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09 Jan 18

‘Disappearing’ Montenegrin Apartments Leave Troops without Homes

 

Organised crime prosecutors are investigating tender procedures for the construction of apartments for defence staff, which saw a state-favourite firm awarded the contract and left many families without homes they expected.

Milan Sekulovic BIRN Podgorica
The buildnig in the neighbourhood of Tolosi in Podgorica. Photo: BIRN.

In a three-day period in 2008, during which one tender for the construction of military apartments was cancelled and another launched, the Montenegrin Ministry of Defence lost 1,500 square metres of housing space in the exclusive neighbourhood of Tolosi in Podgorica.

It is estimated that the value of the ‘lost’ space was at least 1.6 million euros, because at the time the tender was announced, the average price of a square metre in a housing development in that part of Podgorica was 1,100 euros.

BIRN and CINCG’s investigation showed that the Ministry of Defence cancelled the first tender on December 26, 2008 because the company that it chose to build the apartments, Cijevna komerc, could not offer a bank guarantee. Three days later new tender was open and the same company won the contract, this time being only bidder.

But instead of delivering 4,999 square metres of accommodation space, which is how much it offered to build for the ministry in the first tender, Cijevna Komerc delivered 3,500 square metres, which it promised in the second tender.

The Ministry of Defence approved 46 apartments, instead of the 70 that would have been possible if there were 4,999 square metres, but only 31 military employees were awarded apartments under to an internal procedure, while the others were allocated in other ways, some of them to people outside the army or the ministry.

The story comes against the backdrop of a widespread shortage of housing for military staff – over 1,150 military personnel have not been allocated the apartments to which they are legally entitled.

Cijevna Komerc from Podgorica is owned by Danilo Petrovic, who was under criminal investigation at the time on suspicion of endangering safety. The company has been awarded a number of lucrative state contracts in recent years, including undertakings to build a bridge, a library and the city assembly building in Podgorica

The tender change that caused the reduction in space has been under investigation since July last year by the Special Prosecutor’s Office for Organised Crime and Corruption.

The Ministry of Defence does not see anything disputable in the deal with the Cijevna Komerc construction company.

The ministry said in a written response that it could not do anything about what it described as the unforeseen change in the banking and real estate markets between the first and second tenders, which it blamed for the fact that Cijevna Komerc gave it 1,500 fewer square metres of accommodation space.

 Military Union chief Nenad Cobeljic. Photo: Montenegin Military Union.

But Nenad Cobeljic, the president of the Montenegrin Military Union, which represents members of the armed forces’ interests, disagreed and filed charges with the Special Prosecutor’s Office for Organised Crime and Corruption last May, alleging corruption and abuse of office.

“Who the participants in all this are and how much of the cake went to who, I don’t know, and it’s not up to me to know, this needs to be verified by the Special and Supreme Prosecutor with whom I filed criminal charges and asked for the facts to be ascertained,” Cobeljic told BIRN and CINCG.

The Prosecutor’s Office confirmed that it has received the complaint from the Military Union, that it has requested and received the necessary documentation and that an analysis is under way. It did not provide details about the preliminary enquiry, however.

 
    Cijevna Komerc’s state contracts worth    millions

Cijevna Komerc often gets contracts worth millions from the state. The company built the Zeta Sports Hall, the Millennium Bridge, the local parliament in Podgorica, the capital’s City Library, and access roads to the Sozina tunnel near Bar.

According to MANS’ 2013 report ‘Town Planning Trapped by Corruption’, Cijevna Komerc’s deal with the state to build the City Library was an example of the circumvention of regulations.

Cijevna Komerc has been blacklisted by the Tax Administration. It owes 1,375,116 euros to the state according to a list published in October 2017, plus 203,679 euros in taxes and employee contributions.

Troops and pensioners without homes

All military personnel and public servants at the defence ministry are entitled to housing.

But a large number of them have not had accommodation provided, and the Military Union estimates that at least 20 families were left without an apartment because of the contract with Cijevna Komerc.

The dramatic scale of the housing problem in the Montenegrin armed forces can be seen from Ministry of Defence data for 2016.

Out of a total of 2,000 employees at the ministry and in the military, 1,159 have no apartment, and 244 do not have adequate housing.

At least 250 military pensioners are also waiting for roofs over their heads, as they ended their military careers as tenants.

In order for the problem of military tenants to be at least partially solved, the Montenegrin government in July 2008, told the Ministry of Defence to hold a tender for the most affordable private-sector partner for the construction of a housing and office building in Tolosi.

The government specified that the private-sector partner must secure at least 3,200 square metres for the Ministry of Defence.

In such a partnership with a construction company, the state provides the land, while the contract between the state institution and the company regulates how many square metres of the finished accommodation goes to each party in the partnership.

The tender is usually won by the construction company that offers the state the biggest area of space.

In the case of Tolosi, the Ministry of Defence provided the land where a military storage facility used to be situated.

According to the tender announcement on July 31, 2008, each bidder was obliged to provide a bank guarantee for 100,000 euros along with the bid, with the money to be forfeited if the bid was revoked during the process.

The company that won the tender was also obliged to deliver a bank guarantee for 5,120,000 euros before signing the contract.

Bids were submitted by September 1, 2008, and three companies took part in the process: Zetogradnja and Gradnja Promet, about which the minutes on the public opening of the bids showed “no objections”, and Cijevna Komerc, about which the minutes said there were no major objections, except that “two copies were not delivered with the original” of a number of quality assurance certificates.

Zetogradnja offered the state 4,410 square metres of accommodation and a completion deadline of 14 months, Gradnja Promet offered 4,000 squatre metres and estimated that it could complete the building work in a year and a half.

The third bidder, Cijevna Komerc, offered 4,999 squatre metres of accommodation and said it could comlete the work in 13 months.

The Ministry of Defence’s tender committee decided on September 18 that all three bids were correct, although during the opening of the bids, Zetogradnja warned that Cijevna Komerc did not deliver copies of some original documents, not even a certificate from the Basic Court in Podgorica stating that there were no pending criminal proceedings against company owner Danilo Petrovic.

However, Zetogradnja did not file a formal objection to the Committee for Auditing Public Procurement Procedures, which is authorised to cancel a tender if it finds any illegality.

The Ministry of Defence told BIRN and CINCG that “the Committee for Opening and Evaluating Bids evaluated that Cijevna Komerc’s bid contained minor deviations, i.e. objections that did not have a major effect on the bid”.

The ministry also said that it was not relevant that there was an ongoing criminal action against Petrovic, since the condition for the tender was that he had not been convicted.

The decision to select Cijevna Komerc as the winner of the tender was made on September 22, 2008.

 
   What happened to the apartments?

According to the contract between the Ministry of Defence and Cijevna Komerc, the military was supposed to get 46 apartments, of which 14 were two-bedroom, 25 one-bedroom and seven studios.

But the Military Union alleges that in the end, only 31 flats were made available for allocation. The remaining 15 were awarded without a public competition, and some were given to other government departments.

The ministry told BIRN and CINCG that the 15 apartments had been allocated properly, however.

Four were given three families of killed members of the Air Forces and one flat to a professional military official with a command position of at least brigade commander, the ministry said.

Four more were allocated under decisions issued by the Committee for Housing Affairs of the Government of Montenegro - two to officials with managerial positions at the Ministry of Defence, one to the Directorate for the Protection of Secret Data and one to the Ministry of Finance.

Two further apartments were allocated to people as a result of court verdicts, according to the Ministry of Defence.

Five studios were meanwhile given to the heirs of a man called Petar Boljevic as compensation for the removal of his rights to the land, which he had owned before it was nationalised, the ministry said.

The mystery of the bank guarantee

In November 2008, there was a twist in the proceedings.

According to the Ministry of Defence, Cijevna Komerc informed the ministry on November 28 that Podgoricka Banka, due to problems in the financial markets, was not able to issue a guarantee for 5,120,000 euros.

The Ministry of Defence on December 26 cancelled the bid and fined Cijevna Komerc 100,000 euros for delivering a bid which did not comply with the Public Procurement Law.

In the new tender, three days later, Zetogradnja and Gradnja Komerc did not bid, so Cijevna Komerc was the only contender and offered 1,500 fewer square metres of accommodation space.

The decision awarding the contract to Cijevna Komerc was passed on February 6, 2009.

Ines Mrdovic from the Network for Affirmation of the NGO Sector, MANS, said that her organisation’s long experience of monitoring public procurements showed that it often happens that several connected firms go for the tender, but some of them are only pretending to be genuine bidders “without any real intention of getting the job”.

Mrdovic said that in such rigged tenders, the company which has been pre-chosen to get the contract makes a bid that is hard to decline, then the others drop out.

However it was not possible to ascertain whether or not something similar happened in the military apartment building tender. Danilo Petrovic, the owner of Cijevna Komerc, did not answer numerous phone calls from BIRN and CINCG’s reporters or answer the questions sent to him by email at the beginning of December 2017 and again at the end of the month.

Neither Zetagradnja nor Gradnja Komerc responded to questions about why they did not bid in the second tender procedure.

“It is incredible and unacceptable for a construction company to win a tender with an offer of 4,999 square metres of housing space… and for this tender to be cancelled because there was no bank guarantee,” said Cobeljic from the Military Union.

“After that, only this company bids and offers 3,500 square metres and wins. The question is, how did the bank provide a guarantee in the second tender, but not in the first?” he asked.

He argued that “it is not a problem to pay a fine of 100,000 euros if you get the next tender worth about 1.5 million euros”.

The president of the tender committee, Dragan Samardzic, and the defence minister at the time the tender was announced, Boro Vucinic, declined to answer BIRN and CINCG’s questions, referring reporters to the Ministry of Defence instead.

Ex-Defense Minister Boro Vucinic and Admiral Dragan Samardzic. Photo: vojska.me 

Investigations but no indictments

Instead of completing the building in Tolosi in 13 months, as Cijevna Komerc initially promised, it took much longer. The contract was signed in March 2009 and the constraction work ended in mid-2012.

It has a total of 18,000 square metres, of which 14,500 went to Cijevna Komerc, including apartments, commercial space and garaging. A square metre of space in the building now costs up to 1,400 euros.

Cobeljic said he hopes that the Special Prosecutor’s Office will deal with the case quickly, but NGOs are not confident, citing numerous investigations which did not lead to indictments.

The Special Prosecutor’s Office in June 2013 opened an investigation into allegedly dubious contracts between the state and Cijevna Komerc for construction and reconstruction work at the Institute for Implementing Penal Sanctions, ZIKS.

On June 18, 2013, police said that on the prosecutor’s instructions, white-collar crime inspectors seized documents about how ZIKS’ management worked with Cijevna Komerc. So far the probe has not led to any charges, however.

MANS has so far filed about 600 criminal complaints to prosecutors over tenders for state contracts, one of them against Cijevna Komerc, although this did not result in an indictment either.

MANS alleges that 80 per cent of the prosecution’s cases are currently unresolved, and claims that some complaints filed by the organisation have remained in drawers for ten years.

Meanwhile the secretary of the Association of Military Pensioners, Radivoje Zdravkovic, complained that in 2012, when the apartment building in Tolosi was finally completed, the ministry completely excluded its members from the allocation process, though it previously had received unofficial verbal promises that they would be included.

“We have a lot of people who have been waiting for an apartment for 20 years, some for even 30. It is especially sad when we see off pensioners to their final resting place from someone else’s house,” Zdravkovic said.