting the ability of local companies to participate in the project. The spending cap for the initial phase at 25 million USD is a high criterion for national road construction companies. Though hiring foreign companies to undertake the project is cost effective, it serves as a missed opportunity to develop local businesses.
20.6 million MNT ‘missing’
The total cost of the road construction was expected to be 62.9 million USD, or 166.9 billion MNT at the average exchange rate on June 12, 2019. Some 83.4 million USD of the project investment was planned for the main road construction, design and budgeted costs, but this amount was reduced to 62.9 million USD in the contract stage, and the difference was 20.6 million USD. The inspection did not find how the 20.6 million USD was spent.
Late delivery, poor quality
During the audit phase, the audit team, together with representatives of consultants and contractors, inspected the construction work. The audit concluded that the work didn’t meet the requirements. Not only technological violations on the part of the contractors, but also rushing to complete the job within six months resulted in poor quality. In addition, earthworks, artificial structures and paving works were planned to be completed within 12 months. However, due to instructions from the Ministry of Roads and Transportation and the government, builders planned to complete the paving work by November 1, 2019. In doing so, they rushed to complete the main road construction work within six months, without taking into account the recommendations of the evaluation committee and seasonal characteristics for construction work. The Asian Development Bank extended the contract until December 31, 2020, due to COVID-19 infection during construction. The project was planned to be fully implemented and commissioned within the deadline, but the contract work of the second and fourth sections were delayed, and the contract was terminated.
