Month: May 2021

Podgorica, PR Press Service–  The system of prevention and prosecuting conflicts of interest in public procurement can be improved through preventive and repressive actions. It is necessary to network the system, avoiding to put all the pressure on one institution, and for the public to have a control role it is necessary to improve transparency.

This was stated at the conference “Fight against corruption and prevention of conflict of interest in public procurement”, organised by the Institute Alternative. The conference was organised within the project “For the Better Use of Public Money!”, with the financial support of the Embassy of the Kingdom of the Netherlands in Serbia and Montenegro.

Stevo Muk, President of the Managing Board of Institute Alternative, believes that resolving a potential conflict of interest on time and in the public interest is one step before the conflict of interest becomes corruption, and that correcting the consequences of conflicts of interest is a costly and arduous process.

“Montenegro so far lacked a strategic, reformist and systematic approach to this topic. How many times have we heard how small Montenegro is and that “everyone is in a conflict of interest with everyone”. It It is the fact that countries with smaller population have also managed to solve, or at least to reduce the scope of this problem. This is why that should not be an excuse for our country. Especially because over half a billion euros a year, or over 10 percent of GDP, is spent on public procurement”, said Muk.

Anne Sietske Brinks, Deputy Head of Mission of the Embassy of the Kingdom of the Netherlands in Serbia and Montenegro, explained that the conflict of interest in public procurement is a key indicator of the country’s success in accession to the EU.

“We have concluded that progress has been made, but much remains to be done. In the upcoming period, Montenegro should work on the implementation of the adopted laws, to respect the EU principles for public procurement and to improve the system defined by the EU Rulebook. Conflict of interest is a complicated topic, with many different layers and it takes time to resolve this matter. The good news is that we can start today, because the rules are important, but sooner or later it all comes down to our behaviour, or the behaviour of others that we tolerate,” said Sietske Brinks.

German Filkov, President of the Center for Civil Communications from North Macedonia, said that a novelty is that the members and the president of the State Commission for Public Procurement Appeals may be exempted from working on a specific case in which there is a conflict of interest on their part.  “The employment and engagement of, business cooperation with and acquisition of ownership by a person from the contracting authority in a tender awarded company is prohibited, if the person has participated in the procurement procedure with that company and if its share is greater than 5% of the value of all contracts of the contracting authority”, stated Filkov.

In practice, not only in public procurement, but in general, there is a low level of recognition of conflicts of interest and even less knowledge of their successful management.

Dubravka Klišmanić, Head of the Procurement Department at the Faculty of Mechanical Engineering and Naval Architecture at the University of Zagreb, explained that the contracting authority is required to implement appropriate measures to effectively prevent, identify and eliminate conflicts of interest related to a public procurement procedure in order to prevent distortion of competition and ensure equal treatment of all economic operators.

“The contracting authority is also required to post on its webpages the list of economic operators that its head or member of managing, governing or supervisory body  of contracting authority or persons related to them are in conflict-of-interest situation with, or statement that no such economic operators exist, and include that information in the bidding document” said Klišmanić.

Aleksandra Martinović, Chairperson of the Parliament, Transparency International, Bosnia and Herzegovina said that the absence of adequate policies and practices in conflict of interest prevention and management in general, and in particular in the field of public procurement, constitutes a major factor contributing to the image of state capture of Bosnia and Herzegovina and its institutions, and consequently of the public procurement system in Bosnia and Herzegovina.

“The references made in the PPL to the provisions of the regulations on conflict of interest at different levels of government is problematic, as in the B&H there are no laws that are mutually aligned and address conflict of interest in a uniform manner. The regulations on conflict of interest are numerous, complicated, inconsistent and inefficient, and the laws are not applied at some administrative levels, so the implementation of the mentioned provisions of the PPL can not be ensured”, said Martinović.

She pointed out that examples of good practices can be found at certain lower administrative levels.

Silviu Popa, Secretary General of the National Integrity Agency, Romania, pointed out that in less than two years, the ANI managed to build an electronic system (PREVENT system) that automatically crosschecks relevant data from various databases and registries in order to detect potential familial links in public procurement procedures, links between contracting authorities and bidders that could determine the existence of a possible conflict of interest.

“Within the same period, the Romanian authorities adopted the legislation that accompanied PREVENT to enable it to function. When potential conflict of interest can not be prevented, then there is nothing we can do”, added Popa.

Jelena Jovetić, General Director of the Directorate for Public Procurement Policy in the Ministry of Finance, said that the New Law on Public Procurement, which has been in force since July, has significantly improved transparency.

“What is of special importance to us is the new electronic public procurement system, whose implementation started in January. Although it was difficult and challenging, we had about 550 million public procurement in the year behind us. These are procurement without procurement of energy and coal. The novelty of our regulatory framework is that simple procurement are conducted through the electronic public procurement system. For 2020, we have an increase in the competitiveness index to 2.27 “, said Jovetić.

In response to the question whether the new electronic public procurement system enables networking with databases important for timely prevention of conflicts of interest, such as the Central Register of Business Entities, Tax Administration, etc, Jovetić answered that networking of some databases is already envisaged by the Draft Strategy on Development of Public Procurement and Public-private Partnerships Systems.

“In our Action Plan for 2021 and 2022, we have a measure that directly refers to the further improvement of the electronic public procurement system and we have the funds to upgrade the system that connects institutions in the public procurement control. There are no technical obstacles in that segment so we can harmonise with other relevant institutions in the coming period”, concluded Jovetić.

Tanja Simićević, Head of the Public Procurement Office at Municipality of Budva, concluded that everything comes down to the responsibility of the contracting authority, recognition of conflicts of interest and possible actions by the contracting authority. She pointed out that under the new Law, the procedure is initiated by the declaration of absence of conflict of interest.

“The moment of signing the declaration is questionable. This declaration would play a more significant role and give a greater contribution if you already have a public procurement contract ready to be signed, when all those who participated in the procedure can sign the contract being familiar with the bidder, when we have a clean procedure, a declaration of absence of conflict of interest and the conclusion of a contract. I think that with preventive measures, that declaration would have a much bigger effect then, because I do not know which of all the persons involved in the entire process could sign before concluding the contract that it is not in a conflict of interest, but it is”, explained Simićević.

Jelena Perović, Director of the Agency for Prevention of Corruption explained that the Agency currently has two segments in which it deals with public procurement, and that is through whistleblower reports and through the financing of political parties and the election process.

“Out of 460 reports from the beginning of the Agency’s work until the first quarter of this year, 31 reports were related to public procurement processes. The largest number of reports referred to irregularities in the field of public procurement at the local level, 32% and 29% at the state level. In 19% of the reports, endangerment of the public interest was determined, while in the rest, the existence of irregularities was not found”, said Perović.

The Agency acted in 22 cases and 4 of them ended with recommendations, in 9 cases other competent bodies acted and 2 were positively ended. Because the identity of the whistleblower is protected all of these cases were not public.

Dragan Bojović, Vice President of the Anti-Corruption Committee in the Parliament of Montenegro, believes that it is very important to find a way to more effectively resolve conflicts of interest. He also shared doubts if the Agency for the Prevention of Corruption could be more effective.

“Maybe the Agency is in a certain sense overloaded with documentation, maybe the number of reports that are submitted is too large. This should be reduced and enable the people who work in the Agency to be more efficient, ie to concentrate on exposing corruption, and not on the administration. I do not know how good it would be to transfer this problem exclusively to the Agency. The institutions in charge for controlling public procurement should be better networked, and the data should be centralised”, said Bojović.

This conference was organised within the project “For the Better Use of Public Money!” implemented by Institute Alternative and funded by the Embassy of the Kingdom of the Netherlands. The expressed opinions and views do not necessarily reflect those of the Embassy of the Kingdom of the Netherlands.

Institute Alternative’s analysis on implementation of the new Public Procurement Law

The Royal Capital of Cetinje amended its 2020 Public Procurement Plan as many as 18 times and the Municipality of Ulcinj executed only 7% of its public procurement budget in 2019.

Those are just some of the examples of poor planning that Institute Alternative pointed out in it’s analysis.

Besides serving as an illustration of poor procurement planning, this case (Cetinje) illustrates the poorly regulated procurement planning procedures: the Law allows for the Plans to be amended as many times as desired and without any rationale. Although the most drastic example, Cetinje was not an exception, states in the findings.

On average, the 24 municipalities covered by this report amended their Public

Procurement Plans on 6.4 occasions during a single year. The ones that resorted to this most frequently, besides Cetinje, were Zabljak (11), Berane, Pljevlja and Petnjica (10), while the ones that amended their Plans the least were Budva, Andrijevica, Mojkovac and Herceg Novi (twice).

Analysis „Implementation of the New Public Procurement Law: A Chance to Leave the Vicious Circle“, focused on the work of municipalities and ministries, was prepared by Ana Đurnić and Dragana Jaćimović.

The 17 ministries changed their Public Procurement Plans less frequently than the municipalities, on average on 2.8 occasions in 2020. The Ministry of Justice amended its Plan most frequently (eight times). The Ministry of Interior had six rounds of amendments; the Ministry of Sustainable Development and Tourism and the Ministry of Public Administration carried out amendments on average almost once in two months, or five times during the year.

The Ministry of Labour and Social Welfare, Ministry of Human and Minority Rights, Ministry of Science and Ministry of Health amended their respective Plans only once during 2020.

The new Public Procurement Law (PPL) was adopted on 17 December 2019 and its implementation began on 7 July 2020. It was adopted with the aim of further harmonisation with the EU Directives within the accession negotiation process between Montenegro and the EU.  Harmonisation of the national framework with the EU acquis communautaire is one of the three closing benchmarks for Chapter 5 – Public Procurement.

The European Commission 2020 Montenegro Report noted limited progress in this area, with the adoption of the new PPL and the Law on Public-Private Partnerships.

It further stated the need for consistent implementation of these laws, along with the adoption of relevant secondary legislation, it is stated in the analysis.  Institute Alternative reminded on the European Commission’s assessment from 2015, which noted good progress on the back of the PPL amendments from late 2014; the subsequent implementation, however, failed, and the 2016 Report noted limited progress. The 2018 Report noted a backslide.

Inadequate procurement planning is illustrated also by the large differences between the planned and executed procurement budgets of contracting authorities. However, the data for the individual categories of contracting authorities, such as ministries and municipalities, are available and suggest that the problem of inadequate planning is particularly present among municipalities.

During 2019, the municipalities spent only some 60% of the budget planned for public procurement: €48,114,198.99 out of the planned amount of €81,703,241. The Municipality of Ulcinj executed only 7% of its public procurement budget in 2019,16 followed by the Royal Capital of Cetinje at just 29%,17 and the Municipality of Budva at close to one half of

the planned budget, almost 54%, stated Đurnić and Jaćimović.  Dana for 2020 are not yet available and the issue of poor planning at the level of all contracting authorities is impossible to measure.  Neither the Ministry of Finance nor its predecessor the Public Procurement Administration publishes the total difference between the planned and spent procurement budget as the aggregate amount for all of the contracting authorities, just for some of them such as ministries and municipalities.

According to the data collected by Institute Alternative, in 2019, Municipality Ulcinj spent spent a bit more than  350.000,00EUR, against the originally planned amount of  5,5 milions EUR. Overall, the ministries executed 93% of the funds planned for public procurement in 2019.19 Individual ministries were flagged up as examples of poor planning: one-half and one-third of the respective planned budgets remained unspent in the cases of the Ministry of Labour and Social Welfare20 and Ministry of Defence, while the Ministry of Interior spent €8 million more (€30,230,903.72) than originally planned (€22, 211,729.21), it is stated in the IA’s analysis.

Institute Alternative recommends that more stringent obligations should be defined on the part of contracting authorities concerning the development of Public Procurement Plans. According to them, such Plans should include the contracting authority’s needs assessment for the previous three years, explanatory notes in case the envisaged needs differ radically from the past ones, and specific explanatory notes on any new procurement. Amendments to the Public Procurement Plan should include mandatory explanations.

Croats constantly conduct market analysis

The PPL introduced market research in the course of developing a Public Procurement Plan or when launching a public procurement procedure. It is prescribed as a possibility, not an obligation, and only provided that it does not jeopardise the principle of market competition, prohibition of discrimination and transparency.

In practice, there are no indications or evidence that the contracting authorities from the category of ministries and municipalities implemented such analyses. No findings of a market analysis were included in Public Procurement Plans, Tender Documentation, procurement notices or reports on implemented procedures i.e. Decisions on the selection of the best tender, they stated.

The IA points to the example of neighbouring Croatia, an EU member state, market analyses are implemented as a rule prior to launching a public procurement to prepare the procurement and inform economic operators about the contracting authorities plans and requirements and are mandatory also prior to launching an open or restricted procedure for the purchase of works or procedures of large value purchases of goods or services.  the contracting authority is required to prepare and publish a report on endorsed and rejected comments and suggestions.

Author: Miloš Rudović, Vijesti

Text is originally published in the Daily Newspaper Vijesti, and also on the portal Vijesti.