Simplified state procurements imply legalized corruption risks
22 May, 2014
Simplified state procurements imply legalized corruption risks
The so-called simplified contracts for state procurements imply legalized corruption risks which allow state officials to strike corruption deals with the private sector without punishment thanks to loopholes in the procurement law. The Georgian Law on State Procurements foresees two ways of state procurement and the cross line between these two means lays on GEL 5,000: state procurements that require products and services with a price exceeding GEL 5,000 must be implemented via open electronic auctions which lately gained international
acclaim as one of the most transparent and technically smoothest tenders across Europe. It has some defects but the real problem lies within the second way. Goods and services with a value equivalent to or below GEL 5,000 may be procured via simplified or direct contracts.
This way of procurement is ample with corruption risks and non-transparency because state structures can contract one desirable company without any competition or tender. Also, the law does not elaborate any eligibility criteria. Moreover, the GEL 5,000 cap limit is pretty ostensible because the law allows procurement of any goods if there is a governmental consent or if it is of particular importance. “To insure a smooth arrangement of social and state events [that bear special importance to the state and society] within the restricted timetables, state procurements can be implemented via simplified contracts with the consent of the government,” the law stipulates but does not elaborate neither the exact meaning of “asocial and state event” or the tentative period of “restricted timetables.” All is left to the subjective discretion of a state structure which makes procurement vulnerable to corruption. For example an entertainment event like a concert can also be seen as a social event. This poses legalized corruption risks, analysts from Transparency International Georgia warn, when officials may mishandle the state money without any punishment because the law does not directly prohibit this activity.
This scheme was successfully exercised under the previous government, especially in the pre-election periods when the ruling party used direct contracts for fundraising. According to the TI Georgia research, the ex-powers enhanced the direct contracts practice from year to year and in 2011 it implemented procurements worth GEL 959 million tvia simplified contracts which made up 45% of all state procurements in 2012. The total sum reached GEL 1.17 billion or more than 55% of all procurements.
On the other hand, there was a certain coincidence between direct contracts and fundraising for the ruling party under the ex-power. The provider company founders were donating impressive sums to the United National Movement and two or three months later they used to secure direct contracts for big volumes of state procurements. Sometimes, direct contracts preceded the donation transfers. TI Georgia calculated more than 50 samples of such schemes. In 2012, the National Movement raised GEL 6.6 million this way while the donor businessmen secured direct contracts worth GEL 160 million. The new authority is less inclined toward direct contracts, but does not show any political will to eradicate the loopholes in the procurement law. Where in August 2012, before the parliamentary elections which meant a shift of power, the National Movement issued contracts worth GEL 172 million, the figure dropped to GEL 21 million after the power shift. However, it started creeping higher and reached GEL 73 million in August 2013.
“As long as there is a paragraph that legally allows state procurements above GEL 5 000 via simplified contracts, there will be a temptation to use it,” Giorgi Chanturia, a TI Georgia legal specialist, elaborates.

Other Stories
Georgian wine tasting in the US came off excellently
Georgian wine tasting in the main cities of the US, New York, Chicago, and Boston went off excellently.
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
Investment Plan for Europe – Additional EUR 800 million for SMEs as EIF and ProCredit double support for innovative companies
The European Investment Fund (EIF) and ProCredit Group are providing an additional EUR 800 million to innovative small and medium-sized companies (SMEs),
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
July 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31