Audit office defends its position on LNG debacle, says it had major doubts

The audit office on Sunday hit back at reports that it was somehow culpable in the growing concern over delays to the construction of the LNG terminal in Vasiliko.

The written statement had a dig in particular at Politis, which it said accused the auditor-general of attending the meeting at the presidential palace on Thursday relating to the issue and “skimming over the contract”.

Defending the audit office, the statement said that Defa had announced its decision to award the tender to the winning bidder on August 23, 2019.

“Our office, as soon as it was informed about the decision and received the data of the ‘confidential’ evaluation, pointed out in a number of letters that firstly, there had been no real competition and that the terms of the tender had led to a single bidder,” the statement said.

“The supposedly successful consortium, which was also the only ‘valid’ bidder, in practice did not collect the set minimum score for its technical ability, but with mathematical errors and irregularities, its bid was judged acceptable by Defa.”

The statement also said that one of the main companies in the consortium, had a conviction against it, which was not identified by Defa.

“However, when we indicated this, Defa decided that it allegedly had the right to proceed with the award of the tender to the other members of the consortium, while the decision to exclude the company should have led to the exclusion of the entire consortium,” the statement said.

Also, it said, a company that had been nominated by the consortium as the provider of expertise and experience in the field of operation and maintenance of the infrastructure of the Fsru terminal, presented projects to show its own experience, which were not really its own.

“Despite all the above, the government decided to proceed, and on December 13, 2019, Defa signed the agreement with the consortium.”

While the terms of the contract provided for a commencement order within 90 days, and while urgency was raised as a reason for not cancelling and announcing a new tender due to the above issues, the commencement finally took place on September 18, 2020 with a duration for the project of 24 months.

“Following our initial observations which, as a result, proved to be correct, as well as the concern expressed for delays in the progress of the project during the meetings of the project management coordination committee, but also for low financial input and physical progress of the works, on January 25, 2022, our office requested in writing from Defa, information on the progress of the project and information on any claims submitted by the consortium,” the statement added.

The audit office instead of responding to the letter, asked the audit office to meet with the minister of energy in the presence of the president of Defa, which took place on February 2, 2022.

The meeting was general and a “theoretical exchange of views”, as well as an explanation of the process that had to be followed quickly by Defa and the energy ministry to examine and resolve the issues, the statement added.

Last Thursday, the audit office said it was invited to the meeting at the palace and handed a brief note with general information on the consortium’s requirements, and on Defa’s discussions with the consortium with the outline of a preliminary agreement.

The statement said that during the meeting, at the presidential palace, the auditor-general, Odysseas Michaelides, explained that his office would take a position on the issue when it received and studied the requested information.

According to the audit office, Michaelides expressed the position of principle that any claims of public contractors are evaluated on the basis of the provisions and the law of contracts.

The same should be done in this case, especially due to the importance of the project and the amount of money involved.

If the consortium does not agree, the contract provides for arbitration to resolve the dispute.

“In no case can the audit office agree to the payment of any amount without justifying itself with the sole argument that, if the amount is not given, the contractor will leave the project and there will be chaos,” the statemen said.

“In our view, no state can be blackmailed or appear to be acting under threat.”

“In any case, the always documented positions of the audit office will be submitted both to the central committee for changes and requirements in which it participates as an observer, if a relevant report / suggestion is submitted, and to Defa itself, and the ministry when we receive the full details we have requested,” the statement said.

“We note, however, that 16 months after the start of the project, which has a total duration of 24 months, it is still in the study stage and not the slightest work has been done on the site.”