Research: Zagreb Deeply at the Bottom of Europe in Public Procurement Competitiveness

Zagreb is at the bottom of the ranking of researched European capitals in terms of competitive public procurement, with only Warsaw being worse, it was stated on Tuesday at a press conference at the House of Human Rights, where the Center for Peace Studies (CMS) and the Center for Corruption Research from Budapest (CRCB) presented the results of an in-depth analysis of public procurement in the City of Zagreb and Zagreb Holding from 2011 to 2016.

The results were presented by the head of the research Istvan Janos Toth from CRCB and co-leader of the research Sandra Benčić from CMS, and they show that the share of public tenders with only one bidder in Zagreb increased from 25 percent in 2011 to 34 percent in 2016. They also show that price ‘distortion’ occurs much more frequently in tenders that have only one bidder than in those with multiple bidders.

>>>P&G Third Time Winner of Employer Partner Certificate

There are significant overlaps in the increase of the scope of public procurement, i.e., the total net amount of tenders and the increase in price distortion in 2013 and 2015, which coincides with electoral cycles (2013 – local elections, 2015 – parliamentary elections), in which the party of Zagreb Mayor Milan Bandić participated.

The total amount spent in so-called non-competitive procurements during the observed period amounts to five billion kuna, with the highest being in 2013 when it reached as much as 1.9 billion kuna. It is estimated that during the observed period, 1.4 billion kuna was lost in the public procurements of Zagreb Holding, and 1.23 billion in the procurements of the City of Zagreb, totaling 2.6 billion kuna that could have been saved through competitive public tenders and proper assessments of tender values.

Zagreb Unnecessarily Spends Two and a Half Annual Budgets of Rijeka

When compared to the money available to other cities, approximately two and a half annual budgets of Rijeka, which amount to around 950 million kuna, or more than eight annual budgets of Vukovar, which amount to around 300 million kuna, were unnecessarily spent in Zagreb over five years.

Interestingly, the most competitive tenders are in the construction sector, while the least competitive are in the IT sector. In addition to the high share of tenders with one bidder, the IT sector also has the highest degree of price distortion, including rounding of prices to 10, 100, and 1,000 kuna.

An example is one of the larger IT companies that, out of 15 selected tenders on which it received a contract with the City of Zagreb/Zagreb Holding, was the only bidder in 11 of them, there was one other offer in three tenders, and only in one were there three offers.

>>>Dalić: The Future is in Innovation, We Need More Money for Research and Development

The value of the tenders ranges from 700,000 kuna to 10 million kuna, with only two tenders having estimated values of less than one million kuna. The analysis showed that in all tenders where the company was the only bidder, there was almost no drop in price compared to the estimated value of the tender, and in one tender, the offer was even nearly double the estimated value.

In tenders where at least one other bidder participated, the price fell by an average of three percent, while in the tender with three bidders, the price was 13 percent lower than the estimated value of the tender.

>>>Ikea Starts Offering Its Products ‘on Third Platforms’

The analysis of corruptive risks, market competition intensity, and assessment of direct social loss covered 5,922 contracts in 4,483 public procurements, and a total of 1,197 winning companies were detected.

Benčić stated that they additionally conducted three mini case studies, where they analyzed the model of ‘Zagreb housing’ and the model of public investments of the City of Zagreb. They analyzed three cases – Sopnica-Jelkovec, housing in Podbrežje, and the Svetice pool, concluding that these apartments and the pool were overpaid.

All the results they reached in the analysis are a good indication that they should be addressed not only by DORH and USKOK but also by the State Audit Office, says Benčić.