Auditors suspicious of irregularities in road reconstruction

Although third-best and one million KM more expensive than competitors, the state-owned construction company Sarajevoputevi still won a contract worth more than 5 million KM to reconstruct the main road from Otoka to Ilidža in 2005.

The lowest bidder was Strabag, an Austrian company that bid a little more than 4 million KM, exactly the amount the Canton of Sarajevro Ministry of Traffic and Communications budgeted for the job.

Two Bosnian companies. Asfaltgradnja of Visoko and GP Put of Sarajevo, were recommended above Sarajevoputevi by a tender commission that studied all the bids.

The commission was ignored. Sarajevoputevi bid was selected despite the fact that it was 25 percent above what officials had put into their budget. They had to find the additional funds from other budgets.

‘Even before this contract was signed, I said that I have 4 million in the budget, and a 5 million KM deal was made’ said Ljijana Sakić, the cantonal traffic minister.

State auditors told the Center for Investigative Reporting in Sarajevo (CIN) that the practice of government agencies inappropriately giving contracts to higher bidders, failing to provide proper bid specifications and adding annexes to significantly add to or modify work bid out is driving up costs and leading to poor construction.

They say many of the annexes are for work that should go through the full tender process but does not. Auditors suspect annexes are being widely abused and are used to direct more money to favored companies.

An 800,000 KM annex was added one month later to Sarajevoputevi’s contract to reconstruct Rustem-pašina street. Auditors say it should have been treated as a separate project and let out to bid. Then, while work in Rustem-pašina was at its peak, another annex was signed for another 300,000 KM project to build a turn-about in Ilidža. Auditors said that too was irregular and should have been a separate project.

The specifications in both annexes didn’t include basic information such as exactly what should be done and when.

The tender Sarajevoputevi won was signed by Besim Mehmedić for the Institute for Construction in the canton. He said he was aware of its shortcomings. Mehmedić’s agency had formed a tender commission that had recommended Strabag. Its second choice was Altgradnja with GP Put next. Sarajevoputevi was placed in fourth place. However, the Ministry of Traffic and Communications rejected the recommendations and selected the fourth-place finisher.

Mehmedić said this was unusual. Someone else seems to have done the job his office was supposed to do.

‘The contractor was picked in a way that the decision was published before I got documentation for review’ he said.

Sakić, who signed the order rejecting the tender commission’s recommendations, said she is just an administrator and the decision was made by Adem Zolj, head of the Cantonal Bureau of Roads.

Zolj claimed that the three companies selected over Sarajevoputevi had problems.

‘Strabag doesn’t have an asphalt plant, and their price was a dumping price and unrealistic’ he said. The Sakić letter disqualified a local asphalt plant Hidrogradnja owns that would have supplied the Austrian company.

Strabag refused to comment other than to say it is not unusual for them to lose bids to local companies in BiH.

Šuhreta Dizdar, director of legal affairs for Asfaltgradnja, said: ‘The Bureau, regardless of the fact we had a better price, rejected us and we consider ourselves damaged.’

Zolj said Asfaltgradnja was rejected because of bad references and a problem with poor quality reconstruction of Drinska Street. However, Asfaltgradnja continues to do a lot of work for the the Federation road agency. Asfaltgradnja would not comment on the bad references.

While GP Put was rated better than Sarajevoputevi by the tender commission which looked at references and quality, its bid was higher and thus rejected.

Illegal annexes

According to the law on procurement, contract annexes are used when there is additional or unforeseen work that stems from the original contract. But, in the case of Rustem-pašina street, auditors determined that the street was not mentioned in the original tender, and that a new tender for its reconstruction should have been issued. They claim that the law was broken.

‘This is neither additional, supplementary or unforeseen work’ said auditor Mirsada Janjoš of the Federal auditors office.

‘This is a completely new section and it should be viewed completely differently from the point of a public purchase’ said Janjoš. She said the cantonal Ministry of Traffic and Communications, as well as the cantonal Bureau of roads “relentlessly” tried to persuade her otherwise.

The catonal ministry agrees that Rustem-pašina was not in the original contract. However, in a response to an auditors report from 2005, officials laimed that ‘because of unforeseen circumstances, work on this street became necessary.’ They did not say what those unforeseen circumstances were or why they would matter.

While construction was still going on in Rustem-pašina street, Sarajevoputevi got another job through a new annex in May of 2006 for construction of a turn-about in Ilidža.

‘The turn-about is neither additional nor unforeseen work, but a completely new project’ said Janjoš.

In the end, Sarajevoputevi earned 6 million KM, more than 2 million KM above budget and 1 million KM above their own original offer.

Zolj dismisses the objections of the auditors saying that everything was done according to law. He said Rustem-pašina is actually a part of the main street.

Zolj said that the original documentation didn’t list street names and ‘Rustem-pašina and part of the main road from Otoka to Ilidža, represents a whole.’

Rustem-pašina street splits from the main road near Energoinvest on Stup and goes all the way to Ilidža municipality building. Only part of the road up to the bus stop was completed by Sarajevoputevi which considers the work done. None of these details are specified in any of the contracts or the annexes.

The rest of the road that goes through the center of Ilidža is in poor condition and is heavily patched.

‘It is laziness and carelessness in the complete attitude and work’ Sakić said.

Samir Salihbegović, manager of construction for Sarajevoputevi, tells a different story how Sarajevoputevi came to fix Rustem-pašina.

‘Rustem-pašina street was reconstructed with leftover funds from work on the Otoka-Ilidža part of the main road’ he said. He said the annex just formalized that.

However, the annex and contract clearly shows that Sarajevoputevi was actually paid an additional 800,000 KM. The three-page contract governing the work is short and dictates very little.

‘Quality and deadline are two parameters that frame a job’ says Ešref Gačanin, a director of IPSA consulting company. ‘Even a small contract which we make with international institutions is usually 50 to 100 pages long. Contract that we make here is usually three to 10 pages and probably doesn’t have all articles which are usual in international contracts.’

Exactly because contracts are not specific about important matters, auditors say they are easily to use to fix jobs for companies.

‘It is very difficult to prove, but no one can convince us in the opposite. They use annexes to the contract in order to get again those preferred by the requestor’ said Janjoš.

Nermin Pećanac, former prime minister in the Canton of Sarajevo, said annexes are dubious business.

‘You put a lower price on works, chose a bidder with the smallest price, and then under the annex of the contract you put additional works which makes it more expensive than other bids. That leaves room for manipulation and no one can convince me otherwise’ he said.

‘Totally true. Everything can be cooked up if there’s a will’ said Sakić.

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