Albania to limit use of unsolicited proposals, scrap bonuses for PPPs

Tirana Times
By Tirana Times January 22, 2019 11:50

Albania to limit use of unsolicited proposals, scrap bonuses for PPPs

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  • The practice of awarding bonuses of up to 10 percentage points for companies submitting unsolicited proposals, putting them at an advantage when tender procedures are held, will be replaced by financial compensation of up to 1 percent of the investment value in case the company initiating the project through a feasibility study fails to win a tender

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TIRANA, Jan. 22 – Albania is planning to scrap the use of controversial unsolicited proposals for public private partnerships in the road sector but continue allowing it for a series of other sectors it considers strategic.

Legal changes already approved by the government and submitted to Parliament for further review envisage the unsolicited proposal procedure will be scrapped for national road projects of key importance starting July 2019 and remain in use only for PPPs and concessions for the provision of works and services in ports and airports, electricity generation and distribution as well as natural gas distribution, the latter expected to receive a major boost due to expected 2020 Caspian gas flows from the under construction TAP project.

The proposed legal changes only partially meet recommendations by international financial institutions such as the World Bank and the International Monetary Fund that had demanded the full removal of such procedure, often criticized for leading to pre-determined winners in tenders with little competition due to bonuses awarded to companies initiating and conducting preliminary studies on the projects they propose in return for government financial support or operating them for a period of up to 35 years.

The practice of awarding bonuses of up to 10 percentage points for companies submitting unsolicited proposals, putting them at an advantage when tender procedures are held, will be replaced by financial compensation of up to 1 percent of the investment value in case the company initiating the project through a feasibility study fails to win a tender.

The government says the proposed financial compensation mechanism puts an end to giving an unfair advantage to companies that submit unsolicited proposals by placing bidders at equal competition.

Legal changes also envisage the establishment of a Committee for the Selection of Concession/PPP Projects, a collegial body chaired by the economy minister, that will also provide expertise in preparing feasibility studies and eliminate the need to rely on the private sector for such costly services.

With the use of PPPs to provide public services having considerably increased, the IMF and World Bank have often recommended in the past couple of years eliminating the practice of unsolicited proposals as a procedure that places bidders at unequal position and leads to controversial PPPs with no thorough cost-benefit analysis that could create new arrears undermining the public debt reduction agenda.

The winners of several major PPP road projects in the past couple of years have emerged through unsolicited proposals placing them at an advantage in tenders that later proved unattractive for potential competitors.

Public procurement has traditionally been one of the key concerns for local and foreign investors complaining of corruption and tailor-made criteria favoring specific companies with alleged links to ruling majorities.

In the latest Balkan Barometer survey, some Albanian companies cited tailor-made criteria for certain participants and deals before the tender is even published for not participating in public tenders.

An earlier survey by London-based European Bank for Reconstruction and Development has shown about 40 percent of Albanian households and businesses believe political connections are the key to factor behind success.

Last year, a report by the European Court of Auditors, the EU’s independent external auditor, showed about a third of all public procurement in Albania is carried out using the little transparent and limited competition negotiated procedure, making Albania the top Western Balkan country that overuses this procedure.

Tirana Times
By Tirana Times January 22, 2019 11:50