RECONSTRUCTION OF SCHOOLS IN NOVI PAZAR, KOCELJEVA AND BELGRADE (2019/2020)
The subject of this case study are three public procurement procedures for construction, reconstruction, adaptation and rehabilitation of school buildings conducted in 2019 by the Municipality of Koceljeva, the Municipality of Palilula (Belgrade) and the City of Novi Pazar. All procurements were funded by the Public Investment Management Office, like in the case of the reconstruction of the General Internal Medicine Clinic of the Clinical Center of Vojvodina.
All these public procurements are an obvious example of the already established (bad) practice in public procurement in Serbia, which is the restriction of competition and favoring a specific bidder through the unjustified use of discriminatory conditions and technical specifications.
The total estimated value of the mentioned public procurements was over one billion dinars (a total of 1,073,296,879.48 dinars without VAT), and the subject of these procurements consisted of a number of different construction works (ground work, masonry, concrete and reinforcement works, carpentry etc.).
Among other things, the subject of all three public procurements were waterproofing works (horizontal hydro isolation) with the use of the HIO technology or other appropriate methodology (in the case of the reconstruction of the Fifth Gymnasium in Belgrade, the words “or other appropriate methodology” were even omitted). However, as the required technology is patent protected, it is quite clear that the contracting authority actually favored the patent holder (HPS HIO-PROTECTION SYSTEM from Novi Sad), i.e. the group of bidders of which it is a member, since there is no other suitable technology that satisfies described technical characteristics. That these suspicions were well-founded was eventually confirmed by the fact that the contract in all three cases was awarded to a group of bidders whose member was the holder of the said patent; the price offered was only slightly lower than the estimated value of the works.
It is especially interesting that the value of the required specific waterproofing works is extremely small. Therefore, it is extremely unusual and incomprehensible that the winner of all three public procurements of extremely large estimated values is essentially determined on the basis of such an item. It should also be noted that the actual economic winners of these public procurement procedures are those members of the group of bidders who will perform most of the public procurement, and not HPS HIO-PROTECTION SYSTEM d.o.o. Novi Sad.
If in this case only the technology of resolving moisture or horizontal waterproofing was really necessary, the contracting authorities could and had to isolate these works into a separate contract and a separate public procurement, which would be carried out independently of the rest of the work. This would avoid the possibility where this really minor item in terms of volume, quantity and value immediately restricts competition right from the start and eventually determines the winner in the public procurement procedure.
In addition to the fact that the contracting authority practically determined the outcome of the public procurement in advance with the above-mentioned request, it is important to note that the tender documentation of this case contained two other disputable conditions.
Namely, in two out of the three procedures, the tender documentation contained the additional condition of business capacity where the contracting authority required certain experience in performing works on high-rise building, but exclusively on public facilities. So bidders with references of tens of billions of dinars, with vast experience, who may have built or reconstructed entire residential and business complexes and settlements would be considered unacceptable and incapable of reconstructing one primary school, and only because they have not previously worked on public facilities. As the ability of the bidder to perform the works in question in a quality manner does not in any way depend on the purpose of the facilities on which he performed these works in the previous period, it is indisputable that this additional condition is not logically related to the subject of public procurement. This has been confirmed several times by the decisions of the Republic Commission.
In addition, in all three procedures, the contracting authorities requested the bidders to visit the locations where the works in question were to be performed. With this request, the contracting authority put the bidders in an unequal position and exposed them to unnecessary costs, especially having in mind the different distance of their locations from the place that should have been visited. In accordance with the law, the tender documentation has to contain all the information necessary for the bidders to prepare an acceptable bid, without the need to find out certain information on the spot through a mandatory site tour. Mandatory tour could only be an option for bidders, but not an obligation, also because through mandatory tour, the contracting authority gains precise information about all potential bidders, which is an information that in itself represents a corruption risk.
Finally, it is important to note that a total of three bids were received in the procurement procedure in Koceljeva, and that due to the insistence on a specific waterproofing technology (whose real market value in relation to the whole work is only a few per mille), almost 25% more expensive bid was selected!! The bid of the rejected bidder amounted to 77,681,713.92 dinars without VAT, while the price of the selected bid amounted to 95,832,804.57 dinars without VAT.
Also, it is quite obvious that in the procurement procedure in Koceljeva there was an illegal agreement between the contracting authority and the selected bidder, which is evidenced by the contracting authority’s answer to the question of the interested person in which the contracting authority addresses the interested person in the first person and replies: “What sets us apart from other contractors who also deal with cutting walls and installing some other materials (…)”. So, what we have here is either an unusual and rare typo, or the selected bidder participated in compiling the answers to the questions of potential bidders, which is much more probable given the other circumstances.
Finally, it is interesting that in the procurement procedure in Novi Pazar, one of the potential bidders first submitted, and soon gave up, the request for protection of rights by which he disputed the content of the tender documentation. The reasons why he withdrew the request remain unknown, but we are sure that they do not refer to the merits of the allegations of the request. If he had not given up on the request, the Republic Commission would most likely have adopted it, given the existing decision-making practice in similar cases. Consequently, this decision would affect a number of other public procurements with other contracting authorities that contain almost identical additional conditions for participation in public procurement, and same or similar specific technical requirements regarding the application of protected HIO-technology, which in turn result in the award of a contract to a bidder / group of bidders of the same or similar composition.