Cause and Effect in European Politics and Law

Full House in public procurement

Adelina Marini, May 2, 2011

This is one of those laws for which the longing for order and rule of law citizen believes would never be written as it should be in Bulgaria. One of those laws in which whatever written will leave you with the impression that it had been done with the aim to serve someone and that nothing will ever change. This how I felt during the public deliberations on the draft legislation in the Council of Ministers, for which however we, the media, were invited ... the European way. We received an invitation two days earlier, which is absolutely contrary to the tradition of the institution to invite media literally five minutes before an event, with no background information in advance. But in that case not only that we received the invitation on time, but it was accompanied by the draft legislation itself and the concept for the foreseen amendments to the public procurement legislation.

The deliberations were led by Tomislav Donchev, Minister for EU funds while the presentation of the draft amendments was done by Miglena Popova, Chief Executive of the Public Procurement Agency.

Why amend the Public Procurement Act?

Public tenders and the way they are held in Bulgaria have caught the sight of the European Commission last year (2010) and were significantly underlined in the annual report on the Control and Verification Mechanism, with which Bulgaria joined the European Union for its incapacity to implement a reform of the judiciary and tackle corruption and organised crime. For the five years of membership with a "probation" Bulgaria still is doing its work with the only purpose to get a positive report, rather than implement the benchmarks. This is the reason for the constant broadening of the scope of the Mechanism.

The European Commission has underlined in the report the huge number of irregularities with the public tenders (60%), which are due, as the assessment of the Commission goes, to frequent changes of legislation and of the applied procedures in the past year, as well as to the conflict of interest, the favourising at local level and the frequent detouring of procedures and contracting without tender. Yet with the presentation of the report before media in the end of July last year, Prime Minister Boyko Borissov solemnly promised that in three months time there would be an entirely new Public Procurement Act. It is not three months and there is no new act but a lot of amendments.

What is the most significant amendment?

I tried to answer this question while I was reading the draft amendments, where I found several disturbing proposals, but it was hard for me to outline the most important one. During the debate in the Council of Ministers, however, all the representatives of branch organisations started their statements with one of the novelties in the draft - the in-house ordering, which practically means internal ordering of a service to be realised by another state-owned body. This proposal, which was mostly criticised, according to Ms Pavlova, was one of the disputed texts which still is heavily debated upon.

The draft still does not stipulate explicitly in which cases this practice could be used. Minister Donchev noted that this text would be deleted if not sufficient mechanisms are found to guarantee that there would be no abuses with this text. According to Mr Donchev, the purpose of in-house ordering is to settle a very close circle of cases, mainly at local level, for which usually there are no candidates. In support to this type of ordering spoke the president of the National Union of Local Communities, Ms Ginka Chavdarova, who said that there was a number of cases for litter collection or local cleaning and there were no candidates in public tenders. However, the local authorities are obliged to provide the service after a tender, and as a result they are being fined for the illegal dung-hills that start popping up.

Another problem which the in-house ordering could solve is the transportation of children to schools in neighbouring larger communities. According to Ms Chavdarova, this is a frequent cases - almost in 80% of the cases when private companies do not appear at the public tenders. "What do we do then?", she asked rhetorically. In her words, though, it is necessary the text for this type of ordering to be more precise and to change the entire philosophy of the legislation so that to shift focus from protection of the interests of business or the state to protecting the interests of the consumer of the service.

According to Kamen Kolev, deputy chairman of the Bulgarian Industrial Chamber, the purpose of the in-house ordering is not clear and it looks as if a way is being sought to substantiate a benefit for somebody, "possibly the state". He said that it was possible the lack of interest to be due to other reasons, for example the basis of the announcement, the technical parameters or else. He insisted the in-house text to be removed. The representative of the Bulgaria Association of IT (BAIT) also criticised the text by stating that the way it was written it was unacceptable. "This means a large door open to corruption".

Changes in motion

Another amendment which is being introduced with the draft is the change in motion of the conditions of the order, which is formulated as "decision for a change" in the draft. It allows the body ordering a service to change the announcement and/or the documentation by publishing a decision for a change. The initiative for the change could be the body's and could be aimed at removing errors or lapses, or could be upon the initiative of an interested entity, filed within 10 days from the publication of the announcement. This is also not very clearly stated and was heavily criticised, but Mr Donchev defined it as "a relief for everyone", because it allowed timely corrections when there are defects in the procedure, without actually terminating the procedure.

He added that this issue was many times debated in the European Commission, where Bulgaria was told several times that its legislation was not flexible at all. According to Ms Miglena Pavlova, the amendments are not aimed at upward changes of the price, as was the first thought that popped up in everyone's mind during the debate. The Public Procurement Act, she said, envisages only 1 amendment aimed at increasing a price. The way the changes are described they include a change of the deadline for procedures, when necessary, changes of subjects of an order in the interest of the state, "when this does not lead to increasing the value of the contract", in cases of reducing the total amount of the contract in the interest of the state because of reduction of the agreed prices or agreed quantities or activities.

An increase of the price is envisaged with the following text: "when an increase of the price is needed because of the endorsement of a legal act - to the volume, ensuing as a direct or immediate consequence of the legal act". Kamen Kolev said though, that the changes of the conditions of the contract concern mainly the price. "Too many are the cases that allow an upward correction of the price". Another problem he underpinned was the significantly high share (22%) of orders without tender or announcement. This practice is maintained with the draft act too, but it is explained that the procedure "negotiating without announcement" is applicable only in force majeure. This is the most frequent practice, used in Sofia to repair roads every year. Mr Donchev reported a downward trend of the "non-negotiated orders" - 18.9% for 2010 and since the beginning of 2011 - 15.6%.

Restrictions for the subcontractors

The draft introduces a restriction of up to 40% of the participation of subcontractors in public procurement. This amendment was welcomed in general by the branch organisations as it solves a very popular problem: firms, especially in the construction sector, often famous big companies, who win public tenders because of their capacity and reputation, but then transfer their work to Bulgarian firms. The precise formulation in the draft is "When the participant envisages participation of subcontractors, the share of their work cannot exceed 40% of the volume of the public procurement".

Another controversial issue was the participation in the assessment committees of external experts, which is denied with the current legislation too. According to Tomislav Donchev, often external experts do not respond to anyone, not even when there are doubts in their expertise or conscientiousness. Ginka Chavdarova supported this, because it was often not to be possible to find an external expert for a service. "A possibility should not be allowed to block orders for the fact that there are no external experts available", she said and added that she could give a lot of examples which were out of the scope of interest of the branch organisations and experts practically cannot be provided. Ms Chavdarova, however, pointed out another flaw in the draft - the lack of commitment to keep up with deadlines. "What happens if deadlines are not met, the draft is silent on the issue", she said and called for "at least some guarantee that there will be some efforts in this direction".

On the most disputable moments the debate on the amendments is going on. The ambition of the ruling majority is the amendments to the Public Procurement Act to be endorsed before the summer break of Parliament, which means that the draft will be entirely functional by the annual report of the European Commission, which is usually being published by the end of July.