Procurement improves

THE SYSTEM of public procurement in Slovakia improved in 2012 as a result of the state using more transparent methods when ordering goods and services, according to an analysis prepared by the ethics watchdog Transparency International Slovensko (TIS).

THE SYSTEM of public procurement in Slovakia improved in 2012 as a result of the state using more transparent methods when ordering goods and services, according to an analysis prepared by the ethics watchdog Transparency International Slovensko (TIS).

The report was published shortly after the cabinet passed an amendment to the law on public procurement, which is to be discussed by parliament at its upcoming session. Despite the government’s claims that the new rules will bring more transparency to public tenders, the watchdog is warning about the possible effects of planned limits on the use of electronic auctions.

Slovakia completed 6,800 public procurements worth €3.9 billion in 2012, of which 2,757, or 41 percent, were done through electronic auctions, the analysis by Transparency International Slovensko (TIS) showed. Electronic auctions were made compulsory by the previous government.

Yet, the current government plans to start procuring “common goods, services and works” through an electronic marketplace rather than through electronic auctions, even though electronic auctions increased the average number of competitors by 1.5 and prices were 5 percent lower than in other types of procurements, the SITA newswire wrote.

Moreover, 63.7 percent of the tenders were done through public competitions, compared to 52 percent reported in 2011.

“Two thirds of the tenders (in number as well as volume) were realised through public competition, which is the most open method of procurement,” Emília Sičáková-Beblavá, a programme director of TIS, told The Slovak Spectator.

In addition, the final prices in procurements were lower than in the previous year. The difference between the contracted sum and the sum expected by procurers was 11 percent, which is a 3-percentage-point increase compared to 2011. The difference even doubled compared to 2010, Sičáková-Beblavá added.

An improvement was also reported in the average number of bidders, which increased from 2.8 to 3 companies, although when it came to the total cost of procurements, the number of competing bidders dropped from 3.5 to 2.8.

“In other words, tenders with higher volumes were made with a lower average number of bidders than a year ago, which slightly balanced higher competitiveness [seen] in relatively lower volumes,” Sičáková-Beblavá added.

Yet, the average number of bidders is still lower than in the European Union where it stands at 5.5.

On the other hand, the TIS analysis indicated an increase in less transparent public procurement methods, such as closed negotiations between the procurer and bidder, which rose from 5 to 7.5 percent, although the share of the total cost of such procurements fell. Moreover, the number of bidders attending the procurements in the second half of the year also fell.

Public procurements have improved but lower competitiveness between the first and second half of 2012 is a warning sign, Sičáková-Beblavá said, adding thatafter the March general election Fico’s government was entirely responsible for the second half of 2012.

TIS recommends further changes

The government passed an amendment to the law on public procurement at its January 9 session. The changes are aimed at limiting the possibility for corruption, manipulation and favouring certain bidders, Kaliňák told SITA.

One of the changes is the introduction of selecting the most economically advantageous bid which will, in fact, supplant the current practice of accepting only the lowest bid. Moreover, the ministry has defined “a very low bid” as an offer that is 30 percent lower than the average amount offered by other companies and 15 percent lower than the second lowest bid.

In addition to this, the government proposes to strengthen the terms for procurements worth more than €10 million; to establish the central procurement of common goods, services or works through the state electronic marketplace which will substitute some competitions currently done through electronic auctions; to evaluate the quality of contractors through references which, if they are negative, could ban them from participating in public tenders from one to three years; to create a profile for each procurer through which the public will be allowed to track the whole competition process; to unite the terms for all orders with a value below the set limit; to implement a rule to decrease the price of procurement when prolonging the agreement if the market situation allows it; and to ban adding addendums to contracts.

The ministry also suggests establishing the so-called Public Procurement Office (ÚVO) Council which will serve as an appellate body. It will judge the decisions of the ÚVO, and its verdicts will be regarded as final. The council will be composed of nine members appointed by the government, SITA wrote.

Parliament will begin discussing the amendment at its session starting on January 29. If the MPs pass the changes, the new rules will come into effect on July 1, 2013. The only exception will be the measure over certification of equipment necessary for electronic auctions, which will become effective on January 1, 2014, according to SITA.

The latest version of the amendment does not cover so-called strategic orders, i.e. large procurement deals that have societal significance and exceed €10 million, which received much criticism. Yet, some opposition politicians claim that the new law still contains several serious flaws.

According to SDKÚ MP and former justice minister Lucia Žitňanská, the proposed changes only prove that the amendment will allow public finances to be wasted since there is little motivation for procurers to select the most advantageous bids, SITA wrote.

“The amendment to the law creates serious holes through which politicians as well as office workers will be able to order goods and services from [the companies] they want,” Žitňanská said, as quoted by the TA3 news channel.

In its analysis of the public procurements TIS recommended further changes to the amendment to make the procurements more transparent. The think tank proposed not to curb the use of electronic auctions, and suggested “strengthening the transparency, impartiality and powers of the ÚVO”, reads the press release.

TIS explained that in its opinion the procurers have considerable power and can, for example, exclude bidders offering very low amounts in procurements. Therefore they propose to change the definition of a very low bid to at least 50 percent of the average amount offered by other bidders and at least 20 percent lower than the second lowest offer.

It also proposed several changes to the operation of the ÚVO Council, including broadening the group that will select its members.

The recommendations were based on an analysis of the system of public procurement and ÚVO activities, Sičáková-Beblavá said. Except for comparing the models with those from other European countries, TIS carried out a poll among the suppliers and procurers who helped them to determine “what to improve and how”.

TIS has already discussed their analysis with the representatives of ÚVO and the Interior Ministry at a workshop held in mid January, Sičáková-Beblavá said, adding that the participants in the workshop seemed to be open to their proposals.

The Interior Ministry responded that it has already accepted several comments TIS made regarding the amendment. Its spokesperson Lucia Garajová told The Slovak Spectator that they will read the recommendations since they would like to create “a public procurement law of the highest quality”.

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