State Procurement – Transparent but Loop-Holey
20 June, 2013
State Procurement – Transparent but Loop-Holey
The loopholes in Georgian state procurement law create corruption risks that blemish the otherwise reputable electronic platform of Georgian state procurement, estimated as one of the most transparent phenomenon worldwide. To reduce corruption risks and make the state procurement fully transparent Transparency International Georgia (TI Georgia) recommends Georgian government to remove the loopholes so as to reduce corruption risks and save the state coffer.
The official electronic procurement system of Georgian Competition and State Procurement Agency (CSPA) through which the government
does its contracting since 2010 is the state-of-the-art and among the most transparent and efficient systems in the world, a new report released by TI Georgia on June 14, 2013 states. The report approves that any person can file electronic complaints that are reviewed by a Dispute Resolution Board of the Agency that helped to increase fairness and competition of the procurement process. That contracts are awarded to the lowest bidder is also a plus however the report finds the quality of a product or the expertise and experience of a supplier acquired through the e-tenders somewhat neglected. Tato Urjumelashvili, Chairman of the CSPA, ascribes this fault to incompetence of governmental organizations and companies that fail to put detailed and skilful description of the product they need to procure in their tender applications thus misleading suppliers. According to Mathias Huter, Senior Analysts and Project Manager at TI Georgia, some governmental agencies need more experts to outline procurement details and improve the procurement quality. TI Georgia research also finds the timelines between tender announcement and closure too short and advise putting longer limits in compliance with the EU practice to insure better competition and price-making. But the key concern is the loopholes in Georgian procurement law allowing big contracts to bypass the transparent procedures of e-procurement thus creating the corruption risks. On the one hand, the law on state procurement exempts too many state-owned entities (Georgian Railways, Georgian Lotteries, Partnership Fund etc.), the Government’s and President’s Reserve Funds and the Ministry of Defence from the e-tenders and allows to sign contracts on their own. Another special loophole is that the president and government can issue permissions to certain companies [after they appeal with the special request] to make procurements through direct purchase bypassing e-platform again and quite often these are very big contracts. As a result in 2012 contracts worth GEL 800 million were procured under opaque procedures and without competition due to special approval by the president and the government; 45% of all contracting or GEL1.2 billion of purchases were done through non-competitive simplified procurement, and only 55% (GEL 1.5 billion) were procured electronically. TI Georgia experts never rule out corruption deals behind the hidden contracts concluded without tenders. To remove the corruption risks TI Georgia recommends Georgian government amending the law so as to put state procurement contracts in e-platform as much as possible.
“When you talk of public procurement there always is a risk of corruption, and the less transparently the contract is done the higher is the risk,” Huter said in the interview to Georgian Journal.
“In certain circumstances when we cannot do the electronic way [of procurement] it is emergency, like flooding for example when people cannot live in their houses but it should not be a standard.” According to him, thousands of contracts bypassing e-platform were construction projects that were not very emergent but planned beforehand. Therefore he questions why there was no public announcement where different companies could participate and fix better price.“There is a risk for corruption and also the risk for money waste because government could get better prices,” he said.
On June 14, TI Georgia also launched a new website which allows the public to search, explore and monitor public procurement.

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