Luxembourg, 15 July 2013
“Significant cost differences between EU-cofinanced road projects”
Over optimistic traffic forecasts lead to more expensive road projects
The EU has allocated around € 65 billion from the European Regional Development Fund (ERDF) and Cohesion Fund for co-financing the construction and renovation of roads from 2000 to 2013. The ECA audited 24 ERDF and Cohesion Fund road investment projects in Germany, Greece, Poland and Spain to assess whether they achieved their objectives at a reasonable cost. The total value of audited projects exceeded € 3 billion.
One very interesting finding of the Court was that there were significant differences between the EU cofinanced road projects.
The Court calculated the total, total construction and roadway construction costs per 1000 m2 of road surface. The projects audited in Germany had the lowest cost per 1000 m2 in all three categories (average total costs 287 043 € in Germany, 496 208 € in Spain; see Figure 2 of the report). There is no evidence that this can be explained by labour costs.
All the road projects examined by the Auditors delivered savings in travel-time and improved road safety. But they found that insufficient attention was paid to ensuring cost-effectiveness. Most of the audited projects were affected by inaccurate traffic forecasts. The result was that the type of road chosen was often not best suited to the traffic it carried. Motorways were preferred where express roads could have solved the traffic problems. 14 out of 19 projects recorded less traffic-use than expected. Compared to initial plans, the average cost increase was 23 %. Time overruns averaged 9 months or 41 % when compared to the deadlines agreed at the outset.
“Bigger is not always better,” said Harald Wögerbauer, the ECA member responsible for the report.
“Motorways should only be financed with EU money where there is a clear traffic need. Getting the right information to the planners and the engineers will help them keep down the cost of building roads.”
The Auditors make three main recommendations: EU co-financing of road projects should depend on clear objectives with targets for travel-time, gains in road safety, capacity improvements and econmomic effects; payments should be linked to the use of cost effective road buildling techniques in line with best practice; and Member States should ensure international competition on construction projects and focus their procurement systems on delivering the most economical offers.
Notes to the editors:
European Court of Auditors (ECA) special reports are published throughout the year, presenting the results of selected audits of specific EU budgetary areas or management topics.
This special report (SR 05/2013) is entitled “Are EU Cohesion Policy funds well spent on roads?” The ECA assessed whether the EU Cohesion Policy funds’ road infrastructure projects have achieved their objectives at a reasonable cost? The audit involved co-financed road projects in Germany (DE), Greece (EL),
Poland (PL) and Spain (ES). These four Member States have the highest allocations of Cohesion Policy funding for roads in the period 2000 – 2013, representing approximately 62 % of all EU road co-financing. The audit covered motorways (10 projects), express roads (10 projects) and ordinary two-lane trunk roads (4 projects).
The audit found that all the projects audited added capacity and quality to the road networks and resulted in travelling time savings and improved road safety. However, the economic development objectives were not measurable and there is no information available on the impact of the projects on the local or national economy. The actual economic viability calculated using a cost/benefit ratio based on the actual cost and use was significantly lower for half of the projects when compared to the assumptions taken in the planning phase with significantly lower costs and / or higher traffic.
The ECA found that insufficient attention was paid to ensuring cost-effectiveness of the projects: (a) Most of the audited projects were affected by inaccurate traffic forecasts. Only four out of 19 projects for which sufficient information was available carried volumes of traffic which were in line with forecasts. (b) The type of road chosen was not best suited to the traffic it carried: motorways, costing much more than express roads (the average total cost per km is around 11 million euro for motorways and 6,2 million euro, i.e. 43 % cheaper, for express roads), were the preferred option of construction, even for sections where express roads could have solved the traffic needs. (c) During the project implementation the projects audited became more expensive and were affected by delays as the average increase to the original contract price was 23 % and time overruns averaged to 9 months or 41 % of the planned time.
Given the results of the audit, the ECA recommends:
(a) the Commission should analyse the differences in roadway construction costs between the Member States in order to identify the causes of significant price differences thereof and assure that the best practices are applied in future;
(b) the EU co-financing of road projects should be made subject to the existence of clear objectives that are accompanied by indicators for travel time savings, gains in road safety, capacity improvements and effects on
the economy. The co-financing should depend upon the use of reasonable and cost effective technical solutions that are in line with the best practices identified and the steps taken by the Member States to ensure international competition on national and/or regional construction markets and focusing procurement systems on delivering the most economical offers;
(c) the Commission should promote the exchange of best practices between national road administrations concerning optimum technical solutions for road projects based upon reliable traffic forecasts; and
(d) the Commission should consider the establishment of a European Union wide unit cost information database for engineers preparing estimates for new projects, in order to help beneficiaries to lower the procurement prices.
Press Officer European Court of Auditors
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