Latvia, Legislation, Railways

International Internet Magazine. Baltic States news & analytics Monday, 16.09.2019, 03:48

Several companies complain about possible misconduct in the Procurement Procedures of the State-Owned Latvian Railway Company involving Siemens and Bombardier

BC, Riga, 20.08.2019.Print version
Non-governmental organisation IMPACT 2040, which supports principles of honest competition and good governance in the Baltic States, has turned to the EU authorities to request to investigate possible limitations of competition and possible misconduct in terms of the absorption of EU funds as part of multi-million public procurements in Latvia organized by Latvian Railway company, involving such multi-national companies as Siemens and Bombardier, the NGO IMPACT 2000 representative Anita Laima Lancmane informed BC.

The state-owned Latvian Railways Company has organised three project procurement processes over the course of a lengthy period of time, and all of them have been unsuccessful due to complaints from different legal entities:

-        an open bid for tenders for the development and construction of the Daugavpils reception yard and its access lines;

-        an open bid for tenders for the development and construction of the Daugavpils sorting station;

-        an open bid for tenders for modernisation and construction of the Rīga Railway section Sarkandaugava-Mangaļi-Ziemeļblāzma.


“This situation with a major Latvian Railways procurement procedure related to railway infrastructure point, as far as I am concerned, to a significant problem with the absorption of EU funds in Latvia.  Information that has been included in complaints about the procurement procedure suggest that there may have been dishonest attempts to limit the competition and create privileges for international companies such as Bombardier and Siemens  in a more than 100 million euros worth public tenders,”  says Anita Laima Lancmane, Board member of IMPACT 2040.


A.Lancmane notes that particularly upsetting is publicly available information that suggests that the "handwriting of Siemens" might be evident when procurement documentation was written up - this would basically be a loud violation of competition laws.


IMPACT 2040 regularly monitors large EU procurements and the spending of EU funds, also analysing and comparing practices related to the implementation of projects in the EU. Hence, IMPACT 2040 has also turned to the European Parliament and European Commission as well as internal compliance departments of Siemens and Bombardier companies to pay attention to the possible misconduct of their regional offices.


Complaints have been filed with respect to both of the projects in Daugavpils. Complaints about the shunting yard station have been submitted by SIA Fima and AS LNK Industries, while complaints about the Reception yard have come from SIA Skonto būve and CBF SIA Binders.


The essence of complaints related to the development and construction of the Daugavpils shunting yard station

The complaint relates to the mandatory requirement that the offer must be adapted to the existing Bombardier system, the argument being that this created crippled competition, because technical and economic support was given to Bombardier as the provider of the system in comparison to other applicants.


CBF SIA Binders argues that the client had a discriminatory requirement that violated Directives 2014/24/EU and 2014/25/EU, which say that technical specifications must avoid artificial reduction of competition by having requirements that give advantages to a specific company.  In this case, the company argues that the technical specifications of the bid for tenders created advantages specifically for the developer and maintainer of the Bombardier system.


SIA Skonto būve filed the same complaints about the client, insisting that applicants had far greater expenses when submitting a bid because only the Bombardier company would have far lesser expenditures due to the fact that the system (which needs to be interconnected) is manufactured by Bombardier itself.


The essence of complaints related to the development and construction of the Daugavpils shunting yard station

SIA Fima claimed that some requirements in the bid for tenders were not compatible with the subject of the procurement, thus illegally making it harder for other applicants to submit an offer.  It suspects that the text for the bid for tenders was written specifically in the interests of Siemens.  The technical specifications for the bid for tenders define requirements for a specific solutions and products(Siemens), not functional or operational requirements, thus creating unjustified competitive advantages for one manufacturer.  SIA Fima also argued that the specifications require that the break shall be designed to work with wagon speeds of up to 10m/s. Such speed is provided by Siemens retarders.  SIA Fima claimed that a lower entrance speed would be totally sufficient for the handling of 3,500 wagons.  The company also says that the requirements in the bid for tenders apply to a specific product from a specific company (Siemens). Its partner, První Signální a.s. asked Siemens AG about the possibility to purchase these retarder  systems, but Siemens AG refused.  Thus, SIA Fima believes that the choice of a supplier in this specific bid for tenders was made not by Latvian Railways, but instead by Siemens AG, which the client specified as the manufacturer of equipment.


Arguments for AS LNK Industries: In addition to the idea that the client's technical specification specifically required hydraulic, not pneumatic retarder systems would make the project much more expensive, the company also argues that Latvian Railways made absurd requirements about the experience of applicants.  The documents of the procurement say that the applicant must have experience in the use of the 1520cm track width and the relevant shunting system.  The complainant insists that this rail width was used when installing railways in Latvia, Estonia, Lithuania, Finland and former republics of the USSR, but not in many other countries.  Most European countries mainly use 1435 cm track widths.  Accordingly, the complainant argues that this requirement excludes applicants who have experience in building railway infrastructure in European countries.  It also claims to have information to indicate that only two companies have the necessary experience -- the Latvian branch of Siemens Mobility Oy, and the AS BMGS company.




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