A New Scandal Erupts in Rail Baltica: Latvia Signed a Contract for Rails at Inflated Prices 0 15

Another scandal is brewing around the Rail Baltica project — this time due to the procurement of rails. According to the program Nekā personīga (TV3), the cost of the rails in the centralized procurement turned out to be significantly higher than the market price, and the possible overpayment for Latvia could amount to tens of millions of euros.

This week, the Saeima decided that further coordination of Rail Baltica will be controlled by the Prime Minister. The reason is the increasing number of questions regarding project management, procurement, and the lack of political oversight in previous years.

Initially, the Baltic countries planned to jointly procure materials for the railway, hoping that large volumes would allow them to achieve more favorable prices. However, in practice, some procurements have already faced problems: some contracts had to be canceled, while others had to be revised.

Now the procurement of rails is also in question. The total value of contracts for the entire Rail Baltica route could amount to about 350 million euros excluding VAT. Latvia has already signed a contract for approximately 106 million euros, Estonia is still assessing the situation, while Lithuania has completely refused centralized procurement.

The reason is the price. Lithuania previously procured part of the necessary rails from the same supplier but at about 13% lower.

Additional questions arose after comparing with the procurements of Latvijas dzelzceļš. In a recent competition, the company received offers for thermally hardened rails at about 1179–1214 euros per ton, while in the RB Rail procurement, the price reaches about 1500 euros per ton. Industry representatives estimate the possible increase in cost to be up to 30%. For Latvia, this could mean an overpayment of at least 20 million euros.

At the same time, the rails will not be needed by the country until at least 2028. Until that time, it is still theoretically possible to refuse the contract.

RB Rail explains the high cost differently. According to the company's chairman, Marko Kivila, the supplier takes on serious risks: reserving production capacities for years ahead, fixing the price for seven years, and must guarantee the supply of a large volume of products even in the event of price fluctuations in metal.

"With this fixed contract, one can protect against all types of price risks, including sharp price increases in the market," Kivila stated.

Meanwhile, criticism of the project management quality is growing louder in Latvia. Minister of Transport Aitis Švinka stated that the Latvian side will no longer automatically sign such contracts without a full understanding of the obligations and risks involved.

Against this backdrop, the story of the procurement of switch points, which Nekā personīga reported on back in the spring, has resurfaced. At that time, a candidate with the cheapest offer was excluded from the competition for formal reasons, and the difference between the bids reached 267 million euros. An investigation concluded that the procedure was legally correct; however, from the perspective of good governance, the competition could have been organized differently to maintain competition.

After this scandal, the Saeima has already supported changes in legislation that will allow for the clarification of non-essential errors in procurement documents even after the submission of proposals.

Latvia is now proposing to reform RB Rail and change the project management system. However, Lithuania and Estonia fear that the new reforms will lead to even greater construction delays.

The story with the rails shows that the main question for Rail Baltica today is not only the construction timelines but also control over how hundreds of millions of euros are spent.