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Romania: Commission Investigating How Bechtel Won Contract

by Phelim McAleerFinancial Times
February 5th, 2004

The European Commission is investigating the award - without a tender - of a $2.5bn (¤2bn, £1.4bn) Romanian motorway contract to the politically well-connected US company Bechtel.

Gnther Verheugen, EU enlargement commissioner, is examining the contract for a 450km road that would be Romania's key transport link with central Europe. He is responding to complaints by Bucharest-based EU diplomats who claim the process was not transparent.

A senior European Commission official in Bucharest said: "The whole thing stinks - but it particularly stinks because none of the international financial institutions will touch it with a barge pole because there was no public procurement process."

EU diplomats are also angry that the Bechtel motorway would be built before another Bucharest-Budapest motorway planned jointly by Romania and the EU. They fear that either the EU-sponsored route will be delayed or the cash-starved Romanian government will waste money building two motorways to the west at the same time.

Brussels has warned that a lack of transparency and the corruption that often follows is one of the biggest stumbling blocks to Romania's proposed EU accession in 2007.

According to the transport ministry, Bechtel was awarded the contract after the US and Romanian governments decided the road was a priority. The ministry added that Romania remained committed to the EU-sponsored motorway as well, saying the country would have enough traffic in future for both routes.

A senior EU diplomat in Bucharest said the deal showed awarding contracts in Romania was a political rather than a commercial process. The diplomat warned that the case threatened Romania's chances of being awarded a market economy status by the EU, a key test before it is admitted to the union.

A spokesman for the US Embassy, which has loudly campaigned for commercial transparency in Romania, said the US had recommended the government issue a tender for the project. But it said negotiated sole source contracts were common commercial practice, were often faster than tenders and were in keeping with Romanian law.

The planned project financing has alarmed EU officials. The US Eximbank, the government-sponsored trade bank, is lending $800m for the $2.5bn scheme.

The transport ministry said it was negotiating with the International Monetary Fund and the European Investment Bank, the EU's infrastructure bank, about raising other finance.

But the EIB said it did not finance contracts awarded without public tenders and the IMF said it did not finance projects.

This means Romania would almost certainly have to raise the money from government resources at a time when it is fighting hard to balance its budget and to finance EU accession.

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