People Convicted of Corruption and Fraud Mustn’t Participate in Public Procurement

Despite many important and positive features of Georgia’s public procurement, the system still requires further improvement. One of the main shortcomings of the existing system is a soft policy against dishonest companies. Nowadays, blacklisting remains the only way of preventing such problems. The blacklisted companies are not allowed to participate in public procurement for a year. However, blacklisted companies are allowed to establish other companies and participate in public procurement. Other companies who are not blacklisted can also subcontract them. Bad subcontracting practice is another problem for Georgia’s public procurement that was earlier highlighted by Transparency International Georgia.

Unlike good international practice, persons convicted of corruption and fraud are no restricted from participating in Georgia’s public procurement, even in case of breaking procurement legislation. This article concerns the mentioned issue.

Problem Analysis

The Anti-Corruption Network for Eastern Europe and Central Asia, which was created under the OSCE, in its 2017 report, recommends Georgia to restrict companies and their management who were convicted of corruption and fraud from participating in Georgia’s public procurement.

Moreover, the Council of Europe recommends to prolong one year term of blacklisting and restrict not only companies but also their owners in order to avoid their participation in public procurement through other companies.

The EU-Georgian Association Agenda does not require the above-mentioned restrictions from Georgia. However, in 2015 the EU adopted a directive, which restricted the participation of persons and companies in public procurement who was convicted of corruption. In future, there is a high probability that Georgia will be requested to harmonize its legislation with the mentioned directive.

In addition to the mentioned recommendations, the necessity of such regulations stems from Georgian public procurement practice. We discuss three cases, where such companies participated in public procurement the owners of which were convicted of corruption, including for violating procurement legislation.

Unfortunately, Georgia does not have even a minimum standard, which could restrict at least those persons and companies from participation in public procurement who were convicted of violating public procurement regulations.

Conclusion and Recommendations

In Georgia companies (for instance, Green Service, Geo-Group and Ibolia) linked with former or acting public officials convicted of corruption in public procurement receive millions of GEL. This contradicts with good international (including European) practice in regulating public procurement and recommendations of international organizations.

The Anti-Corruption Network for Eastern Europe and Central Asia, which was created under the OSCE, in its 2017 report recommends Georgia to restrict companies and their management who were convicted of corruption and fraud from participating in Georgia’s public procurement.

Nowadays, blacklisting remains the only way of preventing such problems. The blacklisted companies are not allowed to participate in public procurement for a year. However, this time is too short. Moreover, blacklisted companies are allowed to establish other companies and participate in public procurement. Other companies who are not blacklisted can also subcontract them.

Recommendations:

It is necessary to amend Georgia’s public procurement legislation which will restrict the participation of those companies in public procurement, owners of which were convicted of fraud or corruption in public procurement. This restriction should last for at least the period when a status of conviction is active;

Public contractors should be prohibited to sign subcontracts with such companies the owners of which were convicted of fraud or corruption.
(TI Georgia)