The joint venture of Rail Baltica, RB Rail AS, has carefully reviewed the findings of the joint audit, that was conducted by the state audit institutions of the Baltic States in 2019. “We fully trust and respect the findings of the joint audit, which were delivered by independent audit institutions from Estonia, Latvia and Lithuania,” says Agnis Driksna, interim CEO and Chairman of the Management Board of RB Rail AS. “We are committed to take action and have already started to implement necessary measures to achieve tangible change in the areas highlighted in the audit.”
“While the audit highlights both scheduling and budget risks, the implementation of Rail Baltica by 2026 remains our target. We have identified the key preconditions necessary to meet this target, including improved decision making during the design and construction phases and timely availability of funding. If these preconditions are met effectively, Rail Baltica can be delivered on time,” says Driksna.
In response to the cost increase of Rail Baltica, Ignas Degutis, RB Rail AS Chief Financial Officer emphasizes: “As Rail Baltica Global Project is progressing into the design phase, more technical information becomes available to planners and new needs of the project stakeholders emerge. The Rail Baltica costs for all countries will be updated after the conclusion of the detailed technical design in 2021 and further studies on estimated passenger and cargo flows. At the same time, it must be acknowledged there are also plenty of options to consolidate the costs of the projects through joint procurement and smart engineering solutions.”
Speaking of the reported budget increase under the first Grant Agreement, which was pointed out in the audit report, Ignas Degutis emphasises: “On the 17th of December, 2019, the Joint Venture of the Baltic States and the European Commission changed the first Grant Agreement and updated the list and scope of planned activities to be financed. According to this, all planned activities are in line with the available funding and the timeline of the first Grant Agreement.”
Key audit recommendations and RB Rail AS actions
The audit confirms that RB Rail AS has developed proper regulations to conduct procurements and to manage contracts. In addition, the audit confirms that these regulations are applied as intended. This is an important conclusion which gives necessary confidence that RB Rail AS public procurements are conducted appropriately. At the same time, the audit points out areas where RB Rail AS should improve both the regulations and implementation, to achieve an even higher quality of the procurement and contracting process. In response, by March 2020 RB Rail AS will develop a new internal procedure regarding the selection of procurement committee members and external experts as well as a new regulation on how to conduct preliminary market research.
The audit highlights the importance of a comprehensive risk management system, which includes all entities involved in the project. The audit concludes that RB Rail AS has identified, assessed and prioritised risks associated with the implementation of the Global Project. However, it rightly points out the need to use a unified risk management system, which is incorporated in the everyday operations. To develop a unified risk management, RB Rail AS has procured a planning, scheduling, reporting and risk management software. It will be used to ensure that the schedule and budget are accurately defined and monitored during the overall project life cycle, and that all the changes, potential issues and risks are quickly anticipated, easily understood and managed proactively. We expect to put this system in place by July 2020.
RB Rail AS, as a central coordinator of Rail Baltica Global Project, is prepared to provide the necessary input to the project owners – the transport ministries of the Baltic States – for making the necessary changes in the decision making, change management and long-term financial planning. These areas were identified in the audit as requiring immediate attention by the project owners.
Rail Baltica results in 2019
While the joint audit report calls for decisive action to improve the implementation of Rail Baltica, in 2019 the Project has delivered significant and tangible results. It has been a coordinated team effort by all entities involved in the Rail Baltica Project – National Implementing Bodies, Beneficiaries, European Commission, Joint Venture and various suppliers from across Europe:
- Design works have started on 411 km of the main line.
- Six detailed technical design contracts for the main line signed with experienced international engineering companies amounting to 58 million EUR.
- The key passenger terminals in Tallinn and Pärnu are being designed and design and build works started in Rīga Central Station.
- Procurement launched for the construction works of the Rail Baltica terminal in Rīga International Airport.
- Separate construction works on road and railway infrastructure elements have started in Estonia and Lithuania.
- Progress with spatial planning phase (incl. land acquisition) in Lithuania, with procedures completed in Kaunas-Lithuanian/Latvian border and launched for the Vilnius-Kaunas connection.
- The Rail Baltica Operational Plan is prepared, providing that Rail Baltica will ensure a fast rail connection between the Baltic capitals every two hours.
- Rail Baltica is being designed digitally by using smart and intelligent technologies.
- 800 million EUR have been secured so far and we are working on submitting the next CEF applications in February 2020.
- In 2019 eight more local companies in the Baltic States have been already involved in the design works of the Rail Baltica main line.
- In 2019 RB Rail AS concluded 66 procurement contracts with the total value of 64.2 million EUR. According to the RB Rail AS Supplier Survey 2019, almost 70% of suppliers say the procurement quality is high or very high.