A damning report on the progress of the controversial $70 million Berkeley Institute site has been unveiled in Parliament - raising a catalogue of questions over the handling of the project so far.

Auditor General Larry Dennis presented his 17-page document to the House of Assembly yesterday and recommended that the Education Ministry be warned as soon as possible that the new secondary school would not be ready for much of the 2003-2004 school year.

He said, in his view, there were sound reasons to conclude that the January, 2004, completion target of general contractor Pro-Active Management Systems was optimistic and further delays were likely.

He also raised concerns over the project's $6.8 million performance bond (insurance policy) put up by Union Asset Holdings, which is owned by the Bermuda Industrial Union.

He said Cabinet awarded the project to Pro-Active before a performance bond was put in place, despite it being a prerequisite of the job.

And Mr. Dennis said when the bond was eventually signed off on June 4, 2001 - it was done 11 days before Union Asset Holdings had even been incorporated.

The report said technical staff at the Ministry of Works and Engineering had recommended that BermudaTech be given the project and had advised that Pro-Active was a "high risk" for Government to take.

Technical staff said there were three advantages of choosing Pro-Active, but seven disadvantages, including its lack of experience and lack of track record.

Mr. Dennis said: "As a result of these concerns, the Ministry's pre-qualification report rated the Pro-Active bid as a high risk.

"Accordingly, Pro-Active was not one of the three contractors the Ministry recommended should be asked to tender."

But the audit also stated how a report written by technical staff had also recognised that allowing Pro-Active, which is a Bermudian company, to bid would be politically desirable.

Government did not only allow Pro-Active to bid, but it then went on to award them the contract.

Mr. Dennis said he was unable to determine the basis for the decision to award the contract to Pro-Active, rather than BermudaTech, especially as BermudaTech's bid came in $5 million less.

"I acknowledge that price is not the only consideration and that the lowest bid may not always provide the best net value," he said.

"In this case, however, the Ministry determined that the lowest bidder provided the best financial and technical value to Bermuda.

"Nevertheless, I recognise that there may be other factors to consider before approving major undertakings of this nature.

"In the broader picture, social, socioeconomic and similar political considerations may have influenced the final decision, considerations that the Ministry would understandably not have included in its analysis."

The auditor's report also mentions cash flow problems within Pro-Active, and a number of cash loans the Ministry has made to the general contractor, all with a nine percent interest rate.

These have been labelled as "concessions".

But it also questions why the Ministry has, on occasion, not taken recommendations from the quantity surveyors in assessing and paying for work carried out, instead listening to Pro-Active.

He said: "I acknowledge that the Ministry is within its authority to grant the concessions described above, and that the concessions were approved at an appropriately senior level.

"I am concerned, however, that the advice of the Ministry's quantity surveyor has been disregarded so often.

"As well, advance payments are generally discouraged by Government policy since they increase the risk assumed under contracts and increase Government borrowing costs."

Pro-Active did not return calls yesterday.