Elbasan Municipality, tenders without race and shadows of conflict of interest

Road and drainage system works, the city’s cleanup, purchase of fruits and vegetables for kindergartens and dormitories have a common denominator in Elbasan Municipalities: the companies that get the right to provide such services and goods, for the most part, do not undergo an open race but enter into agreements through negotiations with municipality representatives.

An investigation of the Center for Quality Journalism discovers that more than half of the procurement procedures in the municipality, which offer services for over 210,000 citizens, are conducted through direct negotiations, without publicly announcing the need for goods or services.

An investigation of procurement practices in this municipality also sheds light on the potential conflict of interest between its former senior officials and operators who have benefited and benefit public tenders.

The Center conducted an analysis of procurement procedures for three companies, which are the only ones that have benefited the most funds from public contracts during a four-year period during 2012-2016.

The three companies that benefited the most from the provision of services, works and goods in Elbasan Municipality are Victoria Invest shpk, Bajrami N shpk and Bikade shpk.

In 56 per cent of the cases, these companies have earned the contracts without an open race. During the four years, the three operators signed only 97 contracts with Elbasan Municipality, for 54 of which, the tender procedure was conducted through procedures of negotiation, without prior announcement.

The law on public procurement clearly emphasizes that negotiation procedures, without an announcement of the open procurement procedure, should be conducted only in cases of specific requests or emergencies.

Meanwhile, the Public Procurement Agency, Albanian and European auditing authorities, as well as civil society organizations have made frequent calls on contracting authorities in central and local institutions to use this procedure as little as possible because the tender procedure through negotiations, without an announcement of the demand for goods or services, creates a closed relationship, where the contracting unit itself selects the economic operator to meet that need.

This process is considered as having a high probability of favoritism and corruption.

Likewise, public budgets do not benefit financially, because contracts are negotiated for the maximum amounts of allocated funds.

In the circumstances of an open race, economic operators tend to provide the requested services or goods below the maximum allocated amount due to competition.

Also, conflict of interest appears to have appeared in this local government unit during the four years under review.

Former Deputy Elbasan Mayor from 2013 until 2016 Anduena Prifti Bajrami is the wife of Nazif Bajrami, the sole administrator of the company Bajrami N. Before assuming this duty, she served also as a manager of the company run by her husband.

During the four-year period under review, this company received alone 24 tenders from Elbasan Municipality, with a value of 372,006,014.00 ALL or about 3 million Euros. Part of these public contracts were entered into precisely during the time when Anduena Prifti Bajrami was vice mayor of Elbasan.

We asked Elbasan Municipality to comment on this case and explain whether operations took place in conditions of conflict of interest, but did not receive a response.

During this time, according to data from the Commercial Register, the company reported unusual transactions. In September 2013, its sole shareholder Nazif Bajrami sold 100% of its shares to citizen Astrit Muzhaqi. At the time, the capital of the company was valued at 30,064,231 ALL or about 240,000 Euro.

After one month, in October, Nazif Bajrami reassumed ownership of 100% of the shares of the company and was also reappointed its general administrator.

One month after, in December 2014, the company declared a capital of 264,111,831 ALL or 2.1 million Euros, an increase of about seven times more than the previous year.

According to law, “conflict of interest” is the condition of conflict through public duty and the private interests of an official, in which he has direct or indirect private interests that affect, may affect or appear to affect the conduct of his public duties and responsibilities in an unfair manner.

Elbasan’s “privileged” companies

According to data in the Public Procurement Agency, the company that benefited the higher amount of money through public contracts with Elbasan Municipality during the period 2012-2016 is Victoria Invest shpk. The company earned 14 tenders worth a total of 704,776,545.60 ALL or a little over 5.6 million Euros.

The company, with Fatmir Kuci and Vanina Latifi as administrators, according to documents submitted to the Center, carried out services such as cleaning up the city, reconstruction, road refurbishment and asphalting, and nine of the tenders were earned through direct negotiation procedures.

The second company appears to be Bajrami N. shpk., with contracts that amount to 372,006,014.00 ALL or about 3 million Euros over the period of four years.

The company, with Nazif Bajrami as the sole administrator, carried out services such as reconstruction, asphalting, refurbishment, street and square lighting, sewage systems, and even the purchase of construction material for Elbasan Municipality.

During this period, Bajrami N. got a total of 24 tenders in this period, seven of which granted through the negotiation procedure, eight through the “request for bids” procedure, which means that the contracting authority seeks offers from a limited number of economic operators. Only in nine cases of contracts, the procedure was open, which means that every interested operator was invited to bid.

The third company is Bikade shpk, with Alket Kasa the sole shareholder, and it earned a total of 138,938,662.00 ALL or 1.1 million Euros during the four years in question.

The number of tenders received from companies (left) and the value obtained in lek from them (right)

This company appears to specialize in the purchase of food items for the city’s kindergartens, day care centers, and dormitories, getting a very high number of contracts through direct negotiation.

Bikade shpk. got 59 tenders, of which 38 through the procedure “negotiation, without prior pubic announcement.”

This analysis leads to the conclusion that of 97 public contracts entered into with these companies, the procurement unit authority of Elbasan Municipality used the negotiation procedure in 54 cases. In other words, about 56% of the tenders were granted without competition.

Asked through a FOIA request on the reasons why it had used negotiations very often to enter into high-value contracts, Elbasan Municipality said this was partly also due to blocking that the municipal budget ran into as a result of political debates in the Municipal Council.

Referring to the law on the management of the budget system in Albania, the municipality stresses that in case of blocking, the chair of the local unit authorizes the monthly spending of up to 1/12th of the factual expenses of the local budget in the previous fiscal year to ensure the continued provision of goods and services.

“Faced with such a situation…the procedure of negotiation without announcement was used,” – the municipality’s response notes.

Yet, in spite of this explanation, the municipality did not provide any information as to how many times in the last years, the Elbasan Municipal Council blocked the budget of the local institution and how many months that blocking lasted for.

Likewise, planned and long-term services, such as cleaning up the city or the food supply for day care centers and kindergartens, were granted in an uninterrupted manner through negotiation for years in a row and granted mainly on a monthly basis. Thus, the Municipality failed to find ways to make possible an open competition and long-term procurement for compulsory public services.

Aranita Brahaj, head of a project for transparency on public procurement in local government, told the Center that tenders negotiated directly “are problematic and often coincide with clientelistic procedures.”

“When there is such a high ratio of tenders granted through this method, then the procurement unit in that municipality did not perform as it should have,” – Brahaj stressed.

In her opinion, it is regrettable that procurement units do not provide reasons why this method was chosen to disseminate public funds.

“As a project, when we face such contracts, we underline them so that local auditors, international ones and journalists will pay attention to these cases because they bear a high risk of abuse and corruption,” – Brahaj emphasized.

The High State Audit, in an auditing report for 2016, encountered irregularities in the procurement process by Elbasan Municipality.

The report calls for disciplinary measures for 13 members of the Bid Evaluation Commission and specialists of the Procurement Unit for various violations of tender regulations, causing financial damage to Elbasan Municipality.

The report stresses that during 2014-2015, the contracting authority in the municipality used 55 times the negotiation procedure without public announcement, using more funds for public works and services than would have been needed had the competition been open.

“The contracting authority paid much more funds than in open procedures or requests for bids and, as a result, procurement procedures through negotiation are ineffective,” – the report notes, adding that it is recommended that the municipality use the procedure “only for special occasions.”

Meanwhile, Albania has been pointed to as a country that generally suffers from non-transparent public procurement procedures.

A report on public procurements in the Western Balkans published by the European Court of Auditors in January 2018 emphasizes the excessive use of public contracts, negotiated without prior public announcement, that avoids competition.

According to the report, about 30 per cent of public procurement in Albania is conducted in this manner, a very high figure even compared to the Balkan region.

“This increases the risk for the national budget to not be used in the most transparent manner possible,” – the report notes.

As in other reports, this one emphasizes the need to reduce the use of this procedure to a minimum, considering it as an “anteroom” to abuse and corruption.

Note of the author: The calculated amounts do not include tenders taken in collaboration with others. The amounts do not include VAT; some PPA bulletins include VAT and some others do not.

*In the first picture: Elbasan City (Wikipedia) and the emblem of Elbasan City Hall

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