Turkish consortium rails against Rail Baltica exclusion

A Turkish consortium which was excluded from a major Rail Baltica procurement process says it is taking the matter to court – and furthermore says some of the winning bidders continue to do business in Russia.

The consortium of companies from Turkey consisting of "IC Içtaş Inşaat Sanayi Ve Ticaret A.Ş." and "Doğuş İnşaat Ve Ticaret A.Ş." has filed a lawsuit against the Republic of Latvia at Rīga Administrative District Court regarding its exclusion from an infrastructure construction tender by Latvia's Procurement Supervision Bureau (IUB).

"In the opinion of the suppliers' association, the decision taken by IUB to exclude one of the two candidates from such a large and nationally important procurement at the very end of the procurement is illegal and is neither legally justified nor in the interests of the Latvian state," said a release from the Turkish consortium.

According to their claim, they submitted a bid that was "almost one billion euros" cheaper than the rival bidder – a consortium of Italian, French and Polish companies – and even after these companies dropped their price, the difference was still more than half a billion euros – 536,415,263.64 euros, to be precise.

But they also allege that they were the victims of a political decision, describing the procedure as "incomprehensible" in which applicants were initially given access to restricted information in order to prepare a bid, but then, apparently on the recommendation of the State Security Service (VDD), the Turkish bid was "unreasonably excluded from the procurement procedure".

"Concerns about a politically motivated decision in this case are also raised by the fact that SIA "Eiropas dzelzceļa līnijas" already has valid contracts with another applicant for construction works, which are currently in the execution stage," said the company statement. Eiropas dzelzceļa līnijas is the state-owned company responsible for the Rail Baltica mainline section in Latvia, as part of the Baltic states' RB Rail joint venture.

"There are a number of other circumstances that make procurement for the construction works of the Latvian Rail Baltica main line look like a farce," they say, arguing that the VDD advice was very belatedly called upon and even when it came was highly questionable.

"If SIA "Eiropas dzelzceļa līnijas" had initially conducted a procurement in the field of defense and security, the request for the opinion of the State Security Service would be legitimate. At the moment, the recommendation given by them is not even considered legally binding in this procedure. Moreover, the Turkish bidders find it hard to understand why, if it got a negative assesment from the security service, the rival bid didn't get the same.

Specifically, the Turkish consortium wonders why the VDD didn't think it important that the Italian company "Rizzani de Eccher SPA" of the winning association "ERB Rail Baltica JV" continues to work on the territory of Russia a year and a half after the Russian invasion of Ukraine. 

"Another member of this association - a company [belonging to] the French "Eiffage Génie Civil SAS" group - actively works on the territory of the Russian Federation with its own company ООО "КЛЕМСИ РУС", and according to publicly available information, two of the clients of this company are included in the sanctions list - АвтоВаз and Ulyanovsk avtomobilny zavod. The company's activity profile is the supply and maintenance of industrial equipment - a critical sector of sanctions - but in 2022 the company increased its profit in the market of the Russian Federation by 254%."

"With regard to the VDD's recommendation on the association of suppliers from Turkey, it should be explained that the justification in this case was actually a political assessment of the role of Turkey as a country in relations with Russia. Not for real violations by the companies themselves, which could endanger the interests of the Latvian state," the Turkish companies contend.

"Therefore, such a recommendation based on political assumptions is not only discriminatory, but also looks like a sabotage attempt against one of the procurement participants, trusting that in the conditions when Russia has launched an unjustified and shocking aggression, a war against Ukraine, nobody will question the actions of the Latvian Security Service," it adds.

As a parting shot, the Turkish companies say Latvia is already lagging behind Estonia and Lithuania on the Rail Baltica project which "gives an unflattering image of Latvia on the international scale," and that thanks to its "questionable procurement procedure" will likely lead to "huge" financial losses.

The Rail Baltica track in Latvia from the Lithuanian to Estonian borders will cover some 265 kilometers. 

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