Budget Resources Are Wasted on Public Procurement. Experts
23.03.2016
12:00
Public procurement system in Armenia is almost a mirror reflection of the economy. Monopolies, merging of business and politics, the impact of corruption expressively affect the public procurement system.

Single-source and framework agreements purchases where great corruption risks are, is the reflection of this image. Varuzhan Hoktanyan, Head of the Transparency International Anti-Corruption Center, said on March 23 at "Media Center" press conference on "Development Trends of Public Procurement 2015".

Transparency International has carried out monitoring of the public procurement system for nine years, and the main problem of the high share of single source procurement, is still unchanged. According to last year’s9 months’ data, in procurement volumeof 170 billion drams (urban communities are not included) carried out by thegovernment bodies,a single source purchase in monetary terms accounted around 45%.For the same time period, according to the quantitative data (based on the number of transactions),volume ofa single source procurementsaccounted for 69% of the entire system.State administration bodies,under the framework agreements, carried out 74 billion drams of purchases, which by monetary volumes accounted for 45% of the total procurement. According to Artak Manukyan, Public Procurement Policy Expert at Transparency International Anti-Corruption Center, quantitative data of single-source procurement transactions in Armenia are quite close to Belarus and Russia, in those countries65% and 51%,respectively.

"But here is a big difference; Russia and Belarus are countries with large state-owned property, and it, somehow, explainswhy these numbers are so big, but Armenia has no such problem. The situation in Armenia is specified by market concentration and corruption,"he added, informing that, according to the World Bank data, the number of single-source purchase transactions in the whole procurement volume should not exceed 10%. “The fact that there are serious corruption risks in these components, has been taken into account," said Varuzhan Hoktanyan. He also noted that for the first time the organization published "Bulletin of Procurement".

Artak Manukian says that there are about one billion dollars, more specifically, 962 million dollars in the public procurement process. “The intensity of one person procurement significantly increases as the fourth quarter approaches and the year nears termination. The point is that there is the following logic in the public procurement.  When you do not spend state funds allotted to you by certain period, the money will be sent back to the state budget, therefore, state bodies try to buy something, even if it contains corruption risks," said Manukyan, noting that many purchases are made from one person in this particular period, which is explained by the scarcity of time and procurement urgency.

Then the expert provided the examplesof risky transactions and the amounts allotted for the purchase of particular items.

"For example, the police purchased 45 alcotesterslast year, andaccording to contract, the price of one itemmakes1 million 98 thousand drams. It is noteworthy that "Legion 9" LLC, the alcotesters provider,was established in March 2015 and was the only company to bid. Under the framework agreement it has also been registered as a landscaping work provider. In other words, we are dealing with a universal company. It indicates at least on an indirect procurement. As it is written alcotester and it has such a price, perhaps it is made of gold. If it is golden, it is very likely to cost 1 million 98 thousand drams, there areno technical specifications. I tried to investigate, and found out thatthe price of one alcotester in Russia isfrom 4 thousand to 8 thousand rubles, it is about 40 thousand drams,"said Manukyan.

Atthe end of the pressconference the speakers mentioned, that the public procurement system studies indicate a great danger of wasting the budget. "There are corruption risks in single-source procurement that may cause wasting of budget funds, and this is the worst type of corruption," concluded Varuzhan Hoktanyan.

 

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