Simple procurements are exempted from the application of the Law on Public Procurements, and the Rulebook that regulates this type of procurements additionally exempts direct procurements, so no sanctions are provided for illegalities related to conflicts of interest or other irregularities, such as the sharing of procurement items.
Responses to the initiatives for inspection supervision by Institute Alternative point to legal gaps that hinder the effectiveness of inspection supervision in relation to potential conflicts of interest and other irregularities in direct public procurement. Therefore, there is no room for punishment by the inspection authorities.
Direct procurement is a special type of procurement of up to 8,000 euros, which allows the direct conclusion of invoices/contracts, which is the least transparent procedure, because it allows the deal to be concluded with whomever the client wants.
From year to year, consumption directly increases, so in 2023 it amounted to nearly 65 million euros.
Institute Alternative analyzed spending through direct procurement for previous years, which pointed to numerous irregularities in the use of this mechanism. Some of them are that individual procurements exceed the prescribed threshold on an annual level, that there is a sharing of public procurement items, as well as conflicts of interest.
The Ministry of Finance says that simple procurements are part of the public procurement system, to which they paid special attention in the previous period, and especially to the protection of the rights of participants in procedures through requests for monitoring. “Inspection control has the authority to act in accordance with the Rulebook and to take certain measures according to inspection supervision,” says Jelena Jovetić, general director of the Directorate for Public Procurement Policy.
The Inspectorate for Public Procurement states that we have an increase in identified irregularities related to simple procurements, but that the amendments to the Law on Public Procurement deleted the provision on the basis of which they could initiate misdemeanor proceedings and issue a misdemeanor order for identified irregularities.
They determine a conflict of interest only over 8,000 euros
According to the current legislation, the representative of the contracting authority and the bidders are required to prepare a statement on the absence of conflicts of interest for all procurements that are carried out through the electronic public procurement system, except for direct procurements where you choose from whom you will procure something and at what price. Although apparently it is about “small amounts”, since there is a limit that these procurements can be worth up to 8,000 on an annual level, it is problematic that most of the procurers misinterpret the law, so they observe this threshold for only one procurement without caring about the total amount on an annual basis.
Research conducted by IA on a sample of ministries, municipalities and individual public companies showed that individual purchasers allocated more than 40,000 euros for the same procurement item on an annual basis. Exceeding the amount for direct procurement as a frequent irregularity was confirmed by the recently completed audit of the regularity of these procurements conducted by the State Audit Institution (SAI).
Institute Alternative, analyzing consumption for 2022 using a direct agreement, determined that the Municipality of Andrijevica made purchases in this way from a company owned by the President of the Municipality Željko Ćulafić.
At the moment when the media became interested in this story, Ćulafić did not want to comment on those allegations, while the municipal Secretariat for public procurement said “it is not about a conflict of interest, but about pure, local patriotism”.
Because of all this, Institute Alternative sent an initiative to the Administration for Inspection Affairs at the end of December last year, asking it to carry out inspection supervision in the Municipality of Andrijevica, and determine the possible existence of a conflict of interest. In the response of the public procurement inspection, it is stated that it was determined that invoices were directly accepted from this supplier during 2022 and 2023, in the amount of 9.5 thousand euros without VAT.
Although the allegations from the initiative were confirmed, the response of the Administration for Inspection Affairs states that irregularities were not established because the provisions on the absence of conflicts of interest are prescribed only for procurements over 8,000 euros.
In the Ministry of Finance, they are aware of some legal restrictions, as they say, they believe that we always have certain examples where we can talk about abuse of the system and what is not regulated precisely enough by certain acts. Acknowledging that the by-law provides a certain width, even acting when they receive a certain suggestion, it can enable them to simultaneously approach changes in the law.
“However, when we talk about the conflict of interest, it is not only a subject of regulation in the area of public procurement. It is a broader concept that implies a conflict of interest for public contractors and for the public sector in general. So it is a systemically broader issue, but in the part that refers to public procurement policy, it is quite certain that the Ministry of Finance will always approach it when there is space and certain suggestions,” Jovetić pointed out.
Referring to the case of Andrijevica, Chief Inspector for Public Procurement Ivan Milićević pointed out that the Law on Public Procurement does not prescribe measures to prevent conflicts of interest in procurements made by direct acceptance of the invoice.
“I was a member of the Working group for changes to the Law.” It honestly never occurred to me that this kind of situation could happen. I also believe it is the same for the other members of the Working group. But I also believe that the Ministry will prescribe some measures to prevent this kind of behavior in the coming period,” Milićević is optimistic.
They break the Law, but there is no basis for punishment anymore
Some violations that are recognized by Law when it comes to irregularities in the implementation of public procurement through electronic public procurement system, do not apply to direct procurement, although they do occur. Such an offense is the division of public procurement items, in order to avoid the application of the law.
Here, as an example, we cite the Municipality of Mojkovac, which with a construction company during 2022 realized the adaptation of offices through three invoices. Although it is a corridor and offices located in the same building, the Municipality implemented the adaptation based on three invoices and thus directly chose the contractor, instead of publishing a public call for a simple procurement that would allow a larger number of interested companies to apply. The amount of the mentioned works without VAT is EUR 8,980, paid through three invoices on the same day, December 28, 2022.
The inspection confirmed the allegations from the initiative of Institute Alternative, that the Municipality of Mojkovac violated the article of the Rulebook on the way of conducting simple procurements, which states that simple procurements, i.e. works with an estimated value equal to or greater than 8 thousand euros, initiates the publication of requests for the submission of offers on the electronic system of public procurement, which was not done.
The inspection showed that the Law on Public Procurement, which was in force at that time and prescribed a minor offense if ordinary procurements are not carried out in accordance with the Rulebook that regulates them, was thus violated.
However, the bottom line is that in this particular case, it was about the division of public procurement items in order to avoid the appropriate procedure. The Law provides for a fine for this offense in the amount of 2,000 to 10,000 euros, if it is committed by a legal entity.
Although it is a violation of the Law on Public Procurement and the President of the Municipality, Vesko Delić himself, admitted that he awarded the work to the same construction company and thus avoided conducting the procedure through transparent procedures, he cannot be punished on that basis, since the Law does not apply to simple procurement. Because of the exemption from the Law, the only basis for misdemeanor liability for irregularities in connection with simple procurement was non-compliance with the Rulebook. Also, since in this particular case it is a legal entity of the municipality that cannot be fined, the inspection fined the responsible person in the local self-government body with a minimum fine of 150 euros. The Law previously provided for a fine of 150 to 1000 euros for the person responsible for this offense. In the meantime, the offense related to non-compliance with the Rulebook was removed from the Law, which also lost the basis for the inspection to punish irregularities related to simple procurement.
Public procurement inspector Ivan Milićević notes that in the part of control of simple procurements, it happens that procurements that are carried out by direct acceptance of invoices are not entered in the records kept by the ordering parties on the electronic public procurement system or are not entered in the records kept by the ordering parties on the electronic public procurement system or are not entered correctly.
“This makes it difficult for us to determine other irregularities such as the division of public procurement items or the implementation of simple procurements through the electronic public procurement system when the amount of 8,000 euros is reached by direct acceptance of the invoice and from when procurements should be carried out through the electronic public procurement system,” says Milićević.
The Ministry of Finance says that it is very important for them to ensure a transparent public procurement system and for public procurement to be efficient, but that they are committed to controlling simple procurements, which currently account for around 10% of total procurements.
“When we saw that the percentage of simple procurements significantly participates in the total value of public procurements, we introduced a limit through the rulebook on simple procurements, so that in one fiscal year, the contracting authorities can carry out one hundred thousand euros of the value of these procurements related to direct negotiations. So that we would ensure that in this segment as many business entities as possible participate in procurement and that direct, i.e. invoiced procurement is reduced to a minimum,” concluded Jovetić.
This article was produced as the part of the project Inspect to Protect_ Turning Inspectorates into Anti-Corruption Allies supported by the Embassy of the United States in Montenegro, the State Department’s Bureau for International Narcotics and Law Enforcement Affairs (INL).
