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Wednesday 08.04.2020 | Name days: Dana, Dans, Danute, Edgars

Audit: Rail Baltica slowed by poor risk management and slow progress with municipalities

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Rail Baltica, State Audit, Latvia, report, Transport MinistryDelays and cost increase of Rail Baltica project is heavily affected by no risk management and no strategy, as well as slow progress in cooperation with municipalities and passive alienation of properties, Latvian State Audit (VK) concluded in its latest report.

Two weeks ago VK warned about the facts uncovered in the joint Latvian, Estonian and Lithuanian audit institutions’ report – the biggest infrastructure project in the history of independent Baltic States worth at least EUR 5.78 billion is behind schedule and its costs only keep increasing. In this international joint audit effort VK evaluated the contribution of Latvian institutions towards the failure to maintain schedule, which will unavoidably lead to increased costs.

Over the course of the first five years of the project’s implementation Latvia has used only near a quarter of the five-year funding. On top of that, a number of necessary tasks are behind schedule by one to four years, VK has concluded.

VK’s conclusions are the most critical when it comes to extension of construction terms for Riga Central Railway Station hub, Riga International Airport’s railway station and railway lines in Latvia’s central parts from two to four years because of missed deadlines with technical projects.

«These serious deviations from the plan show that at the beginning of the project we had only an ambitious commitment and no actual ability to manage the project. The project represents a serious test for all sides involved in it, but I would rather Latvia does not become the weak link,» admits Latvian State Auditor Elita Krūmiņa.

So far, Rail Baltica project has not been effectively managed in Latvia. A number of facts point to negligence and reliance on «higher powers», VK states.

Transport Ministry is responsible for Rail Baltica project in Latvia. Since 2014 the ministry has delegated formation of Rail Baltica infrastructure to LLC Eiropas Dzelzceļa līnijas. VK notes that the ministry’s supervision over the project has been insufficient so far.

Up to 2016 not a single Transport Ministry’s employee has had any direct duties in relation to the project’s supervision. In the two years that followed only one ministry worker was responsible for the project’s supervision. The four workers of a structural unit formed in 2018 basically worked on their own because there were no project management order and rules ready then. In 2017 the ministry’s high-rank coordination work group consisting of representatives from the ministry, LLC Eiropas Dzelzceļa līnijas and AS RB Rail met only four times, and the last meeting took place a year and a half ago, VK notes.

More on the topic: Rail Baltica employees: the project is in critical state due to poor management

«So far Transport Ministry and LLC Eiropas Dzelzceļa līnijas have not been able to agree on the project’s costs worth approximately EUR 170 000 in relation to the project’s general expenditures. Additionally, Transport Ministry’s developed mechanism for prevention of unrelated costs does not work,» VK concluded.

«Cooperation with municipalities, especially Riga City Council, has been neither regular nor sufficient. Sustainable Development Consultative Coordination Council, though composed, has convened only two times, and the last time was one and half-years ago,» explains VK.

Actual alienation of real estate properties has not even begun in Latvia

The pre-condition for design work completion and commencement of construction work is alienation of real estate property within the project’s territory. Rail Baltica project will affect at least 1 623 real estate properties, including 1 179 real estate properties owned by private and legal persons. Alienation of real estate properties in Latvia’s central territories was supposed to have had finished by the end of 2019. However, not a single previously initiated real estate alienation process had been completed by October 2019, leaving 97% of the process unfinished.

Delays with real estate alienation has also negatively affected other important tasks, such as development of the construction project’s guidelines by RB Rail, as well as measurement of the railway line’s  location and submission of amendment of related regulations for review to the government, VK explains.

For comparison – in Estonia the real estate alienation process’s completion had reached 26% by the end of 2018.

«The risk of Latvia failing to meet terms outlined in European Commission’s decision for co-financing of the project increases with each passing day,» VK warns.

VK believes there is no excuse for delays – real estate property alienation process is complicated, yes, but so far the progress of legislative amendments pushed by the ministry itself has been inexcusably slow.

Projects of Rail Baltica’s scale cannot be implemented without proper risk management

Neither Transport Ministry nor LLC Eiropas Dzelzceļa līnijas have seriously considered introducing an efficient risk-management mechanism, which is unacceptable for a project of such a scale, VK concludes.

«Effective management of such mechanisms also serves as an early-warning system that lets the government add timely corrections and reduce risks. For example, this is where amendments to regulations are needed – to speed up the alienation process. This problem was previously identified in the Transport Development Guidelines 2014-2020; LLC Eiropas Dzelzceļa līnijas also considers this a risk,» VK notes.

Read also: Estonia’s prime minister: Rail Baltica project unlikely to be finished on time

VK invites putting in practice actual risk assessment on the ministry’s level and prevent risk management problems observed at LLC Eiropas Dzelzceļa līnijas, improve overall project discipline and reduce increase of costs.

VK also intends to ask the Cabinet of Ministers to support Transport Ministry more intensely in the real estate alienation process, as well as ask the government form a system for supervision over strategically important projects and take over responsible ministry’s functions if need be.

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  1. Zerry says:

    Is this s surprise to someone? It could be good also to open a little more from where comes delays with municipalities? Someone asking pocket money?
    Anyway, architects have made a great job for nice presentations, but who will finsnce Riga central station and airport changes? Never told, or?

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