Slovak cabinet approves controversial “Bratislava bypass” PPP contract

Slovak cabinet approves controversial “Bratislava bypass” PPP contract
The Bratislava bypass will relieve congestion in the Slovak capital
By bne IntelliNews May 11, 2016

The Slovak government on May 11 gave final approval for the signing of a Public Private Partnership contract to build the €1.9bn motorway project commonly referred to as the “Bratislava bypass,” but will impose new conditions of transparency.

The previous Smer government led by incumbent Prime Minister Robert Fico in February awarded a contract to build the D4 motorway around the Slovak capital via a tender. But former opposition lawmakers – some now in the new coalition government led by Smer – had pushed for a state-run project, saying the PPP project was overpriced.

However, the new transport minister from the Siet party - which ran in the March election on an anti-corruption platform - has pushed to have the project approved with new conditions he says will ensure transparency. The ministry has until May 13 to sign the concession contract or face the possibility that it may need to run a new public procurement process.

It appears Bratislava may have been sought some last minute leverage ahead of the approval, to push those concerns over which companies will be allowed to work on the project. On May 4, the cabinet approved legislative changes that opened the way for EU funds to be used to co-finance the project; an apparent hint that the PPP contract could be scrapped.

In its manifesto approved on April 26, Fico’s new coalition government pledged to fight corruption, including by cracking down on shell companies in the wake of the Panama Papers. Transport, Construction and Regional Development Minister Roman Brecely said that an expert commission he had appointed to review Cintra’s contract had uncovered no concerns.

“We’ve managed to put a provision on [the prohibition of] ‘letterbox’ companies in the contract. We’d like all the firms participating in this public contract to have unambiguous ownership structures,” Brecely said, according to TASR.

Among other conditions designed to increase transparency and limit the scope for corruption, the PPP project sets payment limits for suppliers at just over €15mn for construction, and just above €1.5mn for maintenance. It also sets out rules regarding payments to subcontractors, requiring them to be listed in the state's Central Register of Contractors.

Questions over the connections between the previous Smer government and road contractors were thrown up by a scandal last year. Bratislava's bail out of creditors of insolvent construction company Vahostav SK flagged up links between the party and a major party benefactor reportedly behind both the collapsed Vahostav and several of the subcontractors owed money.

The Zero Bypass consortium led by Cintra has pledged to build the road within 52 months after breaking ground. Without extra traffic lanes and routes circumventing the city, transport experts say the Slovak capital would be in permanent gridlock by 2020.

The consortium will be paid annual instalments of €56.72mn over the 30 years it will operate the D4, after which the road will be transferred to the Slovak state. Adjusting for inflation, the Bratislava bypass should cost around €1.9bn.