Case Studies: Motorway E-75 Horgos – Novi Sad, Second phase, Serbia

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Project Overview
Horgos.png
Figure 1: Horgos – Novi Sad Project, Serbia
Motorway Е-75 Horgos – Novi Sad (second phase)
Project Type: Both
Type of Project Financing: Public
Contract duration: 15 months (construction)
Project Time Line
1970-1988: The first (right) carriageway of the motorway Horgos – Novi Sad was built. It was financed from foreign loans.
2005-2008: The motorway Horgos – Novi Sad (the existing carriageway and a plan to build a second carriageway) was part of the scope of a concession for Horgos – Pozega Toll Motorway. The tender for the concession was held in October 2005, the contract was awarded in March 2007, and the concession was cancelled in December 2008.
2008: Project conceived, after the concession had been canceled.
2009: Open call for construction of two sections of the second carriageway (section from km 28 to km 38 and section from km 98 to km 108).
2009: Construction of sections from km 28 to km 38 and from km 98 to km 108 (May 2009 to November 2009).
2010: Open call for the construction of sections km 00 to km 28 and km 38 to km 98.
2011: Completion of construction (March 2010 - December 2011).
Sections of the road were opened to traffic in 2011:
July 15th, 2011 km 00 – 28
July 20th, 2011 km 38 – 50
August 5th 2011 km 85 – 98
August 29th, 2011 km 50 - 71
September 26th, 2011 km 71 - 80
December 20th, 2011 km 80 - 85

Although the second carriageway was built and opened to traffic, there is still an issue of an unfinished lay-by on the section from km 38 to km 98, which caused a delay in operation of the particular section.

There is also a lawsuit about cost adjustment, which is still not resolved (2015).


Introduction

The project concerns the construction of the second phase of E-75 (M-22) motorway in the stretch from the Hungarian border (Horgos) to Novi Sad, i.e. construction of the second (left) carriageway of a total length of 107km.

The stretch from Horgos to Novi Sad consists of four traffic lanes (two in each direction), two stopping lanes, with central reserve, and with a design speed of 120 km/h.

The project also includes a total of 13 pairs of bridges, nine interchanges, three large fills, one main toll gate and another under construction, two rest areas and two more under construction, 44 pipe, frame and box culverts, and several multipurpose lay-bys with gas stations and motels.

The motorway Horgos – Novi Sad was part of the scope of a concession Horgos – Pozega Toll Motorway, cancelled in 2008.

Instead of the concession, two sections of the road (section from km 28 to km 38 and section from km 98 to km 108) were completed in 2009 on a design-bid-build contractual basis.

During 2011, the construction of the remaining 86.88 km long left carriageway was completed on a same basis and the section from Horgos to Novi Sad was opened to traffic.

This project does not include the “Y branch (Y krak)” (from Kelebija to Subotica South loop).

The Contracting Authority (Public Party)

The former Ministry of Infrastructure (now Ministry of Construction, Transport and Infrastructure) was the contracting authority.

The project coordinator (Project Implementation Unit) was the company Koridori Srbije Ltd., that was founded in 2009 by the Government of the Republic of Serbia, with the aim to perform works in the sphere of the transport infrastructure – highways on the territory of the Republic of Serbia, and also for the purpose of investing in the construction of highways, organizing and performing professional activities related to the construction of highways, including the activities related to the expropriation, drafting of plans and design documents and performing of works, organizing of professional supervision over construction, as well as the activities related to the planning of highways construction.

Sources of Financing

The project was financed 100% from public funds (budget of the Republic of Serbia).

According to the conditions of the construction contract for the sections from km 00 to 28 and from km 38 to km 98, the payment to the contractor was to be made in the following manner:

  • 35% from the Interim Payment Certificate (IPC) value was to be paid during construction, the rest was to be payed after 30 months

Users

Individual national and international users, as well as local, regional and international industry users (freight transport).

Key Purpose for Public Financing Model Selection

The project, along with other parts was initially tendered and awarded as a concession. Following the cancellation of the concession contract, the project went ahead with public funding.

Project Timing

The forecasted growth of GDP for Serbia in the feasibility study was 6% for the period 2006-2011 and 3.5% for 2012-2025. However, the average growth of Serbian GDP in the period from 2006-2014 was 1.38%. GNI per capita is lower than expected, while unemployment rate is higher than expected.

Project Locality and Market Geography

The motorway connects the Hungarian-Serbian border and the city of Novi Sad as the capital of northern Serbian province Vojvodina.

It was a part of the former Pan European Transport Corridor X, which connects Austria, Hungary, Croatia, Serbia, the former Yugoslav Republic of Macedonia, Bulgaria and Greece. Nowadays, it is marked as comprehensive TEN-T corridor.

Procurement & Contractual Structure

The contractual basis for project delivery was a Design Bid Build contract. PE Roads of Serbia, after the end of the guarantee period, should have taken over the responsibility for operation and maintenance. However, due to unfinished work on one rest area, the section from km 38 to 98 has not yet been taken over (2015).

Tendering

The tendering for construction was organized as an open call.

For sections from km 28 to 38 and from km 98 to km 108, the open call tender was launched in April 2009. Two national companies (PZP Beograd and Putevi Uzice) won the tender.

For sections from km 00 to 28 and from km 38 to km 98 (one contract), the open call tender was launched in February 2010. The results were, however, annulled. The procedure was changed to negotiations, with the Serbian consortium that offered the lowest price in the annulled tender. As a contractor for sections from km 00 to 28 and from km 38 to km 98, a consortium of the following contractors was enrolled: Preduzece za puteve Beograd (PZP Beograd), AD Putevi Uzice, GP Planum, Borovica transport. PZP Beograd went into the bankruptcy 12 months after the beginning of the works on this project.

Contract Structure

The contractual basis for project delivery was Design Bid Build contract with unit price payment. No standard form of contract agreement was used.

Risk Allocation

The risk allocation is depicted in Figure 2.

Horgos2.png

Figure 2: Risk allocation

Performance

In the design and construction phase, performance was measured in relation to:

  • Cost: There were defined planned costs as well as planned cash flow, based on the planned progress of works. Actual costs were compared to the planned costs and the trend in achieving planned costs on a monthly basis;
  • Time: There was also defined planned time for completion with milestones for key phases. Actual progress of works was compared to the planned on a weekly basis;
  • Quality objectives: The level of the required quality of executed works was defined in Design and in domestic legislative. The achieved quality of executed works was controlled by an expert supervisor on a daily basis and approved on a monthly basis.

The performance goals for operation and maintenance phase were related to:

  • Reduction of travel time through increase of operating speeds;
  • Reduction of vehicle operating costs;
  • Reduction of number of traffic accidents caused by inadequate cross section of semi-highway.

Project Outcomes

The investor personnel stated that the project can be considered as very successful. Although there is a cost overrun of 25.9% of the original budget, actual construction costs of 1.72 MEUR/km are considered as a very good achievement.

However, the specific payment method for part of the project, that allowed 35% from the IPC value to be charged during construction, and the rest to be paid after 30 months, lead to the bankruptcy of one of the consortium members.

References

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