Public procurement and public-private partnerships - between solid regulations and poor practice

Public procurement in Serbia is ever less public even though basic regulations in this area are mostly harmonized with the European standards. This is the main conclusion of the research Transparency Serbia has performed, and presented at today’s media conference.

As poor as the situation in public procurement is, it is even worse in the area of public-private partnerships where even the law is not harmonized with EU standards. In addition to numerous shortcomings in this law, which relate not only to EU standards but also to the transparency of the procedure, a major problem in practice is the unavailability of data on whether and in what way public authorities monitor how private partners fulfil contractual obligations.

The transparency of procurement is compromised in five ways. The first is that the Government of Serbia directly contracts contractors using interstate agreements as legal cover for such arrangements. This type of undermining of public procurements is the most dangerous because deals worth billions of euros are contracted whereby the choice of the company or the price to be paid are not subject to either parliamentary or public control.

Second type is to apply tailor-made laws for one or more projects instead of the Law on Public Procurement. The most obvious examples from the recent past are related to line infrastructure and state housing.

A very significant reduction of transparency occurred not only by violating and circumventing the implementation of the Law on Public Procurement but, paradoxically, because of the application of its provisions. Namely, raising the bar above which public procurements must be announced – from the earlier 500 thousand dinars to the amounts from one to 20 million dinars (depending on the subject and type of the contracting authority) – has drastically reduced transparency. Thus, in 2019, an average of over 5,000 procedures was published on the Public Procurement Portal per month, while in the first five months of 2021 there were just over 3,000 such announcements for each month.^[1]

The fourth type is the fact that some of the important documents which used to be published are no longer available on the portal – such as tender documents and opinions of the Public Procurement Office when conducting a negotiated procedure without publishing a public invitation. This is exactly the type of procurement in which alleged urgency is most often used as an excuse to shorten procedures. Not only these documents are not published on the portal but the clients do not submit them even upon requests for access to information. That was the case of procurement for equipping a COVID hospital in Batajnica or for purchasing vitamin packages for pensioners.

The fifth type of drastic reduction in transparency refers to the fact that the Government of Serbia has declared confidential all procurements related to the pandemic, although such secrecy is supported neither by the old nor by the current Law on Public Procurement. As a recently published international survey^[2] showed, Serbia is in the group of the worst-ranked countries in terms of this parameter.

In addition to these, there are a number of other factors that harm competition in public procurement. Competition is also distorted through the setting of discriminatory conditions for tender participation (illustrated by many cases of buying and leasing cars). Even when procurement is not rigged using criteria that only one bidder can meet, it is obvious that contracting authorities do not make sufficient efforts to ensure competition, by making invitations to all firms that can deliver certain goods, services or works for example. It was also noticed that the contracting authorities in the preparation of bids for very complex procurements leave a minimum legal deadline and do not perform adequate market research. Furthermore, there are many situations in which the purposefulness of public procurement is disputable – again, a good example are situations when contracting authorities rent cars instead of buying them, although this is less profitable in the long run.

Abuses in public procurement generally remain uninvestigated and unpunished. In 2020, 89 persons were reported for the criminal offence of "abuse in connection with public procurement", which is 18% less than in 2019. Of all reports that were in process in 2020, 45 (one quarter) were rejected. The number of indictments in 2020 was similar to 2019 (24 vs. 25). As for convictions, 21 was passed in 2020 (of which 20 were suspended sentences) compared to 10 a year earlier. Although they refer to a property crime, the measure of confiscation of property gain has not been imposed.

For misdemeanor prosecution, where the system did not function at all due to the inconsistency of the Law on Public Procurement and the Law on Misdemeanors from 2013 to 2020, there are no published data for last year yet.

One of the reasons for a large number of undetected and unpunished irregularities lies in the inadequate monitoring mechanism. The Public Procurement Office foresaw that only five officials would monitor public procurement procedures. During 2020, the office monitored the tender documentation in 274 cases and acted in 42 at the requests of the prosecutor's office, the police and the Agency for the Prevention of Corruption, as well as in 35 cases based on reports from businesses and other persons. This means that only one of the 400 procurement procedures was monitored.

The situation is even worse when it comes to supervising the execution of contracts. The new Law on Public Procurement designates the Ministry of Finance as the competent supervisory body. However, it remains unclear in what way and to what extent the ministry will perform the supervision. There is no report on the conducted supervision, although the data from that report should be one of the indicators for achieving progress in the field of European integration in this area. The need for stronger supervision is clearly indicated by the data published by the State Audit Institution (SAI): during 2020, the SAI found irregularities in 14.24% of cases.

All this indicates that it is necessary to correct all other observed shortcomings in the next changes to the law (which are planned by the end of the year), based on the Media Strategy, and in order to better regulate the procurement of media services.

^[1] The consequences of changing the law in 2020 were even more drastic - although both the old and the new law were in force for six months, 12 times more contracts were concluded under the provisions of the previous regulation.

^[2] https://internationalbudget.org/covid/