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Corruption risks detected in tender procedures of state-owned and municipal utility enterprises

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Today, 6 October 2020, the Center for Civil Communications (CCC) releases its research paper “Mapping Corruption Risks in Public Procurements of Enterprises Owned by the Government and Municipalities”.

Corruption risks were mapped as part of in-depth monitoring conducted on tender procedures of 37 joint stock companies and enterprises founded by the Government, the City of Skopje and Municipalities of Kavadarci, Gostivar and Struga. In 2029, these enterprises have signed public procurement contracts in the value of 247 million EUR, accounting for 27% of all public procurements in the country.

Key findings from the analysis:

  • Corruption risks detected are manifested as frequent and significant changes to public procurement plans, but also poor implementation rate of these plans. In the case of 16 from 37 analysed enterprises, implementation rate of their public procurement plans is below 50%. The highest implementation rate of 96% is noted with JSC MIA, while the lowest rate of only 1% is noted with JSC Water Economy.
  • Concentration of public procurements with particular company, as one of the most relevant indicators of corruption risks, is a problem noted with large portion of analysed enterprises and joint stock companies. In the case of almost one third of them, concentration of public procurements with one company exceeds 40%. The highest value share for single company is observed with JSC Power Plants, while the highest share for public procurements is observed with JSC Water Economy.
  • One third of targeted enterprises have organized non-transparent negotiation procedures without prior announcement of call for bids. High shares of such procurements in total value of all public procurements are recorded with the Official Gazette (28%) and PE City Parking – Skopje (22%).
  • The relevant share of annulled tender procedures exceeds 20% in the case of as many as 20 from 37 targeted enterprises. Frequent tender annulment is defined as indicator for existence of corruption risks. High frequency of tender annulments is noted with MR Transport, PE National Forests and PTE Skopje.
  • Major differences are established in prices attained for procurement of same type of goods and services, by 24% to 120%. 1 MWh of electricity has been procured at prices ranging from 4,738 MKD to 5,888 MKD. 1 ream of print paper, white, weighing 80 grams and A4 format was procured for 158 MKD to 349 MKD. As regards physical security services provided by one person, enterprises have paid monthly fees to security agencies in the range from 24,255 MKD to 36,875 MKD. Analysed institutions engaged temporary employees from specialized agencies that charged them commission rates ranging from 0.01% to 8.90% of gross salary entitled to engaged workers. Oil derivatives were purchased at the highest retail price.

The research paper Mapping Corruption Risks in Public Procurements of Enterprises Owned by the Government and Municipalities is developed as part of the project “Toward Accountable Public Enterprises” with financial support from the Embassy of the Kingdom of the Netherlands in Skopje, implemented by the Center for Civil Communications in the period 1 October 2019 – 30 September 2021.

Weaknesses detected in the analysis further confirm the need for enhancing integrity and reducing corruption risks at public enterprises and joint stock companies. In that regard, this analysis will be followed by individual screening at all 37 enterprises, including an overview of key parameters that reflect public procurements at the level of individual contracting authorities, as well as human resources and internal policies at targeted enterprises. The purpose is for this screening effort to be used for adjustment of planned workshops and training sessions intended for representatives from public enterprises and joint stock companies and aimed to overcome actual weaknesses in implementation of public procurements, while maximizing effects from capacity-building of human resources and developing individual integrity plans for public procurements. Therefore, the Center for Civil Communications has recently signed letters of intent with the founders of targeted joint stock companies and public enterprises, i.e. the Government of RNM, the City of Skopje and Municipalities of Kavadarci, Gostivar and Struga, wherein it is enlisted that after identification of corruption generators in public procurements of these enterprises, activities will be implemented for setting standards to improve accountability and integrity, and support will be provided for introduction of sustainable mechanisms to advance implementation of public procurements.