EMBASSY TOLD U.S. PARSONS WINS PROJECT MANAGEMENT CONTRACT TO OVERSEE CONSTRUCTION OF 7 BILLION DOLLAR BRIDGE (BUT WILL IT BE BUILT?)

UNCLAS SECTION 01 OF 03 ROME 003857 SIPDIS E.O. 12958: N/A TAGS: ETRD EINV EIND IT BUY AMERICA SUBJECT: EMBASSY TOLD U.S. PARSONS WINS PROJECT MANAGEMENT CONTRACT TO OVERSEE CONSTRUCTION OF 7 BILLION DOLLAR BRIDGE (BUT WILL IT BE BUILT?) REF: A. ROME 02087 ¶B. ROME 00014 -------------- SUMMARY -------------- ¶1. Parsons Corp., a California-based engineering and construction firm, told the Embassy that it has provisionally been awarded the 120 million euro project management contract to oversee construction of the bridge to connect mainland Italy and Sicily. Italian engineering firm Impregilo had previously been awarded the general contract for the final design and construction of the bridge. These developments are the closest Italy has been to realizing this 40-year-old project. Impregilo will lead a consortium of Italian and international engineering/construction firms (none U.S.). There has long been skepticism over whether the bridge would be built; and while strong opposition remains, consensus is growing that it will be built, if for no other reason than that too many contractual commitments have been made. However, skeptics believe that any change in the GOI governing majority resulting from the spring 2006 general elections will again paralyze the project. The European Commission has threatened to halt funding and take action against Italy for not providing a full environmental impact assessment. Italy has until year-end to respond, or risk EU co-funding. ¶2. If ever built, the bridge would be the longest single-span suspension bridge in the world (3.3 kilometers) and would reportedly be the most expensive infrastructure project ever in Italy (6 billion euros). Through state-owned companies, the GOI will reportedly fund forty percent of the project; possible EU funding and private capital will cover the remaining sixty percent. Investors will reportedly be paid back over thirty years from toll receipts. End Summary. -------------- Parsons Awarded Project Management Contract. -------------- ¶3. Pending formal review of its documentation, Parsons Corp., a Pasadena, California-based engineering and construction firm, was provisionally awarded November 17 the contract to monitor and verify implementation of the final project to construct a bridge connecting Sicily to mainland Italy. The contract is worth 120 million euros. The Italian engineering and construction company Impregilio had been chosen October 12 to be the general contractor for design and construction of the bridge (Comment: while several companies had qualified to bid for the general contract, uncertainties surrounding the project meant only two chose to compete. Moreover, the losing bidder, a consortium led by the Italian firm Astaldi, has reportedly decided to appeal the award decision. Formalization of award to Impregilo is pending the Astaldi appeal. End Comment.) Impregilo will head an international partnership including, inter alia, Spain's Sacyr, Danish Cowi and Japan's IHI. ¶4. This is the largest infrastructure project ever planned in Italy. The actual bridge will cost 3.9 billion euros (5 billion USD),though the entire project may cost an overall 6 billion euro (more than 7 billion USD) once supporting infrastructure costs and inflation are considered. Although presenting this as a "business investment," rather than a direct, non-refundable state contribution, the GOI via state-owned companies, will cover approximately forty percent of the costs. The GOI claims this arrangement will not impact the State's budget. Sixty percent will be covered by possible EU funding and private risk capital. (Comment: while not in the original financial plan, EU funds may cover up to ten percent of the total, since this project is considered an "EU-level interest project." End Comment.) Embassy contacts estimate the original investment would be made back through tolls over a 30-year period. -------------- If Built...Facts and Figures -------------- ¶5. If built, the "Messina Strait" bridge would be the longest single-span suspension bridge in the world (3.3 kilometers, or almost three times as long as the Golden Gate); and its two towers would rise 382 meters (taller than the Eiffel Tower). The 60-meter width will provide room for six lanes, two service/pedestrian lanes, and two rail tracks. Work is scheduled to begin in 2006 and last 70 months. -------------- -------------- GOI Says Benefits Will Be Immediate and Enduring. -------------- -------------- ¶6. The GOI fully supports the project and Infrastructure Minister Lunardi has said, "By appointing a general contractor, everyone will understand that we were not joking when we committed to build the bridge. The tender is closed, the party that will build the bridge is known, and work will begin next year." ¶7. Our contacts report that the GOI believes construction of the bridge, "in addition to the obvious practical advantage of connecting Sicily to the mainland by road," will have both an immediate and an enduring economic and social impact. The GOI believes that up to 75 percent of the total investment will remain in southern Italy and particularly in the two regions of Sicily and Calabria. An estimated 40,000 jobs will be created directly and indirectly from construction of the bridge. (Comment. This figure may be inflated, and many say that only one quarter of the jobs created will be directly in bridge construction, while the rest will be through a multiplier effect. End Comment.) ¶8. The GOI claims that the bridge itself will generate new economic opportunities (such as creating business centers on either side of the bridge); road connections between the island and the mainland will also increase tourism and trade. The rail connection will allow goods to move faster and more efficiently from Sicily to mainland Italy (and the rest of Europe) thus making Sicily's ports more attractive destinations for goods coming from the Mediterranean area. Also, connecting Sicily to mainland Italy will bring psychological and social benefits to the area that will be "closer" to Europe's heart. Finally, as the "life cycle" of the bridge is envisioned to be much longer than the thirty years it will take to make the investment back (per our contacts),the GOI claims that the bridge itself will, eventually, become a profitable operation. -------------- ...But Will it Really Be Built? -------------- ¶9. One press commentary underscored that, "1000 obstacles remain before the bridge is built." Although many see appointing a general contractor (pending appeal, see para 3) as a point of no return, opposition to the bridge construction remains strong. Most members of the current center-left political opposition are against the project; and experts believe that if the center-left wins the spring 2006 general elections, the project will be shelved. ¶10. Some opponents believe that, while it is not a bad project per se, the GOI should focus on other priorities first. Many are concerned that costs will escalate, making the project economically unviable. There are also doubts on the long-term economic and social benefits of the bridge. Some are concerned with safety aspects (the Messina strait is a seismic area). Another big concern is that organized crime, the Sicilian mafia in particular, will win control of the project. However, environmentalists--who believe the bridge will irreparably spoil the coastline and dramatically affect the existing fauna--have made the strongest arguments against construction of the bridge. ¶11. The European Commission's Directorate for the Environment, following a case filed by the World Wildlife Fund, has taken a first step towards opening an infringement proceeding against Italy, by arguing that Italy "has not taken adequate measures to prevent deterioration of the environment and disruption for birds. (Apparently, 312 species migrate over the Messina strait.) Italy has until year's-end to respond. Press reports indicate that such Commission initiatives are common and maintain that the Commission is not going to take a "dogmatic" approach. Thus, there reportedly is a good possibility that Italy will be able to argue a successful case. However, the risk that possible EU funding may dry up also exists. ¶12. Separately, allegations of misconduct in the tender procedure have been raised; and an investigation is ongoing. However, the consensus appears to be that such allegations are unfounded. -------------- COMMENT -------------- ¶13. The "pharaonic" Messina bridge project has been on Italy's agenda for almost forty years. Innumerable studies, opinions, papers, seminars, projects, televisions shows, and political debates have been dissected the issue. However, assigning the general contractor and the project management contracts is the closest Italy has ever been to actually launching the project. That said, there are several facts that beg cautious optimism. First, opposition is very strong; and if there is a change in Italy's leadership in 2006, construction may well cease. (However, should the project be stalled, there could be a price to pay for breaching commitments already made.) A second big obstacle is that private funding has not yet been lined up. End Comment. -------------- EMBASSY FOLLOW-UP -------------- ¶14. Embassy will closely monitor developments, both to report possible subcontract tenders for U.S. firms and to monitor transparency of the process as part of our efforts to promote transparency in Italy's public procurements. SPOGLI