Transparency International – Georgia, a civil society organization, published a report on 11 August that analyzed state procurements carried out by the government and municipalities of the Autonomous Republic of Adjara and found that the practice of subcontracting in tenders is unregulated and “increases the risks of corruption in the public procurement system and encourages harmful practices in managing public finances.”
Within the framework of the research, TI – Georgia surveyed 14 budgetary institutions operating in Adjara – 4 ministries of the regional government, 5 municipalities, 2 sub-departmental institutions (Adjara Roads Department of Adjara Tourism and Resorts Department), a legal entity in the public law of the Finance and Economy Ministry of Adjara (Batumi Boulevard), an autonomous LLC (Adjara Project Management Company) owned by the Republic and the large municipal non-entrepreneurial) legal entity (Batumi Civil Infrastructure and Amenity Department) – and studied procurement contracts of 2020-2021 which exceeded GEL 100,000.
In the study, the CSO draws attention to the inconsistent practice of public agencies in setting the upper limit of the volume of work to be performed by subcontractors and says that the upper limit (30%) is set only by the Ministry of Education.
Per the document, the limit of work to be performed by a subcontractor is not set by the Department of City Infrastructure and Improvements of the City Hall of Batumi Municipality, where winners of tenders are in most cases donors to the ruling Georgian Dream party which “actually performs the role of intermediary between procuring entities and subcontractors.”
For example, out of 16 contracts signed by the division, in 10 of them, more than 90% of the works were performed not by the winners of the tender but by subcontractor companies. This means that the winner of tenders “sell their experience and get from 10% to 15% of the amount envisaged by the tender, while less experienced companies perform the work.”
In addition, TI – Georgia declared that none of the contracts signed by the companies supplying services to the State Procurement Agency have been uploaded to the agency’s website which affects the transparency of the process.
According to the organization, except for three public agencies (Batumi City Infrastructure and Improvement Department, Adjara Highway Department, and Batumi Boulevard), no one provided signed contracts with subcontractors and said that they do not have such contracts.
“It is commendable that almost all entities require that suppliers of goods/services under tenders agree on the issue of subcontracting companies with the procuring entities,” TI – Georgia stated. The only public entity that does not require this is the Batumi Civil Infrastructure and Amenity Department. It only requires that it be notified about subcontracting at least five days prior to the start of the work.
Per the study, the Audit Office revealed just two instances where companies who won in two tenders announced by the Finance and Economy Minister of Adjara signed agreements with subcontractors without notifying the Ministry.
Additionally, the Adjara Roads Department fined several supplies for failing to agree to subcontract.
TI – Georgia recommended the following:
- Procuring organizations should stop being guided by their own initiatives and practices and should establish a single standard;
- Ministries and municipalities should request signed contracts with subcontractors;
- Budgetary organizations should not consider the main contractors to have fulfilled the terms of a tender that was “practically” performed by the subcontractor.