A look at holding government procurement tenders in the Republic of Azerbaijan

According to the report of the international group Tasnim news agency, citing the media of the Republic of Azerbaijan, Public and government procurement is one of the most common areas of corruption in the Republic of Azerbaijan. So far, several facts have been revealed about things like awarding tenders to companies owned by or close to the management of the declaring institution and receiving additional money for winning the tender.

The annual allocation of billions of manats to procurement The government in the Republic of Azerbaijan increases the importance of work in this direction.

Economic experts of Azerbaijan believe that if the atmosphere of transparency and accountability is not enough, government procurement worth billions of manats per year will not be effectively used. puts the budget at risk.

According to official statistics, in 2023, 7 billion 546 million manats were spent on government purchases in the Republic of Azerbaijan. In 2022, this index was 6 billion 779 million manats, which means that the volume of government purchases increased by 767 million manats last year or more than 11%.

This year, the volume of non-competitive purchases from a source in this country was 2 billion and 856 million manats. In other words, a total of 38% of all purchases were made through non-competitive purchasing.

For comparison: in 2022, the total volume of government purchases will be 6 billion and 779 million manats, the volume Purchases from one source were 2 billion 779 million manats, which means that the share of purchases from one source was nearly 34% of all purchases.

In other words, if in 2022 from Every 100 manats of government purchase was 34 manats without competition, in 2023 this amount increased to 38 manats and the share of purchases from one source increased in terms of volume and number. In 2022, 35 percent (4 thousand 278) of a total of 12 thousand 102 government purchases were made from one source.

In 2023, a total of 12 thousand 483 A government purchase has been made. 37% of it (4 thousand and 665) was done without competition. Although the government of Azerbaijan has made statements about transparency in public procurement, the increase in the share of non-competitive procurement calls into question the effectiveness of the government’s activities in this field.

In 2023, 48 percent of Public purchases were made in the form of open tenders, 13% in the form of requests for proposals and 0.8% in the form of requests for proposals.

Most of the purchases were made in the fourth quarter

from the public procurement indicators, it is clear that most of these procurements are done at the end of the year. Last year, 35 percent of Azerbaijan’s government purchases (12,483) were made in the last quarter of the year, and most government purchases were made in the fourth quarter of the year. Regarding the implementation of the 2023 budget, it indicates that government purchases are mainly made at the end of the year, which creates many risks and shows that there is a gap in the planning of government procurement.

Carrying out purchases at the end of the year creates a series of risks for the public finances. Thus, this situation at the end of the year leads to the transfer of unused funds to bank accounts and letters of credit, and at the same time leads to the transfer of a significant amount for the initial payment (advance payment).

The contractors, as a result, increase the advance payment amounts at the end of the year. Public procurement is usually held in the fourth quarter of the year due to improper planning of the purchasing organizations and lack of sufficient competence of the purchasing organizations in this field. They work to make purchases, or the fact that a suitable market has not yet been fully formed, also has a negative role in this.

Tenders are still held through paper

“Electronic tender” platform is one of the mechanisms used by the government of Azerbaijan to eliminate corruption in public procurement. It has been provided to the public in this country.

This online platform envisages conducting public procurement electronically. From the official indicators published in the field of public procurement, it is clear that although the electronic platform has been operating for a long time, an important part of procurement is still done on paper. It is true that online shopping still does not guarantee 100% transparency, but then participation in public procurement can be relatively higher.

According to official statistics, 3% of The number and 55% in terms of the number of open tenders held in 2023 were done through paper. Although government institutions make relatively few purchases through the online platform, large purchases are mostly done on paper. In 2023, the share of public procurement made through the integrated public procurement internet portal etender.gov.az of all purchases was 58% in terms of number and only 22% in terms of amount.

Will the new law work?

The new public procurement law from January 1 It was implemented in the Republic of Azerbaijan this year. In that law, innovation in purchasing is foreseen. According to the new law, public purchases will be made only through the portal, bid announcements will be placed on the portal, purchases related to confidential information and procedures related to these purchases will be made on paper carriers.

The fact is that one of the main reasons for violations in public procurement in the Republic of Azerbaijan is the widespread expansion of official entrepreneurship. It is in this country. So far, it has been proven in many journalistic investigations that the winners of tenders announced by government institutions are mostly companies owned by the heads of those institutions.

In most cases, managers ensure that companies owned by members Family and other close people win these tenders. From this point of view, the most important factor to ensure transparency in public procurement in this country is the elimination of official entrepreneurship and as a result conflict of interests.

There is also the fact that in some cases artificial competition in related tenders It is created to public procurement. The participation of different companies owned by the same person in the tender is guaranteed. In the situation where these fake companies ask for higher prices, a company affiliated with the same person will do the proposed work at a lower cost, creating the appearance of a free tender in a competitive environment.

On the other hand, some articles of the new law may also create conditions for the continuation of corruption in procurement. For example, Article 49.1.3 of the law says that procurement may be made from a single source “for standardization considerations” or “with regard to the need to ensure compliance”.

with However, how the procurement organization reaches this judgment remains open, and those organizations may be requisitioning from a single source for considerations and economies of scale that do not in any way reflect reality.

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