State Audit Office: the system of public procurement still to be developed

Toomas Mattson | 11/23/2004 | 12:00 AM

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TALLINN, 23 November 2004 - The State Audit Office (SAO) states that there are shortcomings in government agencies in respect of public procurement planning, assignment of responsibility for the management of public procurement and performance of internal audit of procurement. However, government agencies have set to improving the situation and the SAO has pointed out several positive trends.

In 2003, central and local government authorities announced public invitations to tender subject to registration in the public procurement register at a total cost of EEK 4.1 billion.

The SAO analyzed the activity of government agencies in the planning and management of public procurement, in particular the planning of procedures and the in-house assignment of rights and responsibilities in these procedures. Another purpose was to consolidate the positive experience of agencies and on its basis make recommendations for the improvement of the internal controls applicable to the management of procurement.

The SAO sees it positive that many agencies have started to draw up annual procurement schemes. This helps to decrease the risk of failing to initiate a public procurement procedure or delaying the commencement of procurement procedures, as well as to prevent the temporal accumulation of procedures to the extent that may interfere with the management of procurement and significantly deteriorate the outcome.

It is equally important to start the preparation for extensive and complex procurement in good time, especially when there are several agencies and their sub-units involved in the same procurement process.

The SAO has had to repeatedly state that these procedures are not started in time, that insufficient preparation does not allow for the attainment of desired goals and that the results are achieved considerably later than intended. At the debates in the course of the audit all audited entities acknowledged the necessity of procurement schemes and after the audit announced of their decision of implementing those schemes.

In general, agencies have designated officials and structural units to arrange for the agency’s procurement activities. However, in many cases the role of the official made responsible for specific procurement, the relation between the said official and the regular procurement committee in the agency, as well as the extent to which the official represents the agency in relations with the tenderer have not been specified.

The SAO has made a proposal to the Minister of Finance to consider an amendment to the Public Procurement Act that would abolish the obligation of the contracting authority to designate an official responsible for public procurement. The Minister of Finance did not consider this proposal practical, because in his view this might disperse the responsibility of the organisers of public procurement and bring about deterioration of the quality of public procurement management.

In recent years many agencies have introduced in-house guidelines on the management of public procurement. As a rule, the guidelines cover procedures from invitation to the determination of a successful bid, but also the procurement planning, conclusion of procurement contracts and the meeting of commitments under the contracts.

As an outcome of the debates in the course of audit, all audited entities acknowledged the necessity of such guidelines and those not yet having them started their drafting. The SAO proposed to the Minister of Finance to make relevant recommendations to agencies. The Minister of Finance announced that the Ministry would complete a corresponding guide by the end of 2004 and give additional explanations to contracting authorities, where appropriate.

In many agencies, the internal audit service has failed to assess the risks inherent in the management of public procurement or to audit the management of procurement, the internal audit services of several ministries have not addressed these problems within the administration area of the respective ministry. The Minister of Finance announced that the Ministry recommends internal audit managers considering the incorporation of the internal controls applicable to the management of public procurement in the internal audit programme.

The SAO has audited the management of public procurement in the Ministry of Agriculture and its administered agencies including the Estonian Agricultural Registers and Information Board and the Agricultural Research Centre, the Ministry of Foreign Affairs and the Government Forest Management Centre. When formulating the findings and proposals of the audit, the observations made during previous audits were taken into account.

The SAO states that not any government agency has a consolidated overview of the amount of state funds that are spent every year on the purchase of goods or works, services and conceptual designs by central and local government authorities, public legal entities or persons related to them.

The Public Procurement Office keeps record of such public procurement which must meet the requirements laid down in the Public Procurement Act. Until 2004 it was obligatory in cases where the cost of a certain type of product or service, with VAT, acquired within one year, amounted to a minimum of EEK 100,000, or EEK 500,000 in case of construction works.

In 2003, all in all 4,859 procedures for such procurement were initiated in Estonia and the procurement contracts concluded on such procurement amounted to EEK 10.4 billion . 72 % of procurement procedures registered as public procurement were organized by central and local government authorities, accounting for 39 % (EEK 4.1 billion ) of the aggregate cost of procurement.

Toomas Mattson
Communication Manager of National Audit Office
Telephone: 6400 777
Mob: 51 34900
E-mail: [email protected]

  • Posted: 11/23/2004 12:00 AM
  • Last Update: 9/30/2015 11:17 AM
  • Last Review: 9/30/2015 11:17 AM

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