Rail projects probed over big budgets

State-owned Hellenic Railways (OSE) is proving a significant money drain for the public investment program, with project budgets, including consultant and planner fees, habitually ballooning after the signing of contracts and a series of questionable supplementary contracts that have come under the scrutiny of European Union officials. Project study budgets are especially prone to inflation. A European Union report on railway projects co-financed through the EU’s Second Community Support Framework (CSFII) program, published in early 2003, shows that, during the duration of CSFII (1994-1999), there were problems with 108 project studies, whose total budget exceeded 32 million euros. These problems concerned either irregularities in the tendering process or gross budget inflation – with the latter ranging between 100 and 800 percent with the exception of one extreme case, where the difference between the original amount budgeted for the study and the final amount paid was 7,445 percent, that is, more than 75 times over. That report found that the mismanagement of the investment program on railways incurred extra costs of 905 million euros. It was only a few months ago that the Ministry of Environment and Public Works sent a bill to Parliament which included measures putting a cap on project study costs. The bill was drafted at the request, and under the supervision, of the European Commission. Just days before the draft bill passed Parliament, OSE’s management somewhat hastily called a tender for project studies to improve and extend the rail network in western Greece. These studies were budgeted at 150 million. Contrary to approved practice, OSE called simultaneously for studies on the new routes and on the required infrastructure projects, when it is common knowledge that the latter cannot be conducted before the former’s completion. OSE has a history of commissioning studies that are proven worthless and are recommissioned, enriching project planners. Because of such faulty studies, projects such as the Kallidromio tunnel in central Greece have been abandoned midway, in this case because the EU cut off funds.