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Public Procurement

If we set aside the potholes on the roads and the theft from the Ministry of the Interior’s headquarters, the topic that has definitely dominated the media and economic space lately is public procurement.

The reason for this is not the awakened awareness and conscience of the public and private sectors but the fact that we have only ten days left to adopt a new Public Procurement Act (the draft of which is still not finished). We are obliged to incorporate new EU directives into it by April 18, which were published in the Official Journal of the European Union on March 28, 2014.

Minister of Economy Tomislav Panenić publicly stated that public procurement is the most important segment in his department, HUP and HGK quickly organized conferences on this topic with one day apart, however, none of this can hide the fact that we are late. And this will not change if we talk about it more loudly. And there has been a lot of talk about various things in recent days.

HUP presented data that the annual value of public procurement in Croatia amounts to 42 billion kuna (12 percent of GDP) and that 10 percent of that amount goes to corruption. This means someone calculated that 4.2 billion kuna was “laundered” and “stolen” by someone else. If they knew how to calculate it, why didn’t they immediately say who? In the end, until now, no one in Croatia has been criminally responsible for rigging public tenders. It seems much more likely that this figure was thrown out by some statistician with a superficial estimate, and we know that statistically anything can be calculated and manipulated.

Businesspeople and politicians are happy that the new Act will increase the possibility of engaging Croatian producers and smaller entrepreneurs in tenders (although this should not be written anywhere in the Act). Absolutely no one has prevented clients from engaging Croatian suppliers until now. Yes, some countries have found models to circumvent European rules and protect domestic products, which in itself speaks volumes about the hypocrisy of the system, but there is very little chance that this will work for us. Someone has obviously forgotten that by signing for entry into the European Union, we also signed that we no longer make any decisions about it ourselves. If we have not found a way to resist the import lobby until now, we certainly will not now. After all, there are many segments and categories in public procurement where there is no Croatian version of the imported product.

The second theory that everyone has unanimously latched onto is that from now on, clients will choose suppliers based on the criterion of the most economically advantageous offer, rather than the cheapest offer, and that this will drastically reduce corruption in Croatia. This theory contains two falsehoods in one sentence. Clients could have used this criterion without any problems before because in Croatian law, the most economically advantageous offer has existed as one of the selection criteria since 2006. Simply, no one has used it until now because it was easier to choose the cheapest, especially considering the insufficient education of clients. It is simpler to justify a decision based on price, even when it is not the optimal solution for the client. So no one guarantees that clients in the public sector will act differently from now on. Another thing, the most economically advantageous offer opens up even more possibilities for corruption because with additional criteria, the possibilities for manipulating conditions increase.

No one in the whole story mentions the consequences of the delay in adopting the directives. Namely, funds from EU funds are drawn into Croatia through public procurement, and if we do not comply with the procedures from the directive, we could have serious problems when competing in European tenders. The likely scenario is that tenders will not be announced after April 18, or that they will be postponed, and thus Croatia will not be able to draw funds from EU funds. Another consequence is that all procurement processes in state and public institutions are currently at a standstill, money is not circulating because no one dares to announce anything until the new Act is adopted. And if we adopt it by summer, it will still take some time before various trainings are held in the counties, etc. All this automatically implies fewer state investments, and thus a “thinner” GDP. Especially if, God forbid, the tourist season also underperforms…