Etika.ba publishes the Analysis on Delay in Sarajevo Tower Construction, which the Korekt d.o.o. Sarajevo submitted to the project actors on 13
October 2020. Due to huge interest of the public, buyers, construction and legislative communities and under the risk of corruption in
judiciary, it is justified and in public interest to publish this specialised report in full, giving it to the court of public. Further
on, read about the conflict between co-investor Smart Invest d.o.o. with the main contractor ANS Drive d.o.o. and sub-contractor of façade
works, Euro Profil d.o.o. Find from the Analysis what was the role of banks: Sberbank BH d.d. and Sparkasse bank BH d.d., as well as the role
of Sanin Bogunic, KS Prosecution Office's Prosecutor.
The Korekt d.o.o. has completed the overall analysis of the opinion of stakeholders, related to the current interruption of construction of the “Sarajevo Tower” structure. In doing so, we carried out comparative analysis of official standpoints and documentation base. We have used an additional method of logical opposing of contrary positions and have executed elimination of unfounded, incorrect and manipulative claims by all involved parties. The conclusions related to the reason for construction interruption have been made based on the above.
The Korekt d.o.o. from Sarajevo was invited to do the analysis. The invite came from one of the stakeholders, Smart Invest d.o.o. (co-investor in the structure). The Korekt d.o.o. holds expertise in the field of business ethics and business dealing concordance with international and domestic laws, standards and best business practices. In scope of our mission, we observe and analyse business processes and practices, disputable business relations, and debatable administrative and judicial procedures, establish irregularities causing damages to legitimate and legal business interests of clients, and prepare public and specialised reports. The Korekt d.o.o. Sarajevo holds a specific expertise in combating forbidden practices and corruption, fraud, extortion, collusion and obstruction of evidences risks, and all other types of unprofessional and unethical behaviours, indicating the possibility a forbidden practice's phenomena.
The Smart Invest accepted to go through rigorous standards the Korekt d.o.o. set as the condition for engagement; those include the right and obligation for Korekt d.o.o. to submit the report against the involved stakeholders, as well as against Smart Invest should the analysis show irregularities within the very Smart Invest. To support the above, I herewith present Article 1, paragraph 1, item 7 of the Contract on Analysis, Assessment and Protection of Reputation, which reads:
- In the situations when the Supplier, during the analysis of documents or in any other way, learns or suspects that the parties in the subjected case act illegally, that there is a risk of corruption or other forbidden practice, the Supplier will independently carry out submission of a report to the responsible bodies on its own behalf, as a reporter, and/or witness, wtihout the right of the Client to decide or to prevent the Supplier in acting pursuant to the legal obligations. In the event that the Client disagrees with the submission of report by the Supplier, the said disagreement cannot be used as a justified reason for cancellation of this Contract.
The Article 4, paragraph 1 of the Contract sets that Korekt d.o.o. can only present the truth in view of all involved parties, regardless the fact that the stakeholders frequently have contrary opinions between them, with a lack of objectivity:
- Article 4: The Supplier is committed to carry out all duties professionally, transparently, truthfully and fair, both towards the Client and all involved parties in the case, in compliance with all laws and regulations, as well as in compliance with the international standards of business and professional ethics.
Please find attached: Analysis of Sarajevo Tower Construction Interruption through Overall Stakeholders Opinion Analysis and Conclusions.
Bojan Bajic, Director, Korekt d.o.o., Sarajevo (illegible signature) (round stamp of Korekt d.o.o.)
ABOUT US – Korekt d.o.o.: In scope of our mission, we observe and analyse business processes and practices, disputable business relations, and debatable administrative and judicial procedures, establish irregularities causing damages to legitimate and legal business interests of clients, and prepare public and specialised reports. The Korekt d.o.o. Sarajevo holds a specific expertise in combating forbidden practices and corruption, fraud, extortion, collusion and obstruction of evidences risks, and all other types of unprofessional and unethical behaviours, indicating the possibility a forbidden practice's phenomena.
Analysis of the Sarajevo Tower Construction Interruption through Overall Stakeholders Opinion Analysis
As set by the contract between co-investors ANS Drive d.o.o. and Smart Invest d.o.o., contract between investors and main contractor, and contracts between investors and buyers of flats, the structure “Sarajevo Tower” should have been completed and inhabited by 01 September 2019. Thirteen months after the foreseen deadline for completion of the works, the structure is still unfinished; currently, the works have been interrupted at the construction site and there is no clear plan when they could restart or when the works might be completed.
The investors, ANS Drive and Smart Invest are currently in a phase of open conflict ongoing through legal actions and press releases.
The specificity of this dispute is additionally burdened by the fact that the ANS Drive d.o.o. is a main contractor, in addition to being in a role of a co-investor in the project as well. As assessed by Korekt d.o.o., this specificity has installed a risk of a conflict of interest into the foundations of the business relationship between the co-investors. It is the usual practice for the system of responsibility and collection of penalties for delays in construction to be set in a way where the investor collects penalties from main contractor, and for the main contractor to collect them from the subcontractors, etc. It is for this conflict of interest, i.e. the flaw installed in the foundation of the business relations, that it is hard to practically implement the policy for collection of penalties for delay in construction, regardless the fact that it had been foreseen by the construction contract. Namely, the main contractor will use their position as a co-investor with a 50% share of investment to stop the other co-investor from collecting penalties. Following this course, it happens that the main contractor has no interest to prove that the subcontractors were late in construction, because that would cause them to admit their responsibility. It all implies the problem of collection of penalties for late construction by buyers of flats, because time and promptness for the buyers to move into their flats and collect their claims is conditioned by the resolution of dispute between co-investor and main contractor.
The case has drawn public attention in the last several months when about 420 buyers and their families gathered into an organised group to start seeking answers from the responsible persons on reasons and causes for the interruption in construction, and making a justified pressure on all stakeholders to complete the structure as soon as possible and to put it in operation. In the conditions of COVID-19 pandemics, the buyers decided to use the method of talking between themselves and with the responsible persons using the online application ZOOM. The selected representatives of buyers hold individual meetings with the responsible persons and then, using ZOOM, they report to their neighbours on the situation.
Increased activity of the buyers caused reaction from all stakeholders who reacted through official letters and releases presented at the same time in online buyers’ groups. Therefore, it leads to impression that all stakeholders pay attention whether their addresses will create sympathies or aversions among the byers of flats.
The analysis of official letters sent towards the end of September and beginning of October 2020 by:
- Smart Invest d.o.o.; (Director Elvedin Mahmutovic),
- ANS Drive d.o.o.; (Director Asmir Dzevlan),
- Zberbank d.d.; (Director Enver Lemes),
- Sparkasse bank d.d.; (Director Sanel Kusturica),
shows that the shortest description of the interruption of works can be “FACADE PROBLEMS”.
ANS Drive d.o.o. and its Director, Asmir Dzevlan, charged Director of Smart Invest, Elvedin Mahmutovic, saying he has a specific “target” to the façade subcontractor, the company Europ Profil, represented by Elmedin Pinjic. The ANS Drive’s thesis is that Elvedin Mahmutovic (Smart Invest) has been using the company Zarka d.o.o., which is a supervisory body on the site, to revenge to plasterer Pinjic and to wrongfully stop the façade works.
It has been known that the plasterer Pinjic reported the representatives of the Smart Invest, Sedin Halilagic and Elvedin Mahmutovic in June 2019 for requesting BAM 200,000 not to activate bank guarantee and to “let him” work in peace, as stated by Pinjic. The Sarajevo Canton (SC) Prosecution Office processed this report and arrested Sedin Halilagic from Smart Invest at the sport receiving EUR 30,000 from Elmedin Pinjic as the first instalment. It was followed by the Federal Police Administration arresting Elvedin Mahmutovic, director of Smart Invest, too. Trial is ongoing and Sedin Halilagic and Elvedin Mahmutovic have been released from detention to conduct their defence.
The thesis of the Smart Invest in view of arrest and criminal procedure is that the plasterer Elmedin Pinjic was in real danger from activation of bank guarantees due to delay with works, because it was his fault. Therefore, he submitted a false report to the Federal Police Administration (FPA) under the thesis that the money, which he was supposed to return as a debt based on the original façade subcontractor, Company MTH-ARI (Director Jusuf Humic), was falsely turned in his story to the FPA into the money allegedly sought after as a bribe. The SC Prosecution Office and FPA have “fallen for this story” and instead of arresting Pinjic, as a false reporter, they arrested the Smart Invest representatives. Smart Invest claims that ANS Drive has been attempting to get an upper hand on Smart Invest in every possible way; they tried also through a court trial, but the judge refused temporary court measure requested by ANS Drive. Now, the same is being done through manipulation with buyers, banks and public.
Korekt d.o.o. has analysed the situation around the arrest and prepared a criminal and legal analysis based on which the Korekt d.o.o. submitted a criminal report for misconduct on 15 September 2020 against prosecutor Sanin Bogunic and Federal Ministry of Interior’s inspector, Zoran Drasko.
For the purpose of the Analysis of the Structure's Current Construction Interruption, we will not primarily focus on different standpoints of the involved parties in relation to arrests, including the Korekt’s opinion, because all of the theories of what had really happened will have to wait for the finalisation of the criminal procedure, which will take a few more years before it becomes legally valid. Having in mind that the buyers have no time to wait for the court ruling in the case of arrests, which by itself will not resolve the completion of construction, it is necessary to analyse the current interruption from the angle of business ethics, and to reveal which party is misusing the criminal procedure to achieve own business goals.
DEFINITION OF CONFLICTED PARTIES:
The first group is made of:
- ANS Drive d.o.o. (main contractor and co-investor),
- Euro Profil d.o.o. (façade subcontractor),
The second group is made of:
- Smart Invest d.o.o. (co-investor),
- Zarka d.o.o. (supervisory body),
The first group accuses the second group that the supervisory body, Zarka d.o.o., at the order of Smart Invest, has been holding back the plasterer in his work.
The second group accuses the first group of being unprofessional and wanting to take over the whole project from Smart Invest through blackmails.
The third group is made of:
- Zberbank BIH d.o.o. (construction creditor),
- Sparkasse bank d.d. (construction creditor),
The third group is officially being neutral in relation to the conflicted parties, but they have put themselves de-facto on the side of the first group (ANS Drive d.o.o. and Euro Profil d.o.o.), because the letter they sent to the parties creates an issue around the supervision of the project. In this way, in view of understanding the situation, they took the stand of ANS Drive and Euro Profil.
The fourth group is made of buyers of the flats, who are mostly taking a neutral stand and trying to objectively review the situation, due to the primary interest of getting their flats.
AIM OF THE ANALYSIS:
Due to the above, with presence of complex interests and different combinations of business interests, the Korekt d.o.o. has decided to bring the analysis down to the absolutely demonstrable facts related to the primary relation between the façade subcontractor, Euro Profil, on one and the supervisory body, Zarka d.o.o., on the other side.
The goal is to use the analysis to establish whether the supervisory body, Zarka d.o.o., has been working in concordance with the contract and its duties or not, and whether the Euro Profil has been working in concordance with the contract and their duties. Resolving this dilemma will provide easier understanding of the behaviour of other involved parties and above stated stakeholders.
INSTALLATION OF FAÇADE:
Through the analysis of contractual provisions and business documentation created between the involved parties, Korekt d.o.o. identified several disputable situations related to installation of façade. Disputable events took place at almost every segment of implementation of contractual provisions and installation of façade, causing the “friction” between the façade contractor on one, and co-investor, main contractor and supervisory body on the other side.
- Difficulties in obtaining bank guarantees by the subcontractor Euro Profil,
- Violation of deadline for completion of the works,
- Mounting a wrong façade scaffolding,
- Purchase and installation of wrong stone wool,
- Purchase and installation of cheaper glue,
- Purchase and installation of wrong final layer of façade “final plaster”,
Analysis of these disputable situations will be made through chronology of the events from the moment of signing the contract on façade works until today, with listing and quoting relevant documentation.
- Offer and execution of contract on installation of facade:
Euro-Profil d.o.o. sent its Offer No. 4/19 to ANS Drive on 06 February 2019.
Contract on implementation of the works was signed the next day, 07 February 2019. The total price for the works is BAM 2,324,916.70 + VAT. The Contract, in its Article 4, foresees the following: “The subcontractor is committed to execute the works professionally, with quality, according to norms and standards related to the contracted type of works within the period of 180 calendar days”.
Remarks: The reason for Euro Profil to sign a contract only one day after sending the offer lies in the fact that the façade works were supposed to be done by the company MTH-ARI, owned by Jusuf Muhic, who withdrew from the works. His offer and the almost completed contracting procedure was taken over by Euro Profil who took the documentation from Jusuf Muhic just changing the name and address on the company on the first page, and entered into the contracting on the next day. Circumstances why and how the change of subcontractor happened leading to introduction of a new subcontractor almost “over night”, has been elaborated in detail in criminal and legal analysis and the submitted criminal report against the prosecutor and inspector of the FPA; therefore, those circumstances are of higher significance for the criminal procedure than this analysis.
- Obtaining bank guarantees by the subcontractor Euro Profil:
Obtaining the bank guarantees by the façade subcontractor is a significant element in timely installation of façade within the contracted 180 days, because the Contract on Installation of Façade in its Article 7, paragraph 1 foresees that the advance payment will not be transferred to the subcontractor until the said does not submit a bank guarantee with a validity of 12 months: “The Client will not transfer the advance payment unless the subcontractor submits the advance bank guarantee and bank guarantee for proper completion of the works, prior to transfer of the advance”.
The Sberbank d.d. authorised Euro Profil with a bank guarantee on 14 March 2019, i.e. 35 days after the Euro Profil executed the Contract on Installation of Façade (07 February 2019).
Korekt d.o.o. checked why the process of obtaining bank guarantee took this long, and has found out from experts in the banking sector that the reason for this is that those requesting bank guarantees usually do not have good financial business indicators and/or do not have quality collaterals to be pledged to the bank as a guarantee to receive the bank guarantee.
Jusuf Muhic, owner of the above stated company, MTH-ARI has stated to Korekt that they were able to obtain the subjected guarantee in a matter of a few days, but that the company Euro Profil had probably been unable to secure the requested quality collateral, which extended the process to 35 days, which caused the delay in the works from the very start at the responsibility of Euro Profil.
Conclusion of the Korekt d.o.o.: Responsibility for the initial delay for the 35 lost days is 100% down to the subcontractor Euro Profil d.o.o. and their financial incapacitation to effectively and quickly resolve this contractual duty.
- Advance Payment to Euro Profil:
Euro Profil d.o.o. issued to main contractor ANS Drive an advance invoice No.: 02/19 dated 15 March 2019, in the amount of BAM 697,475.01 + VAT of BAM 118,570.75, making a total of BAM 816,046.76.
Seven days later, on 22 March 2019, the ANS Drive d.o.o. issued an advance invoice to Smart Invest No. 015/19 for the advance payment to Euro Profil for the façade works, in the total amount of BAM 408,022.88, which is exactly 50% of the total advance Smart Invest was supposed to pay. As already explained above, ANS Drive and Smart Invest are co-investors on this project and they bear all costs in proportion of 50:50.
On the same day, 22 March 2019, the Smart Invest carried out payment of 50% of the total advance in the amount of BAM 408,022.88 to the account of ANS Drive, and ANS Drive, on the same day, 22 March 2019, transferred the amount of BAM 697,475.01 to Euro Profil and carried out the payment of VAT in the amount of BAM 118,570.75.
Conclusion of the Korekt d.o.o.: ANS Drive as a main contractor was seven (7) days late in processing the advance payment, because it is indisputable that the Euro Profil sent the advance invoice to the ANS Drive on 15 March, while it was only seven (7) days later that the ANS Drive sent the advance invoice to the Smart Invest. Smart Invest did not have any days of delay in processing the payment.
- Euro Profil contracts purchase of materials for installation of façade:
Euro Profil d.o.o. as a subcontractor for installation of façade, executed a contract on material purchase with Percon d.o.o. from Sarajevo on 16 April 2019. On behalf of Percon, the contract was executed by Director Bahrudin Zjajo (Protocol No.: 64-04/19), and for Euro Profil it was director Aida Pinjic. Previously mentioned Elmedin Pinjic is a husband of Aida Pinjic, and otherwise the person who managed all contracting and works on behalf of the Euro Profil.
This contract was executed 25 days after the Euro Profil received the advanced payment to its account (the above elaborated advance payment dated 22 March 2019). In this way, the unjustified loss of days by the Euro Profil rose already to 60 days 35 days for obtaining the bank guarantee and 25 days from the advance payment to the execution of material purchase contract).
An important element of the contract is given in Article 8.1. of the Contract, where it says that Percon, as a supplier of materials, will supply the said within the deadline of 10 business days from the day of advance payment by Euro Profil.
By the analysis of this contract, the Korekt d.o.o. established that it contains a significant irregularity, which is in the root of the current construction interruption of the Sarajevo Tower. Namely, the contract on construction, signed by the co-investors, sets each element of construction individually. In the part related to the installation of the final layer of façade, every document foresees installation of the final layer of organic plaster called: StoIspolit. The said product was listed in the contract executed between the co-investors and main contractor with the subcontractor Eur Profil d.o.o. on 07 February 2019.
Still, another product for the final layer of façade is listed for the first time in the contract between Euro Profil and supplier: StoSilkolit for 9,337 square meters, while the originally foreseen period: StoIspolit stays for the reminder of the surface, i.e. 12,797.5 square meters. Euro Profil d.o.o. had not asked, nor was it given an agreement by the client to contract purchase of StoSilkolit.
Conclusion of the Korekt d.o.o.: Euro Profil d.o.o. was not permitted to order and plan installation of product not foreseen by the contract wtihout an agreement of the investors. The contract signed between Euro Profil and ANS Drive and Smart Invest, in its Article 12, paragraphs 9 and 10, set the following: “9. Subcontractor does not have the right to replace any material from teh agreed project and technical documentation, nor to acquire any privileges in the event of installing material or equipment better in quality than the materials set in the technical documentation;
- Prior to any purchase or installation of materials and equipment, the subcontractor is obliged to obtain agreement by the authorised representative of the Client;”
- ANS Drive sends the FIRST early warning to Euro Profil for the delay in works:
On 18 April 2019, Document No.: 099/19
Technical Director of ANS Drive, Avdija Custovic, d.i.g. sends an early warning to Euro Profil, saying:
“By the daily observation of the implementation of contracted works and comparison with the adopted dynamics of the works, as a main contractor for the Sarajevo Tower, we have established the following and wish to warn you on:
- Based on the Article 12 of the Contract, you, as a contractor, were obliged to supply a dynamic plan, but this has not yet happened.
- Pursuant to the Contract, i.e. Article 23 of it, you as a contractor, took over the obligation to submit documentation: Programme of Organisation and Technology of the Execution of Works, which you had not done, and therefore you have disrupted the dynamics of the works.
- You have not submitted the workshop drafts and details,
- On 15 April 2019, it has been established that you do not have the sufficient number of people; in relation to the work force, the planned number of people required for the submitted dynamics is 14, and you have 6 engaged persons,
- It has been established that you are late with the execution of the contracted works; according to micro-dynamic plan, the works should have started on 06 April 2019 for the levels 3, 4, 5 and 6, but with 15 April 2019, those had not started,
By this way, in accordance with the terms of the contract on execution of the subjected works, we are warning you that you are obliged to speed-up the works, in order to fulfil the obligations within the given deadline, and not to cause chain delay in execution of the works of other subcontractors… Should this not happen, we will have to use all legal and factual means to protect ourselves as a main contractor, responsible towards the investor for all the works, including yours.
Conclusion of the Korekt d.o.o.: This letter leads to conclusion that the subcontractor has not done almost anything within the first 70 days of the contract. From the critical tone of the ANS Drive towards the Euro Profil on 18 april 2019, it is concluded that the alliance of these two companies against the Smart Invest emerged only later. IT is visible from this letter that the main contractor, ANS Drive is aware of its responsibility towards the co-investor Smart Invest for the delays caused by subcontractors.
- Problems with mounting of façade scaffolding:
In addition to the problems with bank guarantee and slowness in contracting material to be purchased, the subcontractor Euro Profil was faced with a problem of mounting façade scaffolding. In March, it works on mounting of pipe scaffolding, but the design engineer, entrusted to design façade scaffolding, refused to accept pipe scaffolding, which is not foreseen for constructions above 50 meters in height, and Sarajevo Tower's height is about 90 meters. Euro Profil has lost time on mounting and dismantling the wrong scaffolding, and repeating the process with mounting of the scaffolding appropriate for high structures.
The first preliminary situation submitted by Euro Profil on 30 April 2019, an exaggerated number of invoiced square meters is listed for scaffolding rental, amounting to 11,053.88 square meters x BAM 2 / square meter. In reality, a total of 4,403.88 square meters were mounted, which is the amount to be paid in terms of rental. Supervisory body, Zarka d.o.o., had not noticed this fact at the time, and it was only with the record in the construction log, at the occasion of submitting the second preliminary situation on 31 May 2019, that the supervisory body stated that there was 4,403.88 square meters mounted in April and an additional 3,432.05 square meters in May. At this occasion, the authorisation was given for payment of 7,835.93 square meters of scaffolding.
Conclusion of the Korekt d.o.o.: It is already visible that Euro Profil d.o.o. had not disposed with sufficient technical, financial and organisational capacities for the adequate implementation of contractual provisions to which it committed.
- ANS Drive sends the SECOND early warning to Euro Profil for violation of contractual provisions:
On 21 May 2019, Document No.: 132/19
Technical Director of ANS Drive, Avdija Custovic, d.i.g. sends the second early warning to Euro Profil, saying:
“By the comparison with the adopted dynamics of the works, as a main contractor for the Sarajevo Tower, we have established the following and wish to warn you on:
- You have submitted a plan of dynamics on 16 May 2019 with the plan for the start of works in April 2019 and deadline for completion of eight months, which is unacceptable and in contrary to the provisions of the Contract. It is set by the Article 12, paragraph 1, quoted: “to submit the plan of dynamics harmonised with the plan of the main contractor before the start of the works.” Plan of dynamics of the main contractor was provided to you already on 12 February 2019.
Additionally, the Article 4 of the Contract, sets the deadline for implementation of the works at 180 calendar days. We wish to emphasise that you had been introduced into the work on 12 February 2019. In relation to the above, we request from you to submit a corrected plan of dynamics in accordance with the Contract and the above facts.
- You had not submitted the plan of organisation and technology of the execution of works, which you were obliged to do in accordance with the Article 23 of the Contract, quoted: “Within the deadline of 7 days from the execution of contract, the subcontractor will provide the Client for their authorisation the programme of organisation and execution of works; the said will give technical description of the organisation of works, plan of dynamics in execution of the works, plans of dynamics for engagement of the workforce, mechanisation.
- You had not submitted the forms with attestation of technical documentation, as foreseen by the article 12, paragraph 10 of the Contract, quoted: “Before the purchase or installation of materials and equipment, the subcontractor is obliged to obtain agreement from the responsible representatives of the Client”; on the contrary, without authorisation and agreement, you purchased stone wool, which had not been set by the contract. By this, you violated the Article 12, paragraph 9 of the Contract, quoted: “Subcontractor does not have the right to replace any material from the agreed project and technical documentation, nor to acquire any privileges in the event of installing material or equipment better in quality than the materials set in the technical documentation;
Namely, you brought yourself in the situation of not executing the works on thermal isolation and flat level surfaces of the façade, which breaks the deadlines and causes loss of time, as you had been warned by the email sent on 15 May 2019 by the technical staff of the construction site.
- You do not clean your waste and by this you slow the implementation of accompanying works. (IMAGE 1), and not the flats, after the work on positions.
- You do not harmonise your work with the works of other subcontractors (Article 12, paragraph 7 of the Contract). You are negligent towards installed positions (copper pipes by MOUNTAIN company) and those are being pulled out, while they had been properly installed and protected.
- You do not maintain the control book for the scaffold, which was requested from you.
Herewith, we wish to ask you to inform us as soon as possible in writing on the measures taken and on resolving the above issues, in order to catch up with the dynamics and carry out without interruptions the whole construction process. We are warning you again about the duties to adhere to all contractual obligations and special provisions in construction. Otherwise, we will have to use all legal and factual means to protect ourselves.
- Attempt at Installation of Wrong Stone Wool by the Subcontractor “Euro Profil” d.o.o.
As already seen from the above presented warning sent by ANS Drive to subcontractor Euro Profil d.o.o. on 21 May 2019, the subcontractor purchased wrong stone wool, which did not comply with the standard, and had it delivered to the construction site. It planned to install it before prior submission of a request for authorisation of materials.
On 23 May 2019, a construction site meeting was held. It resulted with the minutes No. 08/19 (ANS), where section 1.3 shows Company: Euro Profil d.o.o. considered issues related to installation of facade, and one of the items (i) concludes the following: “Supervision concluded that the material currently at the site (KI FKD-N) does not comply with the criteria specified in the Contract and it is not in the system StoThermMineral and it must not be installed (Imamovic)” (author’s note: meaning Zijo Imamovic, director of Zarka d.o.o. – supervisory body in the project).
On the same day, 23 May 2019, branch office of the Austrian company STO from Zagreb sent a letter to its representative in BiH, Percon d.o.o., who forwarded the said to Sedin Halilagic from Smart Invest stating that the Austrian company STO cannot authorise installation of materials already provided at the construction site by the Euro Profil d.o.o., the (KI FKD-N) from the producer Knauf Insulation, and that they can authorise only the KI FKD-S Thermal from Knauf or Frontrock Max E from Rockwool as the products compliant with the standard of the system.
Besides the opinion of supervisor Zarka d.o.o. stated at the meeting held on 23 May 2019 that the supplied KI FKD-N type of stone wool could not be installed and besides the letter sent by STO Austria from Zagreb, affirming the right opinion of the supervisory body, the Euro Profil d.o.o., in spite of it all, submitted the request for authorisation of materials on 24 May 2019 requesting authorisation of the wrong material, KI FKD-N, for which the authorisation was not issued.
It was only on 01 June 2019 that Euro Profil submitted a correct request for authorisation of materials, namely stone wool Rockwool Frontrock Max E, which was authorised by the supervisory body Zarka d.o.o.
- Attempt at Installation of Cheaper Glue by the Subcontractor “Euro Profil” d.o.o.
On 07 May 2019,
Muhamed Hasanovic, on behalf of Euro Profil, wrote an email to ANS Drive:
“We herewith inform you that we will stop the implementation of façade works on the Sarajevo Tower structure on 08 May 2019, because we believe that the quality of the supplied glue (stolevell duo) was not appropriate and we do not want to bear any responsibility for the consequences that might be caused by the use of this glue in the period so far.
Occurring problems: – quick drying of glue, large, hardened materials when preparing – mixing glue, falling of styrofoam from loggia soffit in a very short period, styrofoam comes off even four days after being glued and the glue stays on it, and this is very worrying.
We herewith ask the supplier company Percon d.o.o. to give their opinion in view of this problem, because 35 people currently on the structure cannot work due to it.
All of the above and the delays caused by this problem, i.e. delay in implementation of façade works are at the expense of the supplier, Percon d.o.o. (STO representative).”
On 07 May 2019,
Adnan Zjajo from Percon d.o.o. sent an email response to the previous accusations by Euro Profil:
“We are surprised by your statements, especially after a collective meeting held on 06 May 2019, with participation of Mr Bahrudin Zjajo, Director of Percon d.o.o., Mr Pasan Sabanovic, supervisory body who is present on the structure every day on behalf of the supplier Percon d.o.o,, Mr Muhamed Hasanovic, structure manager on behalf of Euro-Profil commerce d.o.o., and Mr Adnan from Euro Profil Commerce d.o.o. as representatives of the supplier.
The same meeting provided adequate preparation based on technical sheet of the StoLevellDuo products; it was drifted on the thermal-insulation plate, which was then glued to the loggia soffit. The said remained glued until this day. When mixing the product, there had been no lumps, no problems with mixing, no quick drying stated by your side.
We wish to remind you that you had received a warning on 30 April 2019 by the Percon d.o.o. representative, Mr Pasan Sabanovic, about leaking rainfall on “stored” material StoLevellDuo, which is, the same as any other cement product, sensitive to humidity. The same fact causes lumpy material. We remark that you are violating the contractual provision of the Article 4, paragraph 1 stating that it is your obligation to provide adequate storing place for the delivered materials.
With all these pieces of information at hand, we can reach the conclusion: Incompetent preparation of product for the use and untimely use of the said, indicating incompetent workers on the structure; this presents a direct violation of the contractual provision from Article 4, paragraph 1 of the Contract…
In this way, we plead with you to stop providing false statements, because our side has proven a number of times that the product is more than adequate for this use. Additionally, we would like the threats of some alleged costs and end of work to stop, because Percon d.o.o. is not responsible for incompetent use of the product by you…
Besides the fact that we believe that the visit of a preparation master from STO Ges.m.b.H. from Austria is totally unnecessary, he will still arrive on Friday, 10 May 2019 for the already agreed meeting with Mr Adnan at 14.30 hrs, which he had already confirmed. All eventual questions will be clarified at the meeting, with presence of ANS Drive d.o.o. representatives, supervisory body Zarka d.o.o, Euro Profil Commerce d.o.o. and Percon d.o.o., and we will prove that all your statements are untrue.
On 08 May 2019,
Euro Profil d.o.o. sent an email to ANS Drive and Smart Invest:
Dear Sirs / Madams,
We are contacting you in relation to implementation of façade works on Sarajevo Tower structure in Sarajevo. Namely, after the start of implementation of façade works and gluing the first EPS panels, we faced the first problems; the glued plates fall off on their own after 4-5 days (attached video and photos as evidence), and we had established that it was related to use of inadequate glue for gluing EPS plates. This is related to the glue StoLevelDuo (technical sheet is attached)…
As we concluded and established from the given reasons that the glue StoLevellDuo is inadequate to be used in our case, and it is only possible to use it for dawning of façade net, we are herewith asking you to authorise the use of another material, from the BAUMIT producer, whose characteristics are attached. Thanking you in advance, Best regards!
On 08 May 2019,
Adnan Zjajo from Percon d.o.o. addressed Sedin Halilagic from Smart Invest in relation to the previous email from Euro Profil:
Dear Sir, we wish to thank you for your email. This email you forwarded to us, originally sent by the contractor Euro Profil Commerce d.o.o., is, in fact, a manipulation with data from technical sheets, because:
- StoLevellDuo has been certified with 9 international attestations issued by the German Institute for Construction Technique DiBt – the largest laboratory for construction materials in Europe…
- StoLevellDuo is successfully used all over the world – Baumit Procontact is a product targeting BiH and partially low-budget Croatian markets.
- On two separate meetings and testing on the spot, functionality and capacity of the StoLevellDuo was proven with representatives of both companies, along with incompetence of unqualified workers of the contractor Euro Profil Commerce d.o.o.”…
Having in mind we have disproved all false allegations and corrected and submitted correct information on products, we can conclude that the contractor Euro Profil Commerce d.o.o. does not have adequately qualified personnel to implement façade systems. The functionality of the product was proven on two meetings directly; while the material is being prepared “in front of us” it is working, but while no one is there, the material is not all right. Alternatively, this is an attempt to gain financial benefit by the contractor Euro Profil Commerce d.o.o. by using false allegations to replace a superior product with an inferior one, which is cheaper and thus leading to financial gain. At the same time, this damages you, as the project investor…
Conclusion of the Korekt d.o.o.: Following the correspondence, a master from STO Austria arrived and affirmed all claims by Adnan Zjajo from Percon d.o.o., related to incometence of subcontractor Euro Profil d.o.o. At this occasion, he carried out mini education of Euro Profil staff, resulting with continuation of installation of StoLevellDuo glue. It can be concluded that the absolute culprit for the issues with glue was, again, Euro Profil d.o.o.
- Euro Profil d.o.o. sends Notice to the Investors ahead of Contract Termination
On 29 May 2019,
Euro Profil d.o.o. sent the subjected notice to the addresses of ANS Drive and Smart Invest, stating in the title: Information on Observed Deficiencies and Notice ahead of Contract Termination.
Acting pursuant to the contractual obligations, the sender of this request has carried out a part of the contracted works in line with the dynamics of the works on the construction site. Therefore, it issued a preliminary situation with the amount of BAM 78,367.02. After the receipt of the submitted situation (in relation to which there had been no objections in the construction ledger), you have verbally informed our principal (author’s note: a solicitor is writing on behalf of Euro Profil d.o.o.) that you will not pay the invoiced amount, and that you insist for the said to be reduced for 30%…
With the aim to avoid the situation in which Euro Profil d.o.o. Visoko suspends execution of works, or terminates the subjected contract, we are herewith inviting you to pay the remaining debt of BAM 23,510.11 within the deadline of eight (8) days from the receipt of this letter and to refrain from similar acts in the future.
Additionally, we are herewith pointing out the fact that your rights from the contract have been additionally secured by a bank guarantee which our principal secured. Therefore, the quality of hte work and similar cannot present any reason for termination of payment for the works done (even if there had not been for a bank guarantee, your company would not have the right to terminate the payment of a quality and properly conducted works).
In addition to the above, we wish to point out the fact that you have provided our principal with the possibility to access the construction site only in April 2019. Also, in line with your plans, forecasts and agreed dynamics of the works, you were in obligation to hand over the structure in full to the Euro Profil d.o.o. Visoko until the day of this letter in order for the workers of the said company to be able to carry out the contracted works uninterruptedly and safely. As you had not done so, i.e. as the subjected structure is still under construction, due to safety reasons the Euro Profil cannot carry out the works on the facade in a way and in the capacity it would have been doing if the structure had been ready for the façade works.
Having in mind the above, if you fail to carry out your contractual obligation, i.e. if you do not pay the due liability, the sender of this request will start with preparations to fully halt the works, and we will inform you on the termination of contract in a separate notice.
Conclusion of the Korekt d.o.o.: With this letter, Euro Profil d.o.o. sends a threat of terminating contract due to reduced first preliminary situation in the amount of BAM 23,510.11, out of the total amount of BAM 78,367.02, making it BAM 54,856.91 paid to Euro Profil. One should have in mind that the investors had previously paid an advance payment to Euro Profil in the amount of BAM 697,475.01. Euro Profil d.o.o. submitted the first preliminary situation in the amount of BAM 78,367.02 in April. In practice, this means that they implemented only about 11% of works in relation to the received advance and only about 3% in relation to the total contractual value. By reduction of the first peliminary situation, the investors had not disputed the works done, but they had deducted the amount of BAM 23,510.11 from the advance payment paid in the amount of BAM 697,475.01. Therefore, in addition to all irregularities it made in continuity at the construction site and in relation to the contractual obligations, as evidenced a number of times, with this threat of contract termination the Euro Profil d.o.o. attempted to blackmail the investors with the risk of halting the works and causing damages to the project.
- ANS Drive sends the THIRD Warning to Euro Profil for violation of contractual provisions, via the solicitor Goran Trivun, at the same time responding to the Euro Profil’s letter from 29 May 2019:
Date: 31 May 2019
Subject: Response to your letter dated 29 May 2019
Dear Sirs / Madams,
We have received your letter on 29 May 2019, titled “Information and Notice ahead of Contract Termination”.
We are of the opinion that your claims given in the letter are unfounded in view of the concluded Contract on Execution of Works on Thermal-Façade and rental, mounting and dissembling of façade scaffold on construction of residential and commercial structure, Il3 “Sarajevo Tower”, dated 07 February 2009 (further in text: Contract), and real business events in the current execution history.
You yourself have reduced the preliminary situation dated 30 April 2019 for 30%, following our intervention (it was suggested to you what was not in compliance with the contract and that the advance payment had to be reduced, as set by the Contract, through preliminary situations and the final situation). This does not present any reduction or repudiation of a part of implemented works (your specification of the works carried out was accepted / verified in full), but clearing of the received advance, as marked in the corrected situation, too…
Your request to “hand over the structure in full” is not founded in the dynamic plan of the main contractor for the whole structure, which you well know. As an investor (with a 1/2 share), and main contractor on the project of Sarajevo Tower, we claim that there is no obstacle even today for your company to carry out the contractual works on at least eight levels of the structure. In relation to the said, all measures of occupational safety have been undertaken and representatives of the main contractor coordinate the work of subcontractors to eliminate any risk; this is under daily control by the responsible inspections, and it is proven by the fact that since the beginning of the works (almost two years), we had not had any incidents or injuries.
On the other hand, your Company had not complied with a number of significant obligations set by the Contract, of which you had been informed in our letters from 18 April and 21 May 2019.
Additionally, during the past four months, since the signature of the Contract, your Company executed about 3% (three percent) of the contractual value of the works. You must admit that this is rather worrying and it does not promise the completion of the works within the contractual period of six months from the introduction into the works.
Finally, as of today, your company has failed to provide contracted materials for the contracted volume of the works and we suspect that it could be the real reason for slower execution of the works in the current dynamics in implementation of the contract.
If you believe that this is in your interest, you surely can terminate the contract, although that would have its further legal and factual consequences, having in mind that there had been no violation of contract on our side. In such an event, you would be held responsible for all types of damages in view of our company, and there are many of those due to the nature and size of the Sarajevo Tower project: damages for the need to contract a new contractor, damage for eventual differences in price, damages for delay in implementation of the works and holding the construction site due to change of contractor, eventual penalties towards the buyers, obligations from the partnership agreements towards co-investor, etc.
Conclusion of the Korekt d.o.o.: Until this moment, it is indisputable that the subcontractor Euro Profil d.o.o. had not done almost anything as set by the contract, while ANS Drive with its three written warnings, prepared the field for the investors to activate the bank guarantee. The last letter of ANS Drive is sent also to the co-investor Smart Invest, by which it informs them on violation of contractual provisions by the subcontractor Euro Profil d.o.o. At this moment, Euro Profil is in a very difficult position, because they had not managed to organise the work and implement more than 3% of the value in the first four months, they do not have qualified work force, they had not managed to implement any replacement of materials with the goal to decrease own costs, they are in conflict with their supplier Percon d.o.o., they are being pressured by the ANS Drive, which is preparing the arena to activate the bank guarantees… All in all, after 31 May it was a question of day when Euro Profil’s unprofessional attitude towards contractual obligations will backfire.
- Smart Invest Responds to the Threat on Contract Termination Sent by Euro Profil
Date: 31 May 2019
Smart Invest’s solicitor responds to the Euro Profil’s solicitor
SUBJECT: Response to the Notice dated 29 May 2019
Dear Sirs / Madams,
Following the analysis of the available documentation (quoted contracts, advance invoice 2/19, bank guarantee securing the advance payment No. 14060262209409719 dated 14 March 2019, and issued First preliminary situation with the amount of BAM 78,367.02), acting as a representative of the company Smart Invest d.o.o. Sarajevo, for which we herewith attach the Power of Attorney, we wish to herewith inform you as follows:
- It is undisputed that your client, as a subcontractor, concluded the contract with ANS Drive d.o.o. Sarajevo, as client, i.e. main contractor on the above mentioned structure, “Sarajevo Tower”. Our client, although being a co-investor, is not a contracting party in the said legal transaction. Therefore, any of your requests related to implementation of the said contract should primarily be directed towards the other contractual party.
- Nonetheless, considering the fact that the said Notice was sent to our client, we wish to remind you that your client in the subjected contract has accepted the method of payment and receipt of advance in the amount of 30% of the contractual value, which the investors, based on the previously submitted bank guarantee for provision of advance, paid in full, in the amount of BAM 697,475.01.
- Additionally, it is undisputed that the provisions of the executed contract do not strictly state that the advance will be justified by reduction of preliminary monthly situations, as it was in this specific case done in relation to the submitted First preliminary situation; the invoiced amount of BAM 78,367,02 was deducted for the percentage of the paid advance, and therefore the amount paid was BAM 54,856.91.
- Nonetheless, the basis for the described method of payment with reduction of 30% from the advance payment on the First preliminary situation, in addition to the usual practice in construction business, is contained in the fact that the guarantee for provision of the advance payment No. 14060262209409719 dated 14 March 2019 (the first page of the guarantee, last paragraph), states:
“The guaranteed amount is reduced for 30% on verified monthly situation, after the submission of the said by the payee in the Sberbank BiH d.o.o. Sarajevo.”
This means that when your client, who is the payee in the stated bank guarantee, submits the preliminary situation to the said bank, the total guaranteed amount is reduced for the amount of 30% of the issued situation automatically. Furthermore, this means that should the investors pay the preliminary situation in the amount of 100%, their contractual right to the bank insurance for the given advance would be reduced for the amount of 30% from the given situation.
Such acting could lead the investors in the situation that they have given the advance for which they have no bank insurance, and that they at the same time paid all issued situations in the amount of 100%.
- We believe that you understand that the reduction of preliminary situations in the percent of the given advance additionally founded on the described provision of the bank guarantee, in spite of being a usual and generally accepted method for clearing the advance.
- Due to the above mentioned, you may consider that no other payments based on the First preliminary situation will be done by the investors in the described circumstances and they expect from your client to comply with the executed contract and the content of the issued bank guarantee.
- In relation to your warning on alleged misuse of dominant position of our client and warnings related to alleged fulfilment of legal and contractual requirements for termination of the contract, we find them unfounded and such warnings cannot result with a change of out client’s standpoint.
- The standpoints of our client, as expressed in the said notification related to eventual halt of the works and termination of contract on works, and standpoints in relation to some other facts related to work introduction and dynamics of the work, are irrelevant for the method of payment for the First preliminary situation, and we therefore aim not to process them at this time.
- We believe that your client should primarily contact the nominated responsible person on behalf of the contractor in relation to any problem at the construction site , related to implementation of the works in view of the concluded contract. It should contact the authorised representative of supervisory body, with the aim to resolve any operational problems related to procurement and installation of materials foreseen by the corresponding project documentation, dynamic plan, creation conditions for uninterrupted work and other similar issues. The investors have a strong interest in having all participants in the construction act legally, in the spirit of good business traditions, and in line with the contracted documentation; all this for the purpose of timely completion of the planned activities. In this view, we consider that your client should be a part of the team having a mutual goal.
- On the contrary, should your client carry out actions which are not in line with the set goal and if they send warnings about the halt in works, termination of contract and submitting a claim in relation to the said, such actions are considered inappropriate and directed towards making the investor unable to implement the planned activities in a timely manner and in accordance with the project documentation. Consequently, we hope you do understand that our client will analyse its position as a beneficiary of the bank guarantee in such a position, both for the received advance and for good execution of the works. Obviously, our client is aware that there is no way to prevent your client in an eventual contract termination, halt in the works or submission of a claim, because those are the acts your client disposes with freely. On the other hand, every action by your client, for which we might assess to be harmful for the “Sarajevo Tower” project and our client, will be followed by adequate measures including the use of bank guarantees, judicial measures and procedures with the aim to protect the contractual rights and the rights in power by the valid regulations.
To conclude the above, we believe that your client should seriously consider the overall situation, reassess its standpoints and inform us in the shortest possible deadline on relevant facts impacting the overall relations. In view of the said, regardless the fact that our client is not a contracting party, the role of our client as a co-investor makes us open for the contact you deem appropriate in the existing circumstances, to resolve the open questions.
Conclusion of the Korekt d.o.o.: From the correspondence between ANS Drive and Smart Invest on one, and Euro Profil on the other side, it is visible that the conditions to activate bank guarantee have been created. ANS Drive and Smart Invest at this moment have absolutely identical opinion on violation of contractual provisions by Euro Profil. Already on 31 May 2019, the investors started asking the bank about the procedure to activate bank guarantee, caused by the threat of Euro Profil that they would terminate the contract and halt the works, and based on the documented current violations of the contract (as elaborated above).
- Turning point and “straw of salvation” for Euro Profil d.o.o.
Although Smart Invest had not been significantly present in all of the above listed problems of Euro Profi from the moment of signing the contract and throughout the first four months of slow progress on installation of façade, because it was obviously a problem of great significance for the main contractor ANS Drive, which sent three quoted, serious warnings to the Euro Profil, a strange web of circumstances led to Euro Profil’s “straw of salvation” come from the Smart Invest representatives.
We have already state above that it was foreseen for the company MTH-ARI d.o.o. (Director: Jusuf Muhic – Juka) to work on installation of façade on Sarajevo Tower, and not the Euro Profil d.o.o. Previously, ANS Drive had been in debt towards MTH-ARI in the amount of BAM 200,000, and it was transferred to the company Panamera Ilidza through cession. MTH-ARI, which did facade on Panamera, made an agreement to issue a book debt to Panamera on BAM 200,000 and for it to be compensated through increase of the contract value for the façade installation on Sarajevo Tower for the said BAM 200,000. These complex obligations had become additionally complicated when Juka, just before signing, suddenly withdraw, forwarded the papers to Elmedin Pinjic from Euro Profil; this is how Euro Profil entered into the already prepared contract and took over Juka’s BAM 200,000 into it. The Juka’s BAM 200,000 had become so complicated that it became a case of interest for criminal, judicial and media entities. All in all, the “lost” BAM 200,000 is one of the key reasons why Sarajevo Tower has not yet been completed.
Namely, at a meeting on 28 May 2019, Sedin Halilagic, from Smart Invest, asked Elmedin Pinjic from Euro Profil about the BAM 200,000 of “Juka’s money”, in the following words: “Hodza, what do we do with Juka’s BAM 200,00?” (author’s note: Hodza is the nickname of Elmedin Pinjic from Euro Profil).
As stated by Elmedin Pinjic to FPA, he then told Sedin Halilagic that he had no knowledge of what had Juka agreed to before and that he had no interest in it. Therefore, the meeting on 28 May 2019 ended without a larger significance.
Nonetheless, after Smart Invest d.o.o. and ANS Drive d.o.o. sent retorts to Euro Profil following their threat that they would halt the works on façade, and after the representatives of the bank informed Elmedin Pinic that the investors had been asking about the procedure to activate bank guarantee against Euro Profil, Elmedin Pinjic remembered the above quoted talk with Sedin Halilagic, on 28 May 2019, and came up with a plan to turn this totally unfavourable business situation into his favour.
On 03 June 2019, Elmedin Pinjic initiated and schedules a meeting with Sedin Halilagic, and at this meeting he made an offer to return “Juka’s” BAM 200,000, i.e. he accepted the debt. It is important to mention that Juka sent a warning before court claim to Smart Invest on 20 May 2019, asking from Smart Invest to return BAM 200,000 instead of suing Euro Profil d.o.o. In this way, the Smart Invest concluded that Euro Profil and Juka want to trick them, having in mind that with the Juka’s claim, it now seemed that they were after BAM 400,000 instead of BAM 200,000. This is how Smart Invest concluded that Euro Profil holds their BAM 200,000, which they needed to pay to Juka, based on the claim he started. Although this is a complex obligation matter related to Juka’s BAM 200,000, it is necessary to present it for the purpose of understanding the context of events.
A day after the said meeting, on 04 June 2019, he goes to FPA and reports being racketeering by Smrt Invest for the amount of BAM 200,000, filing a false criminal charges to the FPA and claiming Smart Invest was asking for bribe from his family, or they would activate bank guarantee, although he himself initiated the meeting offering to return BAM 200,000 which initially belong to Juka from MTH-ARI. In the criminal and legal analysis and criminal report submitted, the Korekt d.o.o. explained contradictions in the very report of Pinjic to FPA. The said himself confirmed what is said in this paragraph, but unfortunately, the responsible prosecutor and inspector of FPA had not done a detailed analysis of Pinjic’s report, nor have they analysed all listed obligations. In this way, in plain words, they “were tricked” into the story about bribe and alleged unjustified threats to activate bank guarantee.
FPA and KS Prosecution arrested Halilagic when taking the first BAM 30,000, out of the agreed BAM 200,000. After that the KS Prosecution starts indictment against the representatives of Smart Invest for the alleged blackmail of Euro Profil, claiming that Smart Invest unjustifiably planned to activate bank guarantee and that Smart Invest intentionally and unfounded disputed preliminary situations of Euro Profil, with the aim to prevent it from doing the works, until the said brought the BAM 200,000 of bribe.
Korekt d.o.o. submitted a criminal report to these circumstances against the KS Prosecutor Sanin Bogunic and FPA inspector Zoran Drasko, for negligent work in the service and “being tricket” into a false criminal report.
- Radical turnabout in the relation of ANS Drive towards Euro Profil:
Until 31 May 2019 it had been visible from the above quoted letters that ANS Drive planned radical measures against the subcontractor Euro Profil d.o.o. Nonetheless, there had soon been a radical turnabout in the ANS Drive’s attitude towards Euro Profil. In the days which preceded 03 June, there had been contacts between Euro Profil and ANS Drive, where they “buried the hatchet” and agreed over a mutual plan of actions on preparation and organisation of involving police and prosecution into the action of arresting and eliminating business partner from the works.
The proof of harmonised actions between ANS Drive and Euro Profil d.o.o. is in the possession of the parties in the criminal procedure.
After this agreement, ANS Drive denied all charges and criticism they had towards Euro Profil for their lack of professionalism, competence and delay in implementation of works. All the critique and charges went now against Smart Invest with a new claim that Smart Invest was to blame for all the problems of Euro Profil with the contractual provisions.
Conclusion of the Korekt d.o.o.: At one moment, ANS Drive realised, and so they stated in their warnings to Euro Profil, that due to the delay in execution of façade works by Euro Profil, ANS Drive themselves, as a main contractor, are under high risk that they would have to pay an approximate amount of BAM 10 million in penalties towards buyers and co-investor, for the delay in completion of the structure. ANS Drive was aware that the damages could not be collected from Euro Profil, because the company hardly got the bank guaranty to BAM 800,000. Therefore, ANS Drive accepted alliance with Euro Profil with the aim to set up an arrest through a criminal report against Smart Invest, and by this to eliminate the partner from the project, all with the purpose to avoid payment of approximately BAM 10 million in penalties, and to, additionally, using the criminal procedure, take over the whole project.
- Final Phase of Facade Installation; installation of final plaster:
After the representatives of Smart Invest were arrested on 10 July 2019 and spent 30 days in detention, turbulent events occurred along with the attempts of ANS Drive to take over the project, based on criminal case. There is voluminous documentation proving this, but it is not currently required for this aspect to be presented in detail in this Analysis, because it can be done in the next phases of analysis of the events. Having in mind that the owners of Smart Invest had a great trust in the arrested representatives of Smart Invest, there had be no changes in the company and following the exit of Mahmutovic and Halilagic from detention, a certain calm was made and an unwritten agreement to leave the criminal process on the side, until the said is finalised, and for all involved parties to carry on with their works and obligations on construction of the structure, as if the arrest never happened.
In such an atmosphere, four months after the arrest, and nine months after Euro Profil d.o.o. signed the contract on installation of façade with a deadline of 180 calendar days, on 07 November 2019 Euro Profil submitted to the supervisory body, Zarka d.o.o., a request for authorisation of materials for the final layer of façade, product called STO-Silkolit K. This request from Euro Profil was not authorised, because the contract and technical documentation foresaw STO-Ispolit.
As a reminder, point 4 of this Analysis presented that Euro Profil d.o.o. signed a contract with the company Percon d.o.o. on purchase of the final layer of façade on 16 April 2019. The contract was in contrary to the contract and technical documentation on construction of Sarajevo Tower, contracting the procurement of product STO-.Silkolit K for the surface of 9,337 square meters, and that they had not sought for authorisation to change the materials. The remains of the façade of about 13,000 square meters were contracted with the procurement of the planned product, STO-Ispolit K1.5.
In further works on installation of façade, an even bigger mystery around the final plaster occurred. Namely, STO-Silkolit K1.5 mm was installed on the building in full, while it had not been foreseen in technical documentation, and was not planned by unauthorised elaborate of Percon, nor by unauthorised contract between Percon and Euro Profil. It would have been easier to understand the whole situation if at least the elaborate from 08 March and contract on supply of material from 16 April 2019 were respected.
Conclusion of the Korekt d.o.o.: Obviously, a decision was made ad hoc to forget Ispolit and to install Silkolit on all surfaces. There can be a number of motives for this, from quality theories to simple things that Ispolit was perhaps not available, etc. But, this analysis cannot go as far as to recovering real reasons for replacement of materials. One thing that is undoubted is that there were certain non-transparent processing which were hidden from the official procurement procedure, set by the contract.
Euro Profil d.o.o. with no authorisation and agreement installs the final layer or façade, contrary to the contract and technical documentation.
The supervisory body, Zarka d.o.o., on several occasions in the construction log warns ANS Drive as the main contractor to stop the works on the installation of façade, but ANS Drive ignores the records and does not order the subcontractor Euro Profil to halt the works.
CONSTRUCTION LOG / RECORDS BY SUPERVISORY BODY:
08 November 2019
Supervisory Body Log: 1. It is requested from the contractor to submit the form for acceptance of materials for the final processing of thermal façade with the accompanying certificates.
Remarks: Subcontractor Euro Profil d.o.o. submitted the form for authorisation of STO Silkolit K material, which was not planned by contractual and technical documentation, and the form made by Euro Profil is dated 07 November 2019. Korekt d.o.o. was unable to establish the reason why Euro Profil dated the form with 07 November, since the supervisory body has given the request for submission of the form only on 08 November.
12 November 2019
Supervisory Body Log: I herewith state that the conditions to start the works on the final layer of thermal façade have not been met and I request that all undefined particularities related to the start of this phase’s works are resolved as soon as possible.
14 November 2019
Supervisory Body Log: The contractor is banned from starting the works on the final layer of thermal façade because the requirements have not been met. Having in mind that this is a very serious structure which cannot take any improvisation, I herewith state that the activities said by the contractor to start tomorrow, i.e. 15 November 2019, cannot be initiated.
15 November 2019
Supervisory Body Log: The contractor is not allowed to carry on with the works on the final layer of thermal façade on the western side.
14 December 2019
Supervisory Body Log: Co-investor of the structure, Smart Invest Sarajevo, has not accepted the implementation of the final layer of thermal façade with the final plaster type STO Silkolit K1.5 and it insists for the said to be done with the final plaster STO Ispolit K1.5. Therefore, contractor is issued an order to use the material for the finalisation of façade type STO Ispolit K1.5, because the said is stated in the contract.
16 December 2019
After the supervisory body asked for four times for the works to be halted, namely on 12 November, 14 November, 15 November and 14 December 2019, which the main contractor ANS Drive and façade subcontractor Euro Profil ignored, the date of 16 December has been reached with ANS Drive entering the following points:
Main contractor Log:
- Forms for authorisation of material (final plaster “STO Silkolit”);
- Note from the responsible designer, Argentaria dated 20 November 2019,
- Note – clarification from material supplier for thermal façade STO Percon d.o.o. dated 16 December 2019,
Korekt d.o.o. has analysed this record of the main contractor in full and it established that there are indications of business fraud and manipulation which was aimed towards with this entry. The elaboration of this segment will be presented in detail, under no. 16, titled: “Operation STO Silkolit”.
16 December 2019
Supervisory Body Log: I herewith state that the contractor carried on executing the final plaster type STO Silkolit K1.5 regardless the supervision log dated 14 December 2019. By this entry, I herewith require from the contractor to take the said entry seriously and to act in accordance with it.
16 December 2019
Supervisory Body Log: Having in mind that the contractor ignores the entries from 14 December and 16 December, pursuant to Article 8 of the Contract on Construction of SPO L13 – Sarajevo Tower, I herewith order halt of the works on final thermal façade, due to the fact that the contractor carried out replacement of the type of final plaster, without the investor’s authorisation. If the contractor does not comply with this order, they will be removed from the construction site for causing damages on the façade.
29 April 2020
Main contractor Log:
Response to the supervisory body log on sheet XXX/26. In view of the final plaster for the thermal façade, the contractor is acting in accordance with the detailed design – modification and amendment of the modification of survey of the façade works and in line with the final report of reviser (I.D.E.A. d.o.o. Sarajevo), and in line with the approved material for thermal façade – form for authorisation of material No. 05/19 dated 07 June 2019, authorised and signed by the designer, supervisory body, client Smart Invest and producer “STO”.
Supervisory Body Log:
The form for authorisation of material No. 05/19, dated 07 June 2019, DOES NOT INCLUDE the layer of final plaster, because the supervision in its log on 08 November 2019 requested the contractor to submit the form for acceptance of material for the final thermal façade processing with the accompanying certificates. This form with the material STO SILKOLIT K1.5 was not accepted.
Conclusion of the Korekt d.o.o.: Entries into the construction log undoubtedly prove that ANS Drive d.o.o. and Euro Profil d.o.o. decided to de facto kick out co-investor from the game and take over the project on the field, after the arrest of the Smart Invest representatives in July 2019.
This is best seen from the fact that an illegal and contrary to the contract decision of the main contractor and subcontractor was made to disobey the orders of the supervisory body, who was nominated by the investor Smart Invest through Contract.
In order to unbiasly and objectively assess which of the parties in this dispute goes out of the contract and misuses its contractual position, it is necessary to assess the dynamics of changes in attitudes in certain disputed situations.
If we analyse the behaviour of supervisory body Zarka d.o.o. from this angle, it is noted that from the very beginning of hte works on the façade, they had had the same standpoint, i.e. to refuse any attempt to install materials not foreseen by the contract and technical documentation. It was so in the case of wrong facade scaffold, wrong stone wool, cheaper glue, final plaster contrary to the contract on construction. Therefore, the supervisory body shows consistency in actions before and after the arresting event.
Euro Profil d.o.o. had had consistent behaviour in almost all situations, but it was with negative connotation. Namely, Euro Profil d.o.o. had attempted to act contrary to the contract in every point, from the scaffold, through stone wool, glue and the final layer; i.e. it attempted to go around contractual provisions. The only change with Euro Profil happened after associating with ANS Drive. All up to then, Euro Profil d.o.o. was forced to obey the orders of the supervisory body, because both investors had the same standpoint towards the subcontractor until the arrest. It was only after the arrest that Euro Profil d.o.o., at an order and in agreement with the main contractor, decided to be “stronger” than the order of the supervisory body for the first time.
ANS Drive d.o.o. strongly criticised Euro Profil d.o.o. until the moment of arrest. It did everything in cooperation with co-investor and supervisory body, of which a number of evidence comes from the quoted statements by ANS Drive until 31 May 2019. After that, the ANS Drive “changes course” and in cooperation with Euro Profil it forcefully carries out installation of the final plaster, by which a number of contractual provisions were broken.
Smart Invest d.o.o., identically like the supervisory body, had a consistent standpoint throughout the time, stating that all contractual provisions must be respected.
- Operation STO Silkolit
Let’s be reminded of the ANS Drive, main contractor’s entry into the construction log, dated 16 December 2019:
Main contractor Log:
- Forms for authorisation of material (final plaster “STO Silkolit”);
- Note from the responsible designer, Argentaria dated 20 November 2019,
- Note – clarification from material supplier for thermal façade STO Percon d.o.o. dated 16 December 2019,
By this entry the main contractor attempts to present STO Slikolit as material that had been already approved by Smart Invest and supervisory body Zarka d.o.o. As a key argument, the form for authorisation of material is used, dated 07 June 2019, for which ANS Drive claims to be the proof that Smart Invest and supervisory body had already authorised the STO Silkolit K material.
The form for authorisation of “disputed” material
On 01 October 2020, ANS Drive d.o.o. sent a letter No.: 502/20 to the buyers of flat and commercial properties at the SPO Sarajevo Toranj, titled: Information on Façade and Façade Works
In this letter, the ANS Drive stated that they are sending the buyers a form for authorisation of the “disputed” material with the signatures of listed persons:
- Form for authorisation of material – overall façade system Sto Therm Mineral and Sto Therm Vario dated 07 June 2019;
Korekt d.o.o. analysed the subjected form and based on the analysis of all listed documents, events and evidence established that a business fraud took place in relation to this form, too.
This form was made and signed by ANS Drive d.o.o. and Euro Profil d.o.o. It lists the name of the material for which the authorisation is requested: ”Styrofoam EPS, D=4,,5,8,10,15 cm, glue, ground, net”. Brand name: STO Supplier: STO Percon d.o.o.
This form was signed by all actors in construction, and EPS (styrofoam) can be considered as authorised.
Disputed issue on this form, indicating that this is a business fraud, is in the section: “Description of the rest”. This section had within, or it was additionally written, the following: “European technical approval, ETA-07/0023”.
Mr Zijo Imamovic, director of Zarka d.o.o., who is the supervisory body on the structure, told the representatives of Korekt d.o.o. that the European technical approval ETA-07/0023 was written later; ANS Drive and Euro Profil aimed for this request for authorisation of styrofoam to be falsely submitted to Smart Invest and the supervisory body, as if they authorised Silkolit along with authorisation of styrofoam.
If the words of Zijo Imamovic, supervisory body, are correct, then ANS Drive d.o.o. and Euro Profil d.o.o. committed a crime of fraud. Nonetheless, how to prove all this? At one hand we have the statement of Zijo Imamovic, but on the other we have ANS Drive presenting this request for authorisation of materials to the buyers as the key argument proving that Smart Invest and Zarka d.o.o. are obstructing the project.
With one simple, administrative reading of the first page of the European technical approval ETA-07/0023, the Korekt d.o.o. established the following: ETA-07/0023 is a system tested by Silkolit and not Ispolit, and therefore ANS Drive and Euro Profil refer to this form claiming that Silkolit was approved. Nonetheless, this is only a half of the truth. The whole truth is that the ETA-07/0023 is the authorisation for combination of Silkolit with stone wool, but not with styrofoam, too. If we now go back and be reminded of what material was requested for the approval, we will see that the approval was sought for styrofoam.
Therefore, it is not logical for the form for authorisation of styrofoam to list ETA-07/0023 which is related to testing of stone wool. This argument goes in favour of the statement by the supervisory body Zijo Imamovic, who claims that this was inserted at a later stage with the aim to use a deception to pass off the material not foreseen by the contract, technical documentation and whose installation was not approved.
Additional logical argument going in favour of the supervisory body’s statement is the following fact:
On 07 November 2019, Euro Profil d.o.o. submitted a request for authorisation of material for final plastering and this is the first time the product Silkolit is seen on a request.
Conclusion: Why had ANS Drive and Euro Profil d.o.o. submit the request on 07 November at all, if they thought that Silkolit had been already authorised.
Conclusion of the Korekt d.o.o.: It is noticeable that ANS Drive tries to “push through” Silkolit in a way to prove that the said had previously been authorised by Smart Invest and supervisory body, but that they changed their thoughts in the meantime and started disputing and blocking construction to allegedly get rid of the criminal procedure. We have herewith proven that these attempts to “push Silkolit through” bear indication of a committed frauds.
CONCLUSION OF THE ANALYSIS:
At the very beginning of the analysis, we set the goal:
The goal is to use the analysis to establish whether the supervisory body, Zarka d.o.o., has been working in concordance with the contract and its duties or not, and whether the Euro Profil has been working in concordance with the contract and their duties. Resolving this dilemma will provide easier understanding of the behaviour of other involved parties and above stated stakeholders.
Logical conclusions can be drawn from the analysis based on evidences in documentation, which are irrefutable, since there is a written evidence:
- The main cause for the delay in construction is non-professionalism, incapacitation and non ethical behaviour of subcontractor for façade works, Euro Profil d.o.o.;
- The main patron of the delay in construction is ANS Drive d.o.o., because it decided to “cover up” and support non-professionalism and non-ethical behaviour of Euro Profil; without the support of the main contractor, Euro Profil d.o.o. would not be able to have such a wide space for manoeuvre;
- Supervisory body Zarka d.o.o. cannot be held responsible because they complied with the contract and technical documentation, and we believe that they were unjustifiably attacked and accused;
- Cantonal prosecutor, Sanin Bogunic has totally wrongly interpreted the facts when in his indictment he accused Smart Invest for obstruction of the Euro Profil’s work, while the truth is rather opposite;
- Sberbank bank d.d. and Sprakasse bank d.d. have wrongly understood and evaluated the situation when in their proposal for the solution they raised a problem over the work of the supervisory body Zarka d.o.o., instead of proposing changes on the side of contractor and/or subcontractor of the works.
- Smart Invest d.o.o. Sarajevo;
- ANS Drive d.o.o. Sarajevo;
- Sberbank BIH d.o.o. Sarajevo;
- Sparkasse bank d.d. Sarajevo;
- Kanton Sarajevo Prosecution Office;
- Zenica-Doboj Canton Prosecution Office
Etika.ba will inform the public of all possible reactions by the said actors, and will continue to monitor the developments related to the delay in Sarajevo Tower construction.