Issue 4, 2013. August-September

   

TI GEORGIA: GEORGIA'S PROCUREMENT SYSTEM TRANSPARENT BUT LOOPHOLES REMAIN

Transparency International (TI) published a report on Georgia's Procurement System in June. Investor.ge spoke with Gerard de Boer, an author of the report, about TI's findings and recommendations - and the organization's new online platform to track tenders and procurements, www.tendermonitor.ge.

Maia Edilashvili

Georgia fundamentally overhauled its government tender system in late 2010 when it introduced centralized and comprehensive electronic procurement system. Regularly procured government tenders are announced on one central website (procurement.gov.ge) and the whole process, starting from the date when the tender is announced until the contract is awarded, is publicly visible.

"Georgia has a very innovative electronic procurement system and most government contracts are tendered in a competitive and transparent way on a centralized website, tenders.procurement.gov.ge," Gerard de Boer, an author of the report, said.

"There are only few countries at this point that have switched to fully electronic bidding."


There are two types of tenders conducted through the e-procurement system: simplified electronic tenders - a procedure with shorter deadlines that can be used for smaller purchases of no more than 200,000 lari - and electronic tenders, which are used for larger procurements. Tenders and awarded contracts under both types of procurements are publicly available for registered users and guest users.

In the report, TI Georgia found that a key strength of the system is the official electronic procurement website which is very innovative and transparent and, thanks to increased efficiency, has "severely" reduced red tape and wasted time. According to official figures, to date more than 400 million lari have been saved since the introduction of the platform in 2010. Another important advantage is that the platform allows a useful appeal mechanism: any person can file electronic complaints that are reviewed by a Dispute Resolution Board, which can force the procuring entity to adjust or cancel the tender. The Board, consisting of three representatives from the Competition and State Procurement Agency (CSPA), and three representatives of civil society, reviews complaints within ten working days.

A potential issue, however, is that the system is currently geared to reward tenders to the lowest bidder. TI Georgia's experts reckon that the procurement system should better reflect the quality of a product or the expertise and experience of a supplier, "to ensure that taxpayer money is spent to maximize the value for the public."

CSPA has developed a Two-Stage Electronic Tenders Module to attach more weight to quality; however, it has not been officially launched.

The main loophole identified by TI experts is that "too many exemptions" in the law on state procurement allow certain state-owned entities -- Georgian Railways, Georgian Lotteries, Georgian Oil and Gas Company, Partnership Fund, the Government's and President's Reserve Funds and the Ministry of Defense -- bypass the electronic procurement platform which "have resulted in misconduct and corruption."

In 2011, according to TI Georgia, 600 million lari, which is two-thirds of Simplified Procurement Tenders, consisted of procurement conducted via the president/government consent clause. In 2012 this amount increased to 800 million lari. Consequently, the report recommends that these exceptions should be revised.

de Boer told Investor.ge that "the most important loophole" is a provision that allows tenders to be awarded directly, bypassing the procurement system." A reform initiative by the CSPA, however, should address the problem, he noted. "We found that many contracts, especially for large construction projects, have been procured in this way, raising the risk of wasteful spending and corruption," de Boer said.

"The Competition and State Procurement Agency has started to publish these contracts online, allowing anyone to see what has been spend on what and for how much and who won these non-competitive contracts."

He added that this was TI Georgia's only major criticism of the system.

"In general the electronic procurement system in Georgia, as well as the regulatory framework, is a great improvement and can be a best practice model for other countries," he said.

"The transparency, the bidding system, but also elements like the appeal mechanism, allowing everyone to appeal a tender they think violates the law, as well as the dispute resolution board, are very innovative and positive attributes of the system. That is why we say if some adaptations are made this system really can be one of the best in the world."

On June 14, TI Georgia also launched tendermonitor.ge, a new website which gives an in-depth look at government spending in Georgia by allowing the public to search, explore and monitor public procurement online. While the CSPA has done a good job of providing information, it is still difficult to understand the "big picture" of government spending, de Boer said.

"The official tender website has all the contracting data, but you cannot get the big picture there," de Boer said.

"[We] wanted to make a website that civil society, but also businesses or students, can use to find for example tenders with an increased corruption risk. Tendermonitor.ge is designed so that users can get the big picture, and see, for example, how government spending priorities change over time, and get a better understanding of the relationship between businesses and the government."