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Procurement Oversight Bureau Ruling on Latvian Railways Bid for Tenders Worth EUR 35.92 Million

BC, Riga, 28.11.2019.Print version
The Procurement Oversight Bureau (IUB) held a meeting on November 25, 2019, to discuss a Latvian Railways bid for tenders that is worth EUR 35.92 million and applies to the development and construction of the Daugavpils sorting station. The project involved EU financing, but it was suddenly interrupted when the BMGS-FIMA-Prvni Signalni group of companies filed a complaint with the IUB to object against the cancellation of the bid for tenders after bids were submitted by applicants and were opened, Aleksandrs Grebežs, spokesman AS BMGS informed.

"We believe that this decision by Latvian Railways is in violation of the state's economic interests and that the procurement process must continue. A state-owned capital enterprise is no exception, and it must follow Latvian laws.  It is unacceptable that a justification about  a decision is offered after the decision has been taken.  What's more, there are suspicions that there have been manipulations with documents and that decisions were made with a reciprocal date," says AS BMGS board chairwoman Svetlana Afanasjeva.

"At the IUB meeting, representatives of Latvian Railways said that the bid for tenders was suspended because the company's financial situation had suddenly worsened," says Aleksandrs Grebežs, board chairman of SIA FIMA.  "Can it really be the case that this state-owned capital enterprise has experienced financial difficulties?  Has the transportation minister been informed of this fact?  In July of this year, Latvian Railways reported unconsolidated profits of 8.9 mln euros during the first six months of 2019, which was 1.9 times more than the planned budget indicated.  What happened to that money?"

"The Transportation Ministry sent a letter to our group of companies to say that it knows nothing about the Latvian Railways decision in this regard," says Afanasjeva.  "We think that the ministry should consider previously identified priorities and goals that relate to EU requirements in the area of developing and improving railroad infrastructure.  The key issue, however, is why it was decided to abrogate the agreement with CFLA.  We took part in the bid for tenders, and we still have not received a clear explanation as to why the process was stopped.  The answers that we have received from Latvian Railways suggest that the company itself does not have clear justification for the process.  One response says that there is no money, while the next one tells us that the company itself is refusing (or being ordered by someone to refuse) EU resources.  That is not an economic decision, and during the meeting the IUB, too, indicated that it cannot understand why Latvian Railways has done so."

"In terms of the chronology, the content and the legal aspects, this is a controversial procedure in which the client stopped a bid for tenders without being able to explain this decision to the applicants," adds Grebežs.  "What's more, the client's decision to reject ESF resources (proposing the abrogation of the agreement in terms of this project, which is worth more than EUR 30 mln) creates serious worries about whether there has been responsibility and authority to ensure a legally proper distribution and use of the resources among various power structures that are involved in halting the procurement process -- Latvian Railways, the Transportation Ministry and the Cabinet of Ministers, to which representatives of Latvian Railways made reference at the IUB meeting."

Chronology of events

• June 3, 2019:  Latvian Railways announces a second open bid for tenders related to the development and construction of the Daugavpils sorting station (the first bid for tenders was announced in 2017, but it was halted several times);
• September 30, 2019:  Project offers are submitted by two applicants -- the BMGS-FIMA-Prvni Signalni group of companies and SIEMENS/SKONTO;
• October 10, 2019:  The investment committee of Latvian Railways decides to halt the project;
• October 17, 2019:  The board of Latvian Railways decides to abrogate its agreement with CFLA;
• October 18, 2019:  Bidders in the process are informed that it is being suspended;
• October 31, 2019:  The council of Latvian Railways approves the decision by the company's board to halt the project;
• October 25, 2019:  BMGS files a complaint with the IUB, and the agency says that it will consider the matter on November 25;
• November 6, 2019:  A proposal is sent by the CFLA to abrogate the agreement that relates to the project.

Background information:

Latvian Railways has been organising procurements related to the reconstruction of the Daugavpils sorting station since 2014.  The project is defined as a priority in the National Development Plan, the White Book, other norms and European Union planning documents.  Modernisation of infrastructure is of key importance today, particularly at a time when rail cargo turnover is shrinking because the transit sector needs a more timely and extensive method of sorting cargoes.  This improvement would increase cargo transport and, accordingly, national budget revenues.  That is why the EU granted co-financing of 85% with the goal of improving the sorting station and improving the way in which wagons are filled with goods.  Plans for the project began in 2014, and it was initially planned that the work would be finished by 2023.

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