TIRANA, July 31 – 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, according to a report by the European Court of Auditors, the EU’s independent external auditor.
Referring to findings by Albania’s Supreme Audit Institution, the report shows about 30 percent of all public procurement procedures in Albania over the period 2010 to 2016 were done using the negotiated procedure which due to its specific nature is one of the least transparent types of procurement procedure where competition is limited, “increasing the risk that the national budget is not used in the most transparent way.”
The report shows that in two-thirds of the cases, the negotiated procedure, officially known as “negotiation without prior publication of a contract notice” was used to procure basic goods such as medicine, security items and food.
“The proper use and operation of the negotiated procedure is crucial for the budget of Albania, which is facing high deficits. It is in the interest of the Albanian people to ensure effective and efficient procurement of goods, works and services as this directly impacts on the availability and prices of strategic goods and services such as medicine, food and roads,” says the report.
Auditors say the negotiated procedure is used extensively in Albania mainly by stretching the argument that a case is an emergency. Albania’s legislation allows 12 different possible arguments for defining a case as an emergency, including procurement needed at the beginning of the year, especially for essential, urgent goods such as foodstuffs and medicine until the relevant budget is transferred by March to allow for normal procurement procedures.
Albania’s Supreme Audit Institution audited institutions such as the Public Procurement Agency, the central body which coordinates the public procurement system in Albania, the Albanian Road Authority and regional road directorates, Albania’s largest hospitals, and municipalities with the largest funds procured to assess whether the negotiated procedure is transparent, non-discriminatory and ensures equal treatment of private operators.
Albanian auditors also unveil the electronic system is frequently unused for negotiated procedures even in cases where this would be possible and appropriate and that the law on public procurement procedures is not fully harmonized with the European Union acqui and the financial management legislation.
“No specific or detailed guidance exists on the steps, deadlines and actions the contracting authorities should apply when using the negotiated procedure and there are no guidelines for the monitoring of public procurement procedures,” concludes the report.
In its recommendations to Albanian authorities, Luxembourg-based European Court of Auditors says the Albanian Public Procurement Agency should address problems related to the definition of cases as emergencies by economic operators and lobby for legal changes to minimize the number of these cases and related problems.
“Emergency procedures inherently lack transparency and are not fully cost-effective. Bidders who do not get an opportunity to participate in such tenders may file complaints and, due to this, the authorities may be forced to annul the tender procedure and start a new one. This causes further delays … with the final effect of jeopardizing the functioning of institutions and their timely and satisfactory provision of services to citizens,” auditors say.
The watchdog, whose report is based on findings by national supreme audit institutions, says Albania authorities should promote the use of electronic public procurement system for negotiated procedures in order to increase transparency and develop specific guidance for their use detailing the steps, deadlines, evidence of standards and technical specifications.
Auditors also recommend harmonizing the law on public procurement procedures and financial management legislation and draw up guidelines in cooperation with the relevant ministries for the monitoring of public procurement procedures.
A regional issue
Citing reports by researchers, the media and non-governmental sector, the European Court of Auditors says fraud and corruption are often the main cause of inherent problems in public procurement in the Western Balkans, resulting in problems in fulfilling those public sector functions that depend on procurement.
In their audit reports, the six Western Balkan supreme audit institutions unveiled untimeliness and unpreparedness, the use of direct negotiation procedures, annulment of tenders, failure to achieve the cost/quality ratio as the most frequently observed problems in public procurement systems.
The report shows that the overall problems in public procurement in the Western Balkans can be traced back to poor planning and poor preparation of the procurement process.
“Failure to estimate future needs properly and in good time, accompanied by a failure to conduct proper market research and prepare clear tender specifications, is at the root of many problems that occur at a later stage. These often cause delays, incorrect deliveries, inappropriate supplies of goods, works and services, tender annulments, and an inability to effectively implement contracts with suppliers,” says the report.
Public procurement accounts for about 11 percent of the GDP in Albania, among the highest levels in six EU aspirant Western Balkan countries, showed the report.
Direct negotiation keeps rising
Albania’s central and local government institutions slightly increased the number of public procurements with limited competition in 2017 when public tenders were suspended for about four months prior and after the June 25 general elections, according to a report by the Public Procurement Agency.
Some 2,234 such procedures, representing 31.8 percent of the number of public tenders were carried out in 2017, representing a 2 percent increase compared to 2016.
When it comes to their value, ‘negotiations without prior notice of the contract,’ were worth 7.6 billion lek (€60 million) in 2017, accounting for 8.3 percent of the total tenders, only 0.1 percent lower compared to 2016 when Albania procured more, about 8 billion lek (€63 mln) under such contracts.
As a rule, negotiations without prior notice of the contract are carried out to meet year start needs at an amount of 20 percent of the previous contract, in case contracting authorities have not had their budgets disbursed yet or due to prolonged procurement procedures because of appeals with the Public Procurement Commission.
The Procurement Agency has earlier warned such negotiations lead to limited competition and discrimination of operators.
“Being held in a written form and limited to a few economic operators invited by the contracting authority, the use of negotiation without prior notice of the contract leads to lack of competition and discrimination of candidates,” the Public Procurement Agency said in 2016 report.
Surveys show public procurement continues to remain one of the main doing business concerns for investors in Albania due to perceived limited competition and discriminatory criteria although the country has been offering e-procurement procedures for about a decade now in a bid to reduce corruption and increase transparency.
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.
The e-procurement system in Albania is mandatory, including for low-value procurement of more than 100,000 lek (€770). A central public procurement portal is in place and all tender documents are available in e-form.
