The European Commission (EC) will not pay a single penny for the scandalous renovation project for one of the main streets in downtown Sofia, which is financed by European Union (EU) funds, an expert analysis shows. The changes in the public tender contract and its assignment to GP Group is a violation of an article of the Regulation on Indicating Irregularities under the Law on the Management of European Structural Funds and Investment Funds, which becomes grounds for a 100% adjustment. The repairs and renovations will be paid entirely from the Bulgarian taxpayer’s pocket.

The public procurement renovation contract is funded under the Operational Program “Regions for Growth” 2014-2020, procedure BG16RFOP001-1.001-039 “Development of an Integrated Urban Recovery and Development Plan”. This means that the spending of the funds is subject to oversight by the EC. The amounts of the financial corrections are regulated in Annex 1 of the Regulation on Indicating Irregularities justifying financial corrections and the percentage indicators for determining the amount of the financial corrections under the procedure for the management of European structural funds and investment funds, adopted with a decree of the Council of Ministers Decree, dated March 28, 2017.

According to Section III, item 24, concerning changes to public procurement contracts, if the changes introduce conditions which, if they were part of the procedure for procurement, would allow the admission of other parties or candidates than those initially selected, or would lead to the adoption of an offer other than the one originally accepted, the amount of the financial correction foreseen is 100% of the value of the additional contracts.

As revealed by the investigation by the team from the “Rescue Sofia” organization, the selected contractor GP Group has used in the construction process an elastic vibration isolation pad system “floating slab” whose performance is worse compared to the base value set in the tender documentation for participation in this public procurement. At the same time, because of the same inferior vibration indicators, a competitor, whose bid has been BGN 2 million lower, has been eliminated.

However, there is no additional contract. The modification of the construction works involves only the original contract and its total value of BGN 24,136,100.87 with VAT.

Investigation and resignation

The Bulgarian authorities have traditionally whined and repented in Brussels to avoid such corrections or reduce them to a minimum. In this case, however, leniency is not foreseen. The violation is so obvious that the Bulgarian Prosecutor’s Office has launched an investigation, which is very rare when it comes to irregularities with projects financed with EU funds. It became clear from reports on the European programs for 2007-2014 that only 0.02% of the EU funds are subject of a national investigation.

It became known on December 5 that the Deputy Mayor of Sofia Evgeni Kussev, in charge of the project, has resigned. The prosecution is expected to press charges against him with details likely to become known in the very near future.

In addition, GP Group is at the center of a huge scandal, known as GP Gate, revealing a well-organized system for manipulation of public procurement, including EU-funded projects, parallel accounting and bribes for officials (see here and here). Due to the raging scandal, Prime Minister Boyko Borisov removed GP Group from public procurement for BGN hundreds of millions, while the company gave up most of them.

GP Group is closely associated with the interests of Lukoil Bulgaria’s boss Valentin Zlatev. In addition, its bosses are partners with the wife of alleged drug lord Hristoforos “Taki” Amanatidis. An investigation by Bivol showed that the stolen funds are syphoned through offshores associated with the Russian oligarchs Roland Isaev and Paata Gamgoneishvili, who built Mall “Paradise” in Sofia. Gamgoneishvili was also named as one of the financial sources for the EUR 400 million deal of Ginka Varbakova for the purchase of CEZ Bulgaria’s assets.

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