CONSTRUCTION OF THE BUILDING OF THE “BIOSENS” INSTITUTE IN NOVI SAD (2020/2021)

The subject of this case study is an international open procurement procedure conducted in accordance with the European Investment Bank (EIB) Procurement Guide. Therefore, this procurement is an exception to the application of the Law on Public Procurement, given that it is financed by EIB loans. Although Serbian Law on Public Procurement was not applied to the procurement procedure itself, this law was indeed applied to the protection of rights procedure, based on the Law on Confirmation of the Amendment Agreement in relation to the Finance Contracts between the Republic of Serbia and the EIB. The procedure in question was conducted by the Public Investment Management Office, and the estimated value was 8,200,000 euros.

According to EIB rules, bidders are required to separately submit technical and financial bids. First, a technical bid is opened, after which the bidders that qualified are invited to open a financial bid. Thus, in the specific case, before making the decision on awarding the contract, the contracting authority first made the decision on the qualification of the bidders, in which it was stated that all four bidders who submitted bids were qualified. It is important to point out that the tender documentation did not provide for the contracting authority to make a decision on qualification at that stage of the procedure: he was only supposed to send qualification notices to the bidders and (at the same time) invitations to the opening of financial parts of bids. This decision is not foreseen by the EIB rules either. The only decision that the contracting authority makes after the opening of bids in the procurement procedure is the decision on awarding the contract. Also, there was no deadline for challenging the decision on the qualification of bidders, nor is this possibility provided in the EIB Procurement Guide, as well as in the previously valid Law on Public Procurement, which in this case was applied to the appeal procedure. So the only decision that could be challenged was the contract award decision.

After the contract in question was awarded to a group of bidders consisting of “Modulor” d.o.o. Belgrade, “Gat” d.o.o. Novi Sad, “Koto” d.o.o. Belgrade and “Elita-Cop” d.o.o. Belgrade, with the subcontractor “Darnico” d.o.o. Vrsac, one of the participants in the procedure submitted a request for protection of rights by which he challenged the decision on awarding the contract. However, the Republic Commission rejected this request with a decision on 24 pages, stating in a few sentences only that it did not consider any of the allegations of the submitted request for protection of rights (while quoting them all in detail), because the applicant had no right to submit the request. As stated in the decision, the applicant did not previously challenge the decision on qualification, thus losing the right to challenge the technical part of the bidder’s bid?! So the Republic Commission avoided considering the allegations of the request which indicated an obvious conflict of interest and submission of false data in the bid of the selected bidder, but also serious shortcomings in the bid of the second-ranked bidder where the Commission simply chose to “close its eyes”.

There are numerous facts that indicate the existence of an obvious and undisputed conflict of interest, in accordance with EIB rules. Namely, the business entity “EuroCons Group” d.o.o. Vršac, whose member is, among others, “Darnico” d.o.o. Vršac, with which the selected bidder acted as a subcontractor, prepared project documentation for the works that are the subject of this procurement and which was an integral part of the tender documentation![1] This is confirmed by the fact that the technical specification sheets all contained headers with the “EuroCons Group” logo. And there’s more. This business entity also participated in the procurement procedure during the preparation of answers to the questions of interested persons, which was confirmed by the contracting authority in its response to the submitted request for protection of rights! Therefore, the tender documentation was prepared and the questions of potential bidders were answered by the entity that had its representative in the bid of the selected bidder. Having that in mind, we can assume that the same business entity participated in the expert evaluation of bids by reviewing the bids and advising the commission of the contracting atuhority, while all the time, we repeat, it had its representative in the bid of the selected bidder.

Also, the subcontractor “Darnico” d.o.o. included in its references the contracts concluded with “EuroCons Group” d.o.o., to which “Darnico” issued invoices that were not certified by the supervisory body (therefore they were not credible), receiving in return the certificates of realized references: all of this was later used together as proof of references in the bid of the selected bidder.

Furthermore, as one of the requested references, the selected bidder submitted a certificate on the construction of the Student Dormitory “Europe – Europa Kollegium” in Novi Sad, which, however, was not issued or certified by the Capital Investment Fund of AP Vojvodina, which was solely responsible for conducting this public procurement according to the provisions of the Public Procurement Law. This reference should have been particularly checked because a participant in the joint bid of the selected bidder presented it as his own, stating that he allegedly performed the reference works as a “subcontractor of the subcontractor’s subcontractor” who is not even specified in the basic contract and who most likely remained completely unknown to the financier (Capital Investment Fund). It is also interesting that according to the confirmation submitted by the selected bidder, the entire works on the said facility were performed by the subcontractor (?!), which could not be approved by the Capital Investment Fund, because it was not possible according to the Public Procurement Law.

Finally, another equally important irregularity of this procedure reflected in the fact that during the expert evaluation of bids, the contracting authority allowed the second-ranked bidder to replace the proof of references, when he realized that the bidder would not be able to meet the qualification criteria required in the tender documentation!

The Republic Commission refused to consider any of these obvious and cardinal irregularities, referring to the non-existent rules of procedure. On the other hand, the contracting authority defended itself by saying that the European Investment Bank was allegedly fully aware of all the details of this public procurement procedure and that it gave its consent through non-objection comments on different stages of the procedure.

However, according to EIB rules, the contracting authority bears full responsibility for procurement procedures. The rules also state that non-objections or comments sent by the Bank to the contracting authority during the procurement process are based solely on the information provided by the contracting authority and that they do not relieve the contracting authority of its entire responsibility in connection with the procurement. In particular, the bank may reconsider its position in the light of new information that may become known to it after having given its opinion on a particular aspect of the process.

The question remains as to how the European Investment Bank was informed about this procurement procedure. In that sense, it would be very important for the Bank to conduct detailed control not only of this procurement but also of some other (if not many) large value procurements conducted by the Public Investment Management Office, which were financed by the Bank. The reason is that, as we have seen, the appeal procedure conducted according to the provisions of the domestic Law on Public Procurement may be rendered meaningless by the actions of the contracting authority and by the decisions of our competent body – the Republic Commission. And these are huge funds set aside for procurement, which the Republic of Serbia (more precisely, its citizens) will repay with interest in the years to come.

[1] At the same time, the same person was a co-owner of the subcontractor “Darnico” d.o.o. with 50% share, as well as a legal representative – director and sole owner (100%) of the “EuroCons Group” d.o.o.