A particularly interesting incident occurred earlier this month at the building of the District Organisation of Nicosia and the Department of Development Licensing. These are organisations housed in the former Water Supply building on Athalassa Avenue. The Audit Office considers that the entire process was marked by a lack of proper planning, undocumented decisions, and violations of fundamental principles of public procurement. Although the project was completed on time, the conditions under which it was carried out raise serious concerns about transparency and good governance.
As stated by the Auditor General in a special report made public, the original plan foresaw that the housing needs would be met through the former SYL building (on Athalassa Avenue). For this purpose, the building was undergoing renovation. Suddenly (it is unclear exactly when the decision was made), the original plan was altered and a decision was made to construct an additional floor and a storage area.
At that point, the Contracting Authority (CA) – former SYL – invoked urgent need and proceeded to direct negotiation without publication, directly with the contractor who was carrying out the renovation of the building. Under time pressure, the agreement was “sealed” at the amount of €1.54 million – much closer to the contractor’s demands than to the estimated value – with a delivery timeframe of 20 days. Due to the extraordinary pace of implementation, our Service carried out an on-site inspection. It was found that although the contract for the construction of the floor was signed on 4.6.2024, the relevant works were almost completed one day later, on 5.6.2024.
In his memo, the Auditor states: “Although we note that the project was completed within deadlines, something not so common compared to other public projects, we must point out that, due to poor planning, the CA was forced to operate under very tight timeframes, resulting in actions that were neither appropriate nor lawful.”
Actions taken
- Article 44(d) was invoked unjustifiably, as the need for housing was foreseeable for the state, given that the start date of the EOA was known two years in advance.
- The project was allowed to proceed before the prescribed procedures were followed, before the contract was signed, and without a prior cost-benefit analysis to assess alternative options.
- There was concealment of factual information during approvals, as it was not disclosed that the project was already underway.
- The contractor had pre-emptively counted on being awarded the project (having apparently received relevant assurances), and thus began implementing the work prior to the signing of the contract.
- The negotiation between the CA and the contractor was conducted under very unfavourable conditions for the CA and very favourable ones for the contractor.
- Competitive prices were not secured – the cost of the project exceeded the estimated value by €200,000.
- An additional €100,000 was paid as an incentive to expedite the project, even though at the time of signing the contract, the project was nearly completed.
On-site inspections
The Service carried out visits to the project site on 5.6.2024 and 12.6.2024 to investigate the matter. During the visit on 5.6.2024, it was observed that, although the Contract for Project No. 46/2024 had been signed on 4.6.2024, by 5.6.2024 (the date of the on-site inspection), the works were almost completed.
Based on these visits and the data/documents submitted to the Service during the audit, the following findings emerged:
1.3.1. Unrealistic contractual duration of project execution
A contractual duration of just 20 days was set for the implementation of a project involving the construction of an additional floor and storage area, which did not reflect the actual circumstances, as the project was essentially almost completed at the time of contract signing. Furthermore, it was not feasible for works worth €1,544,455 to be carried out within 20 days. Based on the data submitted and the on-site situation, it can be readily concluded that the works were planned, designed, and commenced well before the signing of the contract – an action incompatible with the provisions of relevant public procurement legislation.
1.3.2. Execution of works before contract signing
It was found that the design and construction works for the erection of the first floor and storage area had begun well before the necessary approvals were secured from the Board of the former SYL and before the signing of the relevant Contract. Specifically, while the proposal to resort to the negotiation procedure dated 15.5.2024 was tabled at the Board meeting on 3.6.2024 and the Contract with the Contractor was signed on 4.6.2024, the project was already at a very advanced stage of implementation. This indicates that construction works had started much earlier, without a signed contract.
Therefore, the majority of construction work was carried out by the Contractor before the necessary approvals were secured from the Board of the former SYL and before the signing of the Contract with the Contractor. Our Service cannot accept the claim made by the CA that no commitment was made to the Contractor regarding the commencement or preparation for executing the construction project of the first floor and storage area, and that the Contractor proceeded with the work at his own sole risk. Furthermore, the relevant Laws and Regulations concerning Roads and Buildings (CAP. 96, Article 3 and its subsequent amendments) explicitly prohibit the commencement or tolerance of any works without a Permit from the competent Authority, as well as the use of the Project before a Certificate of Approval has been issued by the competent Authority, even if a relevant Permit has been granted [CAP. 96, Article 10(1)].
Also read: Wedding and baptism envelopes under scrutiny by banks
