GEO

Allegedly corrupt procurement practices of the Academy of the Ministry of Finance

04 May, 2018

Transparency International Georgia regularly monitors public procurement in Georgia. In this process, we have had many interesting findings potentially related corruption. In this case, a tender announced by the Academy of the Minister of Finance attracted our attention due to some dubious circumstances.

This Academy is a Legal Entity of Public Law (LEPL) working under supervision of the Ministry of Finance of Georgia.

On March 14, 2018, the Academy announced an electronic tender (SPA180002914), valued at GEL 73 625, on purchasing hotel services (CPV კოდი: 55100000) for lodging of training participants. The state budget will fully cover hotel costs for two groups: the first group should be served for 7 days and the second one - for 14 days. Each group includes 20 participants.  

This tender had only one bidder – Robert Ovanesian Hotel Cron Palace Tbilisi – and its bidding price equaled to the announced tender price.  As this hotel did not have a competitor, it won the tender and the Academy signed a contract with it on March 30. According to the website of Cron Palace Tbilisi, it is a four-star hotel registered as a sole proprietor owned by Robert Ovanesian,

If we browse www.booking.com, there are 103 four-star hotels registered in Tbilisi and most of them are located in the city center. Therefore, a fact that only one hotel participated in the tender announced by the Academy and won it without competition seemed dubious for us. In general, being an only bidder in a tender might not be a problem in such sectors, where number of suppliers is small, but in such a competitive service as a hotel lodging, this fact raises certain questions and deserves an interest.  

As we dug deeper, it turned out that a reason for having only one bidder stemmed from the tender requirements. Apparently, the Academy intentionally wrote the tender requirements in such a way that only hotel Cron Palace Tbilisi could meet them.

The Academy, among other requirements, set such unreasonable preconditions for potential bidders as:

  • Hotel should be located adjacent to the Training Center (not far than 10-minute driving distance from Gorgasali street #10, Tbilisi);
  • Hotel should have at least 20 single rooms, restaurant-type dining room for 20 persons, indoor swimming pool, sauna and spa center located in the same building;
  • Hotel should have indoor parking space;
  • Hotel guests should have a free 24-hour access to the indoor swimming pool, sauna and fitness center.

 

Indicating exact hotel location in tender requirements significantly reduces competition. Moreover, it is hard to explain why it is necessary for a hotel to have an indoor parking space, indoor swimming pool, sauna and spa center located in the same building and open for 24 hours.

When we researched more on tenders of the Academy, it turned out that this was not the first time when this organization announced a tender for purchasing hotel services that were won by the sole bidder – the hotel Cron Palace - Tbilisi.

Since November 2014 up until now, the Academy has announced six similar electronic tenders. Cron Palace - Tbilisi won five tenders out of six without any competition from other hotels. Total value of these five tenders was GEL 300 000. This hotel won all tenders by providing the first and maximum price bid; therefore, the Academy did not saved anything in this process. It is clear that the reason why Cron Palace - Tbilisi won all these tenders laid in awkward tender requirements.

In addition to electronic tenders, in 2014-15 the Academy directly purchased hotel services from Cron Palace - Tbilisi twice by using a simplified procurement method. Total value of these contracts amounted to GEL 146 000.

During the last years, the Academy signed a contract on providing hotel services with other hotel only once. It happened in February, 2017, when the contract was signed with the hotel Kopala LLC. Apparently, Kopala could win this contract because the tender requirement slightly changed: the following requirement was added: “hotel should have a view on old Tbilisi”; and a requirement that “hotel guests should have a free 24-hour access to the indoor swimming pool, sauna and fitness center” was removed from the tender announcement. (More info on the Academy’s procurement of hotel services can be seed in the table below)

Table: A list of procurement of hotel services done by the Academy of the Ministry of Finance

 (November, 2014 – March, 2018)  

Date

Number of Bidders

Procurement Value

Procurement Type

Winner

14.03.2018

1

73 625

Electronic Tender

Cron Palace - Tbilisi

24.09.2017

1

41 559

Electronic Tender

Cron Palace - Tbilisi

13.02.2017

1

124 677

Simplified Electronic Tender

Kopala LLC

06.07.2016

1

7 812

Simplified Electronic Tender

Cron Palace - Tbilisi

15.02.2016

1

124 200

Simplified Electronic Tender

Cron Palace - Tbilisi

02.11.2015

N/A 

85 822

Simplified Procurement

Cron Palace - Tbilisi

28.04.2015

1

53 640

Simplified Electronic Tender

Cron Palace - Tbilisi

03.11.2014

N/A 

60 491

Simplified Procurement

Cron Palace - Tbilisi

Source: The Public Procurement Agency

We call on:

  • The Ministry of Finance of Georgia - to study procurement practices of hotel services of its Academy;
  • The Prosecutor’s Office of Georgia and the Anti-corruption Agency of the State Security Service – start an investigation of alleged corrupt deal;
  • The Public Procurement Agency – study the above-mentioned procurement cases and, pursuant to the article 159.61 Administrative Offences Code of Georgia, fine the members of respective tender commissions for writing improper tender requirements.