The latest report of the European Court of Auditors published in 2010 analyses the effectiveness of EU investments in the railway infrastructure as well as the improvement of transport performance on Trans-European rail axes.
According to the report, over the past years, transport volumes in the European Union have increased significantly, with growth in freight transport volumes outstripping GDP growth between 1995 and 2007. This situation is expected to continue in the period up to 2020 with recent predictions suggesting that growth in freight transport will be borne mostly by road and sea transportation. What is worrying is that Europe’s railways stand to account for only a small part of the expected growth; indeed, its relative share of the transport market as a whole is predicted to fall. Previsions which, unfortunately, have turned out to be true since the publication of the report, but a major cause can be attributed to the economic recession, which has strongly affected Europe.
The European Court of Auditors has identified three major obstacles which hinder the development of a strong and competitive European railway transport sector. Thus, rail infrastructure is not well adapted to cater for trans-European services, the European rail network is made up of a patchwork of national rail networks and the third obstacle, rail ser-
vices in Europe have historically been provided within national markets only; consequently, a competitive market for trans-European services needs to emerge. We can say that the process of removing the last obstacle for the creation of the European Single Railway Area is already underway and Regulation 913/2010 concerning a European rail network for competitive freight also has its contribution.
A problem reviewed by the European Court of Auditors refers to exceeding the budget costs. In nearly all cases, these escalations arose for reasons linked to unforeseeable factors that came to light during the construction phase, such as unexpectedly difficult geographical conditions, environmental protection requirements, safety requirements and higher than expected bids from contractors. Cost information was available for 19 out of the 21 sections audited. 11 sections experienced cost escalations of up to 49 %, six sections experienced escalations between 50 % and 100 % and two sections experienced escalations of more than 100 %.
Of the sections reviewed, the Warsaw-Gdynia section (funded under Cohesion Policy) has seen the most significant cost escalation, a rise of 166 % from an estimate of EUR 475 Million in the project proposal in 2004 to EUR 1,265 Million according to latest estimates in November 2009. Projects that were subject to thorough and detailed preparation were less likely to experience escalations; for example, the Perpignan-Figueras which was completed more or less on time and on budget. In order to take account of the complicated nature of the projects and the risk that cost escalations may be experienced, some projects (for example, Brenner Base Tunnel) set aside contingencies, in order to mitigate the impact that such escalations could have on overall budgets.
The risk of project cost escalations can exacerbate concerns regarding low rates of return and therefore represent a disincentive for private sector investors.
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