The Auditor found various discrepancies between the conditions Enemalta had included at tendering stage and the conditions that feature in the contract signed with Danish company BWSC on May 26, 2009.
All bidders knew the conditions of contract highlighted in the tender document would serve as a framework in the implementation of the project.
Selected parts of the contract were made public by the government as BWSC would only allow partial release of certain sections. The contract is covered by a confidentiality clause.
According to the Auditor, the contract was signed hastily, to the extent that it also included track changes.
He pointed out that Enemalta weakened its position by giving BWSC a lot of leeway.
The Auditor's report lists a number of salient differences between the tendering document and the final contract.
Drawings approval
Signed contract: Enemalta is bound to approve any drawings or documents supplied by BWSC within 10 working days and any resubmission within seven days. If Enemalta defaults on time limits drawings are deemed to be approved.
Tender document: Enemalta had no time limit imposed on how long it took to approve drawings as long as it was "within a reasonable period".
Difference: The considerable change puts Enemalta in a tighter spot and even presumes BWSC has the go-ahead if approval is delayed.
Mistakes in drawings
Signed contract: Enemalta has to pay the costs of additional work needed because of inaccurate information supplied to BWSC.
Tender document: Apart from Enemalta's obligation to pay for additional costs because of inaccurate information, another clause made it clear that the contractor was not exonerated from the obligation to finish on time if the inaccuracies were not Enemalta's fault.
Difference: The signed contract does away with BWSC's obligation to finish on time.
Sub-letting of contract
Signed contract: BWSC can transfer its rights and obligations to a wholly owned subsidiary company without prior written consent from Enemalta.
Tender document: It was not lawful for the contractor to transfer or assign the contract to anybody else.
Difference: The unequivocal position changed in the final contract to give BWSC leeway to transfer its obligations to a wholly owned subsidiary. What concerned the Auditor was the lack of obligation to obtain Enemalta's consent before the transfer.
Appointing another contractor
Signed contract: Enemalta will have the right, after giving 30 days' notice, to appoint another contractor if BWSC discontinues work.
Tender document: Enemalta would have the right to appoint another contractor if the chosen bidder discontinues work or neglects to execute the works with due diligence and expedition. The new contractor would have the right to use the equipment left on site by the previous contractor.
Difference: The Auditor said Enemalta's position was weakened in the final contract when compared to the more advantageous clauses stipulated in the tender document. Enemalta also lost its right to appoint another contractor if works are not executed with "due diligence and expedition".
Contract termination
Signed contract: If BWSC becomes bankrupt, Enemalta can give 30-day notice to end the contract. However, the contractor may refer the matter to arbitration.
Tender document: Enemalta had the right to end the contract in the case of bankruptcy without additional conditions attached.
Difference: The Auditor said Enemalta gave BWSC evident concessions when signing the final contract because it changed the unconditional action contemplated originally.
Delay of tests on completion
Signed contract: No reference is made to delays of tests on completion by BWSC.
Tender document: Enemalta had the right to order completion tests within 10 days and if the contractor failed to adhere to the timeline, the corporation could perform its own tests at the expense of the contractor.
Difference: The original conditions in the tender document protected Enemalta's interest. The final contract did not include any safeguards.
Liquidated damages
Signed contract: If the plant fails to pass the completion tests, BWSC can either choose to adjust the works or pay liquidated damages that are capped at 15 per cent of the contract price.
Tender document: Originally, Enemalta had not included liquidated damages.
Difference: The Auditor commented positively at the fact that safeguards were included in the contract but criticised the 15 per cent capping. He also noted that damages were only applicable for late delivery, shortfall in electrical output, higher than guaranteed heat rate for the power block and higher than guaranteed CO2 emissions. In the case of non-compliance with emission limits of the major pollutants (SOx, NOx and dust), Enemalta reserved the right to reject the plant outright.
Contractor bonus
Signed contract: If BWSC completes the job earlier than stipulated it will be entitled to a bonus of €150,000 per week.
Tender document: No bonus was envisaged originally.
Difference: The Auditor questioned the reasoning behind such a bonus but Enemalta defended its actions claiming that early completion would save it almost €400,000 in fuel costs from its current expense at Marsa power station, which will be closed down.
Arbitration
Signed contract: In the case of a dispute between Enemalta and BWSC the venue of arbitration shall be London, England and proceedings shall be in English.
Tender document: Disputes had to be settled at the Malta Arbitration Centre.
Difference: The venue of arbitration was changed radically. The Auditor said he was not aware of the reasons for such a shift but pointed out that the agreement ended up being more favourable to BWSC at the detriment of Enemalta and the Maltese taxpayer.