Romanians Accused by Anti-Corruption Prosecutor’s Office Win Railroad Tender for BGN 380 M

Consortium with no experience prevails over well-established global companies in tender for the rehabilitation of the Kostenets-Septemvri railroad
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A consortium of Bulgarian, Romanian and Spanish companies has won one of the largest public procurement tenders of the National Railway Infrastructure Company (NRIC) for the modernization of the Kostenets – September train track for BGN 379 million. The Bulgarian participant bears the markings of a classic shell company, the Spanish partner has no experience in railway construction, while the Romanian company, which has a modest experience, has been accused by the Romanian National Anticorruption Directorate (DNA) of theft of European Union (EU) funds from the rehabilitation of a railroad, a joint investigation by Bivol and the Romanian Center for Investigative Journalism “Rise Romania” reveals.

The public procurement tender for the rehabilitation of the 24.5 km section between the towns of Kostenets and Septemvri was announced in July 2017, then stopped and resumed twice, while in August 2018 the examination of the offers eventually started. The price offers were opened on November 21, as shown on the tender page on the NRIC website. The decision for the selection of a winning bidder was published on Monday, December 10.

The project is extremely complex with very specialized engineering equipment, experts in railway construction told Bivol. The section represents a 24.5 km two-track railroad with two train stations, three single-pipe tunnels with a length of 4.5 km, one underpass, three overpasses, 23 bridges and viaducts with a length of 2.23 km, 4 km of retaining walls, 48 waterways, 9.2 km of roads, 4.2 km of noise barriers, a pedestrian underpass, 42 intersections, as well as route-computer centralization at the Kostenets and Belovo train stations. Therefore, the requirements for the bidders are extremely strict. The deadline is 2021.

Having experience means elimination

The decision reveals that four of the six offers have been eliminated and only two price envelopes have been opened:

– The “Kostenets Septemvri Railway” Consortium with the participation of “Glavbolgarstoy” (GBS) and two Portuguese railway companies – Somafel and E.P.O.S. has offered BGN 410 million.

– The “Kostenets-Septemvri 2018” and “Trans Logistika” (Trans Logistics) joint venture in its capacity of leader and with partners “Contratas Iglesias” S.A. Spain and “Arcada Company” Romania has offered a price of BGN 379 million.

The “Kostenets-Septemvri 2018” joint venture with a leading participant “Trans Logistika” has received the maximum number of points for a technical proposal. Furthermore, its price offer is lower than that of GBS. Therefore, “Kostenets-Septemvri 2018” is the winning bidder with the maximum 100 points.

Major companies with definite experience in railway construction and major infrastructure projects such as the Greek Terna S.A., the Chinese China Communication Construction Company (in consortium with Trace Group), the Mexican Tradeco (in consortium with “Avtomagistrali Cherno More – Black Sea Highways) and the Italian Todini have been eliminated as candidates.

According to the committee’s decision, all of the experienced bidders have not been able to convey a technical proposal at the level of the consortium led by the unknown “Trans Logistika” – a company that has never dealt with railway, tunnel and bridge construction.

The leader – a shell company?

The leading company in the winning consortium has an address for contact in the northern city of Pleven. The owner and manager of “Trans Logistika” is Toni Petkov Todorov, while its activities involve construction design and geodetic surveys.

It is noteworthy that “Trans Logistika” has not won any public procurement and has no experience in railway construction. A reference for the insured persons (employees) in the National Social Security Institute (NSSI) shows that throughout 2017 the company had only one insured person. In January 2018, the number of insured persons suddenly rose to 48 and since March 2018 the company again pays pension and health insurance to just one person. The revenues of the company for 2017 are BGN 3.1 million and BGN 78 thousand in 2016.

It is unclear how the company will provide the cash flow for such a complex project for BGN hundreds of millions. Bivol did not receive a response to the questions about the funding, sent to the company’s email address by the time of the publication of this article. Furthermore, the company does not have its own domain and uses an ABB email address.

A connected parties check shows that “Trans Logistika” is indirectly linked to the “Railway Infrastructure Construction Company”, which is already working on the rehabilitation of another section of the same route.

The Romanian firm: rails, pastries and accusations of theft of EU funds

A check of the “Arcada Company” shows that the company is based in the eastern Romanian town of Galatz (Galați). The majority shareholders are Spiru Mantu (44%) and Mihai Huma (44%). They are not publicly known as wealthy businessmen, although the company has managed to win procurement for more than EUR 800 million over the period 2007-2017.

The largest project with the participation of “Arcada” is for EUR 600 million for the rehabilitation of a railroad in Western Romania, part of Pan-European Corridor No. IV. It has participated in the public tender in a consortium with the Greek “Aktor”. The project must be completed over the next four years and the trains reach a speed of 160 km / h. However, the other bidders have filed a complaint about the result in a Romanian Appellate Court.

The “Arcada Company” won this project in 2017 despite the fact that in October 2016, the DNA had filed charges against the company and its owners for abuse of EU funds.

According to the prosecutors, in 2011, “Arcada Company” S.A. had presented false documents to the Romanian Ministry of Transport in connection with the reconstruction of a railroad in the Vrancea area, which had been damaged by floods in 2005. The project was funded by the European Commission. In the documents, the firm has declared that it has planted 30,000 acacia trees to consolidate the terrain. In fact, no trees have been planted and the damage to the European budget amounted to EUR 138,600. The next court hearing on this case is scheduled for Tuesday, December 11.

It is quite peculiar that the public procurement contracts won by “Arcada” in the past include bread supplies for the Galatz prison and pastries for a psychiatry ward in the same town. In addition, the company has been involved in the reconstruction of a treatment plant and of a school. Some public contracts have been awarded without a tender, through a direct negotiation procedure with the local authorities.

The charge against the “Arcada Company”, however, is not grounds for elimination from the public procurement tender. According to Art 54 (1) of the Public Procurement Act, only a candidate or participant that has been convicted of corruption offenses, including those committed in another EU Member State or a third country, with an effective sentence is eliminated from participation in a procurement procedure.

The Spanish “Contratas Iglesias” is a real construction company, however, according to its online portfolio, it has never been involved in a single railway project. All projects that the company boasts are for the construction of roads and road junctions, as well as buildings. Such capacity in the railroad project is also needed for the construction of road connections. The offer does not provide for subcontracting, therefore all rehabilitation works on the train track, itself, must be carried out by the Romanian “Arcada” with its own resources.

The investigation is part of the project “Exposing fraud in EU-funded projects in Romania and Bulgaria” by Bivol and Rise Romania, funded by the European Commission’s IJ4EU Fund and the European Centre for Press and Media Freedom (ECPMF). Atanas Tchobanov of Bivol and Ana Poenariu of Rise Romania worked on this story.


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