The data available to MANS provide evidence for yet another possible abuse of office by the Mayor of Bar, Žarko Pavićević, for personal gain, but also for the benefit of third parties.
On 03 July 2008, having conducted a public competition, Montenegrin Postal Services “Pošta Crne Gore” entered into an agreement with the Zavod za izgradnju Bara (ZIB) owned by Pavićević, on joint construction of a residential and commercial building.
The Contract referred to a construction of a residential and commercial building no. 13 in zone G within the DUP “Topolica 1” in Bar, at the location of today’s main post building in Bar. The Contract envisaged that the stake of Pošta in this joint deal to be the building lot of 3,734m2 and the old post building that was supposed to be demolished and the new building of mixed use built. ZIB, on the other hand, was supposed to assume full construction costs, payment of municipal fees, and procurement of a building permit and certificate of occupancy.
For its stake, Pošta was to receive 30% of all residential and commercial units in the future building, or not less than 4.3 million euro in value in total. The remaining 70% was supposed to go to ZIB.
ZIB committed itself to a turn-key project to be completed for not more than 30 months starting from the signature day, i.e. not later than January 2011. The contract also envisaged that Pošta was entitled to 0.1% of the said 4.3 million for each day of the delay, or 5% of the amount at the most. On the other hand, ZIB committed to ensure blank bills with monthly authorities as a guarantee for timely and good quality works.
The contract also envisaged for Pošta to set up a supervisory service to monitor the implementation of contracted works.
Six months after the expiry of the deadline, and almost three years after the Contract signature, the winning bidder ZIB failed to build a single floor of the envisaged building of mixed residential and commercial use. The construction site has been fenced, the foundations and the underground floors built, and that is it. The valid urban plan envisages an eight-storey building on this lot.
Construction site, May 2011
Information received by MANS from Postal Services of Montenegro , invoking the Free Access to Information Law, evidence many an irregularity in the contract execution, both by the Pavićević’s company, but also by Pošta.
According to information held by MANS, Pošta failed to set up the supervisory service that was supposed to monitor the contract execution, but approached ZIB on the account of the delay for the first time after the deadline has already expired in early February this year. In the letter signed by Milan Martinović, Executive Director of Pošta, ZIB is called to provide an explanation regarding the delay in the contract execution and supply evidence of being able at all of executing this investment.
In the next letter sent to ZIB on 08 February this year, Martinović informs ZIB that a joint working group needs to be set up composed of the representatives of Pošta and ZIB, that should assess the situation on the ground and prepare the so-called Protocol on the Degree of Development.
The said working group came up with the Protocol already on 10 February which stated that of all the works envisaged ZIB carried out only the dislocation of underground electrical and water installations, and that the excavation works for the foundation are now in progress.
The interesting thing about the Protocol is that at the moment of the conclusion of the contract between Pošta and ZIB in 2008 no building was envisaged at the given lot and one of the reasons for the delay was the fact that ZIB waited for the adoption of amendments to the plan which occurred in September 2009 before starting the development. However, the official data depict a different scenario.
Changes to planning documents
The changes of the DUP “Topolica 1” from December 2005 envisaged for the given lot the residential and commercial building of the size ground floor + 4 to 5 upper floors (G+4-5), which is understood to have provided grounds for the Contract conclusion between Pošta and ZIB in the first place. The contract itself does not provide information on the gross floor area, nor the number of floors, nor the total investment value, which enabled at a later stage when the DUP was changed to increase the number of floors of the future building without any problems.
An excerpt from DUP Topolica 1, December 2005
In July 2009, a year after signature of the Contract between Pošta and ZIB, the Amendments to DUP Topolica were put for public discussion, which instead of 5 storeys envisaged now a 7-story building at the lot owned by Pošta. During the public discussion no one had any objection on the number of floors envisaged, nevertheless the final draft of the DUP approved in September 2009 had another, eighth storey added. The amendments to the plan were done by “Basketing” known as of earlier for their cooperation with ZIB and Žarko Pavićević.
An excerpt from Draft DUP, March 2009
An excerpt from the final DUP, September 2009
Particularly disconcerting is the fact that the Protocol itself states that after signing the Contract ZIB “started the building design based on the unofficial information on planning documents”. This is indicative of suspicion that ZIB, through its owner, Žarko Pavićević, had privileged access to information on final solutions in the Detailed Urban Plan, in this case the final number of storeys allowed.
This reconfirms our suspicions that the Mayor of Bar is unable to keep his office, in which capacity he has the authorities to initiate the amendments to planning documents and act in public interest, separate from the need that as the majority owner of ZIB to procure for his company as much profit as possible. In this specific case, there is no official record of anyone during the public discussion for G-13 asking for the increase in the number of floors, implying that the agreement with “Basketing” was made in a different arrangement.
No Contract termination, only deadline extension
The representative of Pošta informed the Ministry of Finance of the situation with ZIB and asked for advice how to proceed. In early March, in a letter to Pošta, the Deputy Finance Minister, Periša Perović indicated two possible scenarios.
The first scenario implied the termination of Contract with ZIB, the payment of agreed penalty for being in default and calling a new tender without prior approval from the Government. The second scenario also implied the collection of the agreed penalties and conclusion of an Annex to the Contract to provide for new arrangements with ZIB, i.e. set the new deadline for completion of works. Pošta would need prior Government approval for the Annex because the previous approval did not envisage any possibility for extension of the deadline.
According to the terms and conditions of the 2008 Contract, as the investor, Pošta Crne Gore was obliged to monitor the development and far before the deadline expiry note that ZIB would be unable to hoour its commitments. Moreover, by signing the Contract ZIB undertook to provide guarantees to Pošta as a security for timely execution of works, but it is not known whether Pošta has ever used it to compensate for damages caused by the breach of the Contract. This leads to a conclusion that Pošta has taciturnly enabled ZIB to be in default without having paid any penalties to date.
In mid March this year ZIB approached Pošta with the demand to conclude an Annex to the 2008 Contract to extend the deadline for completion of the construction works by the end of 2012. It is noteworthy here that one of the criteria for winning the tender was the deadline by which ZIB committed to complete the building, which has been doubly extended by this Annex. On the occasion, ZB informed Pošta that they have agreed with the Atlas bank, should there be a need, to support them in the project execution.
Finally, in early May this year, the Board of Directors of Pošta approved the text of the Annex of the ZIB Contract which was sent to the Government for approval. The Annex was considered in the last session of the Government held on 02 June this year.
At the proposal of ZIB, the Annex envisages the extension of the deadline for the completion of works by the end of 2012 and sets for the first time the total area of business and residential premises belonging to Pošta as per this deal. Thus, Article 1 of the Annex envisages 1,790m2 of residential and 329 m2 of business premises belonging to Pošta.
Instead of taking over the apartments, Pošta decided, as per the Annex, for ZIB to pay the total of 3.2 million euro instead for the 1,790m2 of residential area, or 1,800 euro/m2 which exceeds by far the current market prices. Obviously, the greater price per m2 enables ZIB to transfer to Pošta less space in residential area. The 329 m2of business premises are estimated at 1.12 million euro, or at the rate of 3,400 euro/m2.
With this Annex, ZIB undertakes to secure blank bills as a security for timely execution of works, implying that ZIB failed to do so at the time of entering into the 2008 Contract with Pošta.
On the occasion of signing the 2008 Contract, Pošta Crne Gore, i.e. its director Martinović and the Board of Directors have most probably “turned a blind eye” and plunged into the development deal without any performance guarantees issued by ZIB. Thus, they failed to properly protect the interests of this state-owned company which has unfortunately turned to be a huge mistake in the case of cooperation with ZIB. Notwithstanding the existence of adequate grounds for one-sided termination of the Contract with ZIB for the two years of its duration, the leading people of Pošta never put this issue on the agenda.
