Monopolistic position of Adjarganateba and Ganateba – companies with links to the ruling party – in the public procurements of the municipalities of Adjara - საერთაშორისო გამჭვირვალობა - საქართველო
GEO

Monopolistic position of Adjarganateba and Ganateba – companies with links to the ruling party – in the public procurements of the municipalities of Adjara

22 March, 2022

The largest spender of the Batumi City Hall, non-entrepreneurial (non-commercial) legal entity (N(N)LE) Division of Urban Infrastructure and Improvements, declared Adjarganateba LLC as the winner of an electronic tender that had been announced with the aim of replacement of the city’s existing outdoor lighting system with LED lights and their maintenance and operation. The tendering commission selected the supplier company without an auction and determined the estimated value of the procurement as GEL 29,859,061. Adjarganateba won the tender without competition and signed a contract for GEL 28,963,288. The winning company is supposed to maintain, renew, and operate the lighting sets in Batumi in the years 2022-2026.

Who owns the Adjarganateba company?                          

Adjarganateba has been fully transferred into the ownership of the family of Irakli Topuridze, a former member of the Batumi City Council from the Georgian Dream.

Initially, the company had three owners: Tamaz Topuridze (a member of the Batumi City Council in the years 2010-2014 and the father of a former member of the Batumi City Council in 2017-2021, Irakli Topuridze) – with a 52% stake; Davit Vashakidze and Gia Oragvelidze with a 24% stake each. After the passing of Tamaz Topuridze, his stake was transferred into the ownership of his spouse, Zoia Dolidze. The company is headed by Irakli Topuridze’s brother, Nikoloz Topuridze. 

According to the contract of sale and purchase, the Topuridzes purchased a 48% stake in the company from two owners for GEL 2,400,000; accordingly, the mother of the brothers Topuridze, Zoia Dolidze, became the owner of a 100% stake in the company. They have already paid GEL 2 m to purchase the stake, and the brothers Topuridze act as sureties for the payment of the remaining amount.

How does Adjarganateba obtain public procurement contracts?

TI Georgia revealed the municipal procurements tailored to Adjarganateba and the risks of corruption in 2019. In this study, we noted that in the years 2011-2019, the company had received GEL 26,523,383, including 82% of the amount (GEL 21,744,016) received from non-competitive and simplified procurements.

Since the publication of the study, the company has obtained 17 more electronic procurement contracts, including 14 contracts obtained without competition and 1 – by means of disqualification of a competitor by the contracting authority. As a result, the company has received GEL 6,614,077 (more than 90% of this amount – GEL 6,002,006 – without competition and by means of disqualification of competitors). 

Adjarganateba was the only company that participated in the tender announced on January 11, 2022. As noted above, the company won the tender without competition and signed a contract with N(N)LE Division of Urban Infrastructure and Improvements of the Batumi Municipality for GEL 28,963,288.

Adjarganateba has received GEL 62,100,748 from public procurements in the years 2011-2022, of which:

Despite the recommendations of our organization and the State Audit Office, the Batumi City Hall still continues the malpractice of tailoring the tendering conditions in large procurements to the company owned by the family of the person linked to the Georgian Dream. 

What causes the doubts that the conditions of the ongoing tender were tailored to Adjarganateba?

As one of the main conditions for participation in the procurement worth almost GEL 30 m, N(N)LE Division of Urban Infrastructure and Improvements of Batumi required that the bidders have a track record of maintenance and operation of outdoor lighting sets with a value of GEL 5 m and installation of street lighting with a value of GEL 3 m during the period from 2018 till the day of announcement of the tender. Based on the data of the Public Procurement Agency and our previous study, it can be said that no company except Adjarganateba has carried out works of such a volume as part of public and municipal procurements announced in Batumi and the Autonomous Republic of Adjara in general. The data of no other company that have taken part in procurements of outdoor lighting works in the region (from the day they were founded till today) – Mardi, Gungli, Gelmari, and Mshenebeli 5 – meet the criteria established by the municipal N(N)LE of Batumi:   

                                                                                                                                

Adjarganateba received GEL 12,475,515 from electronic tenders during the period determined by the tendering conditions (2018-2022), including GEL 11,084,154 (up to 89% of the income) received from tenders with no competition. 

It was the N(N)LE Division of Urban Infrastructure and Improvements from which the company received more than 83% of its income received without competition – GEL 9,249,421. In the years 2018-2022, Adjarganateba received a total of GEL 10,302,462 (more than 92% of the total income received during the same period) from electronic tenders announced by this N(N)LE. 

It should be noted that Adjarganateba also won the latest tender announced by the same N(N)LE – with a value of GEL 500,000 – without competition, and is supposed to maintain the city’s outdoor lighting sets until the summer of 2022, i.e. until the winner of the new GEL 30 m tender is selected, although, as we have noted, this tender also has one bidder – Adjarganateba. 

How was the estimated value of the ongoing tender determined?

One more circumstance attracts attention in the tendering documentation: before the announcement of the procurement whose value is almost GEL 30 m, N(N)LE Division of Urban Infrastructure and Improvements conducted a market study and examined the data of the Public Procurement Agency. The division states that the estimated value of the procurement was determined on the basis of this study.

TI Georgia has established that the N(N)LE received the price offers of three companies – Adjarganateba, GL+, and Electroni – in order to determine the estimated value of the procurement.

Electroni LLC named GEL 59,718,123 as the amount needed for the performance of the works, GL+ named GEL 55,239,264, and Adjarganateba – GEL 29,859,061. The municipal division determined the amount offered by Adjarganateba as the estimated value of the electronic tender.

The examination of the market study documentation has raised doubts regarding several issues:

  • What were the reasons why Adjarganateba submitted a price to the contracting authority that was twice as low in one case and 1.85 times lower in another case compared with its potential competitors?
  • Why did the municipal N(N)LE decide to request offers from the companies that have not taken part in public procurements for years and whose income received from public procurements – and, accordingly, the volume of the works performed – does not correspond with the conditions of the subsequently announced tender? Specifically, GL+ has not taken part in public procurements since 2019, and before that, it had not received even GEL 2 m in total from tenders and simplified procurements; Electroni participates in tenders to this day, but it has not received more than GEL 2 m from public procurements either. 
  • One more circumstance: The director of Adjarganateba, Nikoloz Topuridze – who is a brother of a former member of the Batumi City Council from the Georgian Dream, Irakli Topuridze – and Giorgi Laliashvili – the owner of a 100% stake in GL+, one more company participating in the market study – are business partners: in 2007, Topuridze and Laliashvili founded the Electra company, which is engaged in “the import and installation of electronic goods”,[1] and Topuridze is the director of this company to this day. There is a well-founded doubt that the market research was not conducted in compliance with the requirements of law – transparently and in a competitive environment.  

Ganateba LLC – one more monopolistic company owned by the Topuridzes   

The Topuridzes own one more company in addition to Adjarganateba. Ganateba LLC, whose 100% stake is owned by Nikoloz Topuridze, mainly takes part in public procurements without competition. Whereas Adjarganateba is the main provider of outdoor lighting services of Batumi, Ganateba is active in the municipalities of Khelvachauri and Kobuleti – in the years 2011-2021, the company received GEL 4,743,591 from electronic tenders and simplified procurements. More than 56% of this amount (GEL 2,668,206) was received without competition, by means of disqualification of competitors and through simplified procurement.

The company took part in 117 electronic tenders during this period, including 4 tenders that didn’t take place/were terminated. Ganateba won in 78 cases (69%). Of this, it won 45 tenders without competition and by disqualification of competing companies.   

Conclusion and recommendations

The public procurement of the municipal N(N)LE of Batumi, Division of Urban Infrastructure and Improvements, which was announced on January 11, was clearly tailored to Adjarganateba. This is not the first time that the municipal organization has resorted to such practice and the self-government body of Batumi has failed to respond to recommendations offered by TI Georgia and to a report of the State Audit Office.

The companies of a former member of the Batumi City Council and his family – Adjarganateba and Ganateba – have practically taken a monopolistic position in the works of installation of outdoor lighting sets in Batumi, Kobuleti, and Khelvachauri. The existing practice of procurement of outdoor lighting works needs to be changed. Announcing tenders for works of average volume and determining the tendering conditions in a way that corresponds with the resources and track record of companies operating on the market is going to enable other suppliers, too, to win tenders, decreasing the risks of corruption.

We call on the Anti-Corruption Agency of the State Security Service to launch an inquiry into those procurements of Batumi, Kobuleti, and Khelvachauri that were won by the companies Adjarganateba and Ganateba without competition and by means of disqualification of competitors and to make the results of the inquiry known to the public in a timely and comprehensive manner. 

 


[1] Quote from the founding documents of the company

 

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