Documentation related to the public procurement for Block 6 of the Tuzla Thermal Power Plant, valued at BAM 63 million, has been submitted to the Federation Police Administration (FUP). Dongfang and Zenica ITC participated jointly in several tender procedures.
The Chinese company Dongfang Electric International Corporation has in the past period secured several highly lucrative tenders from Elektroprivreda BiH, amounting to hundreds of millions of BAM. Since there are indications of corrupt practices in the selection of Dongfang and other companies with which it formed consortia for tenders of Elektroprivreda BiH, extensive documentation has been handed over to the Federation Police Administration, learns Fokus.ba.
Due to suspicions of favoritism towards a bidder in a contract valued at 63 million BAM (excluding VAT) for desulfurizing flue gases at Block 6 of the Tuzla Thermal Power Plant, a criminal complaint has been filed against several individuals at Elektroprivreda BiH, including the director Sanel Babić, has been submitted to the Federation Police Administration.
The complaint was filed by the founder and CEO of the company Tehnopetrol Tuzla Elvir Ferizović and Nedim Mujkić, as well as the company Deling from Tuzla.
Suspicious move
In addition to Buljubašić, the criminal complaint has also been filed against Fahrudin Tanović, Executive Production Director, and Munevera Avdić, Head of the Commercial Sector of EP BiH. They are suspected of abuse of office and dereliction of duty.
It appears that Elektroprivreda BiH made a controversial decision on April 24 by selecting the Chinese-Zenica-Banjaluka consortium, which includes Dongfang Electric International Corporation China, ITC Zenica, Fujian Lonjing Environment Technology CO Ltd. China, and Institute for Construction IG Banja Luka (referred to as consortium DEC-ITC-LONJING-IG), as the sole qualified candidate at the pre-qualification stage, meaning the consortium would go further in the tender awarding process.
On the other hand, EPBiH disqualified consortium consisting of Deling Tuzla – SBB Energy S.A. Opole Poland – Tehnopetrol Tuzla – Termoelektro Brčko – Tehnograd Tuzla.
The criminal complaint submitted to the FUP reads that the rationale of the decision clearly indicates that the EPBiH’s decision is illegal and these actions have the characteristics of a crime. The complaint further reads that Elektroprivreda BiH acted contrary to the law by not rejecting, on several grounds, the request of the DEC-ITC-LONJING-IG consortium to take part in the public procurement procedure.
Serious allegations
One of the most serious allegations in the criminal complaint submitted to the FUP is that EPBiH based the economic and financial capacity of the selected Chinese-Zenica consortium solely on their statement, rather than on valid financial reports or income statements. It is pointed out that the contracting authority failed to verify the validity of the consortium’s based on documents of competent authorities and valid regulations.
Furthermore, the complaint claims that the contracting authority evaluated the financial capacity of the Chinese-Zenica consortium using inappropriate documentation, contrary to the directive of the Procurement Review Board (PRB) of BiH dated August 31, 2023. In this order, PRB instructed EPBiH to base its stance on the validity of income statements on documents of competent authorities. However, it is asserted that EPBiH did not comply with this order and instead relied on statements from the DEC-ITC-LONJING-IG consortium to establish the facts.
Thus, as highlighted in the complaint and evident from the public procurement file, the EPBiH sought to address these issues by querying the consortium led by the Chinese company. They inquired whether Chinese accounting laws or any other regulations specify the requirements for financial reports, balance sheets, and related documents in terms of language format.
The consortium responded to EPBiH stating that the Law on Auditing of the People’s Republic of China does not stipulate the language in which authorized auditors must prepare reports. Subsequently, Elektroprivreda BiH approached the Embassy of China in BiH for clarification, but received no response. Instead, the embassy directed EPBiH back to the consortium itself. Despite this, EPBiH decided to accept the consortium's response, a decision deemed illegal by the petitioner.
It is also alleged that the DEC-ITC-LONJING-IG consortium did not provide copies of the original profit and loss statements, thereby failing to meet the tender requirement regarding economic and financial conditions, as specified by Article 68 of the Public Procurement Law of BiH, according to which the request of this consortium should have been rejected as unacceptable.
Chinese and English language
The complaint further emphasizes that the DEC-ITC-LONJING-IG consortium submitted income statements in English along with a translation into one of the official languages used in Bosnia and Herzegovina. However, the independent auditor’s report that they have submitted (page 155) reads that these translations are from Chinese to English. Moreover, it is stated that if there are discrepancies between the English version and the original Chinese version, the Chinese version will take precedence and be considered relevant?!
The complaint further asserts that the contracting authority has continuously disregarded the fact that the report submitted by the DEC-ITC-LONJING-IG consortium was a translation, implying that the original reports were not provided.
Furthermore, doubts were raised regarding the lawfulness of EPBiH’s actions in assessing the validity of the certificate confirming the successful implementation of contracts by the DEC-ITC-LONJING-IG consortium. The assessment was made by an expert witness of criminology, and the petitioner has never received the certificate.
The reason given by EPBiH for disqualifying the consortium Deling Tuzla – SBB Energy S.A. Opole Poland – Tehnopetrol Tuzla – Termoelektro Brčko – Tehnograd Tuzla was that terms like “senior”, “designer”, “assistant”, “University”, ”Project Management”, and others in the documentation were not translated into one of the official languages used in BiH?!
But, they have accepted reports in English language from the Chinese-Zenica consortium?!
The complaint further states, as evident from the public procurement file, that EPBiH, in its efforts to ascertain qualifications, sent inquiries to the DEC-ITC-LONJING-IG consortium seeking clarification of its request and permitting the submission of additional documentation. Concurrently, it did not seek any clarifications from the petitioner and failed to assess the documentation submitted by the petitioner during the appeal procedure, which eliminates any doubts regarding the fulfillment of technical and professional capabilities.
Decisions of the PRB
It should be noted that the EPBiH announced the aforementioned tender on September 30, 2022, and it has been subject of the PRB’s deliberations on several occasions.
An additional shadow of doubt regarding this entire process is cast by the fact that on January 4, 2023 EPBiH initially passed the decision on the results of candidates’ prequalification in the negotiated procedure, qualifying both consortia as eligible candidates. This decision allowed both consortia to obtain the tender documentation and submit their bids.
Shortly after the decision, on January 24, 2023, the Chinese-Zenica consortium promptly filed an appeal with the Procurement Review Board.
The appeal contended that EPBiH had incorrectly determined facts, misapplied substantive law, and violated the Public Procurement Law. The other consortium is accused of inadequately submitting evidence of successfully completed contracts, as well as the evidence of technical and professional capabilities. The consortium led by Deling considers these claims to be completely unfounded and responds with a counter-appeal. At the same time, EPBiH assessed the allegations made by this consortium as unfounded.
The Procurement Review Board accepted, on March 23, 2023, the appeal filed by the consortium Deling Tuzla – SBB Energy S.A. Opole Poland – Termoelektro Brčko – Tehnograd Tuzla, and has instructed
Elektroprivreda BiH to reconsider the case
Among other arguments, the appellant contended that EP should have rejected the DEC-ITC-LONJING-IG consortium primarily because one of its members, the company Institute for Construction IG Banja Luka, had committed serious professional errors in EP's projects. They pointed out that these issues arose in contracts related to HPP “Una” in July 2018 and TPP “Kakanj” in March 2020, both terminated due to failure to meet obligations. According to the appeal, these incidents caused direct and indirect damage to EP.
Elimination of competition
In response to these allegations, EPBiH stated that there is no legally binding court ruling against IG Banja Luka, while the PRB has deemed EPBiH’s response unacceptable. Furthermore, PRB also found EPBiH’s response to the arguments of the appeal concerning the failure to submit income statements and other financial documentation unacceptable.
Consequently, the Procurement Review Board has instructed EPBiH to gather all necessary evidence in the reassessment procedure.
On May 22, 2023, EPBiH passes a decision observing the PRB’s decision and annuls the negotiated procedure. However, on April 24 of this year, it made a controversial decision by declaring only the DEC-ITC-LONJING-IG consortium as a qualified candidate in the procurement procedure.
Nedim Mujkić, director of Tehnopetrol Tuzla, stated to Fokus.ba that they have observed a recurring pattern with the Chinese-Zenica consortium across several project.
-The pattern is the following: EPBiH announces public procurements with pre-qualifications during which professional capabilities for these projects is proved. Those who qualify then proceed to the commercial bidding stage. However, a recurring pattern has emerged across multiple projects. All the procedures in which we have competed for a project so far came down to the Chinese-domestic consortium consistently employing various tactics to eliminate competitors, aiming to be the sole negotiator with EPBiH during the project offering phase – said Mujkić.
On May 24 of this year, Elektroprivreda BiH awarded the contract for replacing the steam pipe on Block 4 boiler at TPP Tuzla to a consortium that again included Dongfang Electric International Corporation of China and ITC Zenica. The contract is valued at 21.2 million BAM (excluding VAT).
Furthermore, the Chinese and Zenica companies are collaborating in a consortium for the construction of a flue gas desulphurization plant at TPP Kakanj, valued at 126.4 million BAM (excluding VAT). In mid-May, the Procurement Review Board upheld the appeal from this consortium and instructed EPBiH to redo the procurement procedure.
“Banovići” brown coal mine selected Dongfang Electric International Corporation China for the construction of Banovići Block 1, a 350 MW thermal power plant a decade ago. The project is valued at 405 million Euro. The Agreement on Strategic Cooperation was signed in 2015. However, the contract with the Chinese still has to be initialed, leading to media speculation declaring the project a failure. This was also reported by Inforadar last year.
Dongfang Electric International Corporation China is involved in several major energy projects in Republika Srpska, including TPP Stanari and a solar power plant in Bileća, and has expressed interest in constructing HPP “Buk – Bijela”.
-Chinese companies are also actively seeking to expand their influence in Bosnia and Herzegovina. They have found partners among domestic companies to handle administrative tasks, obtain licenses, and manage other matters related to their projects. However, when these projects materialize, they often subcontract work to companies from neighboring countries, particularly Serbia, where many of them are headquartered. For instance, eight out of ten subcontractors working on a recent project in Tuzla were Serbian companies. Local companies in Tuzla did not have the opportunity to participate in the project.
These Chinese companies are imposing their own terms – said Mujkić for Fokus.
What did EPBiH say
Fokus.ba sent a series of questions to Elektroprivreda BiH seeking clarification on these matters. In response to our inquiry, EPBiH stated that, due to the ongoing two-phase procedure and the filed appeal, they are unable to disclose any information regarding the case that hasn’t been resolved yet. They further noted that information can only be shared with parties not involved in the procedure once a decision on selecting the most favorable bidder has been reached.
We did not receive a response to our official inquiry to Chinese Dongfang. Additionally, we have contacted ITC Zenica through official channels, but haven’t received any response by the time this text was published. If we receive a response later, we will publish it accordingly.
According to the information from the Public Procurement Portal, ITC Zenica has entered into a total of 580 contracts with contracting authorities in recent years, with a combined value of BAM 137.243.018.
Also, on the Public Procurement Portal, it is stated that the main activity of ITC Zenica is the wholesale trade of agricultural machinery, equipment and accessories.
The website of ITC Zenica reads that they expanded their operations in 2007 to include trading in firefighting trucks and equipment. Since 2008, they have also been involved in providing services in the areas of air conditioning, heating, and cooling.
