A new set of documents published by the Serbian government, following the report from the Expert Group of the University of Belgrade, includes a draft conceptual design for the reconstruction of the railway from Novi Sad to the Hungarian border. The draft, created by the CIP Institute in November 2017, provided an initial estimate for the project’s cost. At that time, the project designers estimated that modernizing the railway would require an investment of 681.4 million euros. Comparing this amount to what has been executed and paid so far, the cost is practically double, writes Forbes Serbia.
According to the draft, “the investment estimate was based on defined solutions for construction infrastructure and experiences from the first two sections of the railway” (Belgrade – Stara Pazova and Stara Pazova – Novi Sad). The conceptual design and draft project are the initial planning and design stages and contain the most conservative cost estimate. However, the question remains whether such a large discrepancy is justified.
In general, there are several reasons why construction project costs can differ significantly at various stages of design and execution. These include special requests from the investor, such as the use of the highest quality equipment and materials or larger quantities than originally planned by the designer. Unforeseen work during the project’s implementation is another possible factor, although this is typically accounted for as a separate item.
Ultimately, cost increases can also be influenced by inflated expenses, such as overpaying for materials, equipment, and labor—an issue that should be investigated by the prosecutor’s office in this case.
Nonetheless, the key factor in this project was the offer from Chinese contractors, which took into account both the state’s financial needs and the project documentation. Initially, the state agreed to a contract sum of 1.16 billion dollars. Subsequently, through annexes, approximately an additional 87 million dollars in costs were added.
The final version of the conceptual design, completed in July 2020, suggests that the initial estimate in the draft conceptual design was too conservative for the state’s needs. The costs had increased significantly by then. Without taxes, the cost reached 789 million euros, and with VAT, 1.04 billion euros. According to the latest published provisional report, the contracted costs have risen to 1.24 billion dollars, with contractors being paid 1.2 billion dollars for nearly 97% of the work completed.
