On March 23rd 2016, the Romanian Academic Society (SAR) in partnership with the Institute for Government Transparency (Budapest), the Competition Council and the National Public Procurement Agency (ANAP) organized the conference entitled “Monitoring Government: Measuring the corruption risks in public procurement data “.
The event was attended by the President of the National Public Procurement Agency (ANAP), Mr. Bogdan Puscas, the President of the Competition Council (CC), Mr. Bogdan Chiriţoiu, the Director of the Competition Council’s Division for Auctions and Petitions, Ms Graţiela George, the President of the National Council for Solving Complaints (CNSC), Mr. Silviu Popa, and two researchers from the Governmental Transparency Institute (GTI), Fazekas Mihaly and Agnes Czibik. Valentina Dimulescu (SAR), ANTICORRP project coordinator, moderated the event.
The meeting focused on the issue of monitoring public spending through access to objective data on the award and implementation of public procurement contracts. Despite its enormous importance and that much of the data is published on Tenders Electronic Daily (TED) – Supplement to the Journal of European Union on public procurement and on national websites, accessible, reusable and quality data still represents a problem for the European Union. This reduces the opportunity to examine long-term trends and to track the individual performance of public or private entities, because the data are available only as separate pieces and often owned and/or used only by experts. Thus, it cannot answer simple, but crucial questions such as what amount of public funds a firm won before and after elections.
In this regard, an early warning tool was presented – developed by GTI researchers with the help of the FP7 ANTICORRP research project, which could increase the effectiveness of control mechanisms that protect state resources.
Mihaly Fazekas, President of GTI, stressed that analyses concerning the level and nature of corruption in a country that focus solely on perceptions rather than evidence-based estimates leads to simplistic and untrue statements. Therefore, the purpose of the research presented at the event is to investigate public procurement corruption at the systemic level using a large amount of data (big data), interconnecting several types of databases, creating objective methods of analysis and applying them in a practical manner so that they can assist all actors involved in public procurement. Specifically, the research focuses on the incidence and not the form of corruption in this sector.
Mr. Fazekas presented the methodology behind the so-called Corruption Risk Index (CRI), which is applied to contracts published in TED. CRI is a rating system based on objective indicators, aggregated and shaped depending on the specifics of the analyzed country. Thus, CRI can be used to estimate the risk of corruption at contract level in each Member State.
The main conclusions on the situation of corruption in Romanian public procurement are:
1. Romania ranks first in the EU in terms of volume and quality of information provided per contract published in TED. This data are not necessarily accurate in every case, but unlike the countries with the fewest data available (Finland, Spain and Sweden) which have an average rate of administrative error of about 32% and 40%, Romania has a rate of only 0.2%.
2. Romania ranks mid-way in terms of the frequency of awarding procurement contracts to a single bidder (22% of the cases). The situation is better than in countries such as Lithuania, Greece and Italy, but worse than in Slovenia, Bulgaria, Latvia and even the average for EU institutions (these institutions award contracts in the same manner as Member States).
3. Romania ranks first in the EU when it comes to the cost of corruption in public procurement. Because of the increased risk of corruption (as measured through CRI, which, in Romania’s case, records the presence of several risk indicators), the average price per contract is approximately 33% higher than in other European countries.
The point is not that there is no corruption in other countries, but the fact that it costs less. Corruption cannot be eliminated entirely, but its impact can be minimized. The emphasis should not be placed on punitive measures, but rather on coercing those involved to deliver the results set out in contracts and deliver them at a price reflecting the cost-effectiveness principle.
When we refer to the state capture concept, we need to see corruption as a network. We will not succeed in eradicating public sector corruption by eliminating 10 to 15 players because the network will continue to exist. Therefore, the criminal punishment of those who are corrupt is important, but it is vital to also take action with regard to the opportunities for corruption, to touch on those aspects that increase corruption. In other words, the systemic nature of corruption needs to be addressed.
The entire presentation can be downloaded here .
Agnes Czibik, GTI researcher, presented the practical application of CRI on Romanian contracts, visualized on the website http://ro.tendertracking.eu/
The website offers the user various detailed filters through which he/she can view both descriptive information and the CRI for the contracts awarded, the contracting authorities and also for the winning firms. In addition, the database of awarded contracts can be downloaded in an open and reusable format (open data). The portal also allows the user to interact with the administrators of this tool (by posting comments, pictures etc).
The entire presentation can be downloaded here
Bogdan Puscas, President of the National Public Procurement Agency (ANAP), stressed that it is vital for Parliament to adopt the new public procurement law package on time (April 18th) since a delay will lead to damages both in terms of institutional image and pecuniary problems that will affect the whole society (European funds absorption, penalties through the infringement procedure).
In addition, the new legislative package aims to improve transparency in public procurement, a process that will result in lowering corruption risks. The package aims at ensuring simplicity and legislative stability along with establishing detailed implementing regulations for each of the three laws (classical procurement, the concessions law and the sectors’ procurement law). The tertiary level (instructions and orders of the ANAP President) will target issues and specifics of an acquisition or a well-defined stage of the procurement process.
ANAP is actively involved, in line with its preventive role, in a detailed screening of all the actors’ conduct on the Romanian market. ANAP expeditiously verifies the correctness of the tender documentation and validates them before their publication in SEAP, thus contributing to the professionalization of procurement practitioners – something that will be continued and improved by the new legislation. Also, verification deadlines were halved to streamline the procurement process.
The number of contracting authorities registered in SEAP has increased steadily, but only 3,000 are active. Therefore, under the new legislation, by December 2016 all procurement procedures which are above the official thresholds will be made online, and until 31 December 2018, all procedures will take place online.
We have observed an increased desire of contracting authorities to use Annex 2B (services exempt from normal procedures and that are subject to internal procedural rules, publication is made if the threshold exceeds internally set standards) in conducting procurement – the number of contracts increased, but their value decreased. Therefore, ANAP leans towards a recalibration of its surveillance and control functions.
In its annual monitoring activity, ANAP has identified four types of irregularities concerning award ads:
- Contracts awarded with less than 10% of their estimated value;
- Contracts awarded at values lower than 85% of the estimated value (in this sense, 2015 was an outstanding year);
- Single bidder contracts awarded in the range of 95% – 100% of the estimated value;
- Contracts that have surpassed the award ad publishing deadline.
Romania is an atypical country, because an increase in the number of competitors does not necessarily result in lower contract costs. In Romania there is a tendency of willful tendering below the estimated value regardless of the number of bidders. One reason is that bidders expect the contract’s implementation to optimize their economic indicators.
Another problem is that in the Electronic System of Public Procurement (SEAP) there are erroneous contracts values, which hinder the work of all those who want to monitor procurement.
ANAP wants three things from the new legislative framework:
- Contracting authorities must spend public money as if it is their own money;
- The majority of initiated procedures must end with a contract;
- The way public money is spent has to be as transparent as possible throughout the implementation of a contract.
ANAP sees in the implementation of the new legislative package a chance to rethink and make the whole procurement process more flexible. Moreover, in April and May new instructions will be issued that will feature examples of good and bad practices. The instructions will also provide step-by-step guidance (eg. specific experience, the interpretation of “intellectual services”, etc.) for those working in this sector.
Graţiela Gheorghe, Director, Competition Council’s Directorate for Procurement and Petitions, welcomed the initiative presented and stressed the importance of inter-institutional cooperation between state entities directly involved in public procurement, offering as a practical example the creation of the Module of Rigged Bids which aims at rapidly transmitting relevant information between state institutions in order to ensure the fairness of public procurement, improve the health of the competitive environment and reduce corruption.
Also, the Council has a very good collaboration with the DNA and DIICOT because agreements between contracting authorities and bidders are usually backed by anti-competitive acts; more specifically, a simulation of competition among bidders. Criminal matters are investigated by the General Prosecutor, while research and penalization of anti-competitive aspects is the competence of The Council. In addition, the CC is actively involved not only in prevention – by making recommendations concerning the new legislative package – but also in investigating and sanctioning anti-competitive practices.
Silviu Popa , National Council for Solving Complaints (CNSC), summarized the work of the CNSC in 2015: they recorded 2,600 complaints (35% accepted, 65% rejected), and 16% of the total were related to tender documentation, a percentage that has decreased due to controls done by ANRMAP, the current ANAP. In addition, 84% of complaints concerned the evaluation phase done by contracting authorities. In a market worth 15 billion Euros, CNSC ordered remedial measures for award procedures worth over 2.5 billion euro and canceled award procedures worth 1.5 billion Euros.
Mr. Popa said that it took Romania over 9 years to submit complete information to the EU, but in terms of corruption perception it ranks first, leading to an increase in prices by about 35% of the average single market price. This incurs costs on all of us and affects our quality of life, and changing this will require great efforts. In this respect, the new legislative package will be extremely important. In this sense, Mr. Popa urged all stakeholders to make sure that the package be voted on time.
Valentina Dimulescu, SAR researcher, stressed that the outcome of the research and the presented online tool showcase the importance of access to accurate data in open format. Any state intervention should be evidence-based, built on analyses of clear and precise data. Also, state authorities could fail to recognize or realize that there is a problem in a particular sector. Therefore, making data available to both the private and nongovernmental sectors gives the two actors the chance to perform independent analyses that can help the state.
Bogdan Chiriţoiu, President of the Competition Council, pointed out that the legislation is not the problem. The CC is satisfied with the shape of the new laws in Parliament. He suggested that there should be more emphasis on monitoring how the law is applied and identifying suspicious transactions.
Instead, one of the main concerns is the database, knowing that SEAP is not sufficiently useful to institutions such as CC, which attempt to identify suspicious aspects (eg. looking at the dispersion of the average price for homogenous goods in order to identify areas with suspiciously high acquisition prices, the number of bidders, the bidding patterns, winners rotation, etc.) by aggregating and processing data systematically. Thus, there will be little dependence on referrals coming from the contracting authorities, which cannot identify such arrangements, or private firms. Mr. Chiriţoiu was surprised that in Romania there are numerous good quality datasets and asked the room the following question: if the data we have is so good, when did we use it?
The kind of analysis presented at the event cannot be found in Romania, but it is present in countries such as South Korea and Mexico.
Mr. Fazekas responded by saying that the data from Romania is better – in terms of minimum quality standards – especially compared with those in other countries, but not overall. The problem with the Romanian data refers to information on prices (including the final price of an awarded contract that was subsequently modified by amendments). Just a few other European countries report this crucial information.
Measuring the price of a contract is a complicated issue, depending on the product/service itself. For example, if we consider constructions, we would need to break up the contract in all of its different components. According to a study done by the European Court of Auditors, the lowest cost (cost per Km) for highways’ construction with European funds is registered in Germany, although this country also has the highest input cost (labor cost, materials, etc.). Therefore, competition plays a role because in countries like Poland the input cost is lower, but the final cost for highways is higher.
An automatic analysis of a large, aggregated volume of data (big data) must be used in assessing the implementation of the law at market level, because we lack the necessary human resources for examining millions of contracts. This way we can concentrate limited resources where potential risks are identified.
A representative of the Romanian Post Office drew attention to the fact that an important corruption risk indicator is also the estimated value of a contract set by the contracting authority. The major problem is that there is no clear and official means of estimating these values, the values are determined based on previously awarded contracts by the contracting authority. This is one of the reasons why one can observe a fluctuation in the value of awarded contracts compared to their estimated value – because the estimated value should be within the market average. Therefore, the value of an awarded contract is not always the most accurate corruption risk indicator. He also drew attention to the need for enhanced monitoring of divided contracts in the telecommunications and IT sectors.
For further details regarding the research and online tool, please contact Ágnes Czibik, e-mail: firstname.lastname@example.org
The project implemented by the Government Transparency Institute think tank (Budapest) was financed through the program “Technological innovation for policy research for think tanks” of the Open Society Foundations.