Targets partly missed in the corporatisation of the Swedish Road Administration and Rail Administration
The state-owned companies Svevia and Infranord were formed to create better competition, greater productivity and efficiency, as well as lower prices in the civil engineering market. The audit of the Swedish National Audit Office (“the Swedish NAO”) shows that the purpose of the corporatisation has only been partially fulfilled.
It has been more than ten years since parts of the Swedish Road Administration and the Rail Administration were corporatised into state-owned Svevia AB and Infranord AB.
The Swedish NAO’s audit shows that the reform has partly achieved the intended effects. For example, the risk of cross-subsidisation has been eliminated. The companies have also coped without financial support from the state.
On the other hand, competition has not increased as expected, and prices in the civil engineering market have not declined. On the contrary, they have increased around twice as much as consumer prices.
“The companies’ productivity has shown slightly positive growth since they were formed, but they have had difficulty in achieving many of their financial targets. For example, Svevia has achieved its target for return on equity in seven out of 14 years, and Infranord in only three years out of 12,” comments Sherzod Yarmukhamedov, project leader for the audit.
Both Svevia and Infranord attribute this to the existence of unprofitable projects. Svevia does not evaluate its measures against unprofitable projects, and Infranord does not specify any concrete measures. There is thus no basis for assessing whether the companies are working effectively to achieve their financial targets.
The Government is ultimately responsible for ensuring that the Riksdag’s intentions with the corporatisation are fulfilled. However, the Government has not followed up on the corporatisation.
“The Government should systematically follow up on why the companies are having difficulty in achieving their financial targets. This should also include the companies’ measures to improve target fulfilment,” comments Deputy Auditor General Claudia Gardberg Morner.
One of the Riksdag’s main objectives for the corporatisation was to improve procurement expertise at the Swedish Transport Administration. The Swedish NAO assesses that the procurement expertise of Swedish Transport Administration has developed in some respects, but not sufficiently to bring about a notable increase in competition.
Recommendations in brief
Recommendations to the Government include performing systematic follow-up and evaluation of Svevia’s and Infranord’s measures to enable them to fulfil their financial targets.
Recommendations to the Swedish Transport Administration include continuing to develop the work on improving procurement expertise, and developing efforts to promote innovation in procurements with a view to boosting productivity in the civil engineering market.
See the report for the full recommendations.
Background: The formation of Svevia and Infranord
Just over ten years ago, the production units of the then Swedish Road Administration (Vägverket) and the Rail Administration (Banverket) were corporatised by means of the operations being transferred to two state-owned limited companies – Svevia and Infranord. The reasons included the fact that the operations were competing with private entities, while at the same time the Swedish Road Administration and the Rail Administration were both the client and the provider.
The Riksdag’s intention included creating better competition by improving the conditions for competitive neutrality and eliminating grounds for suspicions of cross-subsidisation. Furthermore, it was to increase the productivity and efficiency of Svevia’s and Infranord’s operations, which was in turn expected to lead to lower prices and better quality in the market. The Riksdag also hoped that corporatisation would contribute to the development of procurement expertise at what later became the Swedish Transport Administration.
Press contact: Olle Castelius, phone: +46 8-5171 40 04.
Presskontakt: Olle Castelius , telefon: 08-5171 42 06.
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