“State Procurement System: Monitoring Results of the First Half of 2017”
12.07.2017
12:00
One of the most risky areas in the fight against corruption in Armenia is the public procurement system.

It has been repeatedly voiced at the highest state level about the need to ensure transparency in this area and to reduce corruption risks.

Last time RA President Serzh Sargsyan stated during the Government session on June 29 of this year: “The procurement system of public expenditures should be fully controlable both for the Parliament and for our entire society. We now introduce new and effective tools to combat corruption and these measures should be combined with our targeted work.”

Transparency International Anticorruption System conducted a monitoring over the state Procurement System during the first half of 2017, the results of which will be presented at Media Center by Varujan Hoktanyan, Project Director of Transparency International Anti-Corruption Center, and Arsen Hambardzumyan, Procurement Expert.

Varuzhan Hoktanyan mentiones that they will mostly address the systemic issues in the field of public procurement, which include procurement from one person, the customer's liability issue, legislative changes, appeal system and web sites.

The speaker says that it is difficult to speak about the quality of the results of the changes in the system of public procurement, as they were just practically applied and the results are not clearly visible.

Arsen Hambardzumyan considers it necessary to focus on the field issues as in the case of solving these problems, it will be possible to recover the sphere. The expert considers the most urgent issue to be customer's responsibility which was not regulated either by the previous or the new law, and duties can be defined only legally and be subjected to liability for failure to fulfill those duties.

“Duties and rights for people involved in the procurement process are defined by the government's decision, and the legislation lacks the components of procurement process or who is responsible for it,” Hambardzumyan said.  

In his opinion, this situation is not fair and logical.

“It turns out that in order to ensure budget entries, we collect money from the economic entities in taxes and fees, provide entries and, if necessary, apply the mechanisms for accountability. However, when we have to manage our expenses with formed entries, there is no accountability. When the customer violates the rules of the game, they are not subjected to liability when the case is disclosed, they say sorry, we will not do it again,” Hambardzumyan said.

Varuzhan Hoktanyan notes that the following formula works here: the participants are accountable and the customers are not.

While studying not only western countries but also the legislation of Georgia and Ukraine now, we see that there are such provisions in Law on administrative offenses, as well as criminal legislation.

Referring to the question that despite the fact that the one-person purchases are observed to decline, the state purchases with thorough technical specifications are widespread, with only one participant, Hambardzumyan mentioned that making such technical specifications is a violation of the law and there is no responsibility, they had always violated and would go on violating.

Speaking about the one-person purchases, Arsen Hambardzumyan mentioned. “Purchases from one person are regulated by law and government decision. If you look at the Procedure for Organizing Procurement Process, you will see a list of purchases from one person. The number of purchases from one person has decreased due to the decrease in the number of lines included in that list. Some lines have been removed from there and they will be implemented in a competitive manner or in the form of subsidies. If we compare with the previous list, we will see included, for example, the entire education field, that is, the allocations to schools have been carried out within the framework of procurement. By purchasing from one person, contracts have been signed that has artificially increased that (one-person procurement) indicator. From now on, some of the provisions have been removed from the list based on our proposals, and this is why there is a decline in that index and after a while, we will see a realistic picture of purchases from one person. Many of our recommendations have not been accepted, one of the most important of which is health care procurement, in particular with hospital services, with the chief order being implemented from one person to the next. This should be viewed as a subsidy, cost recovery, rather than buying. In this case, if they are not considered as purchases from state and community institutions, we will also have a reduction in the purchasing power of one person, and in the private sector very competitive procedures can be applied because there is no exclusive right, and many health organizations.”

The speakers consider the imperfection of the appeal system not less important systemic problem, which creates significant obstacles for the participants. 

Under the new law, the members of the Procurement Appeals Board are appointed by the President of Armenia at the suggestion of the Prime Minister. The expert draws attention to the fact that the Board does not have the status of a legal entity, and it is very difficult to appeal against its decisions in court.

“Being an important institute, its decision is final but today there are cases when the participant disputed the decision of the Board but the court returned the suit, justifying that the organizational-legal type is not mentioned because according to the Civil Procedure Code,  the respondent can be legal and natural persons,” Hambardzumyan said. 

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