National Audit Office: attempts to simplify procurement tend to make things more complicated

Priit Simson | 2/6/2020 | 10:00 AM

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TALLINN, 6 February 2020 – Although the aim of the new Public Procurement Act and the new public procurement register was to simplify procurement, the contracting authorities do not find that this goal has been achieved, the report of the National Audit Office shows. The National Audit Office observed the area of government of six ministries where auditors had previously noted the most issues with conducting procurements.

In September 2017, the new Public Procurement Act entered into force, and in 2018, the new public procurement register was introduced. The National Audit Office investigated their impact on the procurement activities of state authorities. The interviews conducted by the auditors of the National Audit Office revealed that several of the authorities do not find that their procurement activities have become easier.

“Ironically, current attempts to simplify the Public Procurement Act have reached a point where the Act has become more complicated in the eyes of users,” the Auditor General Janar Holm admitted. “Navigating in the Act is particularly difficult for those who don’t carry out procurements constantly.”

The contracting authorities also found that the public procurement register is somewhat more complicated than before, particularly if the register is rarely used.

In addition, the National Audit Office analysed whether the structure of internal audit systems and carrying out procurement procedures associated with the procurement activities of state authorities comply with the new Public Procurement Act. Among others, we determined the purchase of which things and which services and works resulted in a situation where public procurement procedures were not carried out most often and what are the most common mistakes and causes in the procurement procedure.

“The mistakes are similar compared to 2016 when the National Audit Office last audited the procurement activities of state authorities more thoroughly. The overall picture is gradually improving, and the number of procurements not carried out is relatively modest,” the Auditor General Janar Holm summarised. In the opinion of the National Audit Office, the biggest issue is that things, services and works have been purchased without carrying out the procedure prescribed by law. In 2018, the audited authorities carried out public procurements in the amount of nearly 145.5 million euros.

Observations of the National Audit Office regarding the issues with procurement activities of the authorities are the following:

  • The wrong type of procedure is chosen. For example, simple procurements were carried out instead of open procedures etc. The main reason was poor planning. The authorities are not able to predict costs and revenues, estimate the actual volume required or the estimated cost of a thing or service.
  • The procurement is divided into parts. In many cases, authorities procured things, services or works that were of the same type, intended to achieve the same objective or were functionally interoperable from several different companies without aggregating these purchases. This principle was most often disregarded upon the purchase of foodstuffs, and the threshold was observed only in terms of the supplier or group of goods.
  • Mistakes are made in the procurement process.For example, contracting authorities often fail to comply with the established procurement rules, the procurement documents do not contain the required information, and documentation associated with the procurement procedure is incomplete.
  • The volume of public contracts is exceeded. In the case of schools, the volume of contracts was exceeded the most upon the purchase of foodstuffs and transport services. One of the reasons for exceeding contracts is also because compliance with contract volumes is not systematically and continuously monitored. Values were mainly exceeded in the case of framework contracts. The explanation given was that a framework contract is not a binding obligation. The National Audit Office is of the opinion that the terms and conditions of a framework contract must be complied with upon entry into public contracts based on a framework contract, because the subsequent amendment of the terms and conditions is not in accordance with equal treatment and the transparent use of funds.
  • Public contracts are often not disclosed or the disclosure is delayed. In order to ensure transparency and control over the use of public funds, state authorities must enable access to public information according to the Public Information Act, but contracts were often not found or were unavailable.
  • Mistakes are made when making entries in the public procurement register. Procurement notices are often submitted with a delay, sometimes an incorrect deadline for the performance of the public contract is entered, amendments to the contract are not specified, the value of the contract is entered incorrectly, etc.

Thermal energy is purchased without a public procurement the most often. The authorities considered a public procurement for the purchase of thermal energy unreasonable, because it cannot be purchased from some other heat company as there are no other competing companies offering district heating in the area and the maximum fee for heat has been approved by the Estonian Competition Authority. In the opinion of the National Audit Office, a public procurement for the purchase of thermal energy would not substantively improve competition or finding the most economical tender. According to the Ministry of Finance, they are unable to propose an amendment to the law in order to establish an exemption, because public procurement directives do not provide for this possibility.

“The Ministry of Finance should look into the possibility of establishing an exemption and, if necessary, actively address the practical need to initiate the amendment of the Directive in their communication with the European Commission,” said the Auditor General Janar Holm. “This with the aim of reducing the burden on authorities upon the purchase of things and services on the basis of a price list established or approved pursuant to legislation.”

The National Audit Office advised the audited ministries to supplement procurement rules and strengthen the supervision by the Ministry of Finance over compliance with the Public Procurement Act in the authorities of their area of government. In addition, the National Audit Office recommended assessing the need for training contracting authorities as well as to aggregate and analyse the purchasing needs of authorities, carry out joint procurements and consider the joining of different authorities in central procurements.

In addition, the National Audit Office advised the Minister of Public Administration to continue cooperation with authorities in drafting the draft legislation for the amendment of the Public Procurement Act in order to make the Public Procurement Act easier to understand for users and to look for ways to reduce the administrative burden. The National Audit Office recommended making the public procurement register more user-friendly, so that the user could understand the information provided therein easily and unambiguously. Control over making entries in the public procurement register should also be improved, for example more automatic controls that enable assessing the integrity and accuracy of data entered should be implemented into the program.

Background:

The audited were the Ministry of Defence, the Ministry of Rural Affairs, the Ministry of Economic Affairs and Communications, the Ministry of Education and Research, the Ministry of Culture, and the Ministry of the Interior. In conducting the audit, the National Audit Office was guided by the principle that the authorities need to organise their work so that as contracting authorities they use public funds purposefully, economically, transparently, controllably and proportionately and treat persons equally, effectively taking advantage of competition by awarding public contracts based on the best price-quality ratio and avoiding a conflict of interest that could damage competition. According to the Ministry of Finance, a total of 7,854 public procurements with a total value of a little over 2.5 billion euros were carried out in Estonia in 2018.

Last year, the Ministry of Finance commenced with compiling proposals of authorities on what could be amended in the Public Procurement Act, and all the submitted proposals are available on the Ministry’s website.[1] According to the preliminary forecast, the draft for the amendment of the Act should be presented to the Riigikogu in the first quarter of 2020. The project for the development of the public procurement register is also ongoing.

 

Priit Simson
Head of Communications of the National Audit Office of Estonia
+372 640 0777;
+372 5615 0280 
Priit.Simson@riigikontroll.ee;
press@riigikontroll.ee 
www.riigikontroll.ee

 

[1] https://www.rahandusministeerium.ee/et/eesmargidtegevused/riigihangete-poliitika/oigusaktid/valjatootamiskavatsus.

  • Posted: 2/6/2020 10:00 AM
  • Last Update: 2/6/2020 9:39 AM
  • Last Review: 2/6/2020 9:39 AM

Attempts to simplify the Public Procurement Act have reached a point where the Act has become more complicated in the eyes of users.

Julia-Maria Linna / Äripäev

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