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International Internet Magazine. Baltic States news & analytics Friday, 03.07.2020, 17:08

Lithuanian Railways comes under fire for electrification tender, winner's reputation

BC, Vilnius, 25.05.2020.Print version
The actions of Lietuvos Gelezinkeliai (Lithuanian Railways, LG), Lithuania's state-owned railway company, have led to the delay and increase in the price of the railway electrification project, and the reputation of the tender's winner, a Spanish company, is raising doubt, according to the summary of an internal audit abstract published on May 25th, informs LETA/BNS.

Transport Minister Jaroslav Narkevic vows that the whole audit report on the 360-million-euro tender on the electrification of the Kaisiadorys-Vilnius section and the Vilnius hub will be published after LG's opinion on confidentiality is received.

"We informed Lietuvos Gelezinkeliai last Friday that due to major public interest in this internal audit, we plan to make the audit report public. We asked the company to indicate whether there's confidential information in the report and also provide arguments and motives," Narkevic said in a statement.

Prime Minister Saulius Skvernelis has also recently called for the publication of this report.

Mantas Dubauskas, spokesman for LG, told BNS the company has never objected to the publication of the audit report, adding that the ministry marked it as confidential at its own initiative.

Contractor's reputation

Open doubts on the reputation of the tender's winner, Spain's Elecnor, are expressed in the audit report.

"We see a risk regarding timely and proper implementation of the procurement contract, having bought design services and contract work from a Spanish business entity with dubious reputation, currently under a pre-trial investigation in Spain," the audit report reads.

Spain's National Commission on Markets and Competition last year hit Elecnor with a 20.35 million euro fine for a cartel agreement on the purchase of materials. Other well-known companies, including Siemens (16.8 million euros), Elecnor's partner Inabensa (11.56 million euros) and France's Alstom (8.83 million euros) also faced financial sanctions for their participation in the cartel.

The watchdog's decision has not come into force yet, however, as the companies later appealed.

Cobra, the company which came in second in the railway electrification tender in Lithuania, was also fined as part of the cartel investigation and received the largest fine of 27.2 million euros, according to media reports.

Lithuania's Transport Ministry says the contract's implementation control should be bolstered during the design stage for the technical project to be completed in time. In that case, contract work based on the completed project could be bought in case of the supplier's bankruptcy.

Price under attack

LG is also criticized for the price of the electrification project. The ministry says Cobra's offer was around 40 million euro lower. Although LG pointed to the advantage of Elecnor's offer during the whole period of infrastructure's existence, the criteria was not mentioned in the procurement documents.

The audit summary also states that "the increased size of the procurement object and very high qualification requirements for suppliers prevented both foreign and Lithuanian companies from taking part in the procurement".

The document states that out of 57 interested suppliers that accepted invitations to take part in the procurement, only seven later submitted their applications. Initial proposals were received from four companies and only two later presented updated and final offers.

"During the negotiation process, some 60 changes (simplifications) were made in the contract's provisions, which was supposed to lower the offers' prize, not to increase it by 40 million euros (in Elecnor's case)," the summary reads.

Moreover, the ministry warned that the project is running behind the schedule, which is increasing the risk of failure to use EU funds.

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