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.

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