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Considerable cost increases for operation and maintenance of railways

The State pays far more for operation and maintenance of railways than is initially agreed, shows a Swedish National Audit Office audit. Worst affected is winter maintenance, where the costs are almost doubled.

Workers at railway yard.

Photo: Hasse Bengtsson

The Swedish Transport Administration is responsible for the operation and maintenance of 14,100 kilometres of public railways.

The cost of the basic maintenance contracts is about SEK 3.7 billion per year. The Swedish NAO’s audit shows that this is considerably more than the Transport Administration initially procured: Of 31 contracts examined, only in three cases were the costs the same, or lower, than the original tender.

– Our overall conclusion is that the Swedish Transport Administration’s procurements are not effective, and that consequently the State receives less maintenance for the money than would otherwise have been possible, says Auditor General Helena Lindberg.

The average cost increase is 74 per cent, but there are great variations. Winter measures constitute about one tenth of the basic maintenance contract. The average cost increase for them was 91 per cent.

There are several explanations. The audit shows for example that the cost deviations are greatest when:

  • certain of the Transport Administration’s regions are responsible for the procurement
  • the Transport Administration’s project manager is replaced during the contract period
  • certain contractors are awarded the contracts.

As regards Winter maintenance, the cost deviations are greater when the same contractor is responsible for a contract area for two consecutive contract periods. This may be an indication of “unbalanced bidding”, when the contractor uses different pricing strategies to maximise compensation in relation to the amount of work done.

– We have clear indications of unbalanced bidding. However, deficiencies in the financial follow-up mean that it is impossible to determine whether, or to what extent, the cost increases are due to this, says Sherzod Yarmukhamedov, project leader for the audit.

The audit also shows that the Transport Administration lacks the basic prerequisites to change the current situation. For example, the Transport Administration’s IT systems do not meet the requirements that can be made of an efficient railway asset register.

Thus the Transport Administration lacks a system that can provide an aggregated picture of the condition of the facility, including historical condition and conceivable future condition. The Transport Administration does not either systematically gather information about what maintenance work has been purchased within a contract.

– This complicates the Transport Administration’s work in several ways. Among other things, it is not possible to use inspection results to predict wear and tear on facilities and what maintenance will be needed, says Sherzod Yarmukhamedov.

Recommendations in brief

The Swedish NAO recommends that the Government instruct the Transport Administration to analyse the scope and consequences of unbalanced bidding.

It is recommended that the Transport Administration:

  • set up an IT system for information about facilities that enables more complete collection of information about the current and future condition of the facility
  • develop a procedure for systematic reporting of purchased quantities and their costs within a contract
  • improve analysis in order to better identify future maintenance needs and plan maintenance measures.

See the summary for full recommendations.

Press contact: Olle Castelius, phone: +46 8-5171 40 04.

Presskontakt: , telefon: 08-5171 42 06.

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Updated: 29 October 2020

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