Press Release: Fifty companies earn about 250 million euro from public procurement

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In 2016, 52 private companies earned more than a half of total amount spent on public procurement. On the other hand, 91.61% of the state budget for public procurement was spent by only 86 authorities, which makes 13.6% of total number of contracting authorities.

In 2016, 616 state authorities, local self-governments, public institutions and state-owned enterprises concluded 7.653 contracts with total value of 447 739 222,36 euros, which makes 11.77% of GDP.

However, most of this money “circulated” between very low number of participants in public procurement procedures – bidders and contracting authorities. Although there are 2.518 bidders registered by the Public Procurement Administration (PPA) in 2016, only 52 of them concluded contracts with total value of 240 584 655,55 euro, i.e. 53.73% of total amount spent on public procurement during 2016.  According to the most recent results from 2017 published by Montenegrin Statistical Office – Monstat, there are 27.954 small, 268 middle-sized and 46 large firms registered.

Also, 91.61%, or 410.174.098,48 euro of the total budget spent on public procurement during the same year, was spent by only 86 authorities, which makes 13.6% of total number of contracting authorities.

Another discouraging number – 2.21 is the average number of bids per tender in 2016. This number is in constant decline and is twice as low as in 2011 when it was 4.34.

These data tell us three facts:

Firstly, the approach of PPA to registering bidders, which is reduced to pure “counting” Public Procurement Portal visitors, is wrong, as we have pointed out several times. Namely, visitors of the Portal are also citizens, journalists, researchers, representatives of non-governmental organisations dealing with public procurement – in short, any interested party who has ever visited the Portal, and not necessarily only bidders. Although small market is often being taken as an excuse for poor competitiveness, we do not know how many bidders there actually is, i.e. how many companies actually participate in public procurement tenders and how small or large Montenegrin market is.

Secondly, the majority share of only 52 companies in public procurement procedures as well as the low number of bidders per tender can be an indicator of the existence of corruption in public procurement, i.e. writing of “too specific” tender specifications for procurement that from the very beginning of procedure were intended for one specific company. On the other hand, the PPA received only two reports on suspicious of corruption in 2016, one of which referred to a bank guarantee, for which the person who reported it believed it was falsified, and the other related to the tender documentation, where the person who reported it believed that there has been an abuse of the principle of ensuring competition and the principle of equality.

Thirdly, in the public procurement system in Montenegro, there is a strong need for centralisation – merging of the same or similar procurement by sectors, as well as for rationalisation of the number of employees working on public procurement tasks. If 13.6% of the contracting authorities conduct more than 90% of public procurement procedures, and the remaining 86.4% implement less than 10%, then it is necessary to urgently start the process of centralisation of the public procurement system.

It is necessary to identify contracting authorities with low number of public procurement procedures that are being implemented annually. It is then necessary to map the areas in which procurement could be merged – centralised. Finally, it is necessary to rationalise the number of public procurement officers – to increase the number of employees in the contracting authorities that are procuring more, and to reduce in the authorities that procure less, as well as to merge the same or similar procurement of these authorities.

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