Rail Baltic companies agree on procurement model, sign agreement

The agreement was signed in Riga on Wednesday, Oct. 5, 2016. (Railbaltic.org)
10/5/2016 12:31 PM
Category: Business

Eight of nine parties in the Rail Baltic project signed an agreement in Riga on Wednesday that sets out the procurement model for the works to be carried out building a new railway from Tallinn to the Lithuanian-Polish border. The ninth party, the Lithuanian state railways, is expected to sign the agreement in the coming days.

RB Rail CEO Baiba Rubesa said at the following press conference that the project was of key importance to the whole region, and that agreeing on a procurement model was essential to the development of Rail Baltic.

CEO of Rail Baltic Estonia, Indrek Orav, said that Estonia welcomed that the parties involved had been able to agree on a procurement model. “This is a big step forward,” Orav said, adding that it was important that the joint company RB Rail still had a role in the process while the local companies would look for partners in each of their countries.

There was no precedent for a railway infrastructure project like Rail Baltic in Europe, with three countries involved, which was another reason why the agreement was so important, Rubesa pointed out.

The agreement signed on Wednesday covers three types of procurement procedures. The first, to be run by the three countries’ joint venture RB Rail, covers common standards, surveys, business development, and marketing.

The second type, defined as common procurement of the countries’ separate RB Rail subsidiaries, covers subsystems and cross-border contracts as well as materials supplies. In the case of these contracts, joint venture RB Rail will have an organizing and supporting role, while the decisions will be made by a committee where the countries that are part of the procurement contract are represented.

The third type, left to the individual state companies, covers all procurement related with the domestic construction, planning, and supply of the Rail Baltic project. The joint company RB Rail will get involved if a single tender goes beyond the maximum value of €40,000.

Anything beyond this threshold will involve RB Rail again, for example the construction of whole network sections, or terminals.

In terms of tax and legal jurisdiction, Rubesa stressed that each country would collect value-added tax on contracts in their respective jurisdictions. Legal liability and contracts with partners would follow the same idea, namely be based on the provisions of the country in which the work was going to be carried out.

Eight parties to the agreement signed it on Wednesday, including RB Rail, the relevant state institutions of the three countries, Rail Baltic Estonia, Rail Baltica Statyba UAB, and Eiropas Dzelzceļa līnijas SIA.

The signature of the Lithuanian state railway company Lietuvos Geležinkeliai is still missing, but would follow in the coming days, Rubesa said.

Lietuvos Geležinkeliai had previously insisted that RB Rail be the sole partner of contractors and suppliers, which would have allowed the Lithuanian state railway company to directly compete for Rail Baltic tenders. Their infrastructure ministry wasn’t ready to entertain the idea.

The Rail Baltic project will build a fast railway connection from the Estonian capital of Tallinn to the Lithuanian-Polish border. The gauge will be the European standard at 1,435 millimeters. The planned top speed of trains is 240 km/h for passenger trains and 120 km/h for freight trains.

Editor: Dario Cavegn

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