The scope of Rail Baltica project in Latvia has changed without a common approach to its approval, and decisions are difficult to trace. This was found in the review conducted by the State Audit Office of Latvia assessing the process of accepting changes for Latvian regional stations in Latvia, the node of Riga Central Passenger Terminal, and the main line.
The national report of the State Audit Office provides more detailed information about the changes in the scope of Rail Baltica section in Latvia and the progress of their approval in the sites included in the joint review by the three supreme audit institutions (SAIs) of the Baltic States.
BRIEFLY
- The Cabinet of Ministers is insufficiently involved in decision-making and monitoring of project implementation.
- Initially, in 2016, the scope of the Rail Baltica project approved by the Cabinet of Ministers did not include regional stations, and since then their number has changed.
- The scope of the node of Riga Central Passenger Terminal has changed significantly during the implementation of the project.
- The estimated costs for the construction of the mainline have increased seven times.
“The State Audit Office of Latvia has found during the review that the Ministry of Transport changed and approved changes in the scope of the Rail Baltica project by not always providing complete and comprehensive information to the government for making justified decisions. For example, regional stations were not included in the initial scope, but later their number was even increased. The costs of the node of Riga Central Passenger Terminal have also increased significantly, but the construction costs of the mainline are predicted to be seven times higher. At the same time, delays in the design of Rail Baltica project pose a risk of losing the financial support of the European Union,” stated Ms Inese Kalvāne, Council Member of the State Audit Office of Latvia.
The Cabinet of Ministers is involved in decision-making and project monitoring insufficiently. The State Audit Office of Latvia has established during the review that the Ministry of Transport has approved the changes in the scope of the project and the related costs for both the regional stations and the hub of Riga Central Passenger Terminal, as well as the main line. However, the government was not always informed when the initial scope was changed and the planned costs increased following a common approach and providing complete and sufficient information for decision-making, namely, not in all cases of project changes, the Cabinet of Ministers has been informed about the changes compared to the initially approved ones, the justification of these changes, the impact on the total costs of the project and the state budget.
Initially, the scope of the Rail Baltica project approved by the Cabinet of Ministers in 2016 did not include regional stations, and their number has since changed. Their inclusion is justified by the Operational Plan developed in 2018, which the Cabinet of Ministers has not reviewed. According to the Ministry of Transport, the Cabinet of Ministers gave approval for the introduction of stations in 2020 when supporting the activity application of designing regional stations for receiving the European Union funding. However, one found during the review that the Cabinet of Ministers was not provided complete information for consideration of this issue, as the Ministry of Transport did not draw the government’s attention to the fact that regional stations were not included in the initial scope of the project, nor did it provide estimates of the total costs for the construction of the stations and the increase in related costs. The number of regional stations has changed from 15 to 17 from 2018 to 2024, as the Ministry of Transport has included new stations in the scope of the project, for example, Āgenskalns station. The total cost estimates for regional stations are 102 million euros, of which only 3.3 million euros are currently available.
The scope of the hub of the Riga Central Passenger Terminal has changed significantly. The hub of the Riga Central Passenger Terminal was initially included in the scope of the Rail Baltica project in a smaller scope, but it gradually expanded. It includes not only tracks and a new railway bridge, but also Riga Central Station and other related facilities. According to the latest estimates, the total cost might reach 888 million euros. Currently, the construction is taking place according to the contract concluded and scope agreed in 2019, and the initial costs have increased by another 135 million euros from 430 million euros in 2024. The Ministry of Transport has approved the changes, for example, by deciding to build four tracks instead of the previously planned two tracks. Similar to the regional stations, the changes planned for the node of Riga Central Terminal and their fiscal impact have not been properly coordinated with the Cabinet of Ministers. Institutions involved in the implementation of the project cite several reasons for the increase in costs, including changes in TOR, design and scope, as well as cost indexation. They also indicate gaps in the 2017 cost estimates.
The estimated costs for the construction of the main line have increased seven times. The estimated costs for the construction of the main line in the Latvian section have increased seven times by reaching approximately 8.7 billion euros. The responsible institutions explain this increase with an inaccurate initial cost assessment due to the lack of Rail Baltica construction design guidelines. The State Audit Office’s review has revealed that they have been clarified more than 100 times since the approval of these guidelines in 2018. Although the Cabinet of Ministers has approved the contract for the construction of the main line, only 4.5% of the required funding is available.
Designing is delayed, and only 54% have been completed. Although the initial deadline for the completion of the works was the end of 2021, they are currently planned to be fully completed by the end of 2027, which poses a risk of fully or partially returning the EU financial support granted so far.
Findings of the supreme audit institutions of the Baltic States regarding the essential aspects and problematic issues in the implementation and financing of the Rail Baltica project
- The expected full-scale costs of the Rail Baltica project have increased more than four times, that is, from 5.8 billion euros in 2017 to 23.8 billion euros in 2023.
- The project is at least five years behind the schedule with the first phase of the project planned to be completed only in 2030.
- Global project risk management and change management have not improved significantly since the audit conducted by the Supreme Audit Institutions of the Baltic States in 2019.
- The governments and parliaments of the Baltic States were not always aware of potential problems, and the Baltic States have different approaches to the involvement of the government and parliament in project supervision.
- The only common decision of the Baltic States regarding infrastructure management is that each country will have a separate manager. In Latvia, only a temporary infrastructure manager is determined yet.
- The responsible ministries of the Baltic States have not decided either on the model to provide trains on the institution responsible for the execution of this task.
About the review
In addition to the joint review by the supreme audit institutions of Latvia, Estonia and Lithuania on prominent issues of the implementation, financing and international cooperation of the Rail Baltica project, the State Audit Office of Latvia has also carried out a national review. It explains the inclusion of regional stations, the hub of Riga Central Passenger Terminal and the main line in the scope of the Rail Baltica project, as well as the adoption of decisions on significant changes in these sites.
A review is a short-term collection of facts about issues relevant to the public, without drawing conclusions and making recommendations. A review report contains only findings, while an audit report contains findings, conclusions and recommendations.
The State Audit Office of Latvia
The State Audit Office of the Republic of Latvia is an independent, collegial supreme audit institution. The purpose of its activity is to find out whether the actions with the financial means and property of a public entity are legal, correct, useful and in line with public interests, as well as to provide recommendations for the elimination of discovered irregularities. The State Audit Office conducts audits in accordance with International Standards of Supreme Audit Institutions of the International Organization of Supreme Audit Institutions INTOSAI (ISSAI), whose recognition in Latvia is determined by the Auditor General.
100 years of AUDIT STRENGTH
On 16 August 2023, the State Audit Law turned 100 years old. With the adoption of this Law, the State Audit Office from a formal de facto institution founded on 2 December 1918 became a de jure independent, collegial supreme audit institution of the Republic of Latvia. The State Audit Office is one of the independent state institutions enshrined in the Satversme (Constitution) of Latvia. The Constitution was signed by Roberts Ivanovs as the secretary of the Constitutional Assembly, who was then confirmed as the Auditor General. He worked as the first Auditor General for 12 years. His signature confirmed the text of our Constitution alongside that of Jānis Čakste.
Additional information
Ivo Valdovskis
Advisor to the Auditor General
Phone number: 29274446 | E-mail: ivo.valdovskis@lrvk.gov.lv