The public procurement system in Serbia is alienated from the real economic life, and bureaucratization that was supposed to prevent abuse only makes economy sustainability even harder. Corruption is the only thing that remained intact in that system, complain our entrepreneurs.
Instead ensuring that the country gets the cheapest goods and services and the best quality for less money, the corrupt suppliers sustain, and framed tenders indefinitely lessen other bidders’ value. "For each tender I want to participate, I have to obtain references from previous clients with whom I worked and they have to be on the form prescribed by the procuring entity. There is not a single, universal form, but each client makes one according to his will. So, I have to go to a client, take the form and then visit all prior clients so that would sign and notarize that reference. Is it really impossible in the 21st century to make a practice for a client to make a report as a reference for the work done, whether positive or negative, and then to make this report available to contracting authorities in the catalog of the procurement or similar body that would be in charge of it?" asks Vojkan Morarevic, Director of KGH engineering firm with 32 employees that manufactures boilers and produces heating and air conditioning installations.
At the same time, no one is getting any negative references and thanks to that we have firms that decrease the prices in tenders indefinitely, until they get jobs thanks to their political connections. And then they are late in the work or service for two years, says Morarevic and gives an example of the construction company that "has to get every construction contract in eastern Serbia."
The fact that companies unable to get or complete any job can slow down and diminish the value of procurement procedures, is one of the biggest problems for Dragan Mirkovic, director of Factory measuring transformers, the company with 200 employees. "In addition, each procedure requires the collection of same papers and each time we pay fee of 6,000 dinars to the Chamber of Commerce to re-obtain confirmation that we our company is of a national character. I wonder if anyone here is trying to help the economy or their only job is to collect taxes," said Mirkovic.
Changes in the system should bring the announced reforms to the Law on Public Procurement, which should be aligned with the Strategy of public procurement. When the Government adopted the Draft Law last winter, Brussels sent warnings that changes were not going in the right direction. EU will define "a good direction" with the new directive on public procurement whose adoption is expected by year's end. Brussels recognizes that procurements have become alienated and bureaucratized, and a new directive which will replace the current one from 2004. should increase the efficiency of public spending and facilitate the operations of bidders.
Upon adoption of the directive, all EU member states will have to adjust their laws. An expert in this area and recent advisor in the Directorate of Public Procurement Sasa Varinac says that the aim of the reforms at the EU level is to modernize these areas in order to further stimulate economic growth, employment and optimum use of public resources in the times of global economic crisis and the recession.
Easier and more flexible procurement procedures would allow the realization of public procurement contracts in easier and faster way, with as little cost, but still above the required level of transparency and the protection of competition.
Therefore, the aim is to promote effectiveness and efficiency of public procurement by means of new measures and achieve a basic and fundamental principle of the area "the highest quality for less money." "It could be said that the acceleration of procedures, reduction of formal regulations, greater participation of small and medium enterprises and encouragement of wider use of electronic means of communication are the main measures on which the proposed new directive is based," says Varinac.
In the Strategy of development of public procurement, which Serbian government adopted last year, one of the main objectives was promoting the improvement and increased efficiency of public procurement. Some of the measures proposed to achieve this goal are the reduction of tender documentation submitted by the clients, the reduction of the evidence submitted by the bidders, and allowing the removal of irrelevant formal defects in bids - exactly what entrepreneurs in Serbia are complaining about.
Varinac hopes that these measures will actually be accepted in the following reforms in regulations on public procurement in Serbia. But he adds that more important is to improve the application of existing regulations, and that the amendment of legislation should await the adoption of European directives.
The directive stipulates that the work of the bidders in the EU should be facilitated by the introduction of e-Certis, an electronic catalog with certificates they meet the general requirements of public procurement, while other attached documents may be old and up to four years.
This is the direction that Serbian reform is taking. In fact Varinac agrees with economists that despite the large number of mandatory conditions for participation, the efficiency of public procurement in Serbia is threatened by complicated and difficult verifications about the fulfillment of these conditions.
Therefore, the development strategy of public procurement in Serbia suggests reducing the number of evidence submitted by bidders and bidding documents prepared by clients. In addition, it is necessary to analyze the possibility of introducing a rule according to which the fulfillment of several mandatory requirements could be confirmed by one evidence, and the method in which the clients could check the contents of electronic records (kept by the authorized state bodies and institutions) to determine whether some of the mandatory requirements are met, states Varinac.
A solution between the submission of all the papers in each bid and electronic catalogs is offered in the form of Slovenian example. In their case, a statement on eligibility is enclosed with the tender, and only then, if the offer is acceptable, the required documents are submitted. According to Varinac, a similar rule would be a big step towards simplification and speeding up the procedures in Serbia. However, it is important to predict the sanctioning mechanism for providing false information in such statements in order to prevent the opposite effect, which is the delay in procedures by a large number of bidders who don’t have the necessary capacity and capability, as well as a serious intention to implement the procurement in accordance with the client’s needs.
In order to protect small and medium enterprises, European directive stipulates that the procurement of more than EUR 500,000 must be divided into several lots. Such an obligation in domestic law would mean a lot to the local economy, agree the directors or KGH engineering and FMT. We need to separate the civil, electrical and mechanical works, as well as products of different categories, as when they are combined, the entrepreneurs who get the job later blackmail the subcontractors or a few companies that can bring together works in all areas, and eventually sign a contract with subcontractors but increasing the final price by at least 10 percent.
EU will try to bring order into the system of protection against dumping which has become a particular problem in construction. A distinctively low bid will be the one that is 50 percent lower than the average price of other bidders, 20 percent lower than the second lowest, and all provided there are at least five bids. In this case, the clients will require the bidders to explain the price or costs. The Serbian law currently defines a distinctively low price as the charge that is "significantly lower than comparable market price, so that clients doubt that the public procurement will be conducted." An extremely low price in Serbia is a regular signal of corruption. However, it is a signal that alerts no one, claim our interlocutors. Morarevic says that in Serbia most of the time we are not dealing with conquering the market with lower prices, but the criteria "lowest price" actually hides an agreement between the client and already chosen bidder. "It is a signal that tender is set up, the unrealistic price is offered because the chosen contractor will be guaranteed all the quantities that will never really be installed in practice. And the control is left to the conscience of the supervisory body," says Morarevic.
Although the public debate is still going on, it is already certain that the new European directive will put an end to the delay of deadline for the complete shift to electronic procurement. As of June 30th, 2016. all procurement of goods and services over 130,000 euros and works in excess of five million euros (new limits) will have to be implemented by electronic submission of bids. "On one hand, it's going to increase transparency, but in some countries it can create problems with the training of officers involved in procurement," said Saso Matas from the Slovenian Public Procurement Agency, who introduced the new directive in the Serbian Chamber of Commerce.
For the first time this directive introduces the issue of conflict of interests in the public procurement system, an especially important chapter in bidding procedures. Matas said the innovations in this area would entail changes in the anti-corruption legislation and the necessity of coordinating anti-corruption commissions and agencies with national bodies responsible for monitoring the implementation of regulations on public procurement.
It is interesting that, along with the aim of strengthening anti-corruption measures, these acts are at the same time getting more flexible - there will be no restrictions on the percentage value of additional works that can be contracted through annexes to the negotiating process. Matas says that any restriction of 20 or 30 percent is meaningless and it actually presents legalization of corruption to the extent prescribed by the state as "acceptable." If there is really a need for additional work, then why limit them? On the other hand, if the annexes are used for abuse, the auditors need to react and file criminal charges.
Serbian entrepreneurs don’t believe we are ready for these measures, because we didn’t develop a system of control. Director of KGH engineering indicates that it cannot be predicted whether there will be a need for additional work, but that the rule according to which Serbia allows 20 percent of the contracts to be made without tenders is put to a maximum use for corruption. If a higher percentage is approved, it will be abused to the maximum, especially in the construction, said Morarevic.