The problem of drinking water in Zrenjanin and the inability of the state to provide the citizens of Zrenjanin with proper drinking water for more than a decade certainly exceeds the problem of public procurement in Serbia and represents a paradigm of the state’s attitude towards citizens. It also shows the state’s incompetence to provide one of the basic human rights – the right to safe drinking water.

From January 14, 2004, by the Decision of the Sanitary Inspector of the Provincial Secretariat for Health and Social Policy, it is prohibited to use water from the water supply network for drinking and food preparation on the territory of Zrenjanin due to the increased concentration of arsenic, with the remark that water from the water supply network can be used as sanitary and technical water. From that day until today, the citizens of Zrenjanin do not have safe and clean drinking water, although the problem of the drinking water safeness is much older than the date of the stated Decision.

In the meantime, the local self-government, as well as the competent public utility company (JKP “Vodovod i kanalizacija”) tried to solve this problem in different ways – through the implementation of a pilot plant in JKP “Vodovod i kanalizacija”, by concluding a contract with the company “WTE Wassertechnik” on the construction of a water treatment plant (the value of the contract is over 25,600,000 euros), and finally by conducting a public procurement of water treatment services for the city of Zrenjanin. All of these attempts were unsuccessful – the pilot plant failed to solve the problem, the contract concluded with “WTE Wassertechnik” in 2012 was unilaterally terminated by the local government in 2014, while the first attempt to conduct a public procurement procedure for drinking water treatment for Zrenjanin also ingloriously ended, since the public procurement procedure was entirely annulled by the decision of the Republic Commission.

The subject of this case study is the repeated procedure of public procurement of drinking water treatment services for the city of Zrenjanin, i.e. the legality of the public procurement contract concluded after its implementation on February 12, 2015, which to this day has not been performed in the part that concerns the delivery of clean drinking water whose quality meets previously agreed quality criteria.

Namely, the subject of the repeated public procurement procedure were drinking water treatment services, which is mentioned and defined in several places in the tender documentation and in the model contract itself. Following the procedure, the public procurement contract was concluded with a consortium of one foreign and two domestic companies owned by private capital.

This fact itself would not be disputable if only the Law on Public Procurement was observed. However, having in mind the subject of procurement, in this specific case it was necessary to apply the Law on Communal Activities (hereinafter: LCA) valid at the time of this particular procurement.

The aforementioned Law explicitly prescribes that the supply of drinking water, which, among other things, includes water treatment activities, is a communal activity, as well as that this communal activity can be performed exclusively by public enterprises established by the local self-government unit, or a company whose sole owner is a public enterprise or a local self-government unit.

Therefore, in this specific case, the task of the drinking water treatment is entrusted to a consortium that is not a public enterprise and is not owned by a public enterprise or by the local self-government, which means that the contract was concluded contrary to the provisions of LCA and that it is contrary to coercive regulations. Consequently, due to the fact that the conclusion of such a contract was contrary to the imperative regulations, it was not even possible to conduct a public procurement procedure that would end with the conclusion of such a contract!

Although the (repeated) public procurement procedure was initiated in 2014, and the contract was concluded in 2015, the stated issue of impossibility of performing this communal activity by a private company was raised only in 2017, when the sanitary inspection, i.e. the Ministry of Health as a second instance body, rejected to issue sanitary certificate, stating that a consortium of private companies can not engage in the activity of the drinking water treatment. In 2018, however, the Administrative Court ruled that the sanitary inspection exceeded its powers and that the sanitary inspector was only obliged to issue or deny sanitary certificate based on the analysis he conducted, without specifying whether or not someone has the right to perform communal activity.

What is almost unbelievable is the fact that in this period, from 2015 to 2017, no local, provincial or republic body has noticed the problem that no private company can engage in the water treatment business! At the same time, in that period, more precisely in 2016, the Government of the Republic of Serbia even joined the contract in question, by issuing financial guarantees for the interests of the customer for the payment of delivered drinking water.

And instead of annulling the contract in question in accordance with the provisions of the Law on Obligations (hereinafter: LO), the state decided to solve this problem by changing the LCA in December 2018, allowing public enterprises and companies owned by public enterprises or local self-governments, to contract (with the consent of the founder) another legal entity to perform certain activities within the framework of the communal activity of drinking water supply, which also refers to the activities of drinking water treatment.

However, taking into account Art. 107 of the LO which stipulates that a null and void contract does not become valid when the prohibition or any other cause of nullity subsequently disappears (unless the prohibition was of minor importance and the contract was executed), the question of the legal validity of the public procurement contract can still be raised.

However, in this particular case, even if we take the position that there is no problem at all regarding the admissibility of this work to be performed by private companies, a significant problem remains regarding the legality of entrusting water treatment activities from the point of view of the then valid provisions of the Law on Public-Private Partnerships and Concessions (hereinafter: LPPPC).

Namely, the LCA prescribes that the drinking water treatment job, as a job within the framework of the communal activity of drinking water supply, can be transferred to the service provider only by applying the regulations on public-private partnership. In the present case, however, the LPPPC has not been applied at all. Instead, the procuring entity conducted the usual open public procurement procedure in exclusive accordance with the provisions of the Law on Public Procurement!

It is true that the LPPPC refers to the application of the LPP, in the procurement procedure for public services, but it also envisages additional complex rules and procedures before and after the implementation of the public procurement procedure, while the rules of the public procurement procedure have also been changed in certain parts. Thus, the regulations on public-private partnership stipulate the obligation of the contracting authority to prepare a public-private partnership project, and to submit the project to the competent and professional body – the Commission for Public-Private Partnerships that will give its opinion and assess whether a particular project can be implemented in the form of a public-private partnership. If the contracting authority had carried out this (obligatory) action, the problem regarding the (inadmissibility) of performing communal activities in the field of drinking water supply by companies that are not public utility companies would certainly have been eliminated at the very beginning.

It is incomprehensible that the contracting authority failed to apply the regulations on public-private partnership, especially if we keep in mind that during the annulment of the originally conducted public procurement procedure, the Republic Commission in its decision explicitly instructed the contracting authority to apply these regulations, as well as to contact the Commission for public-private partnerships for its opinion as to whether a specific project can be implemented in the form of PPP.

Finally, it is important to point out a few more illegalities in this case:

– The public procurement contract was concluded for an indefinite period of time, contrary to the provisions of the LCA and LPPPC valid at the time, and as the result it remains unclear what the validity period of this contract is;

– During the execution of the contract (and contrary to the LPP), the financial circumstances were significantly changed, in relation to the rules previously determined by the tender documentation that were known to potential bidders when publishing the invitation to submit bids and tender documentation. These changes could have certainly affected the willingness of potential bidders to submit bids if such a possibility had been known in advance, which could lead to an increased number of bids and larger competition;

– The original deadline for the realization of the project was October 12, 2015. Later on, the new deadline was set for December 31, 2016. Both deadlines have long passed, and the project still has not been realized.

In the context of all the problems that arose after the conclusion of the public procurement contract, the observed case best indicates the importance of good preparation for public procurement and consideration of all relevant regulations (not only public procurement regulations) and circumstances that may be relevant for public procurement. By failing to consider these circumstances and relevant regulations in their entirety in this particular case, an almost unsolvable problem arose during the conclusion and execution of this contract, with very complex legal, financial, business, investment and other consequences, since the problem has only been noted when the plant was already built, as a result of which a very unusual and unique solution was applied: change of the Law, instead of the problem being solved beforehand on the basis of correct application of the norms of the valid law.

In the end, it is worth repeating once again: at the time of writing this study (2019), the citizens of Zrenjanin have been denied one of the basic human rights for 15 years – the right to safe and clean drinking water, all due to incompetence, ignorance and negligence of the state and its administration.