BUILDING HIGHWAYS IN ROMANIA:
CURRENT PROBLEMS AND POSSIBLE SOLUTIONS |
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Introduction
In Romania, the building of highways is quite a topical issue, being
constantly and amply debated in the media. Unfortunately, the poor
results in this field are mostly due to a lack of will and coherence on
the part of the Government when elaborating the relevant public policies
and also to a plump yet inconsistent legislation. |
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Public Policies in This Field |
Besides being regulated by a significant number of
leges generales of concern for public investments, the spending
of public funds, public budgets and budgetary discipline (such as Law
500/2002 on the public finances, Law 69/2010 on the fiscal-budgetary
accountability or the Methodological Norms of 26.03.2014 for the
prioritization of public investments, etc.), the construction of
highways is also regulated by several special laws outlining the public
policies devised specifically for the transportation field[1].
In addition, beyond this ample national legal
framework, the construction of highways must as well observe the
European Union’s correlative rules and policies. In this regard, it is
worth mentioning that Romania, as a Member State of the Union, is
obliged and expected to connect to the European transport networks and
pan-European corridors as devised through Decision No. 1692/96/EC of the
European Parliament and of the Council of 23 July 1996 on Community
guidelines for the development of the trans-European transport network,
as further amended and completed, such interconnectivity requiring a
strict optimization of both the relevant national routes and distances
with the main purpose of reducing the costs entailed by the
trans-European multi-modal freight consignment. According to Article 1
paragraph 2 from the mentioned Decision, “The guidelines referred to
in paragraph 1 shall constitute a general reference framework intended
to encourage the Member States and, where appropriate, the Community in
carrying out projects of common interest, the purpose of which is to
ensure the cohesion, interconnection and interoperability of the
trans-European transport network, as well as access to that network.
These projects shall form a common objective, the implementation of
which depends on their degree of maturity and the availability of
financial resources, without prejudging the financial commitment of a
Member State or the Community.[…]” whereas according to Article 2
thereof “1. The trans-European transport network shall be established
gradually by 2020 by integrating land, sea and air transport
infrastructure networks throughout the Community in accordance with the
outline plans indicated on the maps in Annex I and/or the specifications
in Annex II. 2. The network must: (a) ensure the sustainable mobility of
persons and goods within an area without internal frontiers under the
best possible social and safety conditions, while helping to achieve the
Community's objectives, particularly in regard to the environment and
competition, and contribute to strengthening economic and social
cohesion; (b) offer users high-quality infrastructure on acceptable
economic terms; (c) include all modes of transport, taking account of
their comparative advantages; (d) allow the optimal use of existing
capacities; (e) be, insofar as possible, interoperable within modes of
transport and encourage intermodality between the different modes of
transport; (f) be, insofar as possible, economically viable; (g) cover
the whole territory of the Member States of the Community so as to
facilitate access in general, link island, landlocked and peripheral
regions to the central regions and interlink without bottlenecks the
major conurbations and regions of the Community; (h) be capable of being
connected to the networks of the European Free Trade Association (EFTA)
States, the countries of Central and Eastern Europe and the
Mediterranean countries, while at the same time promoting
interoperability and access to these networks, insofar as this proves to
be in the Community's interest.” A failure to implement these
measures by the mentioned deadline (i.e., 2020) could lead to harsh
infringements.
Nevertheless, the Romanian authorities have shown
an inexplicable lack of interest in creating and developing a vigorous,
durable national strategy in this field, whence the actual havoc.
Highway routes are drawn up hastily and without a consistent impact
study, being changed by each Government based on unclear interests and
in complete disregard of the EU’s guidelines and policies while their
implementation, if eventually set out, is every so often halted or
postponed with or rather without a concrete objective reason etc.. The
latest master plan elaborated by the Romanian Ministry of Transport
(available at
http://www.mt.ro/web14/strategia-in-transporturi/master-plan-general-transport/documente-master-plan)
which hasn’t been so far endorsed by the European Commission and pushed
through into law and which, according to specialists, goes adrift from
the national plans already consecrated by OG 16/1999 but also from
Decision 1692/96/EC, is a good example in this regard. Another good
example is the Comarnic-Brasov project which has been put out to tender
several times so far and which, if it were to be implemented as
negotiated with the consortium that was awarded the contract in the
latest of the three procedures, would apparently have breached the
mentioned master plan (which, ironically, was devised by the same
authority that set the technical specifications for the Comarnic-Brasov
works concession), so that it now needs to be re-drafted and
re-tendered. Additionally, there are many important foreign investors
who, invoking the fact that Romania is so short on highways, simply
refuse to invest here while others, already doing business on the
Romanian soil, threaten to put up the shutters and leave unless Romania
builds highways at a fast pace at least on some key routes.
As a matter of principle, while the national routes
which follow the European corridors itemized by Decision 1692/96/EC are
financed with priority by the European Union (through its various
financial mechanisms) other routes, which are not part of this strategy,
must (in case Romania wants EU to support their implementation) be
subjected to thorough negotiations with the European officials and
usually enjoy a less favourable financing regime. This means that such
other routes must, in bulk, be financed mainly (if not solely) from the
national budget, which usually leads to frequent stalemates in their
implementation due to frequent budgetary restraints. A wise strategy in
this field would hence imply giving outright priority to the projects
destined to connect Romania with the EU through the corridors approved
by Decision No. 1692/96/EC (which, with the financial support from the
European Union, are supposed to be quickly implemented) and leaving the
alternate projects for the later stages.
All in all, planning, preparing and securing the
financing for an investment of this kind are very important steps and
the competent authorities in charge with probing their legality (in
particular the Romanian Court of Auditors and the National
Anticorruption Directorate) have lately revealed, in a number of
important projects, many abuses in this area. A good example in this
regard is the Transalpina project which, although it was part of neither
the priority Program released through GO 16/1999 nor the transport
networks comprised in Law 363/2006, obtained full financing and was set
into operation through fraudulent means, which led to its staying and
the conviction of the main contractor. Therefore, it is advisable that
investors interested to participate in a procedure for the award of a
public contract for the construction of a highway (or a portion thereof)
run a proper due diligence with regard to the conditions in which the
project at stake was elaborated and approved in the first place, in
order to avoid any unpleasant consequences.
Finally, the implementation of such projects proves to be, in many
cases, hindered by the anomalous procrastination of the relevant
preparatory formalities (in particular the expropriation of the land on
which the highway is to be built — which takes place as per Law No.
255/2010, since many landowners challenge in court the meagre value of
the compensation granted to them in exchange for the expropriated land
and this takes months and even years to resolve). To this extent,
investors must always check whether such preparatory formalities are
required and, if so, depending on their nature and complexity, ask for
thorough clarifications and allow for a longer period of implementation
and higher costs when elaborating their bids.
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Project Implementation |
As a matter of principle (stemming from the
case-law of the Court of Justice of the European Union — CJEU), in
performing their public-interest tasks, public authorities enjoy a full
liberty to choose between (i) employing their own administrative
technical or other resources (solely or in cooperation with other
authorities) or (ii) devolving these tasks upon authorized
economic operators.
In Romania, the construction of highways is
explicitly reserved for the Ministry of Transport through the National
Company for Highways and National Roads – CNADNR, a public entity set
up, by the reorganization of the former “National Roads Administration”[2].
To this extent, when deciding to invest public
money in the construction of a highway CNADNR may, based on a germane
feasibility study, either proceed to the construction thereof with its
own resources or purchase such works from third parties. In the latter
case, it must organize an appropriate procedure for the award of the
relevant contracts for the design and the execution of the desired
thoroughfare. Of course, once the highway is built, it must be properly
maintained, preferably throughout its lifetime. This is likewise to be
done by the procuring entity itself or through a specialized entity
hired by a separate public services contract. Alternatively, in case it
does not have enough resources to purchase the required works and
services entailed by the building and/or the maintenance of the
prospected highway, CNADNR may seek for a private partner with which to
implement the envisaged project in a public-private partnership.
Public-private partnerships (PPPs) are forms of
cooperation between public authorities and private undertakings aimed in
principal at carrying out complex infrastructure projects. These
arrangements have been developed in key areas of the public sector and
are widely used across the EU in particular in transport, public health,
public safety, waste management and water distribution.
There are two known types of PPPs: contractual
PPPs (i.e., the standard concession agreements) and institutionalised
PPPs (or IPPPs), the latter involving the establishment of a mixed
capital entity which shall be commissioned to further deliver public
contracts or concessions.
Romania has formally consecrated both categories of
PPP. Contractual PPPs are regulated, at a general level, by Government
Emergency Ordinance No. 34/2006 ("GEO 34/2006") for the award of public
procurement contracts, of public works concession contracts and of
services concession contracts, as subsequently amended, by Government
Decision No. 925/2006 ("GD 925/2006") approving the Norms for the
application of the provisions concerning the award of public procurement
contracts as contained in [GEO 34/2006], as subsequently amended and by
Government Decision No.71/2007 ("GD 71/2007") approving the Norms for
the application of the provisions concerning the award of concession
contracts as contained in [GEO 34/2006], as subsequently amended.
In turn, IPPPs are specifically regulated by Law
No. 178/2010 on the public-private partnership ("Law 178/2010"), as
subsequently amended, and Government Decision No.1239/2010 ("GD
1239/2010") approving the Methodological Norms for the application of
[Law 178/2010] and for the approval of certain measures concerning the
reorganization of the Central Unit for the Coordination of
Public-Private Partnership [UCVAP] from the Ministry of Public Finances,
as subsequently amended.
Due to obvious advantages, the Romanian authorities
prefer to build highways through PPP arrangements, usually contractual
PPPs, as IPPPs are, given an ill-devised legislation, rather hard to
implement. In this context it should be pointed out that Law 178/2010
contains a series of provisions which appear to be unconstitutional,
whereas others are simply impossible to apply due to an elusive,
expletory wording. Last but not least, Law 178/2010 fails to fully
clarify its scope ratione materiae which, due to a bizarre
approach, overlaps with that of GEO 34/2006, while some of its
provisions are actually in striking dissonance with the relevant EU
public procurement norms.
According to article 3 paragraphs g) and h) from
GEO 34/2006 as complemented by article 3 (1) from GD 71/2007, “works
concessions” are contracts with features similar to those of a standard
public works contract, except for the fact that the economic operators
involved in the delivery of the contracted works receive not an actual
price but, rather, a consideration which consists either solely in the
right to exploit the outcome of those works or in that right together
with a pre-set payment. Along the same lines, “services concessions” are
contracts with characteristics similar to those of a standard public
service contract, except for the fact that the economic operators
involved in the delivery of the contracted services receive, instead of
a fixed price, a consideration consisting either solely in the right to
exploit those services or in that right together with a pre-set payment.
This general framework is complemented by a number
of secondary norms applicable explicitly and solely to public works
contracts and works concessions involving the construction (and eventual
exploitation) of highways and national roads[3]. These norms
are accompanied by several Regulations issued by CNADNR for the award of
public works contracts in this field and also for the monitoring and the
implementation of the relevant technical assistance contracts,
consultancy services contracts and works contracts as per the FIDIC
rules. All these rules and regulations impose some strict margins and
give practically no leeway for CNADNR with regard to the elaboration of
tender documents and the drafting of relevant contracts.
Of course that, should the works contract or
concession be financed from funds made available by the EU, World Bank,
EBRD or similar institutions, other specific rules shall apply as well.
However, the norms dealing with the award of public
works contracts and concessions (in particular GEO 34/2006 and the
accompanying Norms), beyond offering a number of useful instruments,
guarantees and opportunities for bidders, open the door to a number of
sore problems of which corruption, the unlawful direct award and the
illegal modification of contracts during their lifetime are of greatest
concern.
Another problematic issue susceptible of marring
the procurement process is stemming from a number of equivocal legal
provisions making possible either a subjective (and thus susceptible of
being biased) approach by the contracting authorities or a perilous
interference of the political factor with the public procurement
process. The poor coordination of the laws concerning public procurement
— between them and with other laws to do with correlative domains
(especially with those regulating the formation of public budgets and
the disbursement of public funds) — is another sensitive issue. This
lack of coordination impedes the completion of many projects due to a
feeble (if not unlawful) financial and/or procurement planning which is
often amended afterwards, i.e., during their implementation.
On a wider scale, many deplore the lack of any
viable legal tools which to bolster sustainable public procurement, or
the lack of rules destined to support innovation and a better access of
innovative SMEs to public procurement or, finally, the lack of a legal
framework which to enhance the use of e-procurement, etc..
A special concern is raised by the recent
implementation, by the Romanian legislator [4], of a number
of controversial new measures allegedly aimed at “streamlining the
public procurement process and protecting contracting authorities from
the submission of abusive complaints which may ultimately skew the
genuine purpose for which the remedies have been instituted [in the
Romanian public procurement system] in the first place”. The most
important change brought by these new rules is that requiring any
complaining party to constitute a so called “good conduct guarantee” (of
1% of the total estimated value of the contract but no more than
€100,000) prior to filing a complaint before the first-tier review body
– i.e., the National Council for Solving Complaints (CNSC) or bringing
an action before the judicial court. The failure to do so shall trigger
a forthright rejection of the claim/action by CNSC or the court, as the
case may be. This guarantee joins and adjoins the other two guarantees
provided by law (i.e. the participation guarantee and the good
performance guarantee) which, all in all, make the participation in a
procurement procedure quite expensive. However, the Constitutional Court
has recently rendered that the automatic enforcement (but not also the
mandatory setup!) of this guarantee infringes the presumption of
innocence guaranteed by the Romanian Constitution.
Many agree that the current remedies system needs a
serious revamping. But, as said before, corruption, bid-rigging,
conflict of interests and incompatibilities are some of the most serious
problems in the Romanian public procurement field (and especially in
the construction of highways, as the recent public scandals have shown).
Romania has indeed created a multifarious legal framework for fighting
these issues. However, instead of having so many provisions scattered
throughout several laws and most times inconsistent with each other, it
would be more productive to have just one comprehensive and easily
applicable law. And, if anything, a reform in this field must
necessarily provide for a new and viable set of tools allowing bidders
as well as any interested party (and not just authorities such as ANRMAP,
UCVAP or the National Integrity Agency - ANI) to easily check, find out
and report any such situations and to intervene, directly and without
delay, in the process in order to prompt an immediate control / sanction
/ remedy etc. Moreover, the procedures provided for the investigation
and the redress of such infringements etc. must necessarily be
correlated with the contract award procedures in terms of periods, cases
of suspension, standstill etc.). Finally, since there are several
institutions with similar powers (ANRMAP, UCVAP, ANI, etc.), the
relevant legislation must necessarily be streamlined so to eliminate
redundancies (which in many cases have led to a stalemate). To this
extent, a betterment of the whistleblowing process is highly
recommendable (not only with regard to the reporting stage - e.g.
reporting suspicions of malfeasance or misconduct should become
mandatory etc., but mainly as concerns the protection of the
whistleblowers and their right to remain anonymous, inasmuch as their
reports are true and accurate etc.).
Anyway, as explained above, if, after elaborating
the necessary investment plans, performing the proper feasibility
studies and obtaining the green light for the project, the procuring
entity lacks the necessary technical resources to implement the project
by itself, it has the opportunity to procure the relevant works from
third parties — especially economic operators authorized to perform such
works. Otherwise, in case the authority has no access to the necessary
funds in order to hire a specialized contractor through a public works
contract, it may put out to tender a works concession and let the
winning operator finance the project, perform and exploit the works and
assume the relevant risks.
According to the norms regulating the award of
public works contracts and concessions, contracting authorities (CNADNR
included) are required to award public works contracts by either an open
or a restricted procedure. All the other procedures itemized under
article 18 (1) from GEO 34/2006 may be applied only in the specific
circumstances expressly and limitedly provided for by GEO 34/2006. Works
concessions in turn may be awarded, as a rule, by either an open or a
restricted procedure or, as the case may be, by competitive dialogue or
via a negotiated procedure with prior publication of a contract notice.
However, since most of the projects involving the construction of roads,
especially those of national importance such as the highways, are
particularly complex and imply some intricate financial and/or legal
arrangements, it is a great opportunity for the authorities procuring
such works to make use of the competitive dialogue, which is a dedicated
procedure, being devised especially for this kind of situations, as
opposed to the open procedure - which is far stricter and allows of no
deviations from the technical specifications of the tender book.
In practice, when defining the relevant
characteristics of a project put out to tender, contracting authorities
have the liberty to define their needs by making use of either technical
specifications, award criteria or contract performance clauses.
According to GEO 34/2006, the award criteria may
only be (i) the most economically advantageous tender (the
so-called “MEAT” criterion) or (ii) the lowest price (not cost!).
As a matter of principle, award criteria must be chosen so to ensure
that the tenders are assessed in an impartial, objective manner so that
a fair, genuine competition is secured (by equal treatment,
transparency, non-discrimination and proportionality). The Romanian
legislation provides also for the necessity of observing the principle
of the efficient use of public funds. On the other hand, the public
procurement legislation guarantees the freedom of any contracting
authority to choose the award criteria as well as their weighting. Given
this liberty, in practice it is almost impossible to control and censure
– where necessary - the way contracting authorities organize their
procurements (since the law provides only how but not what
to buy).
Regrettably though, the same practice shows that the Romanian
contracting authorities prefer in most of the cases to define their
needs through complex technical specifications and award the contract
based on the “lowest price” criterion, instead of using more
wide-ranging and flexible specifications doubled by some detailed
factors that would, in the procurer’s opinion, make a tender the most
economically advantageous one. This habit however stifles innovation and
fetters the bidders from offering more flexible, modern and possibly
cheaper solutions. In fact, it is a common practice for CNADNR to
elaborate tender books in such an intricate and unsustainable way (by
defining some thorough technical specifications which in many cases are
unrealistic, ignore the most important horizontal considerations and
shun innovation) that it eventually constrains the tenderers to offer
highly expensive and hardly feasible solutions. The result of this is
that Romania now has the most expensive motorways in Europe (with a just
two-year warranty term) – as opposed, for example, to Germany where they
allegedly cost even five times less and are guaranteed to remain
functional for up to 30 years.
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Conclusions |
Against the apparently catastrophic backdrop
envisaged above, which make investors think twice before deciding to
invest in Romania, some important steps have nevertheless been, or are
soon to be, taken in the right direction.
Thus, at least some of the problems described above
(especially those to do with public procurement and the award of public
contracts) are supposed to be solved sooner rather than later, as
Romania is about to transpose and implement (i.e., by April 18, 2016)
the new European Directives on public procurement[5] which
come with numerous innovative solutions.
This will give the Romanian contracting authorities
the chance to exploit a series of remarkably efficient and flexible
instruments such as the preliminary market consultations, the new
“toolbox” approach which cuts through the red tape and comes with a
reformed competitive dialogue and two novel procedures, i.e., the
competitive procedure with negotiation and the innovation partnership,
or the means devised to spur innovation and ensure a strategic use of
the horizontal considerations and the life cycle costing, etc.. All
these should improve the procurement process, enhance lawfulness and
lead to a more transparent environment, which may ultimately convince
investors to participate on a far wider scale in public procedures and
the implementation of some important public projects in Romania.
As for corruption, incompatibilities and the
conflicts of interests, it is worth mentioning that Romania has adopted
in the last couple of years a series of amendments to the primary
legislation concerning public procurement, with the aim of ensuring a
substantially better transparency and celerity at the award of public
contracts, such amendments being the upshot of a long series of
negotiations between the Romanian authorities and the European
Commission.
The secondary as well as the tertiary public
procurement legislation have been thoroughly reformed, mainly with
respect to the ex-ante verifications performed by ANRMAP or UCVAP, etc.,
whereas the cases involving fraud in public procurement actually top the
list of priorities and are part of the local anti-corruption strategy of
any prosecutor’s office.
Another measure meriting attention is that recently
propounded for public debate by ANI, concerning the implementation of a
mechanism for the prevention of conflicts of interest in public
procurement (the so-called “PREVENT”). PREVENT (an electronic program to
be built with the substantial technical and financial support of the
European Union) entails the obligation of each contracting authorities
to upload thereon (in connection with any contract financed through - at
a first stage - EU funds) relevant information and personal data of all
individuals involved in the procurement process (heads of the procuring
entity, consultants and experts, members of the bid evaluation
committees or representatives of the bidders). PREVENT, which is also a
comprehensive database, will run a thorough check-up and will
automatically prompt “integrity warnings” if it detects a potential
conflict of interests. Upon receiving such warning, ANI’s functionaries
shall investigate the case and, should they find the warning true, shall
promptly notify both the person in breach and the head of the procuring
entity which must take all the necessary measures to eliminate the
conflict of interest (including by eliminating that person from the
procedure and/or disqualifying the bidder etc.). Once adopted, this
ex-ante check would join the verification process already in place under
the current legal framework (which involves ANRMAP and UCVAP).
Last but not least, the convictions that made the
rounds and generated breaking-news alerts in the media are a good proof
that the Romanian judiciary is now functioning at full capacity.
At a wider level, with regard to the elaboration of
public policies in this field, the good news is that the master plan
cited above is on its way to be finally approved by the European
Commission (it is supposed to happen later this month), which will
entail an important financial support from the European Union and which
may also raise the interest of some important international financial
institutions.
It is true that, at this stage, reforms are still
frail in Romania. But, provided that contracting authorities will
eventually succeed in taking advantage of the afore-cited implements and
with a proper guidance from a proficient legal advisor, investors have
now good reasons to forgo their reticence and involve more decisively in
the implementation of the public projects put out to tender by the
Romanian authorities.
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2015 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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