Public procurement

Incompetence in public procurement costs us millions

Foto: CIJM
Author: Natalia Porubin, Elena Moldoveanu
05/05/2016 7270

The public money comes to be spent meaninglessly because the persons responsible for procurement don’t have the necessary preparation. The mistakes of the persons responsible for public procurement cost us millions. Due to the fact that the authorities have no capacity to conduct trainings, the specialists state they learn how to carry out a tender on the internet, and also from their own mistakes. For many of them, the development of technical specifications is like a formula from applied physics.

The investigation has been conducted as a result of a notification on the Corruption Map.

 Unaware of what technical specifications look like

An error made by the administration of the Pedagogical College „Vasile Lupu” of Orhei city increased the amount of the contract for repairing the roof of a study block by over 240 thousand lei. Five participants applied for the competition announced by the management of the institution, “Lemfabric” company being assigned as the winner. The initial contract was signed for an amount of 1.793.811 lei, after which, in a month, the volume of works increased by another 241.995 lei. So, the roof came to cost over 2 million lei.

The irregularities started from the very first days. One of the building site masters had an expired license and the second one prolonged it when the works were about to be finished. So, for a month the construction has been carried out practically without one building site master. Contacted by the reporter of the Centre of Journalistic Investigations Valentina Sandul, director of the college, says she hasn’t even noticed this irregularity, because she didn’t look at the date on the license, but only that on one of them the „month of November” and on the other one – „the month of December” was written.

The range of infringements however does not end here. Thus, the works were performed without a procurement plan and the technical specifications (where all the works that should be done are detailed) didn’t even exist. The director has here a justification as well, stating that it is the first time when she organizes a public tender. „We are calling the cost estimate - technical specifications. I didn’t know certain things because it was for the first time when I organized a tender. We formed a working group, invited an expert to guide us, we looked through the respective things but didn’t know them.  We went to the Ministry of Constructions and they drafted for us an Endorsement Report for the cost estimate of the bid.”

Work volume increasing according to the transferred money

Even though the additional works were important, they had not been foreseen at the beginning of the tender, because it was not known what amount the Ministry of Education would allocate, the director of the college stated. „We were told like this: First we shall see, because the money was given to us from the ministry in instalments, it was the end of the financial year, you use them and if you fit into the timeframe, we shall give you more. It was late autumn. We did not know whether it would be sufficient and if we would fit into the timeframe and make use of the money. The money came in stages. And we did the works depending on what we had got, that is why we have an additional agreement.” Valentina Sandul specifies. According to her, when the money came to the ministry, the set of documents, as well as the works were performed at the speed of the thought, so, until the New Year the roof was installed.

They didn’t have even a procurement plan

As for the procurement plan, the director claims she didn’t even have one. „We had our plan -the Plan of repairs which we submit annually to the Ministry of Education. We submitted the plan in 2013 for 2014. The 2 million were granted by the state because it was raining and the whole roof was being damaged. We selected „Lemfabric” because it was the most advantageous bid and the price was advantageous, and they had equipment, that is, they had all the conditions for constructing”, Valentina Sandul added.

Also, in the set of tender documents, the statements on impartiality and lack of conflict of interest of the working group are missing. Valentina Sandul has the same explanation: „We didn’t know”.

Incompetence generates additional expenses

The case of Orhei is not a single one in the country. Ialoveni Rayon Council increased the amount of the contract for repairing the premises by over 1 million lei, because the technical specifications had not been developed correctly. IRC concluded a contract amounting to 3947,6 thousand lei with „Getarcon Grup” LLC which had to perform construction works of an attic. In a year, an additional contract was concluded, the amount being increased up to 5, 1 mil lei. Due to the fact that the responsible persons failed to provide in the contract a performance bond for the works, there was a need for another, almost 200 thousand lei for additional repairs of the top floor of the building, which had been flooded by rain. In line with a report of the Court of Accounts, „the performance bond for the contract was not ensured by the entrepreneur, and the Apparatus of the rayon head was deprived of constraining levers in case of damage caused after the execution of some works of poor quality”.

Nicolae Secrieru, specialist at the Construction Section of Ialoveni Rayon Council claims that initially the contract provided for a provisional roof, but subsequently gave up on it because the works had to be done during the summer time. „No one thought that in that summer it was going to rain so much”, Secrieru states. Besides, initially, in the technical specifications the construction material called etalbond was not foreseen, the cost of which rose to one million lei. „The problem emerged in the process of work. Etalbon had not been included in the technical specifications”, Secrieru adds.

Unaware because they lack necessary preparation

The experts say that most of the irregularities in the public procurement process are committed at the stage of developing the technical specifications for the economic agents, and the responsible persons do not have the necessary preparation to draft the tender documents.

Several persons responsible for organizing tenders on public money state they have committed mistakes in the working process whereas this allegedly happened because they did not have the necessary preparation. While in many countries these persons benefit from specialized trainings, in the Rep. of Moldova there are no institutions to provide educational services in this field.  Igor Schin, the representative of the Regional Centre for Social-Economic Development of Cahul, thinks that the economic faculties from the country should have a special course to train specialists in the field of public procurement.

They learn from their own mistakes

Several mayors form Cahul say they have learnt on the fly how to make a correct bid in the tender process. „At the beginning we made mistakes because we didn’t know how to develop the tender documents for the economic agents. We were writing that we needed butter but we didn’t show, for instance, the fat percentage and we were receiving a product which was more like plasticine than butter. The onion they brought was smaller, should I have described the diameter so as to have them bring to us a quality product?! We cannot refuse a product if we don’t like it, because the children need to be fed. We have learnt from mistakes – we must describe correctly the product we need”, Nina Munteanu, mayor of Pelinei community of Cahul, says. She believes that there should be a public procurement specialist in the mayoralties to make this process more efficient. „This specialist could be responsible also for drawing investments from the outside. At present projects of this kind are being developed by the employees of the Mayoralty who have besides this many work obligations”, the mayor says.

„It’s good that Internet exists”

Nina Munteanu states that the biggest difficulty the procurement group is facing is to develop the technical specifications, especially in case of procuring goods, services and works. For example, we had to procure furniture for the kindergarten but neither me nor the accountant and the employees of the kindergarten had the necessary knowledge in the field. We had to describe the product in such a way as to have it match all the necessary parameters for the adequate growth and development of the children. We handled it with the information we found on the internet. Thanks goodness the internet exists”, Pelina mayor says.

The problem resides in the legislation

The low degree of preparedness of the persons responsible for public procurement has been noticed also by some economic agents. Nicolae Dunas, representative of „Nico Art” company from Cahul states that often the contracting authorities face big difficulties in developing the technical specifications of some goods or services. „There are system errors and it is very important to have them solved by the persons responsible for the policies in the respective field.  I cannot accept my child to be poorly fed at the kindergarten. That is why there should be a quality and price balance. The problem resides in the legislation, which is a very poor one and provides no systemic solutions”, the economic agent underlines.

The public procurement experts found that the contracting authorities make mistakes when procuring goods and services on the state money. According to Serghei Merjan, expert in public procurement, often the contracting authorities do not know how to identify the services and goods the community and institutions need. As a result, useless procurements are made and there is no money left   for the services which are really needed. „Because of lack of knowledge, many authorities formulate inadequate requirements towards the economic agents - either very general or exaggerated ones.”, the expert states. Those who formulate very general requirements end up buying low quality services or works, which imply also exaggerated costs for maintenance. At the same time, the authorities that formulate exaggerated requirements towards the economic agents end up procuring goods which exceed the real needs, Serghei Merjan states. According to him, some authorities initiate and award procurement contracts lacking financial resources which would cover the total cost of the works. In these cases, it often happens that the construction objects remain unfinished, and the procured goods are not functional.

We cannot train everybody

Valeriu Secas, deputy head of the Public Procurement Agency admits that many irregularities in the procurement process occur because the procurement group lacks knowledge in the legislation in the field, which is an extremely complex one. „Each institution has a working group in charge of organizing tenders and assessing the bids, but its members lack the necessary preparation”, Secas specifies. According to him, the existence of some thousands of contracting authorities and the fluctuation of staff within the state institutions makes it impossible to have this kind of training. In 2015, the Public Procurement Agency organized only 7 training seminars for the employees of the contracting authorities and just 6 for its staff within the territorial services.

Another public procurement expert, Serghei Merjan, mentions that the contracting authorities make mistakes when buying goods and services on the state money. According to him, often the contracting authorities do not know how to identify the services goods the community or the institution needs. As a result, useless procurements are made and there is no money left   for the services which are really needed „Because of lack of knowledge, many authorities formulate inadequate requirements towards the economic agents- either very general or exaggerated ones”, the expert states. Those who formulate very general requirements end up buying low quality services or works, which imply also exaggerated costs for maintenance. At the same time, the authorities that formulate exaggerated requirements towards the economic agents end up procuring goods which exceed the real needs, Serghei Merjan states.

According to him, some authorities initiate and award procurement contracts lacking financial resources which would cover the total cost of the works. In these cases, it often happens that the construction objects remain unfinished, and the procured goods are not functional.

A report drafted by the Court of Accounts on the performance audit of the public procurement system shows that the Public Procurement Agency has neither information on the number of people involved in the public procurement process within the contracting authorities nor on the training needs to ensure the efficiency of public procurement. In 2015, the Public Procurement Agency organized only 7 training seminars for the staff of the contracting authorities and just 6 for its employees within the territorial services.

The value of the public procurement contracts registered at PPA in 2014 amounted to 11538,4 mil. lei, constituting about 10,3% of the National Gross Product (111757 mil. lei). Last year  the amount was of 1 884 736 705,84 lei.

The investigation has been done in the framework of the Campaign „Public Money Is My Money Too”, conducted by the Centre for Journalistic Investigations (CJI) and the Association for Efficient and Responsible Governance (AGER), within a project funded by the European Union and the National Endowment for Democracy.

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