Money well spent?

Author: German Filkov, President at the Center for Civil Communications

Source: AmCham Macedonia, summer 2016.

Poor planning, selection of the bids based solely on the lowest price criterion and insufficient institutional capacity to implement tenders and control are common problems in public tenders in four Western Balkan countries, including Macedonia. Research on the effectiveness in public procurement in Macedonia, Serbia, Bosnia and Herzegovina and Montenegro done by a regional civil society organization (CSO) network, Balkan Tender Watch, shows a constant decrease in the average number of bidders per tender in all four countries in the last four years. This, according to the researchers, indicates an increased level of corruption and mistrust in public tenders. Beside comparative analysis of legal and institutional frameworks, the research included direct monitoring of selected procurement cases of the same types of products and services. Findings suggest questionable public procurement purposefulness (i.e., necessity of a given purchase and value for money) in all four countries. In their recommendations, CSOs ask for the EU integration process to be used to push beyond the minimum acquis requirements, given that research indicates wide room for corruption and mismanagement of public spending while EU legal requirements are largely met.

In Macedonia specifically, the lowest price as single bidding criterion, mandatory e-auctions and the obligation 18 AM CHAM MAGAZINE Author: German Filkov, President at the Center forCivil Communications BALKAN TENDER WATCH @nter for Civil Communications ~Ilclll ap .la I P<.IIaucxu ' h'llIYIIIIKdIUIII for contracting authorities to obtain prior approval from the Public Procurement Council constantly decrease competition, compromise quality of purchases, cause a high number tenders to be annulled and jeopardize the 'best value for money' principle. Once very close to being fully harmonized with the EU requirements, the countries' public procurement regime is now further from being aligned with the acquis. The following list summarized issues identified at each phase of the procurement process:

• Public procurement planning is one of the country's weakest phases; annual procurement plans are considered pro forma by contracting authorities. The research showed a lack of analyses required to ensure the best value for money in public spending.

• The contracting phase is complicated, lasts longer and is more expensive due to the Obligation for contracting authorities to seek approval for tender specifications prior to them being published. While this step was added to increase competition, the number of bidders per tender keeps declining, causing a series of distortions in the market.

• The contract management phase is the most secretive one. Given that the Public Procurement Law ends with signing the contract, there is no publicly available information on the execution of the contracts. Simultaneously, the scope of documents contracting authorities submitted during the research through the Free Access to Information Act for this phase was very limited and incomparable to the documents for the other phases of the monitored tenders.

Research findings and various forms of best practices in CSOs monitoring of public spending were presented on an international conference: Public Procurement Oversight: Corruption Risks Identified by the CSOs, which took place in Skopje on June 7, 2016, organized by the Center for Civil Communications and the Macedonian Center for International Cooperation. Various stakeholders, including contracting authorities and business people agreed with the findings, adding more insights to the problems and emphasizing the urgent need for legal changes to bring the procurement system back on track with EU requirements.

Read more at AmCham Macedonia.