The conflict between the Taipei City Government and Farglory Group over the Taipei Dome project has turned ugly, with the city planning to dissolve the contract, and Farglory asking for NT$37 billion (US$1.15 billion) in damages for breach of contract. City councilors do not want Taipei residents to foot the bill and the end result might yet be another failed build-operate-transfer (BOT) project.
The main premise for a successful BOT project is that both the government and the contractor agree to abide by the law and the spirit of the contract. The contractor must follow the contract and the government must keep strict tabs on progress to protect the public interest. All proceedings must be transparent and there must be no room for any underhanded dealings.
However, the Taipei Dome project ground to a halt due to several critical flaws that have become all too common with BOT deals in Taiwan: neither the contractor nor the city government respected the original contract. Once the tender process is completed and a contractor has been selected, there are often a series of negotiations and closed-door meetings aimed at amending the contract — which runs counter to the spirit of the BOT ideal.
Farglory came up with different reasons why the Dome contract should be amended, such as the distribution of the space and the structure’s volume. The contract details were changed repeatedly, with the administrations of former Taipei mayors Ma Ying-jeou (馬英九) and Hau Lung-bin (郝龍斌) caving in to Farglory’s changes each time.
Because neither contractors nor governments, local or central, appear to respect contracts, instead preferring to resolve problems that arise behind closed doors, the history of BOT projects in Taiwan is one of flaws that governments can use to settle accounts with their predecessors.
However, the lack of understanding of how BOT projects work leaves a lot of room for criticism and political attacks. When a new administration uses a BOT project as a bat to attack its predecessor, the infighting can become very intense. A good example of this is Taipei Mayor Ko Wen-je (柯文哲), who, since taking office, has focused on five projects that he said involve major irregularities, including the Dome.
Ko’s administration suspended construction of the Dome, leaving a skeleton of a building in the middle of the city. The problem is that the city government’s tough stance prevents it from taking a step back, even though it is unclear how it should proceed.
Even if another contractor was willing to take over the Dome project, whether they would be willing to take on the immense media and public scrutiny that would entail is a big question. That leaves the question of how this mess should be dealt with.
The Ko administration and Farglory are certain to settle their dispute in court. Less easy to resolve is the unfinished structure itself. Leaving it unfinished puts the surrounding area, the city and the public at risk. If an earthquake or a typhoon struck and the structure collapsed or parts of it broke off, who would assume liability?
BOT projects are common worldwide, so it is hard to understand why they have become so problematic in Taiwan. If responsibility for the Taipei Dome cannot be corrected in accordance with the law, future BOT projects are likely to be equally disastrous.
The government must insist on maintaining its original contract requirements after a bid has been awarded. It would be better to dissolve a contract than to give in to a contractor’s demands.
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