Finance agency terminates agreement over controversial Rīga tram project

The Central Finance and Contracting Agency (CFLA) has made a decision to terminate the agreement with Rīgas Satiksme municipal public transport company on implementation the Skanste tram project co-funded by the EU funds, the agency announced May 2.

The decision has been sent to Rīgas Satiksme, the agency said. 

So far CFLA has paid €451,304 to Rīgas Satiksme for the project activities, and the company is to pay back this sum by August 3, 2019.

The agency has assessed the information and explanations provided by Rīgas Satiksme, the upgraded action plan concerning risks, reports of Ernst&Young Baltic audit company and other available information on operations of Rīgas Satiksme. Based on all these findings, CFLA has made a decision to unilaterally terminate the contract.

CFLA Mārtiņš Brencis said that the risks are unacceptably high and, in fact, exclude a possibility to implement the project in line with the plan and report its expenses to the European Commission in due time.

“Also, the company is still struggling with organization of its activities and project management, there are suspicions about possible fraud in procurements. I would like to remind that there is zero tolerance to fraud and corruption in projects co-funded by the EU,” said Brencis.

Rīgas Satiksme had planned to implement the Skanste tram project by August 31, 2023. In line with the project, in total of 6.6 kilometers of tram line would be upgraded or built anew, and 12 low-deck trams would be purchased. The total costs of the project were estimated at €97.4 million, excluding value added tax (VAT). €65.66 million would be financed by the EU Cohesion Fund, €27.4 million by Rīgas Satiksme and EUR 4.33 million would come from other public funds.

The planned construction of a new tram line to serve the Skanste region of Rīga was put on hold for at least a year after a huge corruption scandal saw raids on the Rīgas satiksme offices by the Corruption Prevention and Combating Bureau and the arrest of several senior employees, as previously reported by LSM.

The Skanste tram project has been highly controversial from its first suggestion. Intended to provide an economic boost to an under-developed district close to the city center, some opponents have questioned its merits, others have objected to the route chosen and others have voiced doubts about potential corruption in the nearly 100-million euro project which involves a new 3.65 km-long line, reconstruction of three kilometers of existing line plus the purchase of twelve low-floor trams.

The Corruption Prevention Bureau (KNAB) has launched criminal procedures in relation to three procurements conducted by Rīgas Satiksme.

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