Filenews 7 February 2025
The Audit Office and the Accounting Office of the State place the entire responsibility for the termination of the Pafos-Polis road contract on the contractor.
In fact, the Audit Office warned the Department of Public Works from 20.12.2023 that the contractor intended to terminate the contract.
Otherwise, the Audit Office is also burning the Department of Public Works for the fact that the project was delayed from the beginning, while it is also nailing the Department on the issue of guarantees, leaving shadows hanging.
Spikes are also left for the Greek Justice, which, without having jurisdiction, prohibited the payment of guarantees to the Republic of Cyprus.
In particular, the Audit Office notes in a memorandum that "the project presented serious delays from the outset, since the financial progress of the work carried out amounted to less than 4% at the end of 47.6% of the contractual time, i.e. 20 out of the 42 months that the works would theoretically last.
In the memorandum, which was submitted before the parliamentary Audit Committee, it is added that based on the above pace, the Audit Office on 20.12.2023 pointed out to the Department of Public Works strong concern and concern regarding the delay and adverse development in the progress of the implementation of the project. He also stressed the need to resolve all the problems encountered immediately.
Therefore, it is added in the memorandum, it is reasonable to understand that the works never showed substantial progress and it was considered extremely doubtful whether the project would be completed even by 1.5.2025 date on which the contractor had arbitrarily set a new completion date in the revised work schedule submitted by him on 26.9.2023.
Moreover, the Treasury in its memorandum, although referring generally to civil engineering contracts, observes that: "The termination of a contract by a contracting authority arises mainly from the inability of the contractor to complete the contract within the framework of public procurement legislation or also because the contractor (contractor) is in financial difficulty and is unable to finance the works.
Furthermore, the view is expressed that no shadows should be left on the contracting authorities that terminated contracts due to the inability of the contractor to deliver what he promised in his tender.
However, the Department of Public Works also hears them indirectly from the Audit Office, taking into account that in a brief history cited by the Auditor General the following are also mentioned:
"The Department of Public Works in May 2023 gave verbal assurances (to the Audit Office) that difficulties had arisen during the execution of the contract, including a reference that third parties were creating many problems for the project and the contractor in question, which (difficulties) seemed to have been overcome."
In the same history, it is mentioned that the contractor in a letter to the Department of Public Works dated 27.11.2023 had alleged that there was a violation of various contractual obligations on the part of the Department of Public Works. When the Audit Office became aware of the content of the contractor's letter, it indicated to Public Works (20.12.2023) that the relevant reports indicated the contractor's intention to terminate the contract.
Subsequently, the Department of Public Works refuted the claims of the contractor and in a letter (5.2.2024) recorded a series of actions of the Department through which it attempted to help promote the project in order to avoid delays.
The memorandum refers to statements by the Director of Public Works (12.4.2024) based on which until then works had been carried out at 30-35% of the total project. In the same memorandum, it is recorded that from the works until January 2024, the statements do not seem to be confirmed since the implementation rate of the project was less than 18%.
The memorandum states that by the time the contract was terminated, the contractor had been paid €14.3 million. which with price fluctuations amounts to a total of approximately €16 million.
On 11.11.2024 the Department of Public Works terminated the contract with the contractor.
"Unfortunately, the concerns of our Office in relation to the serious delays in the progress of the project, as repeatedly expressed in the Department of Public Works, the CSCP and in meetings of parliamentary committees (in which the issue in question was discussed) were confirmed with the termination of the contract on 11.11.2024", adds the Audit Office.
Commenting on the contractor's claims, it is stated that they were examined by an ad-hoc committee which concluded that no claim was affected by the project. The committee also concluded that the time delays could be covered by the uninterrupted execution of works, at a satisfactory pace, by the contractor. As of April 2024, the pace of the project had been drastically reduced without justification.
The Central Committee for Changes and Claims, adopting the recommendation of the Ad-hoc committee, ended up rejecting all the contractor's requests.
Guarantee grey area
Regarding the issue of guarantees, the Audit Office's memorandum notes that "the fact that the letters for seizure were served one day after the termination of the contract and not on the same day, raises reasonable questions for the Audit Office as this gave the Contractor the right to secure the issuance of judicial measures prohibiting the liquidation of the guarantees.
It is noted that the memorandum of the Audit Office also leaves spikes against the Greek Justice.
Specifically, the following are mentioned:
The wording of the letters of guarantee states that they will be governed and interpreted in accordance with and in accordance with the laws of the Republic of Cyprus and will fall under the jurisdiction of the Cypriot Courts. Therefore, it is of great concern to our Office that Greek courts have ruled that they can take decisions on guarantees that do not fall within their jurisdiction.
We consider that this court decision will set a negative precedent for guarantees submitted in the context of public procurement and issued by banking institutions in Greece.
