How state money is eaten: facts remained behind the scenes after September 15

On September 15 the president had a meeting with the government, which was widely covered in the media, however the publications included the president’s announcements only.

We have the statement of the president’s controller commission concerning the procedures of procurement. The violations in that paper is a real “policies and procedures manual” for those who launder money.

On September 15 the TV companies broadcast the words of the president only. However, before the meeting the participants were given the paper of the president’s controller commission containing violations and findings in the procurement department. There are very interesting facts in that paper.

The controller commission has found out that in the procurement department, which has been decentralized since one and half years ago, still there are organizational and institutional shortcomings.

State procurement “transparency”
The first finding concerns the management, procurement approvals, development of reports and statistics. The CC criticized the finance ministry (even though the president did not speak a single word of critics toward the finance ministry). The paper writes that till now they have failed to approve policies and procedures and forms for invitation for competition and agreement with bidders, as well as the forms and procedures for submission of reports. As a result, the bidders are showing different relation to the process, the procurement department fails to fulfill its duties in a duly manner, due to lack of information the competition is not fair and transparent, fulfillment of contracts is not efficient and the procedures fails to comply with the standards.

“Urgency” of state procurements
Another shortcoming emphasized in the paper concerns procurement from one person (this is the problem that the president addressed). The paper writes that there were cases when the buyers could buy from other sources, but preferred buying from one and the same source. There is a very interesting point in the paper, which shows that in many situations the buyers failed to obey the rules of the finance ministry. “It is a very interesting fact that after a negative conclusion and opinion of the finance ministry concerning a procurement transaction the buyers still preferred buying from one and the same source,” writes the statement. The CC mentions that in many situations the urgency of procurements and were not checked, as a result of which “extremely urgent” orders were delayed.

“Cynicism” of state procurement
The analysis of the complaints submission and processing procedures has discovered the cynicism of some departments of the state system. For example, the statement of the Controller Commission writes that it has discovered a case, when the state department in charge of organizing competitions has rejected an applicant with a cheaper price and without waiting for the established ten days period for complaints processing the bid and competition was given o another company with much higher prices. However, the company that offered lower prices submitted a complaint to the commission, which was satisfied and confirmed.

The CC mentions that after all that in fact the ordering department had to make an agreement with the company that offered cheaper prices, however it was refused with an explanation that the order had already been placed and products had already been shipped.

Limitless and careless violations of the state procurements department
The Controller Commission adjacent to the president’s office reports that different governmental departments in charge of state procurement have made a lot of violations and embezzled a lot of money. For example, the report says that those departments fail to provide access of all participants wishing to participate in competitions to the building. Or, they may give access to the building but no opportunity to be present during announcement of prices and other conditions of the competitions.

In another case as a result of arbitrary behavior of the department that placed an order a company that offered cheaper price for products was rejected and another one with higher prices was approved, which was done in violation of the law. The CC reports that only in this direction of activity in case of organizing fair competitions the state would save 70 million drams.

Kickback mechanisms enrooted in procurement departments
The Controller Commission has found out that the calls for competition included unjustified requirements. “For example, for procurement of products they required ISO 2001 certification in case when such requirement can be put only against producers but not suppliers of products. As a result, a company that had a stamp only and ISO 2001 certificate but was offering much higher prices won the competition and another company that was offering better prices but did not have that certificate failed to win. As a result, the company that had a certificate bought the same products from the other company that failed to win and added a solid amount to the price and supplied to the governmental department,” writes the statement.

You were saying electronic…
There are problems in the electronic purchase system as well. The statement writes that according to the RA law on purchase policy the state started the purchase of electronic facilities since March of this year. According to the statistics service, after adoption of that system, the arbitrary behavior of orders will be limited. So far the state has made 38 purchases of electronic facilities. However, the experience has proven that the system is not effective as it does not have the primitive software support. For example, the time of the system is one hour behind. It may seem to be a small thing, but in fact it misleads the participants as they don’t know the right time to participate in auctions. There are many other problems too, which have not been solved by the controller institution.

Secret of secrets in state procurement deals
A recent problem brought up by the Statistics service concerns the institutions in charge of public services and application of the law by such institutions. For example, they have found out that the purchase reports are filed in a duly fashion established by the law.

Since January 1, 2011, 3000 customers (including all state institutions) buy their products independently, which means that officials are embezzling huge money from it. Even though the statement does not refer to any mechanism, we may assume that the government knows about the amounts, the mechanisms and sources of such deals. They should have concrete names and information about all deals and transactions. Time will show what actions will follow, which will show whether the president’s meeting with the government and critics was a demonstrated show or no.