Georgia

East-West Highway Corridor Improvement Project

Redacted Report

March 2021
Statement of Use and Limitations

This strictly confidential report (the Report) was prepared by the World Bank Group (the “WBG”)
Integrity Vice Presidency (“INT”). It provides the findings of an INT administrative inquiry (the
“Investigation”) into allegations of corrupt, fraudulent, collusive, and/or coercive practices, as
defined by the WBG for the purposes of its own policies, rules and procedures (the “WBG’s Anti-
corruption Framework”), in relation to WBG-supported activities. The purpose of the
Investigation was to allow the WBG to determine if the WBG’s Anti-corruption Framework had
been violated.

This Report is being shared to ensure that its recipients are aware of the results of the INT
Investigation. However, in view of the specific and limited purpose of the Investigation underlying
this Report, this Report should not be used as the sole basis for initiating any administrative,
criminal, or civil proceedings. Moreover, this Report should not be cited or otherwise referred to
in the course of any investigation, in any investigation reports, or in any administrative, civil, or
criminal proceedings.

This Report is provided without prejudice to the privileges and immunities conferred on the
institutions comprising the WBG and their officers and employees by their respective constituent
documents and any other applicable sources of law. The WBG reserves the right to invoke these
privileges and immunities, including at any time during the course of an investigation or a
subsequent judicial, administrative or other proceeding that your authorities may pursue in
connection with this matter. These privileges and immunities cannot be waived without the prior
express written authorization of the WBG.

1
Background

In February 2016, the International Bank for Reconstruction and Development (“IBRD” or the
“World Bank”) 1 and the Republic of Georgia (“Georgia”) entered into a Loan Agreement for the
East West Highway Corridor Improvement Project (the “Project”) in Georgia. In December 2017,
additional financing was approved for the Project. The Project became effective in May 2016, and
is scheduled to close in December 2020.

The Project, implemented by the Roads Department of the Georgian Ministry of Regional
Development and Infrastructure (“RDMRDI”), seeks to (i) reduce road user costs along the East-
West Highway Corridor section upgraded under the Project; and (ii) strengthen the capacity of the
RDMRDI to manage the road network and the capacity of the Ministry of Economy and
Sustainable Development to provide an enabling environment to improve logistics services.

In January 2016, RDMRDI published an Application for Prequalification Document (the
“Prequalification Document”) for Contract X. 2

In March 2016, Company A submitted its Prequalification Document. Accordingly, Company A
was prequalified to bid for Contract X.

In December 2016, RDMRDI published the bidding documents for Contract X. In January 2017,
Company A submitted its bid (the “Bid”) for the Contract with a bid validity of 120 days.

At the early stage of evaluation, Company A’s bid was considered technically and substantially
responsive and was ranked as the lowest priced responsive bid. During the evaluation process,
RDMRDI twice requested that bidders extend their bid validity in order to allow RDMRDI
complete the necessary evaluation and verification process. Company A declined to comply with
the second extension request and informed RDMRDI that it would not extend its bid validity. As
a result, Company A withdrew from the bidding process.

Company A is a large company, operating more than 35 fully-owned subsidiaries, including
Company B and Company C. For the purpose of submitting its Prequalification Document and
Bid, Company A, Company B, and Company C prepared the Bid.

1
IBRD is one of the five institutions comprising the World Bank Group. The International Development
Association(“IDA”) and IBRD constitute the World Bank.
2
Contract X consists of two lots. Lot 1 is financed by the European Investment Bank and Lot 2 is financed by the IBRD.
Both lots followed the World Bank’s Guidelines for Procurement of Goods, Works and Non-Consulting Services
published by the Bank in January 2011 and revised in July 2014. Company A bid on both lots, however for the purpose
of this Report, only Lot 2 is discussed.

3
Allegations & Methodology

The World Bank’s Integrity Vice Presidency (“INT”) received allegations of potential fraud by
Company A under the Project. Upon reviewing procurement documents, INT found indicators of
possible fraudulent practices in violation of the World Bank’s Anti-corruption Framework. As a
result, INT opened an investigation.

INT reviewed relevant procurement and Project documents and conducted verifications.

Findings

1. Evidence indicates that Company A did not possess the construction experience that
it claimed.

The Prequalification Document required that applicants submit “General Construction
Experience” as a prime contractor, joint venture member, management contractor or subcontractor
for at least five years. The Document also required applicants to submit “Specific Construction
and Contract Management Experience and Construction Experience in Key Activities” as a prime
contractor, joint venture member, management contractor or subcontractor between January 1,
2010, and the application submission deadline. The Document specifically instructed that only the
qualification of the applicant(s) shall be considered. Qualifications of parent or affiliate companies
were not to be considered as the applicant’s qualifications.

To demonstrate that it was qualified, in its Application for Prequalification Document, Company
A claimed to have performed ten projects as prime contractor. However, evidence indicates that
contrary to Company A’s claim, Company A had only performed one of these ten projects.
Evidence suggests that five of the projects were awarded to two of its subsidiaries, and four of the
projects were awarded to Company C. Evidence also shows that contract documents such as the
Letters of Acceptance, Contract Agreements, and Completion Certificates for these projects did
not include Company A as a prime contractor, joint venture member, management contractor, or
subcontractor.

In response to RDMRDI’s inquiries, Company A confirmed that it submitted its subsidiaries’
experience as its own. However, Company A did not provide any legal basis for its position,
although Company A and its subsidiaries are separate entities with distinct corporate
personalities.

2. Company A included in its bid a list of equipment and key personnel that were
purportedly available to Company A to implement Contract X. However, evidence
indicates that neither the personnel nor equipment would have been available to
implement Contract X.

After Company A prequalified to bid based on its claimed experience, it proceeded to submit its
Bid in February 2017.

4
In its Bid, Company A submitted a Resume of Proposed Personnel, which represented that eight
key personnel were Company A’s employees. However, evidence indicates that the proposed
personnel were not Company A’s employees, but Company C’s employees. Evidence further
shows that the key personnel were, at the time of Bid submission, implementing another
independent contract for RDMRDI.

Also, in its Bid, Company A represented that it had the required equipment to implement Contract
X. However, evidence indicates that all the equipment listed in Company A’s Bid was owned by
Company C, not by Company A, and would not have been available to Company A for the Contract
Implementation.

In response to RDMRDI’s inquiries, Company A stated that the proposed key personnel were
senior managers of Company C, who were working on another project in Georgia. Company A
also stated that Company C owned the proposed equipment that it claimed as its own.

Corrective Actions

The World Bank has imposed the sanction of debarment on Company A, Company B and
Company C.