2018-05-07
National Features of Public Procurement: Inadequate Focus on Demonstrative Transparency outweighs Rational Effectiveness
The legal regulation of the public procurement system and the skills of employees responsible for the planning and implementation of procurement are sometimes insufficient to provide the conditions necessary for the effective functioning of public procurement, as evidenced by the audit “The Functioning of the Public Procurement System” conducted by the National Audit Office. In 2016, the value of public procurement conducted in Lithuania was 4.6 million EUR, which amounts to approximately 12 percent of the GDP. According to the calculations of auditors, the operational costs of the system consist of approximately 101 million Eur per year.
“The effective performance of public procurement must not only ensure the rational use of funds, but also promote economic growth, reduce social exclusion, and promote environmental sustainability and innovations, thereby making a contribution to the improvement of public sustainability,” said Director of the Economic Audit Department Julius Lukošius.
According to the audit conducted by the National Audit Office, strict regulation and the procedures for procurement currently under development are oriented towards the implementation of the procurement process, rather than its outcomes. Contracting authorities find it difficult to procure necessary goods, services and works in a timely manner.
The National Audit Office notes that Lithuania, which has the right to set special procedures for simplified procurement, which could facilitate the process of such procurement, chose the detailed regulation of all procurement. According to auditors, 99 percent (or 801,000 individual procedures) of the 810,000 procurement procedures conducted in 2016 were of low-value, while simplified and international procurement accounted for the remaining 1 percent (or 9,000 individual procedures).
“In order to achieve effective public procurement, we should focus not on increasing the number of formal procedures, but rather on strengthening the internal control procedures of contracting authorities which could allow them to conduct procurement more effectively,” said Julius Lukošius.
The effectiveness of the public procurement system is also impacted by the skills of employees responsible for the planning and performance of procurement. Experts of public procurement must have the appropriate skills required for navigating the complex legal environment and ensuring that contracting authorities procure the necessary goods, services and works timely and without breaching the relevant legal requirements. The audit has shown that contracting authorities are lacking in experts of public procurement with the requisite skills and competencies to conduct public procurement in a satisfactory manner.
According to the auditors, there are currently about 4,000 contracting authorities which conduct at least one procurement procedure every year. Based on the calculations of the National Audit Office, contracting authorities which conduct more than 150 procedures of public procurement, each amounting to 1,000 EUR, incur three times fewer expenses than contracting authorities which conduct less than 150 procedures of public procurement (of which there had been 2,200 in 2016). Greater centralisation of public procurement would allow for improvements of the effectiveness of administration, the specialisation and professionalisation of experts of public procurement, and the concentration of expert knowledge, thereby reducing the number of mistakes and violations.
The audit on the functioning of the public procurement system conducted by the National Audit Office recommends the Government, the Ministry of Economy, and the Public Procurement Office to improve the strategic planning of public procurement: to set priorities, goals, tasks and indicators for the public procurement policy and make the relevant
decisions regarding the simplification of the regulation of simplified and low-value public procurement, the centralisation of procurement, and the qualifications of the experts of contracting authorities.
In order to identify the key risks related to public procurement, the auditors cooperated with authorities responsible for the development and implementation of the public procurement policy, the Competition Council, law enforcement agencies, contracting authorities, institutions responsible for the administration of EU investment funds, business associations, representatives of the Lithuanian Bar Association, the National Courts Administration, and others. Meetings were focused on discussions and analyses of the key public procurement issues, and the introduction of proposed means of addressing them.
The National Audit Office will present the results of the audit at the Seimas together with the Seimas Committee on Audit and the European Information Office at the conference “Public Procurement. Good EU Practices and their Practice in Lithuania” scheduled to take place on 18 May.