“Neo Fiji Ltd was awarded the construction contract principally because it tendered the lowest price of $28,507,489.91. However, this contract price was subsequently revised within six months to $34,428,995.10”
We are yet to see the Ernst and Young Report of 2007 titled "FNFP Special Investigation - Internal Report". Now, Coupfourpointfive has been informed the Report has not been made public by Aiyaz Sayed Khaiyum because a section of it is highly critical of the Tappoos, to whom Khaiyum, through his private company Latifa Investments Ltd, had sold his Berry Road property at a grossly obscene price. Our regular contributor, VICTOR LAL, has been examining the Report and has filed Part Six of his investigation.
A document titled “Tappoos City Project – Issues for Clarification at Cabinet/FNPF Board” authored by David Hanfakaga and dated 23 January 2007 addressed the question of why the contract for the construction of the building was awarded to Neo Fiji Ltd, as a fully owned subsidiary of Tappoos.
The main points of this document can be summarised as follows:
The Project was unique in many respects as Tappoos was the building contractor (via its subsidiary company Neo Fiji) and also tenant (via its retailing and trading arm). Therefore Tappoos is the entity that would eventually pay the rent and hence make the investment viable for the investors (including FNPF as Lender and the major shareholder in Penina Ltd);
Tappoos has always been transparent in its approach to the Project as they had the most to lose if the project cost increased or if the construction was not up to standard that met the Tappoos upmarket departmental store profile;
The ‘main contract’ for this Project commenced with a “prequalification of tender” being an invitation to contractors for expressions of interest;
The “prequalification of tender” interest was assessed by the Project Team (which included the Project’s architect, structural engineer, service engineer and quantity surveyor);
The Project Team assessed all tenders received and recommended that the contract be awarded to Neo Fiji Ltd, whose bid was the lowest;
Tappoos had declared their interest in Neo Fiji Ltd to the Board of Penina Ltd well before they expressed interest in the construction of the Project, of which Penina Ltd had informed the Board of FNPF;
Neo Fiji Ltd’s prime interest in the project was due to the facts that:
They are a construction contractor
Bidding for the project, they would ensure that the tender price would be competitive
The competitive bid would make the project viable for Penina Ltd, the Tenant (Tappoos) & the Financier (FNPF). An excessive bid would on the other hand adversely affect the Project’s viability
Tappoos as tenant also had it in their interest to bid for the project via Neo Fiji Ltd as the rent payable by the Tenant was based on a % of the Project cost
Tappoos had on several occasions advised FNPF they would be happy if another contractor tendered less than Neo Fiji Ltd.
Other subcontractors on this Project would benefit from the investment also (including fire fighting, air-conditioning, elevator, electrical etc)
On 25 November 2005, the Board of Penina Ltd resolved that the building contract be awarded to Neo Fiji Ltd as a Guaranteed Maximum Price contract. It was noted that the Tappoos’ directors had not been involved in the short-listing of contractors. The fact, according to E & Y auditors, that the decision to provide the tender to Neo Fiji Ltd was made by the full board of Penina Ltd, however, represented a conflict of interests on the part of Penina Ltd.
Fletchers, Raghwan Construction and J S Hill Locked Out
According to E & Y, the arguments provided in the Tappoos City Project – Issues for Clarification at Cabinet/FNPF Board’ paper described above ignored certain facts which occurred in the tender process, including that:
One of three tenders, from Fletchers, was disqualified as it was received four hours late (Minutes of Penina Ltd board meeting held on 24 November 2005)
Penina Ltd board minutes dated 25 August 2005 indicate that the expressions of interest received form two contractors, J s Hill and Raghwan Constructions, were ignored on the basis that one (as noted by Mr Mar in relation to Raghwan Construction) had a “heavy workload” and the other was not desirable based upon Tappoos’ past experience of working with them (as noted by Vinod Tappoo in relation to JS Hill). On this basis, these contractors were effectively barred from tendering for the contract.
Neo Fiji Ltd was awarded the construction contract principally because it tendered the lowest price of $28,507,489.91. However, this contract price was subsequently revised within six months to $34,428,995.10
The cost revision by Neo Fiji Ltd occurred in circumstances where:
It was in excess of the bid submitted by another contractor who tendered for the project
It was made after Neo Fiji Ltd initially bid with the guarantee of a Guaranteed Maximum Price contract
It increased its bid by in excess of 10% only six months after winning the bid and prior to the contract works commencing
According to E & Y report, despite board minutes of Penina Ltd dated 24 November 2005, in which it is noted that Tappoos had abstained from the selection of contractors, Tappoos had influenced the process by which expressions of interest were offered.
In circumstances where it was first flagged in the Joint Venture Agreement that Tappoos could tender for the Project, and Tappoos had written to FNPF in 2003 stating that they should be awarded the construction contract without it going to tender, it was of concern to E & Y which noted that Tappoos directors ultimately voted on the awarding of the construction contract to Neo Fiji Ltd.
Further, at the time when Neo Fiji Ltd submitted a revised cost estimate for the Project, which in effect negated the justifications proposed for why it should have been awarded the contract in the first place ( i.e. that it had provided the lowest quote), FNPF should have worked to formally assess, and minute, whether the movement was something outside the control of the contractor and whether the contract should have been re-tendered by Penina Ltd.
TO BE CONTINUED