1.1 The latest situation

The Light Rail Train (LRT) Macau Peninsula Line and Taipa Line phase 1 were planned in 2007 and were expected to be in operation in the end of 2011; however, the schedule was extensively delayed and only the Taipa Line is expected to be operated in 2019. Until December 2017, only the civil engineering of the Taipa Line, which is 9.3 kilometers in length, was completed, accounting for 44.28% of the construction works in the phase 1 of the LRT, while the Macau Peninsula Line only started the preliminary works of the Barra Station. At the end of 2016, the Transportation Infrastructure Office (hereinafter referred as “GIT” according to Portuguese abbreviation) re-planned the LRT system and set a total of 11 routes for the short, medium and long term. The Taipa Line and the Macau Peninsula Line, as proposed to be built in the LRT phase 1 previously, were scheduled to construct in the short and medium term plan respectively. However, except for the five routes in the short term plan, which were expected to be completed in 2026 at the earliest, the remaining routes in the medium and long term plan do not have a schedule for their completion.

Regarding to the investment cost, the estimated construction cost for the LRT phase 1 was significantly increased from 4.2 billion patacas in 2007 to 14.273 billion patacas in September 2012. Since May 2016, GIT has not updated the estimated construction cost of Macau Peninsula Line on the ground that its route has not yet been decided. In addition, when GIT planned the 11 routes for the short, medium and long term, it did not prepare any information on the cost estimate for each route or entire project. Until December 2017, CA compiled the information of each route and found that three routes did not have any information about their cost estimate, while the other eight routes, only Taipa Line had been updated its estimate, involving 10.823 billion patacas. Moreover, until 31 December 2017, the total awarded amount of LRT system was about 13.273 billion patacas; besides, three main contracts were revised or terminated, involving the additional expenditure and damage of about 1.726 billion patacas.

In terms of the preparatory work for the operation of Taipa Line, it was firstly reported in June 2016 that GIT would be replaced by a company in 2017, which was responsible for preparing the LRT operation. However, up to July 2018, the company was not established. Besides, in April 2018, GIT outsourced the “operation and maintenance services” of the Taipa Line at the cost of 5.886 billion patacas to the contractor who would prepare the work before the opening of Taipa Line and provide the first five years of operation and maintenance services of LRT.

1.2 Audit findings and opinions

1.2.1 The related situation in the extension application

The three sections of Taipa Line were approved to extend the construction period several times after the commencement and the extended construction period accounted for 95% to 111% of the original construction period. From the application for extension of construction period in three sections of Taipa Line, CA selected the key dates with more days of extension as the cases of study and found that GIT had serious deficiencies in the analysis of the extension application and its approval, as well as the work of coordination and management.

For the incident that could cause the extension of time, the international standards of engineering industry give great importance of advance warning and require the contractor to notify within 28 days after the awareness of it, but the general practice of engineering industry can be more stricter. For the Macau legislation and the terms regulating the LRT project contractor, there are also related provisions requiring that contractor should inform the owner within five days after being aware of the occurrence of the incident. This practice can help avoid getting into future disputes by understanding the actual situation on time, and control the problem immediately to prevent causing irreversible facts. However, GIT did not pay any attention to this. For the problem in which the construction was obstructed by a traffic direction sign (case one), the contractor only gave notification after more than six months; moreover it was found out that only a smaller machine could solve the problem. This fact shows that dealing a problem as soon as possible can definitely reduce the impact on the construction schedule or even there would not need to delay.

For the assessment of the extension and its approval, there are three important factors to consider: whether it would influence the total construction period (i.e. the critical path of the works), the number of days delayed and whether it is possible to reduce the days through the adjustment of the work plan. However, GIT failed to properly consider the above factors, such as failing to assess the impact of the delayed incident on the critical path. In a case where the pier and the foundation structure of the connection point to Hengqin line lacked design information (case two), which could be inferred that the time from which the construction was influenced should have been begun in April 2013; however, without detailed explanation, GIT approved the extension time to start to count from October 2012. Besides, GIT did not fully consider the possibility of taking measures to avoid the extension period. In the case one and case two, no adjustment was made to the work plan for constructing the piers that were not affected in advance in order to reduce the impact on the progress of the works. With regard to case one, GIT even spent six months to coordinate the work of removing traffic direction sign and found that the problem could be solved by using a smaller machine. Moreover, since the problems reflected in the warning letter to the contractor were not mentioned in the analysis result of extension request, for example, the constructor did not put sufficient manpower and equipment into construction, and the mismanagement delayed the progress of the works, there are doubts about the GIT’s approval.

In respect of the preliminary coordination and management works, although the LRT construction site was occupied by the temporary office of other public works (case three), GIT was inactive in coordinating the removal works before the construction began and did not send a letter requiring the related department to vacate from the site until four months after the commencement of the works, therefore delaying the progress for about one year. In addition, GIT still signed the written record of the commencement of works with the contractor while the site did not have the conditions for handover because of the obstruction, and then it approved the application for time extension due to the handover problem; this reflected that GIT regarded the relative work as the formalistic procedures.

1.2.2 The follow-up on the audit findings of previous reports

Since June 2010, a total of 16 audit findings have been proposed in the three audit reports on LRT system, of which two have not yet been improved, namely the drawing up of the liquidated damages clause and the estimate of overall investment cost. In respect of the liquidated damages clause, the Secretary for Transport and Public Works stated in the Legislative Council in March 2016 that the penalties in current construction contract are more effective than the compensatory liquidated damages, yet Macau does not have a culture of enforcing penalties. Therefore, GIT also stated that the Secretary for Transport and Public Works had already expressed his position on this issue, showing that it did not intend to introduce the compensatory liquidated damages at this moment.

Regarding the estimate of the overall investment cost, GIT proposed to set the short, medium and long term plans which include 11 routes for LRT system in December 2016, while the concept of the first phase of LRT system was no longer used in the project. However, the proposal did not provide any information on the preliminary cost estimate of each route or the rough estimate of the overall project cost, which is not conducive to the consideration of the economical benefit of the project and also make it impossible for decision maker to be aware of the approximate expenses in the future. When CA compiled the information of 11 routes, it found that the cost of five routes was estimated by the dynamic method, two routes was estimated by the static method and one route had budget, while three routes did not have any information about their cost estimate. GIT indicated that apart from the Taipa line and its extension to the Barra station, the remaining routes only had the rough estimates of their cost because they failed to meet the basic conditions for estimating the cost by dynamic method. However, some short-term routes (such as East Line and Seac Pai Van Line) were unqualified according to GIT’s view that were estimated their cost by dynamic method. Therefore, there is doubt on the GIT’s view and its estimate work still has room for improvement.

1.3 Audit suggestions

GIT should:

manage the construction period in accordance with the international practices on works management and review the legislation in order to find its deficiencies and propose the relevant amendments. Before completing the amendments, it should try to enhance the terms regulating contractors for an effective control.

do its best in the management work of each process, such as the early research, the design of the project and the handover of the construction site, in order to avoid becoming the cause of project delay.

In the feasibility study and planning stage, roughly estimate the cost of the overall project, each component and different options for conducting analysis and comparison before making decision. In addition, the estimate should be made according to the price charged in the same year, so that it can compare the projects that have different costs or implement in different times.

For the predictable projects, implement the dynamic method in the cost estimate since it can provide the basis of accountability for the cost overruns.

Timely update the cost estimate according to the actual situation as the project proceeds.