One of the unsuccessful bidders for Stonington Beach Hotel said yesterday the Auditor General's scathing report on the deal vindicated complaints he made two years ago.

Auditor General Larry Dennis branded the process where businessman John Jefferis got the contract to operate the Government-owned hotel then radically renegotiated the lease to save himself millions of dollars as unfair and said it should have been put out to tender again.

Mr. Dennis said if companies did not feel the process was open and fair many would not bother applying, leading to Government not getting best value for money.

The lease was so different from the heads of agreement - the original specifications - that Mr. Jefferis saved millions by paying landlord Bermuda College much less than was originally agreed; was given 1.9 acres of beachfront land and two cottages that were not on offer; obtained a 50 year lease rather than the proposed 21 years; and was given approval in the lease to build and sell 30 luxury condominiums.

Mr. Jefferis' company Coco Reef Resort, Bermuda Resort Hotels (BRH), and Mega Contracting Services were the three short-listed companies the College put the contract out to tender in 2002.

The College selected BRH, whose operator Billy Griffith, was a member of the Bermuda College Board of Governors.

The hotel was then transferred from the Ministry of Education to Tourism and the contract put out to tender again to avoid, said College President Dr. Michael Orenduff, any perception if impropriety.

This time the contract went to Mr. Jefferis. Mega Contracting wrote to former Premier Jennifer Smith complaining about the way BRH won the contract, and again wrote to new Premier Alex Scott about the way Coco Reef won the deal second time round.

Mega Contracting principal PK Patnaik, who runs the Montibello Foods company in North Carolina, said yesterday the Auditor General's report confirmed the fears his company had earlier expressed about the tendering process.

"We congratulate the Auditor General for his fair and balanced assessment of the manner in which the Bermuda Ministry of Tourism awarded the Stonington Beach Hotel management contract to Mr. Jefferis," said Mr. Patnaik.

"We feel vindicated that the Auditor General agreed with our complaints that the Ministry of Tourism awarded the contract to Mr. Jefferis in gross violation of laws and regulations of Bermuda and obviously showed favouritism to Mr. Jefferis.

"As one of the short-listed companies, we responded with a proposal that was consistent with the terms and conditions specified in the Request for Proposal.

"For two years, we have been complaining to the Governments of Bermuda, including Minister Webb and Premier Scott. We outlined the same points in our complaints (that) the Auditor General discovered in his audit but nobody listened to us.

"The sad fact is the people of Bermuda got the short end of the deal and will stand to lose millions of dollars. We hope that in light of the Auditor General's report, the Premier will take a very close look at the Stonington Beach Hotel deal and act expeditiously to restore credibility in the government bidding process."