Tender Announced by Georgian Railway Restricts Competition - საერთაშორისო გამჭვირვალობა - საქართველო

Tender Announced by Georgian Railway Restricts Competition

05 August, 2021


On 10 June 2021, JSC Georgian Railway announced a tender worth GEL 52.8m to procure mainline rails and requested that the suppliers provide certificates established by the Eurasian Customs Union founded by Russia. The deadline for tender submissions by suppliers was set at 1 July. Only one company, Uni-2 LLC, made a bid. Uni-2 matched the amount of its bid exactly with that of the tender – GEL 52,799,117. Even though the company did not have any competitors, Georgian Railway has not yet declared the winner and has not awarded the contract to Uni-2. The participation of only one supplier in a tender worth GEL 52.8m raises suspicions whether the invitation to bid issued by Georgian Railway restricted competition and the tender was “tailored to fit” a specific supplier.

The suspicions are solidified by the fact that Transparency International Georgia received a letter from GSL Steel Trad GmbH, an Austrian company, whose representatives believe that competition had been artificially restricted in case of this tender. The company said that it has experience of supplying railway equipment to the countries of the former Soviet Union, including the region of Transcaucasia, but the tender requirements made its participation impossible this time.

The Austrian company’s arguments regarding restricted competition, which are confirmed by the documents uploaded by Georgian Railway to the electronic public procurement website, are as follows:

  1. Only Georgian and Russian versions of the tender documents were uploaded.
  2. The proposed goods, when supplied, must be accompanied by a certificate of compliance established by the Customs Council’s technical protocol TP TC 003/2011 and have the marking envisaged by this protocol. The Customs Council implies the Eurasian Customs Union which is part of the Russian-founded Eurasian Economic Union (Eurasian Union) and consists of Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan. With this provision, Georgian Railway had effectively defined the list of countries where the goods to be procured could be manufactured.
  3. The period between the tender announcement and the deadline for bidding was 21 days, which, in the opinion of the Austrian company, is a very short time, especially for a non-resident company.
  4. The technical specifications provided in the tender documents were focused exclusively on the standards of the Russian Federation.

The Austrian company also noted in the letter it had sent us that they also addressed Georgian Railway with an official letter in order to clarify the details mentioned above, but never received a response.

Georgian Railway announced this tender using a Special Procurement Procedure (GEO). This is the procurement of goods and services using a special procedure established by the government for a specific procurer. The Government of Georgia adopted the Special Procurement Procedure for Georgian Railway on 30 December 2020; it will remain in force until 1 January 2022.

First and foremost, this decree lists goods and services covered by the Special Procurement Procedure, however, procurement of rails is not listed there separately. Furthermore, the special procedure does not relieve Georgian Railway from rational spending and providing fair and non-discriminatory approach to procurement participants (Article 1).

The tender that Georgian Railway announced on 10 June openly violates the fair and non-discriminatory approach to procurement participants by requiring the certificate and marking of specifically the Eurasian Union. In accordance with good practice, a procurer must emphasise the quality of the goods to be procured rather than their origin.

In addition, the Special Procurement Procedure in general sets lower standards compared to the Law on Public Procurement thus increasing corruption risks.

As noted earlier, only one company, Uni-2 LLC, participated in the tender. It plans to import the rails to be supplied to Georgian Railway from Russia and Kazakhstan. Uni-2 has already submitted the documents that the Russian and Kazakh rail manufacturers have the relevant certificates of compliance of the Eurasian Economic Union. The owner and director of Uni-2 LLC is Giorgi Ghudushauri.

Uni-2 LLC already won a tender announced by Georgian Railway for rail procurement worth GEL 8m once before, in 2019. In this tender, Georgia Spetsgidroenergomontazhi LLC had offered a lower price than Uni-2 but was disqualified based on technical documents and the contract was awarded to Uni-2. Then too, Georgian Railway requested the certificate of compliance and marking established by the technical protocol of the Eurasian Union’s Customs Council.

Transparency International Georgia considers the following necessary:

  1. Georgian Railway must present its arguments for why it needed to restrict competition and procure rails only from the countries which are part of the Customs Union;
  2. The Anti-Corruption Agency of the State Security Service of Georgia must look into this tender in order to establish whether there are corrupt interests behind the “tailored-to-fit” tender.