Performance of simplified public procurements

The value of public procurements amounts to one-tenth of the gross national product, which is more than one-third of the country’s national budget. In 2011, 80 per cent of all public procurements in Lithuania were procurements conducted under the simplified procedure, which accounts for 33 per cent of the total procurement value. The National Audit Office conducted an audit to assess whether the simplified procurement procedure does make it possible to conduct efficient procurement. Auditor General, Mrs Giedrė Švedienė, commented on the audit results as follows: “The existing public procurement system pays special attention to public procurement procedures, which often leads to a lack of attention to the very goal of public procurement, therefore funds are not used in the most rational way thus preventing economic benefit."

From its entry into force in 1997 until the middle of 2012, the Law on Public Procurement (the Law) was amended 37 times, i.e. every six months on average. The articles regulating simplified procurement procedures were amended 16 times over the period 2009-2012. The Law is complicated and difficult to understand and its continuous amendment complicates the process of simplified public procurement procedures and prevents establishment of consistent public procurement practices. There is a growing number of public procurement procedures, the procurement process is getting longer, and there is more technical work – all this requires additional human resources and time. In addition, due to the increasing complexity of the procedures, public procurement staff is required to attend regular competence development trainings, services of outsourced experts have to be purchased because of a lack of appropriate expertise, which results in increasing financial costs of procurements.

In order to avoid violations, contracting authorities mainly focus on procurement procedures and not on the ultimate goal of procurement. The lowest price criterion was chosen in 97 per cent cases of procurements conducted in Lithuania over the period 2009-2011, though the lowest price bidders often fail to meet their obligations and their service or product is of poor quality. As a result, contracting authorities experience both material losses and additional time costs. The criteria much more often used in the EU countries, in 60 per cent cases, is the principle of cost efficiency. In Lithuania, however, this criterion is applied only in 4 per cent procurement cases since this criterion is difficult to determine, there a lack of practical examples of the application of this criterion.

When a contracting authority wishes to modify the terms and conditions of a contract, it has to obtain authorisation of the Public Procurement Office (PPO). However, the PPO does not always evaluate the consequences of its decisions for the final result of the procurement. Law enforcement supervision should not be formal and meticulous, as in cases when only compliance with the procedures is assessed, without taking account of the results achieved. When analysing and assessing a public procurement process, all institutions taking part in the control system should follow the criteria of fairness and reasonableness. Controls should be distributed proportionally so as to ensure rational use of funds and prevent unlawful acts.

The irregularities identified by the PPO and courts in assessing public procurements are mainly those violating the key principles of public procurement; however, the concepts of these principles have not been defined either in the Law or the implementing legislation. A commentary on Chapters I-III of the Law was prepared during the audit, focusing on the interpretation of public procurement principles and their application in practice.

Seeking to reduce the administrative and financial burden of contracting authorities, to develop and strengthen training and advisory activities, the National Audit Office made recommendations to the Ministry of Economy and the Public Procurement Office.