Inside the EU’s Sewerage Project: Bankruptcy, Delays and Broken Pipes

By Vincent W.J. van Gerven Oei,
Inside the EU’s Sewerage Project: Bankruptcy, Delays and Broken Pipes

In July 2017, at the height of the tourist season, the seaside of beach resort town Ksamil was covered in excrement. While the Municipality of Saranda placed responsibility with the EU, which had financed a renovation of the sewerage system, the EU claimed that the project had been handed over to the Albanian government in April 2017. In a response to a request for commentary by Exit, EU spokesman Ernest Bunguri stated:

The new sewerage network in Ksamil, funded by the EU, has been completed, tested and handed over to the Government of Albania in April 2017, who took it over and transferred it to the Saranda Municipality. Since May 2017, the sewerage network is operated by the Water and sewerage Utility of Saranda.

The network is under guarantee by the contractor against defects for a period of one year ending in April 2018. The pipe burst that occurred on 26 July 2017 is being investigated on site by the supervisor of the works. A section of the pipe that burst has been sent to Tirana for detailed inspection and testing. Responsibility for the incident will be pursued but can be established only once the ongoing investigation has been completed.

In the same month, Exit filed a freedom of information request to have access to the tender procedure documentation, as well as the monthly expert reports provided to the EU Delegation in Tirana regarding the progress of the project. The more than 50 redacted documents provided by the European External Action Service (EEAS) show how an EU investment of more than €14 million euro derails from nearly day one – and has now resulted in a faulty sewerage system along stretches of the Albanian Riviera.

This is a story that features all the reasons why foreign investments shy away from Albania: uncooperative public and private institutions, conflicts over land ownership, non-coordination within the government – and on top of it a bankruptcy. It is also a story of the EU Delegation in Tirana being completely incapable of enforcing the contractual obligations of those it pays with EU taxpayers’ money.

The tender procedure

The year is 2011. The Italian Ettore Sequi is Head of the EU Delegation in Albania, Sali Berisha’s PD rules in a coalition government with Ilir Meta’s LSI. In the context of the Instrument for Pre-Accession Assistance, the EU invests in the renovation of sewerage systems at different locations in Albania.

According to the Evaluation Report for the public procurement of the EU-financed project “Construction of the Sewerage Systems in Vlora, Ksamil, Kavaja, and Shëngjin, Albania,” the winner of the €14 million tender was determined during 17 meetings of the Evaluation Committee at the offices of the EU Delegation in Tirana in November 2011. Eleven international and national companies and consortia participated in the tender.

Tender 9 by Copri Construction Enterprise W.L.L. from Kuwait was excluded because companies from outside the EU are not eligible. The Evaluation Committee asked for further, unspecified clarifications of Tender 4 (Primorje D.D., Slovenia/Alba Konstruksion shpk, Albania), Tender 6 (Friulana Bitumi srl, Italy/Atzwanger SpA, Italy), Tender 7 (SADE – Companie Générale de Travaux d’Hydrolique, France), and Tender 11 (Gener 2 Ltd, Albania/Kiros SA, Greece).

Screenshot from 2017-09-18 15-08-50

In the case of Tender 6, the Evaluation Committee asks additional questions about the consortium’s “economic and financial capacities.” Although all answers are redacted, the Committee finds them satisfactory. We will return to Friulana’s actual financial capacities below.

Screenshot from 2017-09-18 15-14-28

The Evaluation Committee judges 8 tenders technically non-complaint, leaving two tenders that move on to round two. The proposal of Primorje D.D./Alba Konstruksion (€12,796,824.89) is announced winner. However, an annex to the report states that the consortium is later excluded from the tender on the basis of being “in the exclusion situation provided by PRAG 2.3.3.”

PRAG is the European Commission’s Practical Guide to Contracting, which provides guidelines for tender procedures. PRAG 2.3.3 refers to a set of criteria on the basis of which a proposal may be excluded, such as bankruptcy, not having paid taxes or social security contributions, or professional misconduct. Again the relevant phrases are redacted from the report, but Primorje/Alba Konstruksion are excluded and Italian consortium Friulana/Atzwanger (€14,191,516.95) declared de facto winner – all other competition being eliminated.

Bankruptcy

The EU project is divided within three lots: Saranda & Ksamil, Kavaja, and Shëngjin. In what follows I will focus on what happened in Lot 1/Ksamil, where five years later a “renovated” pipe would rupture and inundate the beach with sewerage. We will follow here the sequence of events on Lot 1/Ksamil as described in 48 monthly reports by supervisor of the construction works, the consortium of Safège (France)/IRD Engineering (Italy).

Works started on October 22, 2012, and were expected to be finished in 24 months, on October 21, 2014. On December 27, 2012, the EU makes a “pre-financing” payment of €1,438,189.00 to the contractor.

Already the second report from February 2013 the supervisor notes problems that sound remarkably similar to those which later supposedly caused the broken pipes in Ksamil and Saranda:

Main sewers, where to connect on the secondary sewers object of the Works Contract, are found blocked (clogged or flooded by water return or collapses – under investigation). As the current season is rainy, this may become an issue for the Contractor. Situation already noticed by the Site Engineer and which is now object of a letter from the Contractor. Municipality services informed about the situation in the Meeting on January 29th 2013, but they can do little due to lack of equipment.

In March 2013, the supervisor reports a first progress update. The project seems is already behind. Only 78% of the planned work has been completed. Late March the Ministry of Tourism and Culture requests a suspension of the works in Ksamil for several weeks “due to clarification with the National Park of Butrint.” Work gets further behind schedule, as the completion rate drops to only 66% of the monthly target.

In May 2013, the leading partner Friulana Bitumi declares bankruptcy.

In June the supervision report inexplicably stops reporting monthly progress, and now only mentions overall progress, making it more difficult to notice that the work is slowing down month after month. In August the supervision report states for the first and only time that the contractor has not enough work force on site, and is not working with the right equipment:

Contractor has been informed that he has no objective reasons to substantiate delay and he has to take measures to eliminate delay, increasing the speed of works progress by increasing the number of mechanisms, supplies and workers. Contractor has to take measures to acquire additional equipment for working with hard rock, or other kind of equipment than he has.

At the moment, there are 2 engineers, 2 foremen, and 30 workers on site, operating 3 excavators and other equipment. In spite of the delays and signs that the contractor has chewed off more than he can handle, the EU transfers an additional €889,891.25 to the contractor on August 9, 2013, in spite of its bankruptcy.

A month later, on September 9, 2013, all works are suspended. After nine months of actual construction work, only 15.4% of the overall sewerage network in Ksamil has been completed, although the supervisor judges that total progress may in fact be as low as 10%. Within little more than a year, the project was planned to be finished.

It thus appears that any doubts concerning the “financial and economic capacities” of Friulana Bitumi already present in the Evaluation Committee, as evidenced by their additional questions, were justified. This, however, did not prevent the company from winner the tender, and now leaving the project indefinitely suspended (see for another EU-project bankruptcy the Vlora Bypass).

A new beginning

Work recommences nearly 7 months later on March 31, 2014 with a new contractor, Italian company Spira Srl in joint venture with Artzwaner SpA. The documentation provided by the EU does not show how this new contractor was found. Within two weeks, without any significant work done, the EU transfers €1,246,337.53 to the new contractor. Progress is even slower than before, as the new contractor works with less than half the original workforce: 1 engineer, 1 foreman, and 11 workers.

Meanwhile, the municipality of Ksamil, without informing the contractor, worked on the road and installed a new high-voltage power supply line, built without building permit. The result is that there no longer place with the sewerage pipes to be laid, and the municipality is unable to provide any technical drawings of the changed situation. An additional €390,408.23 is wired to the contractor on July 24, 2014, while the supervisor once again urges the contractor to employ more workers as “progress is not sufficient.” Nevertheless, more payments follow regularly in the coming months.

In September, the contractor asks permission to decrease the depth at which sewerage are being placed, while the supervisor notes that “testing of previously completed lines is in progress, but too slow and delayed from the testing plan submitted by the contractor.” Also, a roller has gone missing, preventing the earth from being properly compacted. Work progresses at a slow pace of an average of about 3% per month.

In October 2014, when Sequi had expected to inaugurate the project, 34.2% has been finished. He leaves his post and the mess to his successor Romana Vlahutin.

In January 2015, workers accidentally cut the high-voltage powerlines laid by the Power Utility of Ksamil without permit or plan. “[I]nstead of cooperating with Contractor in identifying the location of these cables,” the supervisor notes, it “is applying fines when they are accidentally cut.” Also the municipality is not helping. It requests suspension of the works from June 15 to September 15. The supervisor notes dryly: “This may influence completion time.”

On May 27, 2015, the contractor receives a letter that Pumping Station 1 and connecting pipes have been built unwittingly on private land. Works are suspended and the Pumping Station will have to be moved. The supervisor notes that “[s]imilar problems may arise” with the other three pumping stations. Apparently no one checked the land ownership of the places where these were planned. Moreover, illegal buildings prevent construction work elsewhere. The EU inform the Albanian government of the problems, but no actions seem to be taken.

Meanwhile, the supervisor continues has complaints that “not enough resources are allocated” to complete the work on time. The EU Delegation appears to undertake no action.

Finally, in October 2016, two years later than planned, all works are finished. The last supervision report is from December 2016. At that moment, the pipes and pumping stations are still being tested. 88.3% of the allocated project has by now been transferred by the EU to the contractor, in spite of significant delays even after extension was granted following the bankruptcy.

According to the EU Delegation in Tirana, the finalized is transferred to the Albanian government in April 2017. Three months later, the first pipe breaks. There could be of course many reasons: the relocation of the pumping station, the shallower depth of the pipes, the rerouting due to the unexpected high-voltage power lines, not properly compacted earth because of the missing roller, not properly testing all the pipes, or just simply sloppy work.

What is evident, however, is how the both the tender procedure and the project management of the EU could not prevent selecting a company on the brink of bankruptcy and massive delays. It is unlikely, unfortunately, that anyone will be held accountable, or that there will be an official investigation as to how precisely Friulana Bitumi was able to win that tender in the first place.



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[…] analysis of the both the tender documentation and the monthly progress reports showed that the EU Delegation in Tirana managed to select a final winner that goes bankrupt 6 months into […]

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[…] analysis of the both the tender documentation and the monthly progress reports showed that the EU Delegation in Tirana managed to select a final winner that goes bankrupt 6 months into […]