CONFLICTS within the ruling Slovak Democratic and Christian Union (SDKÚ), threats of a government crisis, heavy media and opposition criticism, and two detailed – and negative – analyses by transparency and political ethics watchdogs all seemed to stand in the way of Nitra Invest, a company owned by an SDKÚ member, closing a deal to rent offices to the Tax Directorate. But despite all these factors the company has now been chosen by the tax authority and will soon ink a deal with the state.
Transparency International Slovensko (TIS) and Fair-Play Alliance, the two watchdog NGOs who – in an unprecedented move by the government – were asked earlier this summer to evaluate the public tender through which the Košice tax office is seeking to rent a new building for its offices – a process which itself follows an earlier property deal which collapsed amid allegations of non-transparency and political favouritism – both concluded their inquiries by saying that it should be cancelled due to serious concerns that several of the criteria stated within it were discriminatory and unclear.
The Tax Directorate has, however, now dismissed all the points they raised and says it will soon agree a rental contact with Nitra Invest.
“The responsibility lies not with NGOs, but with people who are responsible for this based on the law,” Finance Minister Ivan Mikloš (SDKÚ) said, as quoted by the Sme daily.
None of the tender participants complained about the tender, Tax Directorate head Igor Krnáč said when announcing that Nitra Invest had won the tender. Krnáč also argued that the tender was evaluated as “the most transparent process [used] to search for a building for the Košice tax offices so far”, partially reiterating a point made in the TIS analysis.
TIS’ exact words were: “The sad fact is that a competition with such mistakes was, despite them, the most transparent selection of a new building for tax offices in Košice to date.”
Looking to rent
The situation in Košice, which has caused significant tension within the ruling coalition, was first brought to the media’s attention on April 11, 2011, when opposition leader Robert Fico termed a lease contract for office space signed by the tax authority a clear “case of party cronyism”.
Fico alleged that some of the money from the €6.6-million rental contract, sealed by the Tax Directorate with Nitra Invest, a company owned by Slovak Democratic and Christian Union (SDKÚ) member Ondrej Ščurka at the beginning of the year, would end up in the coffers of the SDKÚ, though he offered no evidence to support his claim.
On April 15, Nitra Invest announced it was withdrawing from the lease agreement, stating that it did not want further suspicions to be connected with its name.
Prime Minister Iveta Radičová, also from the SDKÚ, called on the head of the Tax Directorate, Miroslav Mikulčík, to take political responsibility for the controversy and resign, which he eventually did after resisting her call for five days.
Subsequently, the Tax Directorate and the Finance Ministry under Ivan Mikloš, another SDKÚ minister, opened a tender to lease a building, but cancelled it before taking any decisions, saying it was unable to evaluate which of two bids – made by Nitra Invest and another company, CTR – was more advantageous.
A new tender was announced, in which Ščurka was the only bidder, offering a 5-year lease agreement for €6.3 million.
Fair-Play Alliance: cancel the tender
However when Fair-Play Alliance, a political fairness watchdog, presented its opinion on the tender on August 11, it recommended that the Tax Directorate not sign a rental contract with Nitra Invest and cancel the tender altogether.
“The competition gave an advantage to Nitra Invest,” the alliance stated. “The competition wasn’t announced with criteria that other bidders would be able to fulfil. Therefore we believe it wasn’t fair and didn’t provide the same conditions for all potential bidders.”
The alliance listed several problematic aspects to the tender, such as discriminatory criteria, non-transparent conditions, and the low credibility of analyses based on which the Tax Directorate decided that renting one building for all its offices in Košice would be the best solution.
The alliance criticised the fact that the Tax Directorate listed very specific criteria in the tender. These, it said, required large-scale reconstruction which the bidders would have to make before knowing if they would win the tender.
“Some entrepreneurs were thus disadvantaged, because they [had to] invest in their buildings before they had an assurance that the tax authorities would sign a contract with them,” Peter Kunder of Fair-Play Alliance said.
Both Fair-Play Alliance and TIS pointed out that the tender required the building to have been constructed no earlier than January 2008.
The Tax Directorate argued that this was important because the law on energy efficiency came into effect on January 1, 2008. By setting this limit, the Tax Directorate said it was seeking to make sure that the building would possess a valid energy-efficiency certificate.
But the watchdogs pointed out that having a valid energy-efficiency certificate was already among the requirements; “obtaining it did not depend on the [date of construction] of the building, but on fulfilling the functional conditions of efficiency”, TIS wrote.
TIS: cancel the tender
“Transparency International Slovakia recommends cancelling the current round of the search for a building to rent, and announce a new competition,” was the conclusion of the analysis published by TIS on August 5. TIS reasoned that the criteria for participation and evaluation were unnecessarily strict, and said they had changed during the two rounds of the competition. TIS added that they also appeared to be unclear.
The impact study of the rental deal came late and contained errors, and the changes in the competition materials that were made in the course of the tender were not explained sufficiently, TIS wrote. And although the calls for applications that were published and the impact study that was carried out show that the objectiveness and transparency of the selection process had improved, there was still no guarantee that this was the best selection process possible, it concluded.
Both watchdogs recommended that a new methodology be designed for tenders announced by public institutions looking for non-residential spaces for rent or purchase, which would guarantee a fair and non-discriminatory approach to all bidders.
TIS, among other things, recommended re-writing the impact study of the alternatives in the case of the Košice tax offices, and relaxing the requirements imposed on bidders.
Fair-Play Alliance focused on the impacts too, saying that renting one big building for all offices should be compared with other feasible solutions in a correctly-written analysis.
Nitra Invest gets the contract despite criticism
Despite all their criticism, Fair-Play Alliance head Zuzana Wienk noted that this was the first time ever in Slovakia that non-governmental organisations had been asked to evaluate a tender before a contract was signed.
“We do appreciate this new culture,” Wienk said. “We expect that those responsible will deal with the facts described in the evaluation and then take an independent, publicly argued decision that will support the fairness of the processes and will be advantageous for the state.”
The Tax Directorate issued a 10-page-long analysis on August 19, explaining why it had disregarded the recommendations of the NGOs to cancel the tender and launch a new process.
“It is true that according to the NGOs several procedural mistakes occurred, but those are, I believe, clearly explained or confuted,” Finance Minister Mikloš said, as quoted by the Sme daily.
