The Rruga e Arbrit, Rama’s Perfect Tender

A few days ago, the Rama government announced that the public procurement procedure for the Rruga e Arbrit project – the public symbol of the “1 Billion Euro Plan” – had finally come to an end, and that the company that would realize the project had been selected. Now the government will start the negotiation of the contract with the selected company, a company that is destined to remain a secret, following the regular justifications of the protection of “commercial interests.”

In this competition, perhaps in terms of size the second largest ever held in Albania, only three companies took part, as many as necessary to keep up the appearances of a legal and regular process.

Two of the “competitors” made it easy for the winner, handing in incomplete offers, allowing them to be disqualified and hand the victory to the only serious bidder, Gjoka Konstruksion sha.

Everyone in the sector of public construction works in Albania knew from the beginning that the aim of the government was to entrust the construction of the highway to Gjoka. This was also the reason the government gave the company bonus points for making an “unrequested offer,” even though the offer was anything but unrequested; the government had already reserved the public money to cover it.

But in order to give the impression of a serious investment process, they held a public tender, even though the eventual outcome was known to all. The participating companies all made sure to present incomplete applications, to make sure that even if Gjoka had made a mistake, the other two companies wouldn’t win by accident.

In fact, to win such a project requires a large financial guarantee, which most probably was provided by the Turkish partner with whom Gjoka made the offer, because the balance sheet of Gjoka seems insufficient to confront the construction of such a project valued at €250 million, more than 30 times the company’s income over the last 3 years.

From what has been made through the declarations of several government representatives, €60 million of the total costs of €250 million will be paid by the state, while €190 million will be financed by the construction company.

In exchange for taking on itself the majority of the road construction costs, the company will receive 50% of the toll that will be levied on the use of the highway, which will be about €4 per car. As we have said before, these numbers make no economic sense and would bring certain bankruptcy upon the construction company.

The only logical explanation for this curious enterprise is that the construction costs have been deliberately inflated, and that the actual construction costs are much closer to the sum paid by the Albanian government.

The government financing of the project will only start in the second year, so the company will probably drag the construction work along during the first year (financed by itself), waiting to start the real work once the government money starts flowing.

To postpone the construction work for a year they’ll only have to find some issues with the expropriation of this or that piece of land, or some unexpected, reasonable technical difficulty.

Of course these are merely assumption based on the little information made available by the government, because the details of the public–private partnership (PPP) will privately negotiated between the government and the company. Judging from the previous PPP contracts, it will most probably be classified as secret.

Also it should be clear that if the PPP contract were to follow the law, the payments of the government could only start after the work had been finished. The law on concessions and PPP dictate that this construction can only be used if there is a transfer of the financing risk from the state to the private company, but if the payments of the state are made before the official transfer of the road into the hands of the state, this means that the state is the one carrying the risk, and not the company.

And so a season of fake “unrequested offers” has started, which presage fake competitions, leading necessarily to direct negotiations about “secret” state contracts, which allow a select group of private companies to appropriate a large amount of the public budget for many years to come, by constructing infrastructural projects with high costs and low yields.

A side effect of this policy – and perhaps its main reason – is that it facilitates money laundering practices through cash payments to subcontractors.

And of course, when in the future there will be a budget deficit and the state will have to choose between delaying payments to concession holders and further decreasing public services, most certainly the government will choose its friendly neighbors, the oligarchs, over the people of Albania.