Press Release – June 3, 2011
The auditing operation scrutinised the funding of the D3 motorway from the State Fund for Transport Infrastructure. The D3 motorway is going to run from Prague to České Budějovice and to the state border with Austria. The estimated construction costs were originally CZK 88,264 million; CZK 13,305 million should have been spent by the end of 2010. Out of the planned 174 kilometres, only 10 % were realized (17 kilometres). The average price was CZK 290 million per a kilometre.
The audit conclusion stated that the Ministry of Transport did not have a binding concept for the construction of the road and motorway network and that the concept was changed at a disproportionate frequency. The design work was suspended at the time when construction documentation for a land-use planning decision was drawn up for almost the entire route. The sources of financing of the D3 motorway construction have not been clarified, neither have the financial requirements been specified. The terms of completing the D3 motorway were postponed a number of times, the last to 2020.
Preparations for the construction of the D3 motorway have been underway for almost 20 years; nevertheless, its route across the Central Bohemian Region has still not been resolved. Since 2002, the Road and Motorways Directorate has already expended CZK 47 million on elaborating studies and evaluating various options for the route across the territory.
Previously, the SAO called attention to the absence of a binding concept in Audit No. 09/16 – Funds earmarked for building the D47 motorway “Lipnik nad Becvou – state border with Poland” (published in volume 2/2010 of the SAO Bulletin) and in Audit No.09/27 – Funds earmarked for building roads (published in volume 4/2010 of the SAO Bulletin). The ascertained state of affairs has not changed.
There were shortcomings also with respect to public procurement procedures, especially in terms of creating a sufficiently competitive environment and ensuring transparency of the entire process. For example, the Road and Motorways Directorate awarded a public contract for six structures worth CZK 10.4 milliard based on the valuations provided by four tenderers, with the construction of the bridge across Koberný Lake being executed for the highest price ranging from CZK 1,078 million to CZK 1,246 million.
The Ministry of Transport also did not proceed in an entirely transparent way in the case of contracts for the provision of legal services. It did not choose the tenderer who should have provided services under the public contract based on evaluation criteria; instead it made use of an exemption under the law that in special, substantiated cases allows it to conclude a contract with any tenderer at its discretion. The Ministry did not duly substantiate its actions and awarded the contract to the tenderer with the highest bid price. The difference between the winning and the second bid was CZK 56 million.
Within the period from 2006 to 2010, the planned costs increased by 52% in 23 construction projects related to the D3 motorway, and the costs are expected to rise even further. The costs increase was influenced by the fact that the Road and Motorways Directorate failed to put in place effective price optimisation rules during the project preparatory phases, and did not assess the technical design of bridges in terms of investment and operating costs or evaluate the distance between interchanges (elevated junctions), which is shorter than in other European countries. Contributing to the cost increases was also the uneconomical manner in which the investor arranged for technical supervision. During the preparatory phase of the operations, local authorities and special-interest groups requested additional structures, which increased the planned costs of the number of construction projects significantly, even by milliards of CZK. Based on these findings, a reasonable solution would be to propose such legislative measures that would make it impossible to add structures not directly related to infrastructure projects.
A current issue in this period of reduced expenditure from the state budget is the selection of the method used to finance the state’s investment projects. It is becoming apparent that financing projects in the form of PPP (Public-Private Partnership) projects or supplier loans, which have been prepared or implemented in specific cases, has brought substantial risk and disadvantages in the form of substantial increases in mandatory expenditure for the state.
The Ministry of Transport planned the construction of the D3 motorway in the South Bohemian Region in the form of a PPP project without even being clear about the subject of the project and without demonstrating the appropriateness of implementing the project in the form of a PPP. It did, however, change the content of the PPP project proposal, often even changing the managing and advisory bodies, and in the end did not even implement the option approved by the government in 2008. Preparation for the PPP project began in 2003 without substantial results and at least CZK 120 million has been expended thereon.
The audit was performed from June 2010 to February 2011. The audited period extended from 2006 to September 2010; where relevant, the preceding period and the period until the completion of the auditing operation were also scrutinized. Among the audited bodies were the Ministry of Transport, the State Fund for Transport Infrastructure, and the Road and Motorways Directorate. The auditing operation was included into 2010 Audit Plan of the SAO under No. 10/15. Jiří Adámek, Member of the SAO Board, managed the operation and prepared the audit conclusion as well.
Supreme Audit Office