Transparency International Georgia conducted a study of  procurements conducted in the Tbilisi City Hall system from August 2014 to August 2017. The study demonstrated several problematic issues, such as low competition in tenders, awarding contracts to inexperienced and newly-founded companies through simplified process, as well as, specific procurements that are associated with high risk of corruption.

Problematic issues revealed in the study:

Procurements conducted through tender (2014-2017)

• Tbilisi City Hall and its agencies – district governments, LEPL Property Management Agency and  LEPL Architecture Service of Tbilisi Municipality, have signed a total of 3 711 contracts through tenders, 1 333 (36%) of which had only one participant.
• In 41 cases of tenders with only one participant, the final value of the contract exceeded the initial value of the tender. Isani District government was particularly noteworthy in this regard, for example:
  • Isani District – estimated value GEL 44 017; final – GEL 51 940 (procurement category – furniture); contractor: LTD Achisari
  • Isani District – initial value GEL 47 960; final – GEL 56 592 (procurement category – furniture); contractor: LTD Achisari
  • Isani District – initial value GEL 65 955; final – GEL 77 080 (procurement category – various food products); contractor: GIC Georgia
  • Isani District – initial value GEL 46 070; final – GEL 53 148 (procurement category – full or partial construction work and civil construction work); contractor: Geo Park
• Some companies that won contracts of tenders announced by Tbilisi City Hall were founded less than 1 year before the tender announcement (in some cases, they were founded after the announcement of the tender), (all bellow-mentioned tenders are by Tbilisi City Hall):
  • LTD Markeri was founded 6 days after the announcement of the tender (full or partial construction work and civil construction work) – GEL 901 456. Terms of the tender included payment of 95% of the contract value in advance;
  • LTD Gamtsvaneba 2016 was founded 6 days after the announcement of the tender (forestry and logging products) – GEL 646 104;
  • LTD Gamtsvaneba 2016, founded 6 days after the announcement of the tender (forestry and logging products) – GEL 645 912;
  • LTD Gamtsvaneba 2016, founded 6 days after the announcement of the tender (forestry and logging products) – GEL 619 160;
  • LTD Enco was founded 8 days after the announcement of the tender (full or partial construction work and civil construction work) – GEL 459 164.
• In case of 24 (4.9%) tenders out of the 494 that were awarded to a newly-founded company, the contracts weren’t fulfilled.
• From signed contracts in the Tbilisi City Hall system, totaling GEL 18.9 million in value, 81 were not fulfilled.
• LTD NCC is the leader among largest providers, it has won contracts totaling GEL 21 million. LTD NCC has also acquired contracts through simplified procedure. Specifically, the company signed contracts in the amount of GEL 5 million through simplified procedures. It is noteworthy that the company owns LTD GC, director of which is the former minister for Regional Development and Infrastructure Development, Davit Shavliashvili. 
• 10 companies owned by 10 financial donors of the ruling party have won 61 contracts in the Tbilisi City Hall system  the total value of the contracts amounted to GEL 41.8 million. Total of 12 donations to the Georgian Dream party from these individuals was GEL 340 000[1].

Simplified procurements (2015-2016):

• In 2015-2016 Tbilisi City Hall and its agencies have signed 2 646 contracts using simplified procurement method, amounting to GEL 157 million, 26% of all public procurement expenditure (including tenders) of Tbilisi City Hall for that period.
• The largest provider awarded contracts through simplified procurement in 2015-2016 was Black Sea Group, with 8 contracts valued GEL 14.2 million; the second was Caucasus Road Project with 9 contracts valued GEL 12.5 million[2].
• 37 contracts in the amount of GEL 3.4 million were awarded through simplified procurement procedure to companies that have been founded less than 1 year prior to award of the contract in 2015-2016
  • Among the contracts signed through simplified procurement procedure with newly-founded companies are agreements that include terms of 80-100% advance payment of the total value. Such examples include the contract of GEL 703 000 signed with LTD Enco, the contract of 102 000 signed with LTD Manufatura and etc.
• 12 contracts, amounting GEL 3.2 million, awarded through simplified procurement procedure in 2015-2016 were not fulfilled.
  • For example, contract signed with Tbilisi Road Company, in the amount of GEL 2.8 million, included a term of 60% advance payment, however the contract was not completed.

• 32 simplified contracts in the amount of GEL 10.2 million have been awarded to 5 companies owned by 5 donors of Georgian Dream in 2015-2016. Total of 6 donations by these individuals amounted to GEL 177 000[3].

Recommendations

• Tbilisi City Hall should implement measures to ensure higher competition in tenders;
• Risks accompanying participation of newly-founded and inexperienced companies in public procurements should be properly considered;
• Frequent use of simplified procurement procedures should be avoided to conserve budget resources and prevent risks associated with corruption. Appropriate supervision of simplified procurement is required.