The Auditor General and the Audit Office have been highly critical of the progress of the concession contract for the (OSYPA) in Paphos and the obligation to renew the bus fleet, since, as has been determined 2.5 years after its signing, although the contractor had committed to adding 72 new buses to the fleet by the end of the transition period, only 32 have been added.
Despite the imposition of financial penalties, as noted in the relevant report by the Supervisory Authority, “the primary objective of the Contract—namely, the Contractor’s substantive compliance with this specific commitment—has not yet been achieved.”
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
The report states that the effectiveness of a public contract “is not judged solely by the correctness of its terms or by the legality of the Contracting Authority’s actions. It is judged, first and foremost, by the extent to which the State is able to ensure that the essential obligations undertaken by the contractor are actually fulfilled.”
This particular case, the report continues, “raises particular concerns,” since “the contractor had committed to adding 72 new buses to the fleet by the end of the transition period. However, approximately two years later, only 32 had been added.
Even if one were to assume that the Ministry acted within the contractual and legal framework and made use of the means at its disposal, the result, according to the Audit Office, “remains the same: a key provision of the Agreement has still not been implemented, 2.5 years later.”
This fact “inevitably raises questions as to whether the initial design of the Contract provided the Contracting Authority (Ministry of Infrastructure, Transport, and Networks) with sufficient and effective tools to enforce compliance and, later, during the implementation phase of the Contract, whether the prescribed corrective measures were promptly implemented.”
According to the Audit Office, this protracted situation raises the following issues:
“(a) the quality of the services provided,
(b) equal treatment and competition among other companies that participated in the project’s bidding process (which evidently factored the implementation of this specific contractual term into their cost estimates)
(c) road safety
(d) environmental impact resulting from the use of outdated technology
buses
(e) the tourism product, and
(f) fosters the perception that non-compliance with essential contractual obligations is tolerated by the State”
The Audit Office’s audit of this matter was conducted, as noted in the report, “following a relevant complaint received by the Service and focused on compliance with the terms of the Public Service Concession Agreement for Domestic Road Passenger Transport on Regular Routesfor the Paphos geographical area, and specifically on the Concessionaire’s obligation to renew the bus fleet with new vehicles within a specific time frame and to operate the network ofroutes.”
Key Findings of the Report
1. Minimum requirements regarding fleet age and ownership, in accordance with the terms of Annex 4 of Part B of the Concession Agreement
Based on data provided to our Agency by the Contracting Authority, it was found that the Concessionaire complies with the minimum requirements regarding fleet age and ownership, with the exception of a single instance. In addition, it was found that the Concessionaire complies with the contractual obligation regarding the total number of 6 leased buses it uses to perform the scope of the Contract, namely that this number should not exceed 30% of the total fleet.
2. Concessionaire’s Commitment to Renew the Fleet
According to the approved SMY schedule, by the end of the transition period on February 7, 2024, the Concessionaire was required to purchase a total of 72 new buses. By February 7, 2024, the Concessionaire had put only 20 new buses into service, and by the time our audit was completed in February 2026, the Concessionaire had put 32 new buses into service. As a result, there was a breach of the timelines set forth in the Service Level Agreement (SLA). Two additional new buses of a specific category were introduced, in excess of the commitment for that category made in the Concessionaire’s bid, but which are not taken into account for the purpose of evaluating the degree of compliance with the Concessionaire’s commitments.
The table below presents the bus fleet that the Concessionaire should have acquired based on the SMY by the end of the transition period, compared to the fleet that was in service at the end of the transition period and as of the date of our audit.
3. Annual Mileage
Based on data provided to us by the Contracting Authority, the Concessionaire meets the annual service mileage required by the Contract, while the absence of the new buses it had committed to putting into service is covered by the existing older buses, as well as by leased buses.
4. Imposition of Sanctions
Months after the end of the transition period and the extension granted (until February 7, 2024), and given that the planned investment had not been completed by that date, the Contract Coordinator sent the Concessionaire two compliance letters on September 18, 2024, and October 3, 2024, setting a final deadline of October 25, 2024, for the Concessionaire to comply with its contractual obligations, and proceeded to impose the relevant penalties (€200 and €500, respectively), in accordance with the provisions of Annex 10 of Part B of the Contract. Due to the Concessionaire’s continued non-compliance, the Contracting Authority also imposed penalties pursuant to Clause 37.6 of Part B of the Contract, namely, an amount equal to twice the corresponding daily depreciation rate for each day of delay, with retroactive effect from the end of the transition period (February 7, 2024). As of December 22, 2025, the total amount deducted from the state compensation payable to the Concessionaire as a financial penalty amounted to €2,373,693.60. As of the date of the audit in February 2026, a legal opinion from the Legal Service was pending in response to a letter from the Ministry of Infrastructure, dated December 22, 2025, regarding a number of issues related to the contract in question, and specifically the Concessionaire’s failure to comply with its contractual obligation regarding its commitment to renew the fleet. As the Director General of the Ministry of Infrastructure, Transport, and Networks informed us in her reply dated July 28,2026, which is reproduced in its entirety in Annex III of this Memorandum, this opinion was received by the Ministry of Infrastructure, Transport, and Networks on July 27, 2026. Due to the confidential nature of the opinion’s content, it is not published as part of this Memorandum.
In its conclusions, the Audit Office notes that the above findings highlight a number of serious issues regarding the management of this specific Concession Agreement.
Specifically:
(a) It highlights the State’s inability to take immediate corrective measures (the transition period ended 2.5 years ago) in cases where substantial deviations from the provisions of public contracts are observed.
(b) Failure to comply with the obligations arising from the Convention may create conditions of unfair competition and run counter to the principles of equal treatment of bidders.
(c) Concerns have been raised regarding the potential for this practice to spread and set a bad precedent, which could lead to similar situations in other public contracts in the future. | 8 MEMORANDUM YP-EY 04/2026
(d) The delay in replacing older-model buses with newer ones that comply with European standards affects safety and quality issues.
(e) The Concessionaire’s failure to comply, despite the imposition of financial penalties by the Contracting Authority, may indicate poor initial planning on the part of the Contracting Authority. The financial penalties imposed may be such that it is financially advantageous for the Concessionaire not to comply, even if the prescribed penalties are imposed. Logically, however, the financial consequences of non-compliance should be severe enough to have a significant impact on the Concessionaire, thereby “forcing” it to comply.
The Agency’s view is “that the Concessionaire’s non-compliance over such a long period creates the impression that the state cannot enforce the provisions of the Agreement and undeniably sends the wrong message to Concessionaires, both existing and future ones,” the report notes.
The Audit Office’s report in its entirety:
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