Arrests of eight individuals including director of “Škoda Transportation” and municipal enterprise’s Riga City Traffic’s official made headlines in December 2018 in Latvia. The case started by Latvia’s Corruption Prevention and Combating Bureau (KNAB) features 800 000 EUR or even bigger bribe. It was allegedly paid to win contract for delivering 200 buses and trolleybuses for Riga City. This is the right time to assess the ability of Latvia’s municipal enterprises to identify and prevent corruption risks and to strengthen public procurement procedures to ensure transparency, equality and fairness.
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One of the tasks of the new Board of Riga City Traffic should be to raise competition in public procurement. A lack of competition in public procurement can result in less effective and more costly public services – so what can we do to make sure there is decent competition?
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WHAT’S THE DEAL WITH SINGLE BIDDING?
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Competition matters. Trying to get fit? Bidding for something on ebay? Some people competing against you can work wonders! Competitive processes include multiple participants – all trying to make sure that their bid is the most effective and best value.
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Single bidding refers to the situation when only one company competes for a contract. There can be good reasons for this, like if the relevant sector is very small and specialised. But it can also be a symptom of contracts being directed towards favoured bidders. Unfair bidding processes are damaging to economic growth, and fundamentally mean that citizens don’t get what they pay for.
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In single-bid situations, it can be wise to take a closer look…
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ON THE RISE
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Single bidding is on the rise. In 2015, the number of European government tenders that received only a single bid was 30%.[1] Back in 2006, that figure was 17% – meaning single bidding had almost doubled in just a decade.
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Single bid contracts are on average 7% more expensive than tenders with two or more bidders. And when you add in the fact that European governments spent a massive 1.9 trillion euros on public procurement in 2015, you can see why it’s such a big issue!
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SINGLE BIDDING AND THE PERCEPTION OF CORRUPTION
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The graph below, from The Economist, shows that single bidding is more common in Central and Eastern Europe than in the rest of the continent. It also highlights the fact that there is an alignment between single bid contracts and the perception of corruption.
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Which brings us to Latvia, where the risk of corruption is perceived by the public as high.[2] There are some worrying trends in public procurement. Take the construction industry, for example, where government contracting actually seems to be becoming less competitive. According to the Procurement Monitoring Bureau of Latvia, the years 2015-2017 saw an average of 8.1% of contracts experiencing single bidding. Compare that to a rate of 13.3% single bids so far in 2018, and you can understand why Transparency International Latvia (Delna) is voicing concerns.
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As part of its monitoring of one such procurement, TI Latvia came across a challenging situation. In smaller markets like that of the transport sector, it is important that tenders be advertised as widely as possible, so that a diverse range of companies have a chance to find out about the contract and put a bid together. In the tender in question, the advert was placed on the Riga Trafic’s website for 34 days, and published in Latvian only.
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That means the number of possible bidders will have been quite small, as it’s unlikely that many companies will have had a chance to see that advert. Now, that doesn’t mean that there was necessarily a favoured bidder in mind, but it does mean the process was less competitive.
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In the same way, there might not be anything specifically against the law in advertising a tender in this way, but it just wouldn’t be the first choice for those seeking better value for money on public contracts.
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As one part of its efforts to try and tackle this challenge, the EU decided to pilot the Integrity Pact tool in 11 countries across the Union. TI Latvia is overseeing one such project, and our work in 2016 ensured the controlling institutions were aware of and could act against the narrowing of procurement requirements, thus ensuring competition remained open. In 2018 our efforts have helped to raise competition and avoid a “single bidder” situation.
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This said, it’s important to remember that these issues will not be changed through Integrity Pacts or civil society pressure alone. Instead we need to see contracting authorities that are more motivated by the spirit and aim of laws, and not just obeying the letter of the law. We need civil society and the public at large to have a better understanding of how their taxes are being spent. With greater access to information about public procurement, important questions can be asked, and shortcomings can be better highlighted.
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In particular TI Latvia would like to see confidential complaint mechanisms being established and whistleblower systems to be used for companies and their employees to convey competition concerns, e.g. in cases when procurement specification is too broad or unduly detailed. Internal procedures that encourage officials to report suspicious behaviour internally and to the competent authorities should also be established. Such systems could help to collect significant information and to detect or prevent violations. A regular training program for procurement officers is equally important and should be implemented on bid rigging and cartel detection.
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[1] This figure comes from the Tenders Electronic Daily, which is an archive of purchasing by European governments. https://ted.europa.eu/TED/main/HomePage.do
[2] Latvia ranks 40th out of 180 countries in Corruption Perception Index. https://www.transparency.org/country/LVA
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ENDS
- TI Latvia’s recommendations for the interim Board of Riga City Traffic (in Latvian): https://delna.lv/lv/2018/12/21/jastiprina-korupcijas-risku-vadiba-rigas-satiksme/
- Information about Integrity pacts and TI Latvia’s monitoring work: https://delna.lv/en/integrity-pact/
- Monitoring report from July 2018: https://delna.lv/en/2018/08/11/13598/
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Authors: Liene Gātere, Roberts Matulis, Transparency International Latvia.
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This article was drafted under the framework of the “Integrity Pact – Civil Control Mechanism for Safeguarding EU Funds” project funded by the European Commission.
