Simple procurements are exempted from the application of the Law on Public Procurements, and the rulebook that regulates this type of procurements additionally exempts direct procurements, so illegalities related to conflict of interest or other irregularities, such as the sharing of procurement items, are not foreseen.
Responses to the initiatives for inspection supervision by the Institute of Alternatives point to legal gaps that hinder the effectiveness of inspection supervision in relation to potential conflicts of interest and other irregularities in direct public procurement. Therefore, there is no room for punishment by the inspection bodies.
Direct procurement is a special type of procurement of up to 8.000 euros, which allows the direct conclusion of invoices/contracts, which is the least transparent procedure, because it allows the deal to be concluded with whomever the client wants.
From year to year, the consumption directly increases, so in 2023 it amounted to nearly 65 million euros.
The Institute of Alternatives analyzed spending through direct procurement for previous years, which pointed to numerous irregularities in the use of this mechanism. Some of them are that individual procurements exceed the prescribed threshold on an annual level, that there is a sharing of public procurement items, but also a conflict of interest.
The Ministry of Finance says that simple procurements are part of the public procurement system to which they paid special attention in the previous period, and especially to the protection of the rights of participants in procedures through requests for monitoring.
"Inspection control has the authority to act in accordance with the Rulebook and to take certain measures according to inspection supervision," says Jelena Jovetić, director general of the Directorate for Public Procurement Policy.
The Public Procurement Inspectorate states that we have an increase in identified irregularities related to simple procurements, but that the amendments to the Law on Public Procurement deleted the provision on the basis of which they could initiate misdemeanor proceedings and issue a preliminary injunction for identified irregularities.
They determine a conflict of interest only over 8.000 euros
According to the current legislation, the representative of the contracting authority and bidders are required to prepare a statement on the absence of conflicts of interest for all procurements that are carried out through the electronic public procurement system, except for direct procurements where you choose from whom you will procure something and at what price.
Although apparently it is about "small amounts", since there is a limit that these procurements can be worth up to 8.000 euros on an annual level, it is problematic that most purchasers misinterpret the law, so they observe this threshold for only one procurement without caring about the total amount on an annual basis.
Research carried out by the Institute of Alternatives on a sample of ministries, municipalities and individual public companies showed that individual purchasers allocated more than 40.000 euros annually for the same procurement item. Exceeding the amount for direct procurement as a frequent irregularity was confirmed by the recently completed audit of the regularity of these procurements conducted by the State Audit Institution.
The Institute of Alternatives, analyzing the consumption for the year 2022 using a direct agreement, found that the Municipality of Andrijevica made purchases in this way from a company owned by the President of the Municipality Željko Ćulafić.
At the moment when the media became interested in this story. Ćulafić did not want to comment on those allegations, while the municipal secretariat for public procurement said "it is not about a conflict of interest, but about pure, local patriotism".
Because of all this, the Institute of Alternatives sent an initiative to the Directorate for Inspection Affairs at the end of December last year, asking it to carry out an inspection in the Municipality of Andrijevica, and determine the possible existence of a conflict of interest. In the response of the public procurement inspection, it is stated that it was established that during 2022 and 2023 invoices were directly accepted from this supplier, in the amount of 9,5 thousand euros without VAT.
Although the allegations from the initiative were confirmed, the response of the Directorate for Inspection Affairs states that no irregularities were found because the provisions on the absence of conflicts of interest are prescribed only for procurements over 8.000 euros.
In the Ministry of Finance, they are aware of some legal restrictions, as they say, they believe that we always have certain examples where we can talk about abuse of the system and what is not regulated precisely enough by certain acts.
Acknowledging that the by-law provides a certain width, even acting when they receive a certain suggestion, it can enable them to simultaneously approach changes in the law.
"However, when we talk about the conflict of interest, it is not only a subject of regulation in the part of public procurement. It is a broader concept that implies a conflict of interest for public contracting authorities and for the public sector in general. So it is a systemic broader issue, but in that part which refers to the policy of public procurement, it is quite certain that the Ministry of Finance, whenever there is space and certain suggestions, will approach it," Jovetić pointed out.
Referring to the Andrijevica case, Chief Inspector for Public Procurement Ivan Milićević pointed out that the Law on Public Procurement does not prescribe measures to prevent conflicts of interest in procurements made by direct acceptance of invoices.
"I was a member of the working group for amending the law. It honestly did not occur to me that this kind of situation could happen. I trust the other members of the working group. But I also believe that the ministry will prescribe some measures in the coming period to prevent this kind of behavior", optimistic is Milićević.
They break the law, but there are no grounds for punishment anymore
Some violations that are recognized by law when it comes to irregularities in the implementation of public procurement through CEJN, do not apply to direct procurement, although they do occur. Such an offense is the division of public procurement items, in order to avoid the application of the law.
Here as an example, we cite the Municipality of Mojkovac, which with a construction company during 2022 realized the adaptation of offices through three invoices. Although it is a corridor and offices located in the same building, the Municipality implemented the adaptation on the basis of three invoices and thus directly chose the contractor, instead of publishing a public call for a simple procurement that would allow a larger number of interested companies to apply. The amount of the mentioned works without VAT is EUR 8.980, paid through three invoices on the same day, December 28.12.2022, XNUMX. years.
The inspection confirmed the allegations from the initiative of the Institute of Alternatives, that the Municipality of Mojkovac violated the article of the Rulebook on the method of conducting simple procurements, which states that simple procurements, i.e. works with an estimated value equal to or greater than eight thousand euros, are initiated by publishing a request for submission of bids on the electronic system of public procurement (ESJN), which was not done.
The inspection showed that the Law on Public Procurement, which was in force at that time and prescribed a minor offense if simple procurements are not carried out in accordance with the Rulebook that regulates them, was thus violated.
However, the bottom line is that in this particular case it was about the division of public procurement items in order to avoid the appropriate procedure. The law provides for a fine for this offense in the amount of 2.000 euros to 10.000 euros, if the perpetrator is a legal entity.
Although it is a violation of the Law on Public Procurement and the President of the Municipality Vesko Delić himself admitted that he awarded the work to the same construction company and thus avoided conducting the procedure through transparent procedures, he cannot be punished on this basis since the Law does not apply to simple procurement. Due to the exemption from the Law, the only basis for misdemeanor liability due to irregularities in connection with simple procurement was non-compliance with the Rulebook. Also, since in this particular case it is a legal entity of the municipality that cannot be fined, the inspection fined the responsible person in the local self-government body with a minimum fine in the amount of 150 euros. The law previously provided for a fine of 150 to 1.000 euros for the person responsible for this offense. In the meantime, the offense related to non-compliance with the Rulebook was deleted from the Law, which also lost the basis for the inspection to punish irregularities related to simple procurement.
The Public Procurement Inspection states that during 2023, the inspection issued 23 misdemeanor orders and filed one request to initiate misdemeanor proceedings in connection with simple procurements, and that in 2024 they have identified 33 irregularities so far, but they could not issue misdemeanor orders and initiate misdemeanor proceedings
Inspector for public procurement Ivan Milićević notes that in the part of control of simple procurements, it happens that procurements that are carried out by direct acceptance of invoices are not entered in the records kept by the ordering parties on the electronic public procurement system or are not entered correctly.
"This makes it difficult for us to determine other irregularities such as the division of public procurement items or the implementation of simple procurements through the electronic public procurement system when the amount of 8.000 euros is reached by direct acceptance of invoices and from when procurements should be carried out through the electronic public procurement system," says Milićević.
When asked why the inspection resorts to the lowest fine in cases like the Municipality of Mojkovac (fine ranging from 150 to 1.000 euros for the person responsible), the Public Procurement Inspection replied that it is not something they can decide on their own.
"This is prescribed by the Law on Misdemeanors. So, when the range of punishment is prescribed by law, the authority imposes a punishment that is minimal," concludes Milićević.
In this example, we see a gap that is particularly illogical since with direct procurement there is more room to divide the subject of procurement, directly choose the desired bidder and thus bypass the procedures that imply transparency of the procedure. Again, this is particularly problematic if it intersects with other non-compliance with total value statutory requirements for direct procurement.
The Ministry of Finance says that it is very important for them to ensure a transparent public procurement system and that public procurement is efficient, but that they are committed to controlling simple procurements, which currently account for around 10% of total procurements.
"When we realized that this percentage of simple procurements significantly participates in the total value of public procurements, we introduced a limit through the rulebook on simple procurements, so that in one fiscal year the contracting authorities can carry out one hundred thousand euros of the value of these procurements related to direct negotiations. in order to ensure in this segment that as many business entities as possible participate in procurement and that direct, i.e. invoiced procurement is reduced to a minimum," concluded Jovetić.
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