A Relative of Pernik Municipal Official Winner of Public Contract for City Bridge Rehabilitation

In August 2017, Pernik Municipality awarded a contract worth BGN 368,982 (VAT included) to a local company, Via Intelego Ltd, for the reconstruction and rehabilitation of a bridge over the Struma River.

The project was financed via Operational Programme “Regions in Growth” 2014-2020 of the European Union.

Via Intelego’s managing director, Ivo Gadzhov, is first cousin of the deputy mayor for construction in Pernik Municipality, Vladislav Karailiev.

According to the Public Procurement Act (PPA), companies managed by the relatives of officials within the awarding authority are prohibited from participating in tenders such as the one in Pernik. The same restriction was specifically mentioned in the documents submitted by all participants in the public procurement procedure. When submitting their offer, each participant had to declare they were not related to any executives at the awarding authority.

The Anti-Corruption Fund (ACF) asked the municipality whether Mr. Gadzhov had submitted such a declaration. ACF also asked for a copy of the document. The request was denied by Pernik’s mayor, Viara Tzerovska, on the grounds that Via Intelego had declined that a copy of the declaration be presented to ACF. The mayor advised ACF staff to visit the municipality’s website and review the documents published by the contractor, as well as protocols outlining the work of the public procurement committee. After a review of said documentation, ACF staff concluded a declaration had most likely been filed by Via Intelego.

The question that follows is has Mr. Gadzhov declared false information in the tender documents by failing to mention he was related to a person holding an executive position at the awarding authority. Alternatively, the tender committee could have omitted to mention in the protocols whether a declaration was filed or not. Any participant who fails to submit such a declaration should be disqualified. ACF has filed reports with the Public Prosecution and the Public Financial Inspection Agency (PFIA) who, we believe, should ask the above-mentioned questions.

A report was also filed with the Commission for Counteracting Corruption and the Forfeiture of Illegally Acquired Property (CCCFIAP) since Pernik Municipality failed to provide a definitive answer to the question whether the deputy mayor for construction had declared a conflict of interest with regards to the public procurement procedure. The membership of the committee also raises suspicions of possible conflict of interest. These suspicions are compounded when the committee membership is reviewed. Three committee members (out of a total of five), including its chair, were municipal employees and subordinates of the deputy mayor.

ACF calls on PFIA to review why Via Intelego was not asked to pay penalties for construction delays. The contract stipulated that the works should be completed in no more than 194 days. However, the project was completed in 287 days ­– a delay of 93 days.

Construction stopped three times, for a total of 95 days, due to unfavorable weather conditions and circumstances that the company and the municipality deemed to be beyond their control. The contract does allow for the construction activity to stop due to unfavorable weather conditions.

Referring to the relevant PPA provisions, ACF asked for copies of the protocols acknowledging the said weather conditions as well as the official references, issued by the National Institute of Meteorology and Hydrology under the Bulgarian Academy of Sciences. The available documents did not confirm if weather conditions had indeed been unfavorable on the days when construction activity had stopped.

Even if the weather conditions did not allow for construction work to proceed, this should have been factored by the contractor who should have included the relevant provisions in the submitted tender documents. According to the contract, penalties for every day of delay equal 0.05% of the agreed daily rate with a ceiling of 20% of the contract value.

ACF will monitor the steps taken by the Public Prosecution, PFIA, and CCCFIAP.