EU auditors and Commission at odds over delays and cost overruns in transport megaprojects

EU auditors and Commission at odds over delays and cost overruns in transport megaprojects
Credit: ECA

Cross-border transport megaprojects in the EU have exceeded their original budgets by almost 50 % and are unlikely to be operating at full capacity by 2030 as initially planned, according to a new performance audit by the European Court of Auditors (ECA). The European Commission does not agree.

A common transport policy was set out already in the Treaty of Rome (1957). In 2013, the EU member states agreed to have a Trans-European Transport network (TEN-T) ready by 2030. A key feature of the network is cross-border transport projects, which aim to improve connections between national networks along European corridors.

“Timely establishment of the core TEN-T corridors is critical to the achievement of EU policy goals, supporting growth and jobs and tackling climate change,” said Oskar Herics, the ECA Member responsible for the report, at a virtual press conference last week (16 June). “Additional efforts should be made to speed up the finalisation of many of the EU’s flagship transport megaprojects.”

“We don’t talk about ‘white elephants’ in the report but about serious shortcomings in the implementation of the projects,” he told The Brussels Times. The importance of auditing these projects was underlined by a request in 2017 from the European Parliament for the ECA to perform an audit of investments in large transport project. ECA relied also on audits by national state audit offices.

The responsibility for the megaprojects is shared between the stakeholders. While the member states are responsible for specific projects and their implementation, the Commission through its Directorate-General for Mobility and Transport (DG MOVE) has an overall responsibility for EU’s transport policy and for ensuring that the megaprojects will deliver expected results.

The auditors selected a sample of eight megaprojects involving 13 member states (Austria, Belgium, the three Baltic countries, Denmark, France, Finland, Germany, Italy, Poland, Romania and Spain) and examined whether they were well planned and efficiently implemented by the EU and the member states. The focus in the audit was on the role of the Commission.

Main findings

The projects, with a total estimated cost of €54 billion (thereof €7.5 billion in co-financing from the EU), include several kinds of transport infrastructure: four railways (Rail Baltica, Lyon-Turin, Brenner Base Tunnel, Basque Y), one waterway (Seine-Scheldt), one motorway (A1 in Romania) and two multimodal connections (Fehmarn Belt road/ rail link and E59 rail link to ports in Poland).

The audit team found that the construction was significantly delayed in all the megaprojects, with an average delay of 11 years, largely because of insufficient coordination between countries. It is likely that six of the eight selected megaprojects, taking into account their connecting infrastructure, will not be able to operate at full capacity by 2030.

Over time, the costs of the eight megaprojects have increased by more than €17 billion (47 %) or €2.1 billion per project, due to changes in project design and scope, as well as due to inefficient implementation. According to ECA, the Commission’s supervision of the network completion is distant and it did not made use of the legal tools at its disposal to enforce the priorities agreed at EU level.

A crucial element in the planning of the megaprojects is the use of cost-benefit analyses to determine their economic feasibility. The analyses are based on forecasts of freight and passenger traffic flows. ECA engaged an external expert from the Free University of Brussels (VUB) to assess the quality of the various cost-benefit analyses.

ECA found that there was no overall high-level cost-benefit analysis covering all the elements in the megaprojects. In most cases the analyses covered only small parts of the links in the transport networks and were often based on overoptimistic assumptions. “Each country is working in its own national bubble.”

On the positive side, the auditors did not find any irregularities in the projects, in which case they would have reported them to EU’s anti-fraud office (OLAF). They did  identify cases of suboptimal use of EU money totalling €12.4 million and waste of €3.7 million of EU co-funding on the A1 motorway in Romania.

Two road sections, built in a timespan of just seven years, were wrongly interconnected. As a result, 800 metres of already constructed motorway had to be demolished in order to rebuild the connection correctly.

Denial or disagreement

The overall findings appear as worrying and would normally require the Commission to take action to remedy the shortcomings but this is not the case in this audit. In its reply to the report, the Commission claims that good progress has been achieved towards the completion of the transport networks and credits the EU financial support and political interventions for the projects taking place.

While ECA and the Commission agree that complex cross-border projects, or transport flagship infrastructure projects  as they are called in the audit report, by nature are subject to frequent changes along the way, they disagree not only on the conclusions in the report but also on some of the factual statements concerning delays and forecasts of future traffic flows.

A Commission spokesperson told The Brussels Times that adding new elements to a project is not necessarily wrong. “Complex projects change over time following stakeholder consultations or new environmental legislation. The assessment of any deviations in cost and of the timely implementation should therefore be made only as from the final investment decision and not at an earlier stage.”

Asked specifically about the Rail Baltica project, which the auditors doubted will be economically viable because of insufficient traffic demand, he replied that the Commission is of the opinion that “it is an economically sustainable project with a high added value”.  

“This project has the potential of becoming a new artery linking the Baltic states with Finland. It will contribute to our efforts to decarbonise traffic and promote rail as a sustainable alternative to passenger mobility for the whole Baltic region.”

The audit team, however, claims that the Rail Baltica project was mainly launched for geopolitical reasons. According to the audit report, the Commission has no models or specific data-collection procedures in place to independently assess the potential for passenger and freight traffic using the new connections before committing EU co-funding to them.

“We have taken into account that changes in complex projects do occur but cost increases should be the exception and should only be explained by justified changes in design,” the audit team remarked.

The team assessed the implementation delays at several points of time. “The aim was to highlight to policy makers and project promotors that in all cases over-optimism is a factor that is almost constantly observed and leads to important cost increases and major delays in project implementation.”

The Commission did not accept the audit recommendations on improving the cost-benefit analyses and strengthening its supervision of megaprojects. Could ECA have formulated the recommendations differently or made them more specific?

“Our recommendations are based on what we found and how the management of such large-scale projects can be strengthened,” the auditors replied. “We provided a specific timing by when we expect the recommended actions to be completed. We have seen in one of our past reports on transport that the Commission did not accept one of our recommendations, but afterwards implemented it.”

M. Apelblat
The Brussels Times

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