behind the headlines

Building roads in Russia at $380 million per mile

vrijdag, november 12, 2010 · Category Business · comments 0


Nineteenth-century Russian novelist Nikolai Gogol once said his country has two problems: roads and fools. And roads cost many times more to build in Moscow than in U.S. and European cities. This is mainly due to 2 reasons: Corruption and the legacy of the Soviet Union.

The Legacy of the Soviet Union

While construction companies in the West are often given a clean piece of land and simply have to put down gravel and asphalt to make a road, the Russian companies have to obtain the land in the first place, clean off everything that is on the land (including what is under it) and then often reconstruct some of the buildings elsewhere.

Moscow MKADMoscow MKAD"Much of the cost issue reflects the historic approach used from Soviet times," says Maxim Bakshinsky, deputy general director for development for Mostotrest. "In the West, they calculate the cost on the cost of the materials and labour that actually goes into building the road, but in Russia the cost includes things like buying the land, rebuilding any infrastructure or utilities items that are on that land – you have to rebuild or move these by law."

The clients that want a new road built – in Moscow this is usually the city government – hire a contractor not only to do the actual building, but pay them sort this mess out on a "turnkey" basis, says Bakshinsky. "The contract value includes costs of land, buildings, courts, utilities, infrastructure. The general contractor, according to the contract, has to not only make the construction works, but also fully prepare the site for construction: to carry out land buyout, relocation of various communications – sewage, telephone lines and the rest. There are dozens of owners, buildings, private garage boxes, complicated utilities, and sewage, gas and telephone lines 20 metres under the ground.


And than there is the corruption. Now that ex-Major Luzhkov has been dismissed, much attention is paid to his 17 years of reign. The exorbitant prices are directly linked to corruption and ties between road builders and authorities. Traffic jams are about corruption. Luzhkov, who has overseen a construction boom in the capital, has often been accused of corruption and of helping advance the business interests of his wife, Yelena Baturina. A major property developer, Baturina is ranked by Forbes as Russia's wealthiest woman. Luzhkov has persistently denied allegations of wrongdoing and has successfully sued many accusers for libel.

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How does it work?

Russian roadRussian roadMoscow city government reserves federal budget for building a new road. The Moscow government than writes out a tender. A view constructors will react to the tender with a bid. The first one is a Turkish company who offers to do the job for $ 30 mln. The second company is from Germany who offers to do the same job for $ 60 mln, but offering German top quality. The third company is Russian and offers to do the work for $ 90 mln. The choice will fall on the Russian constructor, but the Turkish firm will execute the project. The remaining $ 60 mln is than split between the Russian contractor and the local authorities.

Cost comparison

Clogged roads are a major problem in Moscow, home to at least 10 million people with another 10 million traveling into the city each day. Road construction proceeds slowly, Nemtsov said, because the price is exorbitant compared to other countries. Opposition figure Boris Nemtsov compiled facts and figures from open sources to shed light on the 17-year tenure of Moscow Mayor Yuri Luzhkov. Construction of Moscow's new, fourth ring road is expected to cost 7.4 billion rubles per kilometer ($380 million per mile). Road construction in China, the United States and Europe hovers between $3 million and $6 million per kilometer (between $4.8 million and $9.6 million per mile). The average cost of road construction in Washington, for comparison, was $6.1 million per kilometer ($9.8 million per mile) in 2002, according to the U.S. capital's transportation department.

Russian "Highway to Hell"

This Russian Federal Highway runs from Moscow city to the Siberian city of Yakutsk.  The last 600 miles is called the "Lena Highway".  This bizarre road runs parallel to the Lena River on the final leg to Yakutsk. Surprisingly, for most of the year, the driving is excellent.  The road to Yakutsk is so frozen that the road is frozen solid. It is only in the summer that the road periodically becomes impassable.  In the autumn the road freezes back and becomes even better than most soil roads.  In the dead of winter there is no problem as vehicles drive over the frozen Lena Highway.  Yakutia is an area of permafrost.  The Lena Highway melts down to 1 meter every summer for 2...3 months (usually July and August) - that makes it impossible to build usual roads (using asphalt or concrete) there. Such roads are called "zimnik" ("zima" means "winter" in Russian). Unfortunately, this major artery does not have an asphalt surface even though it is a vital Federal highway.  Attempts have been made to put down a proper surface, but the road immediately turns to mush the moment it thaws making repairs impossible.  Consequently, in the summer, every time it rains, hundreds of cars become stuck in the mud.

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International Specialised Exhibition-Forum ROAD, Moscow, Russia

The upcoming event "ROAD 2010" will be held On November, 22-25, 2010 in Moscow, Russia. This exceptional business event will serve to create a platform to encourage collaboration between Russian and international partners for the sake of ITS development for the cities, highways and regions throughout Russia.


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