The number of legal entities created by the Kutaisi Municipality is growing year by year. N(N)LE "Kutganatebi Service" is one of the legal entities created recently by the Municipality. According to the information provided by the Municipality, it was established for cost savings, but the maintenance/operation of the network of outdoor lighting and traffic lights is nowadays more expensive as compared to the previous years.

N(N)LE "Kutganatebi Service" has existed since 23 January 2018, and its main function is the upkeep and operation of 16,000 outdoor lighting points and 29 traffic lights.

Prior to the establishment of "Kutganatebi Service", Kutaisi City Hall procured the service of operating the lighting network through a tender, which was won by "Global Service" Ltd. throughout 2012-2017 in an uncontested bidding process.

"Kutganatebi Service" spent 1,626,587 GEL in 2018 for the functioning of lighting points and outdoor panels, in 2019 - 1,506,145 GEL, while in 2020 - 1,690,000 GEL. Furthermore, the N(N)LE collects additional electricity charges from the City Hall of Kutaisi.

At the time the company was established, the number of staff was set at 43 employees, and the total monthly salary of the employees was set at 32,650 GEL. In 2019, the number of employees increased to 51, and the total monthly salary to 39,900 GEL.

According to the State Audit Office 2019 Compliance Report, the estimated operational costs of the outdoor lighting network in 2015-2017 were not based on actual calculations. Moreover, the principle of competition was limited in the process of purchase of the lamps. Nevertheless, the cost of services increased in 2018-2019 in comparison with 2015-2016.

The information we obtained and the findings of the State Audit Office clearly show that in 2015-2017 the tender was announced at an unreasonable cost and was carried out in a non-competitive environment. The creation of "Kutganatebi Service" from 2018 has not resulted in any reductions in costs.

Once we summarized the data, we asked the Kutaisi City Council about the reasons for the increase in costs and why the target set at the time of the establishment of the N(N)LE was not met. The City Hall did not verify the increase in costs. Responding to the question, we received data on services and electricity consumption, which contradict the data previously provided by the City Hall and the N(N)LE 'Service Kutganatebi', as well as the information published on the website of the procurement agency and indicated in the Report of the State Audit Office.

The letter received from the Kutaisi Town Hall on 23 April 2020 states incorrectly the expenses incurred for the services in 2015-2017. The City Hall paid 1,340,395 GEL (SPA140027321) to Global Service Ltd in 2015, 1,357,375 GEL (SPA150031723) in 2016, and 2,331,252 GEL (SPA160030098) in 2017. Likewise N(N)LE  'Kutganatebi Service' was granted in 2018 a subsidy amounting to 3 463 000 GEL, while electricity consumption totaled 1 836 413 GEL. In 2019, the N(N)LE received a subsidy of 3 413 500 GEL, with electricity consumption amounting to 1 907 355 GEL.

According to the information provided by the City Hall, "Kutganatebi Service" provides installation of road signs and road laying, something that "Global Service" had not done, however nowadays it is no longer responsible for the functioning of video cameras in the city, which used to be included in the terms of the tender of "Global Service".

Transparency International Georgia believes that the Kutaisi City Hall should provide outdoor lighting and traffic light services through a tender rather than via a municipal legal entity. Prior to announcing the tender, the Municipality should calculate the estimated service costs in a reasonable manner, and the conditions of the tender should be designed in a way that ensures a competitive tendering environment.

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^[1] In 2017, the purchase price increased by GEL 1,246,400 as the old lamps were replaced with LED lamps.