How Chinese Companies Deceived During the Construction of Highway Sections in FBiH

Fokus.ba has obtained official documentation from Autoceste FBiH detailing how Chinese companies manipulated the construction of certain highway sections in the FBiH region during the recent period, particularly during tender applications. Specifically, these companies include Sinohydro Corporation Limited, Powerchina Roadbridge Group Co., and China Gezhouba Group Co. LTD. These companies are already known for their involvement in corruption scandals, fraud, and failure to fulfil contracts on a global level.

These mentioned companies were previously selected as contractors for the Počitelj – Zvirovići highway sections (including the Počitelj bridge) and were candidates in the tender for the Medakovo – Ozmice sections and the Prenj tunnel.

What's Stated in the Resolutions?

According to the resolutions of Autoceste FBiH dated May 16th, which have been obtained by Fokus.ba, two Chinese companies that had previously signed a contract for the construction of the Počitelj bridge on the Počitelj-Zvirovići subsection have been disqualified for a period of two years due to contract violations.

These companies are Sinohydro Corporation Limited and Powerchina Roadbridge Group Co. Ltd. These firms were part of a consortium along with the Azerbaijani company Azvirt Limited Liability Company, with which a contract was signed in June 2019 for the construction of the Počitelj bridge, valued at 54,942,837 KM or 28,114,889 euros (excluding VAT).

Four years later, as stated in the resolution of Autoceste FBiH, it was found that Sinohydro Corporation Limited and Powerchina Roadbridge Group Co. Ltd blatantly violated the contract by not performing the works on the span structure of the bridge themselves. Instead, the subcontractor, namely the company Hering from Široki Brijeg, carried out the work. This, it was emphasized, should not have happened under any circumstances.

As explained in the resolution, the terms of the signed contract explicitly prohibited the contractor from subcontracting works on the span structure of the bridge. On the other hand, subcontracted works were only permitted up to a maximum value of 15% of the Contract. In this case, it was determined that the value of the subcontracted works far exceeded the 15% limit.

On May 10th, Autoceste FBiH consulted the supervising engineer from IRD Engineering S.r.l. – Italy, who confirmed that Hering had entirely carried out the works on the span structure of the Počitelj bridge, and no approval had been issued by the investor (Autoceste FBiH) for such an arrangement.

Hering's Comment

Ladislav Bevanda, the Director of Hering, briefly stated to Fokus that they have neither direct nor indirect contact with Autoceste FBiH and that he knows nothing about it.

“That is, if it is, after all, the least of the damages that people from Autoceste FBiH are causing,” Bevanda commented shortly.

Furthermore, up until the statement of the supervising engineer on May 12th, the deadlines for completing the construction of the Počitelj bridge had been blatantly exceeded by 218 days. According to the contract, everything was supposed to be completed by October 6, 2022.

It was only on July 6th of this year that the span structure of the Počitelj bridge was connected, while the complete works on this facility, or the subsection of the highway, have not yet been concluded.

In the resolution of Autoceste, regarding the disqualification of the Chinese companies Sinohydro Corporation Limited and Powerchina Roadbridge Group Co. Ltd, it is stated that this represents a prohibition of participation in all tenders and any other business activities where Autoceste FBiH is the investor for a period of two years, excluding ongoing construction contracts.

Due to certain ambiguities in this resolution, or open questions regarding what will happen next with the construction of this subsection since two out of three contractors have been eliminated, we contacted the Highways of the Federation of Bosnia and Herzegovina.

Regarding the Počitelj bridge, as stated to Fokus by this public enterprise, uninterrupted construction work is ongoing based on the active contract.

They stated that they are implementing all protective measures in accordance with the contracted provisions. After the final connection of the bridge's span structure, as emphasized, preparatory work is underway for waterproofing, drainage, road construction, concrete and safety barriers, and other tasks.

Funds from the EU

However, the gravity of this issue is heightened by the fact that the construction of the Počitelj-Zvirovići subsection is also financed through funds secured under a loan agreement with the European Investment Bank (EIB) amounting to 100 million euros and non-repayable funds from the European Union totalling five million euros, secured within the framework of the Connectivity Agenda through the Western Balkans Investment Framework (WBIF).

Considering that this involves EU funds, the implementation of which is rigorously monitored, it is evident that the decision of the Federation of Bosnia and Herzegovina Highways (Autoceste FBiH) is a result of the reaction from EU institutions.

Sinohydro Corporation Limited and Powerchina Roadbridge Group Co. Ltd are companies that are already on the blacklists of the World Bank and the African Development Bank due to corruption and fraud. However, this did not deter the Mayor of East Sarajevo, Ljubiša Ćosić, as recently reported by Inforadar, from signing a Memorandum of Cooperation with them for the construction of a tunnel through Trebević, connecting East Sarajevo with Pale.

The third company that has been disqualified in relation to Autoceste FBiH projects is China Gezhouba Group Co. Ltd.

Along with it, the Turkish company Ozaltin lnsaat Ticaret ve Sanayi Anonim Sirketi has also been disqualified. According to the resolution obtained by Fokus, both companies submitted false documentation during their application for last year's tender for the construction of the Medakovo-Ozimice subsection, as well as the Prenj Tunnel.

– For the procurement process of Medakovo-Ozimice, it is stated that China Gezhouba Group Co. Ltd participated with a 50% stake in the Joint Venture as a partner, while for the procurement process of the construction of the Prenj Tunnel for the same project, it is indicated that the company was the sole contractor for the project. Upon review of the submitted confirmations and contract extracts, as well as their translation by a court interpreter for the Chinese language, it is established that according to the submitted Contract, China Gezhouba Group Co., Ltd. was not a member of the Joint Venture at all, but rather China Gezhouba Group Fifth Engineering Co. Ltd. Furthermore, based on the confirmation of successful contract completion, the Joint Venture partner was neither China Gezhouba Group Co. Ltd., nor China Gezhouba Group Fifth Engineering Co. Ltd., but rather a third company, China Gezhouba Group Road and Bridge Engineering Co. Ltd. – as stated in the resolution by Autoceste FBiH.

Turkish Companies

When it comes to the Turkish company, it was determined that contrary to its claims in the tender documentation, it did not complete the project “Giresun Ayr. – Dereli – Sebinkarahisar Susehri Ayr. Motonvay” in Turkey, nor were the statements about that project accurate, as confirmed by the General Directorate of Highways in Turkey.

Ultimately, on March 9th of this year, a contract for the construction of the Medakovo-Ozmice section was signed with another Turkish company, Cengiz Insaat Sanayi ve Ticaret A.S., worth 361.7 million euros (excluding VAT).

Since EU funding is also significant for this section, Autoceste FBiH referred to the regulations of the European Investment Bank and the European Bank for Reconstruction and Development.

Furthermore, China Gezhouba Group Co. Ltd is part of a conglomerate of companies that includes China Gezhouba Group Corporation (CGGC), with which the Government of Republika Srpska signed an agreement in 2016 for the construction of the Dabar Hydropower Plant, a project worth 131 million KM that has not yet been realized.

It is also part of the consortium for the construction of the failed project Block 7 of the Tuzla Thermal Power Plant, as extensively reported by Fokus.

We reached out to all the mentioned Chinese companies for comment via official email, but we have not received a response by the time of concluding this text.