Transparent public procurement system: where private offers meet public needs

Due to large amount of money spent on public procurement at annual level, this area is very susceptible to corruption. In previous year only, BAM 3.08 billion was spent on public procurement contracts, which comprises 9.39% of total nominal GDP for 2018[1]. Corruption in public procurement is not only expressed in money but also reduction in quality of works and services in all sectors, from education, health to infrastructure and so on, and in the worst case scenario consequences may be lost human lives. in order to reduce such risks to the lowest possible level and encourage fair competition, it is necessary to introduce transparent public procurement process through improvements and implementation of legislation.

Where are we now?

Currently, Bosnia and Herzegovina is rated at 14^th position (out of 32 countries) on the Transparent Public Procurement list[2], with recommendations about necessary changes in legislation regarding area of transparency, efficiency and competition. For the purpose of improving the stated areas, it is crucial to make available the information on cycle of public procurement, from planning, procedures to fulfillment of public contracts.

Information about the contract implementation are most commonly major limitation in covering the full circle of procurement, although this information presents the best indicator of real costs and quality of works performed, services provided and products procured. Any misalignment with negotiated terms or Law on Public Procurements in the realization of the public contract as one of the important phases in public procurement are placing other bidders to unfavorable position which makes entire public procurement system pointless.[3]

In large number of cases costs from the public procurement plan get exceeded by the end of contract fulfillment which may occur due to unplanned changes in the project, but it is more often due to poor planning of procurement and lack of market analysis prior to taking activities. Consequently, there were situations like construction of toll booths at Banjaluka–Gradiška motorway where contracting party first had three million BAM planned, but after the bids exceeded that value substantially, public procurement was rendered invalid and new call was open in double value. Similar situation occurred with the toll booths at road M16 in Glamočani, built in 2013 but never used, generating zero income, causing dozens of car accidents and taking several lives. Removal of the booths amounted BAM 750,000.00 in the first procurement plan, whereas in the sixth the value doubled, with no additional clarification.  

Negative effects of poor public procurement planning can be various, from selection of procedure to delays in implementation, and they may eventually lead to consequences with severe negative effects to everyday activities of the citizens, like temporary lack of medications, food in kindergartens or public transportation. For the purpose of putting such practices to end it is necessary to provide for efficient and transparent planning process, especially when we have in mind that success of the following steps in the public procurement procedures largely depends of manner of planning.

Best value for money

Primary aim of efficient public procurement policies is getting the best value for public money which can be reached only with providing equal treatment and non-discrimination of participants in the procurement procedure.  without transparent activities it is impossible to see whether the contracting party treated all the bidders equally, and it is the lack of openness and transparency that presents the reason why foreign investors criticize public procurements in Bosnia and Herzegovina.[4]

Average number of bids in public procurement procedures is constantly reducing and in 2018 it was 2.33, whereas an average number of accepted bids was 1.95[5], and one of the ways to increase the number is increasing the level of trust of the bidders in the public procurement system and involvement of SMEs into the market competition.

In addition to increasing the level of trust of the bidders into the public procurement system, quality of the public procurement procedure can be initiator of economic growth.  For that reason it is, among other things, necessary to provide that tender documentation guarantees all the bidders equal  and non-discriminating access to bidding. We currently have large number of examples of discrimination in favor of certain bidders, mostly through technical specifications, which particularly show in car procurements where brands of vehicles can be guessed by simple internet search of axis length, vehicle length, warranties for specific parts characteristic for specific manufacturers. In such procurement cases only one bidder applies.

Also, all the bidders interested must have equal access to all information which would not favour anyone. This would haelp avoiding the practice of some conracting parties to publish competing application with submission deadline  of 3 to 4 days only (including the days of the weekend) which favours bidders who were notified about it in advance. We must also mention favourizing bidders who already have goods in stock, favourized through  defining sub-criteria for economically more favourable bid in terms of delivery. Favourising through sub-criteria is performed also in terms of payment deadlines where bidders who are ready to wait longer for payment, and in some cases they are awarded a contract even if they offer double price in comparison to other bidders on that ground only.

Compulsory division of procurement to LOTs, whenever the subject of procurement allows, encourages participation of large number of SMEs which are generator of economic growth. This would help avoid situations such as procurement of translation services where translation is required for several languages (German, Farsi, Kurdish, etc.) where procurement is not divided to LOTs, so the question is how many agencies are able to provide translation services for all those languages. In addition to division into LOTs, encouraging participation of SMEs is possible through defining the conditions for qualification adequate with subject of procurement. Problem for participation of SMEs are high appeal costs prescribed in existing legislation.

In current system of legal protection in public procurement dominant role is played by the bidders, guided by their own economic interests and who are able to file a complaint. Due to tacit agreement between bidders in certain areas of public procurement it happens that no one complained even to very open discrimination. For that reason it is necessary to provide for active legitimating even to actors whose primary role is protection of public interest. In regional countries that role is played by audit institutions, prosecutors, attorney general, and in Serbia there is Institute of civil supervisor which follows procedures with high values and their realization.

Good practices

Establishment of Public procurement portal is a step forward in sense of transparency, regarding the fact that the only manner of obtaining information on public procurements in the past was application pursuant to Law on Freedom of Access to Information which was not always granted and could not be timely obtained.  However, there is still large number of data relevant to public procurement not publicly available at the Portal, and all the non-transparent circumstances threaten to destroy competition and reduce efficiency of public spending. Following the model of countries who are leaders in the area of transparency of public procurement, Portal should provide additional information such as contracts of public procurement, information on payments, quality control of the works, services and goods procured.

Additional challenges existing are connected to need for improvement of data availability format so the participants involved into social control can have access to data in more efficient way. Positive examples are Georgia, Ukraine, Romania and Moldavia where access to all the bids is in machine-readable formats in order to stop corruptive practices because main points from the bids can be separated and analyzed. Georgia and Ukraine also grant access to information on bidder complaints and their outcomes in machine-readable format which enables more efficient analysis of complaints and development of recommendations to bidders on the basis of complaint results.

What do we need?

To conclude, for the purpose of upgrading public procurement system, we recommend implementation of the following recommendation set:

• Standardization and obligation of publishing procurement plans of all values at one place in machine-readable format.
• Detail market analysis in the public procurement procedures through transparent process of consultations comprised of consultations with individuals with expertise in the area or independent experts, competent bodies, business organizations or business subjects, under the condition that such advising does not influence the market competition and is not in violation of discrimination and transparency.
• Mandatory division of contracts into LOTs, whenever the procuremet subject allows, for the purpose of encouraging  involvement of more SMEs.
• Publishing in the Public procurement plans and notification on contract award in the lower value procedures.
• Reinforcing provisions regarding conflict of intrerest of all the participants in  the procedure.
• Mandatory publication of all the information characterizing public procurement, primarily public procurement contract.
• Expansion of active legitimation.
• Higher penalties (fines) for incrimination.