Public Procurement for a Councillor

Saturday December 24th, 2016

Former councillor Savo Lalović’s firm Marvel received at least 5.4 million KM worth of public works contracts. After signing contracts, which offered low prices or the shortest construction deadlines, additional works were approved increasing the initial price.

Ćosić, Lalović

Party peers Ljubiša Ćosić and Savo Lalović signed contracts for the upgrading and additional works on the East Sarajevo public health clinic. (Photo: SNSD East New Sarajevo)

By The Center for Investigative Reporting

Savo Lalović’s construction firm Marvel based in East New Sarajevo received at least 5.4 million KM worth of public works contracts over a four-year period.

The majority of contracts were signed during Lalović’s term as an East New Sarajevo municipal councillor. His company built the School of Economics in Pale, renovated a local office of the Republika Srpska (RS) Health Insurance Fund, and upgraded the East Sarajevo public health clinic. The tenders were put out or financed by institutions headed by his peers from the Alliance for Independent Social Democrats (SNSD).

Marvel won each of the contracts by offering lowest price or by giving shortest construction deadline. However, following the signing of contracts, the construction deadlines were pushed back further and additional work multiplied thus increasing the total costs by around half million KM, according to an investigation by the Center for Investigative Reporting in Sarajevo (CIN).

 Division of Work from the Project

One of the last public works by Marvel was the upgrading of the East Sarajevo public health care clinic, which included building new space for a paediatric ward, an emergency room and a pharmacy.

The East New Sarajevo Municipality put out a tender in July 2014. Lalović was a councillor at the time. Marvel was one of the six firms that bid and it gave the best offer – for the price of 389,312 KM it would do the job within 90 days. No one complained and three months later, Lalović and his party peer mayor Ljubiša Ćosić signed a contract. The works began.

However, according to paperwork acquired by CIN, the construction costs rose by another 66,485 KM because of additional works and the deadline was prolonged by 40 days.

Mayor Ćosić told CIN that additional and unforeseen works arose at the request of the RS Institute of Health and Sport Medicine, which required additional rooms to be built for the Institute, as well as due to the planner’s fault. The paperwork shows that these works were related to lightening insulation and water and sewerage infrastructure.

However, Miljan Luketa of the construction planning outlet “K-Projekt” says that these works were the part of the project from the beginning.

“Those who were tailoring the bid and who ordered the project had not ordered these works initially and when they realized that this had to be done as well, then they ordered them. Everything was in order as far as the project is concerned,” Luketa told CIN.

Dogradnja Doma zdravlja Istočno Sarajevo

Upgrading of the East Sarajevo public health clinic started two years ago and has cost nearly 456,000 KM. (Photo: CIN)

His words are backed up by a document produced by the planning firm after it gave the go-ahead to Marvel to start the construction. In it, the planners warned Ćosić that they had noticed that all mandatory works had not been covered by the basic contract.

“What else should I do — say great, bravo, you’ve done a good job, go ahead, and then you’ll have to knock down everything you’ve done (so far).”

In a telephone conversation with CIN, mayor Ćosić said he could not recall all of the details because some time had passed. “If additional works pop up during the construction, then I send assistants to check if there’s a need for unforeseen works or not (before) they sign.”

Last September, five months after the first phase of the works had been completed, a tender was put out for the second and final phase of the clinic’s upgrade. However, this tender was voided and and a new one has not yet been announced.

Fond Zdravstvenog osiguranja RS

An overhaul of Republica Srpska Health Care Insurance Fund’s branch in Pale has cost more than 100,000 KM. (Photo: CIN)

This March, Ćosić told the municipal assembly that this bid was voided after the best bidder Marvel gave an offer of 900,000 KM, which was around 300,000 KM higher than the projected value of the works.

Lalović, who did not win another term as councillor at this year’s elections, does not approve of this turn of events: “Now I could sue the municipality and the planners and everyone for voiding the tender because, in effect, they did not arrange the investment.”

Mayor Ćosić said that Lalović could have sued the Municipality earlier because it did not pay for the completed works on time, but he did not do it. “He did not do it because he is my friend, my buddy and because he respects what I do.”

Similar Pattern in Other Contracts

An increase in the price of works and at prolongation of deadlines after the signing of contracts also happened in two earlier public works that Marvel did in Pale – the overhaul of the RS Health Care Insurance Fund’s branch office and the construction of the School of Economics.

The overhaul of the Fund’s branch office was agreed in 2012, at the time when the agency’s head was Goran Kljajčin, another SNSD member. Six bidders applied and Marvel was selected because it offered the shortest deadline of 24 working days, even though its price of 82,910 KM was not the lowest.

In September 2012, Lalović signed the contract with Kljajčin. Nevertheless, Kljajčin — who is not the Fund’s head executive anymore  — denies knowing Lalović.

Savo Lalovič

The Mayor of East New Novo Sarajevo, Ljubiša Ćosić, said that he was not setting up tenders for his party colleague Savo Lalović: “I want to know who’s the cheapest and the cheapest will win.” (Photo: CIN)

“I have never heard of that man, neither of Marvel nor of Savo Lalović,” says Kljajčin adding that he had signed many a contract.

Draško Petrović of a Pale-based construction firm Vranica, which offered a lower price than Marvel, said that the deadline was not realistic.

“A man gave a really short deadline. Touché,” said Petrović.

In this case as well, the original agreement had to be amended due to unforeseen yet necessary works, so the Fund had to pay up for an additional 18,428 KM for works that were concluded in October 2012.

After a CIN reporter showed the changes to Miloš Gavrić from the Bratunac firm Mega-project, he said that all those additional works should have been in the original contract.

“The rub is in the unforeseen works that form the price. You offer a price for additional works and the investor asks you if you can give a discount. You bring it two percent down and then double the price in order to make up for what you had budgeted too low,” said Gavrić.

Neither he nor other bidders, including Milorad Živković from Brčko-based Astra Plan have filed a complaint. He said that an investor can always find a way not to accept a bidder’s offer if he does not want to, because he has the discretion to decide on the tender’s conditions.

Everything Goes On Paper

Based on the work construction deadline of 144 days Marvel was awarded the contract for the construction of the School of Economics on Pale worth nearly 4.95 million KM.

East Sarajevo University was in charge of the tender under the oversight of the RS Ministry of Finances, headed by Aleksandar Džombić of SNSD. The decision to finance the construction was in the hand of the RS Development Council headed by the party president Milorad Dodik.

Savo Lalovič

An outgoing councillor on the East New Sarajevo Municipal Assembly, Savo Lalović, concluded public works contracts worth more than five million KM during his four-year term. (Photo: CIN)

Lalović said that he was not a party member at the time and that he entered into politics in 2012 after he was talked into being the head of the party list of nominees for the local elections. He said that he did not win any contracts due to his political connections. “Everywhere I had to be the cheapest notwithstanding other references. This was the only way to get the contract.”

Nevertheless, in this case Marvel offered a price that was nearly 770,000 KM higher than the next bidder’s down the list – the consortium of two Pale-based firms Građenje and Santing – and its offer was accepted.

The contract on the School’s construction was signed by Lalović and the then University chancellor Mitar Novaković in June 2011. New works and additional costs were also approved in this case. According to the paperwork, all works were finished a year after the signing of the initial contract and were around 300,000 KM more expensive  than the initial price.

The costs might further jump by an additional 417,000 KM if the Court of Bosnia and Herzegovina (BIH) rules in favour of the lawsuit filed by Građenje construction firm. Ever since Marvel was awarded the contract, Građenje, which also did the project planning for the School, has claimed that the works cannot be completed to the required quality in 144 days. Građenje bases its claim on the fact that the bid specified a building of 5,106 square meters with amphitheatres, classrooms, specialized classrooms and additional space.

Ekonomski fakultet Istočno Sarajevo

Marvel completed work on the East Sarajevo University School of Economics’s building a year after the contract was signed. The cost of the school’s construction was 5.3 million KM. (Photo: CIN)

Zoran Popić of “Građenje” told CIN that he doubted they would get a contract:

“I’m not part of this establishment but I only took the opportunity to take a piss at the times and things that we cannot influence.”

Architect Mirza Hulusić said that unforeseen works can be justified when something comes up that no one could have forseen coming.

“Also, it can happen, which I suspect happens an awful lot in Bosnia, because of tender paperwork manipulation,” said Hulusić

The Law on Public Procurement stipulates that all justified additional works should be paid on top of the original contract with taxpayers’ money. The contractors are taking advantage of this provision, while public institutions are mainly taking this for granted without conducting a strict assessment of the justification of these works.

Hulusić says that contractors are not held accountable for such decisions and they always play the innocent: “A government agency can always justify itself that it had the municipal council’s backing which was signed by the mayor. Everything is handled legally.”

Published December 24, 2016

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The Center for Investigative Reporting in Sarajevo (CIN) work is available for free to all organizations that credit CIN as their source and link to www.cin.ba.

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