New Year related public procurement goes through non-competitive process

Introduction

In the framework of public finance monitoring project, Transparency International Georgia (TI Georgia) studied public expenses on the New Year and Christmas celebration events of five self-governing cities (Tbilisi, Batumi, Kutaisi, Rustavi, Poti).

In general, public procurements related to the New Year celebration are characterized by a high share of non-competitive, simplified procurement. The reason usually given for justification of simplified procurement is force majeure or high public interest in holding the event. Despite the New Year always starts on 1 January, municipalities cannot manage to start preparation works for the New Year celebration on time and avoid simplified procurements. This stems from the improper practice of procurement planning, which has been remaining a problem for many years and has already been highlighted by TI Georgia.



Executive Summary

Five self-governing cities of Georgia (Tbilisi, Batumi, Kutaisi, Rustavi and Poti) in total spent up to GEL 6.5 million from their budgets for the 2019 New Year and Christmas celebration. Tbilisi spent 82% of the mentioned amount.

Tbilisi City Hall spent 36% (GEL 1.9 million) of its money allocated for the New Year celebration, without tender, through simplified procurement. Poti spent the smallest amount among five self-governing cities on the New Year celebration. However, Poti City Hall spent the total amount through simplified procurement. As for Kutaisi, its City Hall spent 68% of its money through simplified procurement.

The reason usually given by the City Halls for justification of simplified procurement was force majeure or high public interest in holding the event. However, we believe, this was caused by improper planning rather than of procurement specifications.

A low competition was the main problem in the New Year related tenders, which is not a new observation. IDO SRL, an Italian company, won a tender valued at GEL 2 million, which was announced by Tbilisi City Hall. Adjaraganateba, LLC also won the GEL 428 000 valued tender without competition announced by Batumi City Hall. Only two companies participated in a tender announced by Rustavi City Hall and one of them was disqualified.



Tbilisi

Tbilisi City Hall (including the state-owned Tbilservice Group, LLC) in total spent approximately GEL 5.3 million on the New Year celebration events. 36% of purchases were made through a simplified public procurement process.



Based on the decree of the Government, Tbilisi City Hall allocated GEL 4 million to Tbilservice Group, LLC for organizing the New Year events. As of 5 February 2019, GEL 3 560 735 was already spent. In addition, Tbilisi City Hall allocated GEL 63 567 for remuneration of those who installed lights.

Tbilservice Group announced two electronic tenders to purchase lights for the New Year celebration events. Alpa+, LLC and IDO SR, an Italian company, won these tenders (the first tender valued at GEL 578 000 and the second – GEL 2 123 000). Both companies won the tenders without competition. Moreover, Tbilservice Group spent GEL 160 300 through simplified procurement.

In addition, the Administration of Tbilisi City Hall spent approximately GEL 1 720 974 through simplified procurement on organizing the New Year and Christmas events. The reason for the justification of simplified procurement was force majeure or high public interest in holding the event. Among other contracts, the following ones were worth mentioning: the contract valued at GEL 52 140 was signed with Tbilisi Park, LLC. On 18 October 2018, Gela Dighmelashvili, the director of Tbilisi Park, donated GEL 20 000 to Salome Zurabishvili, a ruling party-backed presidential candidate; the contract valued at GEL 6 752 was signed with Luma Development, LLC. In November 2017, Otar Tevdoradze, the owner of this company, donated GEL 30 000 to the ruling Georgian Dream party.



Batumi

Batumi City Hall in total spent GEL 788 623 on the New Year and Christmas celebration events. All procurements went through electronic tenders.

In 2018, Batumi City Hall did not purchase accessories needed for the New Year celebration. The City Infrastructure Development Unit, a N(N)LE[1] established by Batumi City Hall, purchased decoration services for the New Year and Christmas events through electronic tender. The value of this tender was GEL 428 423. Adjaraganateba, LLC won this tender without competition and installed and uninstalled Christmas tree and its decorations.

Batumi Culture Center, another N(N)LE of Batumi City Hall, spent GEL 360 200 for the New Year celebration events, out of which GEL 177 700 was spent on organizing expenses and GEL 182 500 – on the remuneration of singers and musicians.



Kutaisi

Kutaisi City Hall spent GEL 229 485 on the New Year and Christmas celebration events. 68% of all purchases (GEL 156 610) went through simplified procurement. GEL 99 485 out of GEL 156 610 was spent on lights.

On 11 October 2018, Kutaisi City Hall announced an electronic tender without reverse auction (NAT) valued at GEL 97 141 for purchasing lights for the New Year celebration events. Geraska, LLC and Dandi, LLC participated in this tender. Dandi’s bid was GEL 94 804 and it won the tender. However, Geraska filed a complaint and Dandi was disqualified due to improper technical documentation. As a result, the City Hall signed a contract with Geraska. On 28 December, the City Hall terminated the contract signed with Geraska due to delays in delivery of work. On December 26, 2018, Kutaisi City Hall, ultimately, purchased the mentioned lights for GEL 99 485 through simplified procurement from Dandi, LLC, which was justified by force majeure. As a result, the City Hall paid GEL 2 300 more than the initial price of the first tender.

It should be noted that Dandi, LLC is one of the primary suppliers of New Year celebration lights for many municipalities of Georgia. For the 2019 New Year celebrations, the following municipalities bought lights from Dandi mainly through simplified procurement: Lanchkhuti, Lagodekhi, Tskaltubo, Tkibuli, Kazbegi, Akhaltsikhe, Gori, Borjomi, Khoni, Samtredia, Martvili, Kareli, Gardabani, Kaspi, Sighnaghi, Poti, etc.

Kutaisi City Hall spent GEL 42 955 on organizing the New Year celebration events, GEL 19 900 – on the stage and sound for the New Year concert and GEL 10 000 – on decorations of the Christmas tree.



Rustavi

Rustavi City Hall spent GEL 208 485 on the New Year and Christmas celebration events. It purchased all goods and services through an electronic tender without reverse auction (NAT). The following two companies participated in this tender: International Center for Youth, LLC and Geotourist+, LLC. The bid of Geotourist+, LLC was GEL 198 041 and the bid of International Center for Youth, LLC was GEL 205 900. Based on the bids, Geotourist+ won the tender and on 19 December Rustavi City Hall signed a contract valued at GEL 198 041. However, in five days, on 24 December the City Hall amended the contract and increased the contract value up to GEL 208 000. According to the amended contract, certain technical conditions of procurement object have changed, which caused an increase in contract value. As a result, Geoturist+ got more money than the bid of its competitor.

GEL 176 959 out of the mentioned 208 000 was spent on procurement of services (concert, kids program, lights, decorations, etc.) and GEL 31 041 was spent on goods (gifts and accessories)



Poti

Poti City Hall allocated GEL 19 600 for the New Year and Christmas celebration events. On 4 December 2018, the City Hall announced a tender valued at GEL 16 610, but due to the absence of bidders, the tender could not proceed. Ultimately, the City Hall bought the needed service? through simplified procurement for GEL 16 610 from Nana Chitanava, an individual entrepreneur.

Poti City Hall also purchased the New Year decorations for GEL 4 862 through simplified procurement from Dandi, LLC. The City Hall in total spent GEL 21 472 for the New Year and Christmas celebration events. All purchases went through simplified procurement.



Recommendations

Municipalities should formulate their annual procurement plans in a better way. The description of goods and services municipalities plan to purchase for the New Year celebration events should know at least a couple of months in advance. Such practice will increase competition among potential suppliers and allow procurers to save money and get goods and services of better quality;

The Public Procurement Agency should have a tougher approach when approving simplified public procurements for the New Year and Christmas celebration events.
(TI Georgia)