CARDS AND REAGENTS FOR BLOOD TESTING - BLOOD TRANSFUSION INSTITUTE NIS (2017/2019)
In the period 2017–2019, the Blood Transfusion Institute of Nis conducted 8 public procurement procedures for cards and reagents for blood testing, exclusively for a specific IH-1000 analyzer. In five procedures, a public procurement contract was concluded, while three procedures ended with the suspension of the public procurement procedure.
This analyzer, as well as other similar devices in this area, represents the so-called closed system, which means that it can only work with cards and reagents manufactured or approved by the manufacturer of the device itself. This means that in such public procurements competition is almost excluded, since the only potential bidders are either the manufacturer or his representative for the market in question. Consequently, this means that very often the value of the concluded contract is very close to the estimated value of the procurement. Also, in such cases the contracting authority is not particularly interested in examining the formal shortcomings of the offer (since there are often no other participants who would point out these shortcomings).
In this regard, the fact that the contracting authority has a certain device certainly speaks in favor of the justification of the procurement of medical devices and supplies that match the equipment already in its possession. However, in order to assess the justification and correctness of the contracting authority’s actions, the essential question is whether the contracting authority procured the analyzer in question in a public procurement procedure that involved competition of different alternative solutions and life cycle cost estimates (for example, the cost of the cards and reagents maintenance for the next few years), or it received the analyzer as a donation, where the donor is also the only bidder that is being awarded contracts for the procurement of cards and reagents, precisely because he is the exclusive representative of the analyzer’s manufacturer.
In all analyzed procedures of the cards and reagents procurement (when the procedure was not suspended), contracts were concluded exclusively with the representative of the manufacturer of the IH-1000 analyzer, company “Diahem-Gramim” Ltd., with which the contracting authority concluded a contract on the donation of the IH-1000 analyzer on June 14, 2016.
It is important to note here that, among other things, the donation agreement in question provided that the contract would be considered terminated if the Blood Transfusion Institute Nis ceased to procure reagents from the donor within 5 (five) years from the contract date, or if the donor assessed that the analyzer was not being used frequently enough!
The mentioned donation agreement came to the attention of the State Audit Institution (SAI), which on November 27, 2018 made a separate Report on the audit of financial reports and regularity of operations of the Blood Transfusion Institute Nis for 2017. In this Report the SAI determined that this particular donation agreement does not have the character of giving without asking for a favor in return, that it is in conflict with the Law on Public Property, as well as that it represents a violation of the basic public procurement principles. It was also pointed out that this donation agreement was concluded in contradiction with the instructions of the Republic Health Insurance Fund on donations from March 30, 2012, since the Institute before the implementation of these donations did not contact other participants who donate the same or similar devices in order to choose between all offered devices according to the lowest price of individual analysis. The SAI also concluded that in the period 2016-2017, after public procurement procedures, the Institute concluded several contracts with the same donor company for the supply of reagents for this analyzer in a total value that is about 1.9 times higher than the value of the analyzer which amounts to 8,717,560 dinars. Let’s add that the contracting authority in the following period, 2017-2019. concluded several more contracts with the same bidder in the value of as much as 50,527,024.00 dinars without VAT!
Following the SAI report, the Transfusion Institute stipulated an annex to the donation contract that cancelled the dubious obligation to procure reagents exclusively from the donor; however, the contracting authority continued with the same practice of awarding contracts to the same bidder, as evidenced by public procurements published on the Public Procurement Portal. This points to the fact that the contracting authority, with its decisions, acts and documents, expressed a clear will and intention to execute its public procurements within a single closed system in which competition is not possible.
In this regard, it should be said that even before the SAI report, the procuring entity rejected any possibility to enable competition in the public procurement procedures in question. Thus, the procuring entity did not accept the proposal of the interested person to delete from the subject of procurement the provision that cards and reagents must refer only to the IH-1000 analyzer, and to enable the offers that refer to any other appropriate device (with same functions and purposes), provided that the selected bidder is required to deliver the appropriate analyzer to the customer for free use, in addition to the cards and reagents that are being procured.
The stated argument, but also the allegations of the existence of an illegal donation contract, were not accepted by the Republic Commission who rejected the request for protection of the rights of this interested person. In its explanation, the Commission stated that there were no grounds for disputing the need of the procuring entity to procure cards and reagents for the device it owns, and that the Commission was not competent to examine the legality of the donation contract.
This is especially interesting for another reason: in 2015, deciding on the request for protection of rights in the public procurement procedure of the Blood Transfusion Institute of Vojvodina, the Republic Commission took diametrically opposed positions on an identical issue – the relationship between donation agreements and restriction of competition in the case of the procurement of appliances that represent closed systems, concluding that in this way competition was being restricted.
The answer to the question whether the absence of competition in the public procurement procedure related to closed systems is justified or whether it is the matter of ineffective public procurement (bad and wrong decision-making), of irregularities, illegalities and / or abuses, can be given only by a comprehensive review of the contracting authority’s business, its specific tasks, activities, work plans, condition of equipment, stocks, personnel, their training and the like.
Taking into account all the above, we would like to emphasize once again that the principle of ensuring competition is one of the basic public procurement principles, and that the Law on Public Procurement requires contracting authorities to enable the greatest possible competition in each procedure.
When it comes to public procurements that include the so-called closed systems, contracting authorities may ensure competition in one of the following ways:
- They can procure (purchase, rent or lease) the device / analyzer, but in a way that in addition to the price of the analyzer takes into account the costs of necessary medical supplies and reagents, maintenance costs, training, etc. for the period of the device’s actuality (3-5 years);
- They can conclude multi-annual public procurement contracts for the requested medical supplies and reagents, but that would also include the use of appropriate devices for the procured medical supplies and reagents.
- Finally, they can conclude framework agreements with several bidders for the maximum allowed period of framework agreements, so that the subject of public procurement would also refer to medical supplies and reagents with the delivery of the appropriate device. In addition to broader competition and fulfillment of needs of the contracting authority for a period of several years, the use of the framework agreement would ensure the availability of new technologies during the validity of the agreement, continuous training and qualification of staff in terms of new technologies, the existence of backup suppliers (in case some of them do not conclude the contract) and / or parallel use of a number of technologies and competing devices by concluding contracts with all or a larger number of bidders with whom a framework agreement has been concluded (according to the formula and percentages specified in the framework agreement), all without assuming contractual obligations for a period of several years in terms of budget regulations, i.e. without the restrictions that limit multi-year contracts due to budget regulations.