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CORRUPTION RISKS IN CITY-MANAGED INFRASTRUCTURE PROJECTS OFFER BITTER LESSONS

A tramline project in Latvia’s capital Riga has been terminated due to suspicions of fraud, mismanagement and unacceptably high risks, information released recently by Latvia’s authorities suggests. The Central Finance and Contracting Agency of Latvia, the government authority tasked with supervision of EU-funded projects, has published its findings into Riga Satiksme, a city-owned company that managed the project. The report follows the announcement on the project’s termination in May.

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In drawing up their decision, the authority consulted an external auditor and considered reports from Delna, Transparency International’s Latvian chapter, who had been monitoring procurements of this public works project since inception. The Riga tram project was co-funded by the European Commission.

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“Recent cases of mismanagement, fraud and bribery have severely tainted Riga’s municipal affairs. Decisive action from the authorities is a welcome development. Next, we hope to see direct accountability for misconduct on this and other Riga Satiksme projects. This would serve as a clear signal that corruption in infrastructure projects will not be tolerated,” said Janis Veide of Delna.

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Corruption scandals have long persecuted Riga Satiksme. At the end of last year, a joint investigation with Polish authorities led to a high-profile bribery case concerning another of the company’s projects. This resulted in arrests,  resignation of Riga’s deputy mayor and together with the mayor standing for EP elections. The scandal implicated Škoda Transportation – a Czech manufacturer that was one of the two bidders for the second and final tender for the Riga tram project.

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Delna had been monitoring the Riga tram project as part of Transparency International’s Integrity Pacts project since 2016.

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“The Integrity Pacts gave Delna a unique opportunity to work towards improving openness and integrity in this expensive infrastructure project,” continued Janis Veide. “Delna scrutinized the project and worked to safeguard taxpayers’ interests. It is disappointing that Riga Satiksme failed to improve its operational integrity and,  consequently, not only failed to deliver the new tramline for the city but there is also a risk that the taxpayers will have to cover nearly half a million euro already spent on the project.”

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Delna’s monitoring reports highlighted poor management and other irregularities within the Riga tram project. This prevented violations of competition and procurement rules through the early detection and amending of apparent restrictive specifications that would have significantly limited competition in a 2017 tender. When Riga Satiksme failed to react to Delna’s concerns, the watchdog brought its reports to the law enforcement and regulatory authorities. Since 2016, Delna had made multiple submissions detailing potential corruption risks and violation of competition rules in this project.

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Based on the monitoring experience Delna also recommends that a more thorough assessment of large-scale projects at the level of the European Commission should be carried out in future. This could reduce the risks of corruption, e.g. feasibility studies of large-scale projects should justify evidence of the included technical parameters.

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The contracting agency has requested that Riga Satiksme pay back nearly half a million Euro received for this project. The company has already made indications that they do not plan to respect this decision, which may bring the case to court. Delna will cooperate with the authorities and share information collected as part of its monitoring work.

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The mismanagement of the Riga tram project is far from an isolated case. Investigations against high-level company officials will hopefully ensure all involved are held accountable but should also highlight the need for systemic changes.

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“Delna’s work as part of the project Integrity Pact points to glaring weaknesses in Latvia’s public procurement system and governance shortcomings in city-owned companies,” said Janis Veide. “We are determined to use this evidence to advocate for improved clean contracting principles and mandatory whistleblowing mechanisms in public works projects. We will also develop recommendations for public procurement regulation.”

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NOTE TO EDITORS

An Integrity Pact is a document signed between a contracting authority, bidders and an independent monitor, in this case Delna – the Latvian chapter of Transparency International. Legally binding, the Pact commits all parties to comply with anti-corruption best practices for the duration of the contract and allows the monitor to make sure this occurs. Monitors follow the whole procurement cycle, from the design of the tender to the implementation of the contract. In addition, Integrity Pacts foster citizens’ engagement by raising their awareness on public contracting and by demanding social accountability.

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FOR MEDIA INQUIRIES, PLEASE CONTACT

Jānis Veide, Project Manager, Transparency International Latvia / Delna

T: +371 67285585

E: janis.veide@delna.lv

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Picture: Creative Commons

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This section was developed under the framework of the “Integrity Pact – Civil Control Mechanism for Safeguarding EU Funds” project funded by the European Commission.

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