The value of public tenders often dramatically exceeds their market value, but because of the commissions, the end quality is extremely low. Much of the public procurement is a deal between the contracting authority and the contractor in which they agree in advance on the money that will be distributed. “The most corrupt public procurement in terms of legality is 100 percent legal,” says Nikolova.
In a candid interview for Bivol, the Director of BORKOR Eleonora Nikolova comments on the way European public procurement programs are carried out in Bulgaria. The reason for the interview was the signal for abuse of euro funds at the Zemen municipality, but BORKOR takes a principled stand for the procurement of euro funds in general.
This signal about Zemen concerns four projects under the Rural Development Program. Regardless of their value, all four contracts awarded by the municipality exceed by much the market value of the underlying works.
Eleonora Nikolova: We are not surprised by the signal; during their work on it analysts have established several categories of vulnerabilities. Vulnerabilities that we have not identified in our business model for a solution in the field of public procurement. In general, these vulnerabilities include insufficient normatively elaborated rules for the procedure of a planned procurement.
Bivol: What are you referring to exactly?
Eleonora Nikolova: How one local community reaches the conclusion that one or another public good is generally needed by this community? Were there any general meetings of the population, meetings of municipal councils where community needs are to be categorized? So that everyone knows that European and Bulgarian money must be used for the most vital things.
Bivol: One of disturbing public contracts, worth over 3.45 million levs, is for the renovation of the municipal stadium in Zemen. Is there any logic in such project?
Eleonora Nikolova: If the population there is mostly elderly, perhaps instead of a stadium it would be better to create for them social care or a nursing home or other type of service that is relevant to this category of people. Stadiums are generally associated with the young generation, with a promising generation that needs to play sports. Separately, we have identified as a weak spot the lack of standards to indicate the way the target price is determined. The word market price is still an unusual concept for the contracting authorities, and they do not have the experience, the desire and lasting habits to make preliminary market assessment of the respective asset or service they want to attract. You see that contracts have an indicative price that drastically diverges from the market one.
Bivol: What is the right solution to overcome these weaknesses?
Eleonora Nikolova: As early as two years ago, in February 2013, the Center came up with a comprehensive solution which recommended a series of measures – technical and organizational to allow the vast majority of these weaknesses, of these shortcomings, of these deficits in public procurement to be overcome. Our measures were divided in two groups. One group included the technical measures – immediately introducing electronic platforms to make the process transparent, competitive and affordable. Furthermore, we proposed several organizational measures that are in direct causal link with your signal. Namely – the need to carry out a preliminary assessment, pre-audit of the terms of reference of the procurement or generally speaking – preliminary control. We worked on the document anticipating Directives 24 and 25 of the European Commission which are already a fact. These directives now impose an obligation on the Public Procurement Agency (PPA) to carry out preliminary control. It has no capacity for that. We proposed then to create six central units at PPA for the awarding of bids to be located in the regions where use of funds is planned. One of the tasks that were listed for them was to offer expert legal advice, both to contracting authorities and to contractors. And last but not least, make a market valuation of indicative values for larger contracts. That is, we were creating local supervisory and regulatory capacities which could have allowed us to fulfill meaningfully and with quality this requirement of the Commission for preliminary control.
Bivol: In other words, had your recommendations been adopted, it would not be possible now to have a public tender worth around one million as, according to independent experts, is the stadium in Zemen, to be awarded for 3.4 three million for example?
Eleonora Nikolova: Yes, this is because in the vast majority of the cases we categorically established that before there is even an idea to hold such public tender, it is preceded by a corrupt deal. A deal between the contracting authority and the contractor in which they agree in advance on the public good that is to be realized and on the money to be distributed among the players. Thus, the contract value dramatically exceeds the market value on one hand and on the other – again because these commissions, the quality that we receive is extremely low. This is why we see prior to all elections urban squares being repaired; the building of water fountains, gazebos, these gyms about which you are talking – all are things that easily absorb money and from there on, there is no control and the opportunity to distribute money that burdens the taxpayer has been previously proclaimed. Without preliminary control of public procurement, things are doomed. Yes, European money is something very important. We need this financial support because without it the Bulgarian population will be even poorer. In just two years, the number of contracting authorities has reached 5,000, compared to 3,000. This shows how great the desire to allocate money is. If these six central units for the awards were established, then to control six offices would have been possible. To control now over 5,000 entities and all their ingenuity in terms of absorbing the money for personal interest is just a lost cause.
Bivol: And how do you see the role of BORKOR in the control of public tenders?
Eleonora Nikolova: We kept for ourselves a task that must be our permanent assignment. Namely – to continue to monitor the gray area of the overall procedure of public procurement. Nobody realizes that the main public tender goes along with a bunch of ancillary tenders that allow the value declared in the main tender to increase drastically. There is no account whether in case of poor performance on the part of the contractor, the contracting authority takes advantage of the agreed guarantee or whether this contractor receives what is listed in the main tender through new money and new companies for repairs. That is, there are many areas that are not in the focus of attention of supervisory authorities which must be analyzed to derive economic and legal conclusions.
Bivol: What do you think of the reaction of the prosecution to this kind of signals for abuses euro funds?
Eleonora Nikolova: Before the prosecution intervenes, there must be a bunch of controlling institutions in place. The control of public procurement in Bulgaria is only over legality. The Commission for Procurement Control (CPC) only examines if the tender is lawful. That is, if it is being held within the norm of the law. The most corrupt public procurement in terms of legality is 100% legal. The control of the Supreme Administrative Court is similar. What remains to do the job based on collected qualitative evidence is the Agency for State Financial Inspection (PFIA) and the National Audit Office which are the controlling institutions under this special law. Only then it is right to send signals to the prosecution. It has no capacity to collect relevant information and inherently relevant evidence. The weakness of controlling institutions must be pointed out and not everything should be send to the prosecution.
Bivol: Is political will the only obstacle for your recommendations to be implemented?
Eleonora Nikolova: Yes. The words political will have become a cliché, but for us this is the largest deficit in terms of the Center. Our work is mediated through the will of politicians. We can make the most qualitative analyzes; send the truest measures; you can agree with them, because you see that they are reasonable. But if they are not implemented by the Council of Ministers or the National Assembly, they will remain only a wish. And we will continue to be a very corrupt country.
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