Our View: Slapdash €300m project costing taxpayer dearly

There is no doubt that the tenders’ procedure for the Vasiliko LNG terminal was a catalogue of errors that violated every notion of rational decision-making. It suffices to say that the Republic’s biggest ever infrastructure project was awarded without competitive bidding to a consortium with no experience in building LNG terminals. It is astonishing that for a €50,000 purchase by the state there is competitive bidding, but for a €500 million project the authorities decided it was unnecessary.

The scandalous shoddiness by the authorities did not end there. It appears that the state agencies that were responsible for the project – the natural gas public company Defa and its subsidiary, the natural gas infrastructure company Etyfa that was in charge of the execution and dealt with the contractor – performed their roles so badly, the state is now in danger of being lumbered with a huge additional bill from the contractor. The head of the consortium, China Petroleum Pipeline Engineering Company (CPP) has submitted a statement of claim to the arbitration court in London, seeking an additional €200m in costs.

Even if this claim is halved by the court, it would still be a significant additional cost to the Republic, which has already paid the CPP €240m plus an extra €25m for the increased cost of materials. What is astonishing is that there has been no penalty for the huge delay in delivering the project, the completion date for which was September 2022. The latest date given is July 2024, but even this deadline is unlikely to be met. Was the absence of penalties for delays, which the auditor-general mentioned in his report, an omission by Defa when preparing the contract?

In a statement, CPP Metron Consortium (CMC) on Monday placed the blame for the delays squarely on Etyfa, which failed to issue a notice to proceed on time and had not appointed a supervising engineer until August 2020, months after the project’s commencement date. These arguments are an indication of what will be used in the court of arbitration. It also said that Etyfa “changed the scope of the project and has consistently interfered with essential design and procurement activities.” The statement also cited delays in payments.

It is difficult to know how much of this is accurate and whether CMC has a legitimate claim, but things are not looking good for the government, which appears to have been let down badly by the people in charge at Defa and Etyfa, who do not seem to have done a very good job of protecting the interests of the taxpayer. In this respect there is consistency as they were following the example set by the president who, against all reason, sanctioned the deal with CMC in the first place. And the price for this slapdash approach to a €300m project keeps rising.