Rail Baltic audit finds project implementation issues ({{contentCtrl.commentsTotal}})

Artist's rendition of a section of Rail Baltic.
Artist's rendition of a section of Rail Baltic. Source: ERR

The Supreme Audit Institutions (SAIs) of Estonia, Latvia and Lithuania have found that while Rail Baltic project management roles, responsibilities and procedures for managing were mostly in place, inefficiencies threaten to push the project beyond the agreed budget and no concrete official budget or schedule changes have been made.

The SAIs said activities agreed within the Connecting Europe Facility (CEF) grant agreements are both up to 18 months off-schedule and over-budget, at present.

RB Rail AS estimated last June the project could be delayed up to March 2030, if risks are realized and funding is not available when needed. The original projected completion date for Rail Baltic is 2026.

But so far, the budget estimated in the 2017 cost-benefit analysis and the official deadline have not been changed.

The budget for the first signed grant agreement is estimated to be exceeded by €59.3 million, though the second grant agreement is projected at €0.231 million under budget.

Legal questions and issues between the three countries

SAI legal analysis found that project implementation structure does not conflict with the legislation in the three Baltic States and found no inherent conflict of interest in the governance structure, within the law at least.

However, the analysis also found a lack of effective mechanism for solving deadlock situations when the beneficiaries cannot agree on a common solution. This is relevant since the three Baltic countries have had different visions of the project's governance, such as deciding the best solution for financing RB Rail AS or the infrastructure management model, which has caused delay.

Longer-term budget issues

The SAIs also found that, though all three Baltic countries have included the Rail Baltic project in state budget planning, none have made long-term plans for financing through to the end of the project.

Neither have the countries formally approved plans to guarantee self-financing in the event of project costs exceeding EU co-financing, and/or the latter being underestimated.

A few positives

The audit did find, however, that RB Rail AS has developed procedures for conducting procurements and contracts, and that related rules have become more comprehensive. RB Rail AS has also established a quality control system, and is in the process of developing a risk management system.

Next steps

The SAIs made recommendations to RB Rail AS and its shareholders, as well as to beneficiaries of the Rail Baltic project, ie. the relevant national ministries.

These are:

  • To agree on the clear decision-making rules for the Rail Baltic project throughout all implementation levels.
  • To agree on clear change and risk management plans to mitigate the risk of going over project schedule and budget.
  • To estimate the long-term availability of national funding for the project, including contingencies for EU funding turning out less than expected.

The auditees (RB Baltic, the national ministries and other interested parties) generally agreed with the recommendations made during the audit, BNS reports, though responses implied a reluctance on the part of the respective ministries in the three countries to plan the project finances through to project end.

Background

Rail Baltic, the largest infrastructure project in the history of independent Baltic states, will bring a 870-kilometer railway line from Tallinn, to the Lithuanian-Polish national border.

Current cost estimates stand at €5.79 billion, and the project is 85 percent co-financed by the EU from the CEF initiative.

In line with the respective grant agreements, joint venture RB Rail AS and the relevant ministries in each of the participating countries are the beneficiaries of the Rail Baltic project funding.

On September 6, 2018, the auditors general of Estonia, Latvia and Lithuania signed the agreement on carrying out a joint audit of the Rail Baltic project. The objective of the joint audit was to assess the management of internal control systems and public procurement of the Rail Baltic project.

The joint audit evaluated whether the procurement and contracting models in the Rail Baltic project were efficient enough to enable its effective and economic delivery. The use of state funds was also in the focus of the joint audit.

The auditees of the joint audit were RB Rail AS, respective national ministries and other entities involved in the project in Estonia, Latvia and Lithuania.

The SAIs of Estonia, Latvia and Lithuania performed national audits regarding the implementation of Rail Baltic project within each state, where the SAIs of Estonia and Latvia performed it in parallel with international audit of the project.

The audit report was issued in 2018 in Lithuania, in 2019 in Estonia and in 2020 in Latvia.

Estonian Minister of Economic Affairs and Infrastructure Taavi Aas (Centre) said in December the 2026 deadline remained in place.

Rail Baltic is also looking for a new CEO, to replace Timo Riihimäki who resigned due to personal reasons in late October.

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Editor: Andrew Whyte

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