With a very long announcement, with a lot of “historical nature” data, the Audit Office responded to a report by “P” last Saturday, which concerned what was stored at the Presidential Palace, at the meeting for the import of liquefied natural gas. However, the auditor general avoids giving clear answers to the substance of the matter, which concerns a contract with a Chinese company, which he, as he said at the meeting, read “up and down”.
The essence is simple. Either we pay € 25 million, in addition to the initial agreement for a cost of € 260 million, and we receive the project in July 2023, or we do not pay it and enter a court marathon to claim compensation for delays, which can not exceed € 45 million, with multiple costs from expected revenue loss?
How did the difference come about?
The company that undertook to build the project, at some point claimed another € 100 million, in addition to what was initially agreed, citing various reasons, which were publicly analyzed (pandemic, cost of materials, delays not due to themselves, etc.) . Marathon consultations followed and after a political intervention of the President of the Republic, towards China and the demand of € 100 million, it was reduced to € 25 million.
As it was said at the recent meeting under the President of the Republic, this development is certainly unpleasant, but it is not something that rarely happens in projects of similar size or even in smaller ones.
“Up and down”
At the meeting at the Presidential Palace, an answer was sought to the question of whether such a compromise is legal.
The answer given was a resounding yes.
This was said by all five lawyers present (President of the Republic, Attorney General, two prosecutors of the Legal Service and George Pamporidis as legal advisor of DEFA and representative of a British law firm that is the advisor of DEFA for this project), as well as general accountant who was also present. The logic of the compromise, in such a case, is explicitly provided in the contract.
Only the auditor general Odysseas Michailidis spoke about illegality, who had admitted from the beginning that he had read the contract “po up-po over”.
It is indicative that Mr. Michailidis read a specific report of the massive contract, which he repeats in his announcement, without knowing that there are clarifications that subvert what he thought were valid and which he repeats to Tweeter talking about illegality.
The public interest
A key point in the conciliation process with the Chinese company is the service of the public interest and whether it is served. Again, all participants in the meeting, except for Odysseas Michailidis, agreed that the compromise serves the public interest for a number of reasons:
Let Bullet} In case we go to Arbitration, the result is unpredictable. Even if we win everywhere, this in 6-7 years will be of minimal importance.
The cost of the compromise (€ 25 million) is minimal in relation to the benefit from the fast delivery of the project as possible, as, as it was said at the meeting, revenues of € 1.6 billion are foreseen in a year, when the project is fully completed functional.
The delay, which will occur if the Auditor General adopts what he says, will lead to losses of millions, which have been spent so far by the state, while the subsidy of tens of millions of euros from the EU will be lost.
There will be huge revenue losses from the non-operation of the project.
Huge costs will arise from the continuing dissatisfaction with environmental parameters that we have to meet.
If we decide to go to a new international tender, no one can guarantee that we will find bidders at a lower cost. On the contrary, it is estimated that, at current international prices, such an attempt would be suicidal. {Bullet}
It would not be an exaggeration to assume that it would be a “scandal” to adopt the position of Auditor General, to go into conflict with the company and refer the project to the Greek calendars, despite the fact that the Republic of Cyprus is in dire need of its non-implementation will mean multifaceted costs, which can not be calculated today.
The “rent” G. Pamporidis
Information from “P” states that during the meeting at the Presidential Palace, a story recorded by George Pamporidis was recorded. As he said, when he was building his house, he had signed contracts and was completely safe with everything. However, shortly before entering the final phase of receiving the project, the contractor asked him for some extra money to deliver the project to him, citing various issues that arose. “I gave it to him,” said George Pamporidis, “to pick up my house. “You, Odysseus, what would you do in such a case, would you stay in the rent to claim your right indefinitely”? There was no answer.
The story of Odysseus
The Auditor General, on Twitter, last Saturday, did not avoid referring to irrelevant cases, in order to respond to the post of “P”. He even recalled an article in the newspaper Alithia, in 2005, about the Nicosia General Hospital. In the gossipy announcement of the Audit Office, reports are made that are not relevant to the present, to conclude: has before it the delay in the progress of the work, the requirements of both parties and their evaluation by the Consultants and DEFA itself, together with the relevant documentation. He 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 amounts referred to. If the consortium does not agree, the contract provides for arbitration to resolve the dispute and not termination. If, for example, the consortium considers that it is entitled to X amount due to material increases and this, if it is not entitled to it, is not given to it, it must complete the project and appeal to the arbitration. Any abandonment of the project, in addition to the financial claims of the Republic, automatically entails a blackboard of the consortium at European level and the name of the consortium and the constituent companies is endangered internationally. In no case can the Audit Office agree to the payment of any amount, without justification, with the sole argument that, if the amount is not given, the contractor will leave the project and there will be chaos. In our view, no state can be blackmailed or appear to be acting under threat. This is the answer to the post (of 'P') which we are commenting on “.
The announcement concludes: “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, provided it submits a relevant report / suggestion, as well as to DEFA and the ministry when we receive the full details we have requested. 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 stage of studies and not the slightest work has been done on the spot “.
