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Latest public procurement monitoring report

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Old habits – stronger than the new Law on Public Procurement

Today, 30 December 2019, the Center for Civil Communications published the Report from the monitoring of public procurement for January-June 2019, which shows some key aspects, as follows:

-Old habits are stronger than the new Law on Public Procurements. Lowest price and electronic auctions remain unchallenged practices in the first three months after the law entered in effect.

-In the first half of 2019, competition in public procurements is worsened compared to the previous two years. The average number of bids in the monitoring sample stands at only 2.74 bids per tender procedure, while high 35% of monitored public procurements were presented with only one bid.

-In most cases, contracting authorities do not indicate the estimated value in their procurement notices, which is in compliance with novelties introduced in the law. However, there are number of cases in which offered prices are symptomatically close to the estimated value which bidding companies were unable to learn from tender documents.

-Every fourth tender procedure (25.8%) is fully or partially annulled. In addition to commonly indicated legal grounds for tender annulment, the new law added another possibility for tender procedures to be annulled upon instruction from the Bureau of Public Procurements, after having conducted administrative control.

-In the first half of 2019, non-transparent negotiation procedures without prior announcement of call for bids were used to award contracts in the value of 9.6 million euros, which is by 11% less compared to the same period last year.

-Analysis of monitored public procurements organized by local institutions shows that these tender procedures are implemented as if the new Law on Public Procurements is not adopted and has not entered into effect. Hence, monitoring activities observed numerous shortcomings; lowest price is still used as the single selection criterion and e-actions were organized in 70% of tender procedures, although when they were mandatory, both elements were criticized as the main reasons for problems in public procurements. Frequency of tender annulments has not receded, and competition is decreased.

The Monitoring of Public Procurement is developed as part of the activity Public Spending for Public Good, supported under the USAID Civic Engagement Project. This activity aims to increase effective public spending by reducing corruption and increasing transparency. For more information about work and activities of the Center for Civil Communications, please visit our website www.ccc.org.mk and http://www.opendata.mk/.

NOTE TO EDITORS

The American people, through USAID, have invested more than $640 million in North Macedonia since 1993. USAID is the world’s premier international development agency and a catalytic actor driving development results. USAID’s work advances U.S. national security and economic prosperity, demonstrates American generosity, and promotes a path to recipient self-reliance and resilience. For more information visit https://www.usaid.gov/north-macedonia and USAID’s Facebook page https://www.facebook.com/USAIDNorthMacedonia/.

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Shadow Report on Public procurement in North Macedonia 2019

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After criticism from all stakeholders, the old and non-functional Law on Public Procurements – adopted in 2008 and frequently amended thereafter - is finally replaced with completely new law, which was adopted in January 2019 and entered into effect on 1 April 2019.

In addition to alignment with the EU Directive on Public Procurement from 2014, the new Law on Public Procurements attempts to “correct” a series of problems in the system of public procurements in North Macedonia.

In particular, it addresses the two problems that have been indicated by all stakeholders as the most burning issues under the old law and concerned use of lowest price as the single criterion for tender award and mandatory organization of electronic auctions. Hence, except for lowest price, the new law introduced other selection elements, while e-auctions became optional with an idea to be organized in cases when there is standard and equal quality and therefore it is logical for the selection to be based on prices offered.

The new law introduced the so-called administrative control conducted by the Bureau of Public Procurements as follows: mandatory control in case of tender procedures whose value exceeds 500,000 euros (goods and services) and 2,000,000 euros (works); control based on risk assessment and random sample control.

In general, the new law liberalizes all public procurements and introduces new possibilities for contracting authorities to procure what they actually need by getting the best value for the money spent. Under the new law, but also previously, a series of measures had been introduced to increase transparency in public procurements.

Nevertheless, the monitoring of public procurements in the first seven months form the entry in effect of the new law shows that procurements are still implemented according to old and bad practices, like nothing had changed.

In this period, high 97% of tender procedures still used lowest price as the selection criterion for most favourable bid; electronic auctions were organized in more than 90% of tender procedures; competition is not significantly improved; more than 30% of tender procedures were annulled; every fifth tender procedure was not presented with any bids; every third tender procedure was presented with only one bid; and there are numerous reports by the media and civil society organizations about problematic tender procedures.

Representatives from contracting authorities mainly refer to three reasons for such practices: lack of knowledge about the manner in which opportunities under the new law could be used; fear that they might make errors and consequences therefrom; and their lack of motivation, primarily in relation to the responsibility they bear.

At system level, the competent institution, i.e. the Bureau of Public Procurements, did not increase its capacity to adequately respond to increased competences, especially those related to faster and timely development of the multitude of bylaws arising from the new Law on Public Procurements, as well as full and efficient implementation of newly-introduced ex-ante administrative control on implementation of tender procedures. Models of tender documents for all types of procurement procedures are still not developed, including detailed manual for application of the criterion defined as “economically most favourable bid” pursuant to the new law. No efforts are made to organize frequent and tailor-made training for people tasked with public procurements.

Also, broad public consultations were not organized for development of relevant bylaws, but also for the new Law on Public Procurements in the Field of Defence and Security, which was adopted in August 2019.

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Policy Brief

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Frequent annulment of tender procedures as one of the major problems in public procurement

Frequent annulment of tender procedures one of the major and most lasting problems in the system of public procurements in our country. The fact that every fourth tender procedure is annulled puts the country on the top rank worldwide according to another infamous phenomenon in public procurements.

The problem with massive annulment of tender procedures did not subside with any of the several measures taken in the past, and more recently with the new Law on Public Procurements, which reduced the list of legal grounds for tender annulment. This shows that institutions easily and daily resort to tender annulment when certain matters are not what they expected, because the analyses do not allow the conclusion that, when annulling tender procedures, they are motivated by the idea of defending the public interest in public procurements.

Tender annulments delay procurement of necessary goods, services and works; create additional costs for repeated organization of procurement procedures; increase economic and legal uncertainty of companies and undermine the trust in public procurements because of the conviction that tender procedures are annulled because they cannot be rigged.

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Policy Brief

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Transparency is not sufficient to improve state-of-affairs in public procurements

Publication of more information and documents related to tender procedures in the last several years has contributed to increased transparency of the system of public procurements in the country, but this trend was not accompanied with improved integrity and accountability of the institutions that implement tender procedures. Hence, implementation of public procurements in the country should be paid much greater attention; the capacity of entities implementing tender procedures should be significantly improved; the Bureau of Public Procurements (BPP) should be enabled to perform its increased competences, especially those related to control over implementation of tender procedure; the trend on taking measures aimed to further improve transparency and openness of public procurements should continue, with parallel emphasis on improving other aspects of public procurements, such as accountability and integrity.