Transparency International – Georgia, a civil society organization, published a report on Aug. 11 that analyzed government procurement conducted by the government and local governments of the Autonomous Republic of Adjara, finding that the practice of subcontracting tenders is unregulated and “increases risks corruption in the public procurement system and encourages harmful practices in the management of public finances.”
As part of the research, TI – Georgia interviewed 14 budgetary institutions operating in Adjara – 4 regional government ministries, 5 municipalities, 2 subdepartmental institutions (Adjara Roads Department of Adjara Tourism and Resorts Department), a legal entity in the public law of the Ministry of Finance and Economy of Adjara (Batumi Boulevard), an autonomous LLC (Adjara Project Management Company) owned by the Republic and the large municipal non-enterprise legal entity (Batumi Civil Infrastructure and Amenity Department) – and studied procurement contracts from 2020-2021 exceeding GEL 100,000.
Harmful Practices
In the study, the CSO points to the inconsistent practice of public bodies in setting the cap on the volume of work to be carried out by subcontractors, saying that the cap (30%) is set only by the Ministry of Education.
According to the document, the limit of works to be carried out by a subcontractor is not set by the Batumi Municipality City Hall Department of Urban Infrastructure and Improvements, where in most cases the winners of the tenders are donors from the ruling Georgian Dream party, which “actually the Plays the role of intermediary between procurement entities and subcontractors.”
For example, in 10 out of 16 contracts signed by the department, more than 90% of the work was not carried out by the tender winners but by subcontractors. This means that the winners of the tenders “sell their experience and receive 10% to 15% of the amount specified in the tender, while less experienced companies do the work”.
In addition, TI – Georgia stated that none of the contracts signed by the companies providing services to the government procurement agency have been uploaded to the agency’s website, compromising the transparency of the process.
According to the organization, with the exception of three public authorities (Batumi City Infrastructure and Improvement Department, Adjara Highway Department and Batumi Boulevard), no one has submitted signed contracts with subcontractors, stating that they have no such contracts.
positive tendencies
“It is commendable that almost all entities require suppliers of goods/services to tender to agree with procurement entities on the subcontracting issue,” said TI – Georgia. The only public body that does not require this is the Batumi Civil Infrastructure and Amenity Department. It only requires that it is informed of the subcontracting at least five days before the work begins.
According to the study, the Audit Office uncovered only two cases where companies that won two tenders announced by the Finance and Economy Minister of Adjara signed subcontractor agreements without notifying the ministry.
In addition, the Adjara Roads Department fined several deliveries for not agreeing to a subcontracting agreement.
recommendations
TI – Georgia recommended the following:
- Sourcing organizations should stop being guided by their own initiatives and practices and set a unified standard;
- Ministries and municipalities should require signed contracts with subcontractors;
- Budgetary organizations should not assume that the main contractors have fulfilled the conditions of a tender that was ‘in practice’ carried out by the subcontractor.
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