Tel Aviv Light Rail Costs Surge Beyond Expectations

The project is currently budgeted at 17 billion shekels, but new tenders came back at twice the cost originally estimated.

Light-rail construction in Maariv Junction in central Tel Aviv. August 2015.
Ofer Vaknin

The light rail project in the greater Tel Aviv area could wind up costing the state an extra two billion shekels, after bids on an international tender came back at twice the cost originally estimated.

The project is currently budgeted at 17 billion shekels, all state funding. The tender, for planning, installing and operating all the systems needed for the project’s red line, including electricity, control, communications and security, received only two bids.

If the tender is canceled and reissued, the project could face a significant delay - with completion only in 2021 – and there’s no guarantee that bids on a new tender would be any lower.

The current tender was released in 2012, and the state had hoped to choose a company to lay the tracks as well as the accompanying electronic systems.

Only two bidders, both French groups, made it to the final stage. One, comprising the French companies Thales, Colas and Systra and the Israeli company Shapir Engineering, submitted a bit for 5.5 billion shekels. The second group consisted of French infrastructure giant Alstom, with Israeli company Minrav Engineering as a subsidiary contractor. It submitted a bid for 4.3 billion shekels.

American company PB, which is managing the project, prepared the estimate for the tender, predicting that the phase would cost 2.4 to 2.5 billion shekels.

After the tender bids were submitted, some officials accused PB of poor work, while others suspected that the two French consortiums may have coordinated prices illegally. That would appear to be unlikely, given the poor relations between Alstom and its French competitors and the large disparity between the two bids.

PB stated in its defense that its estimate was based on current international comparisons.

NTA, the state company building the light rail, stated in response that it was facing repeated efforts by interested parties to undermine the tender process.

The latest incident has raised even further the level of mistrust between the government companies carrying out the project and the international equipment retailers. The mistrust arose over the past year in previous tenders, such as the tender for purchasing train cars, which drew accusations of deception, corruption and the illegal use of private investigators.