Do you care about the quality of the meal that your child is eating in kindergarten? How about the effectiveness of the medicine your grandparents are using? Or how safe it is to travel on Serbian roads? If the answer is yes to any of these questions, then this article is for you. It discusses the goods, services, and works (e.g. construction) that the Serbian government and state-owned enterprises are purchasing with the taxpayer’s money. This is called public procurement and it can be positively influenced by open contracting. This type of tendering enables all the interested individuals and legal entities to easily access data on public procurement, ensuring higher transparency and allowing user-friendly business analytics.

Let's explore how

According to the Open Contracting Partnership data^[1], more than 40 countries and cities are pursuing open contracting reforms. Serbia will be the 41^st country. We are just in the starting phase, so it’s too early to talk about the progress and impact. But, what we can discuss are the challenges our public procurement system is facing, and the ways in which open contracting can offer quality solutions.

Serbia adopted a new Law on public procurement in December 2019, introducing e-procurement practices such as electronic communication and the exchange of data in public procurement procedures. This is a positive step forward, as it eliminates paper-based administrative procedures, allows greater transparency and more efficient communication among key stakeholders in the tender procedure. What are the remaining challenges and how can open contracting help us to overcome them?

Catch-22 of Serbian public procurement

In 2019, the public procurement market represented 8.14% of Serbia's GDP^[2], which is slightly lower than other European countries (compared to 20% in the Netherlands and 16.5% in Sweden for example). However, this figure still reveals the potential to help the national economy grow through public procurement, by ensuring SMEs are included in the government supply chain. When they are part of the supply chain, it can lead to job creation, increased domestic tax revenue, and more robust domestic economic growth. Unfortunately, this potential is currently lost due to the high percentage of tenders (55%^[3]) with only one offer (the EU average is 23.9%). This is a missed opportunity, for the state, to maximize the benefits offered through public procurement. At the same time, large, and especially small, players on the market lose out because they are not given a chance to sell their goods and services to the public entities. This is particularly hard for businesses, especially smaller ones, which are going through tough times due to the Covid-19 pandemic. When we are talking about the challenges in the public procurement in Serbia, this is just the tip of the iceberg - just like the one which Titanic crashed into, you can only see a small portion of it and the rest is hidden below the surface.

It is below the surface where corruption takes its toll. According to the government's Anti-Corruption Council, the current framework of internal and external controls over the expediency of public procurements in large public utility companies is both inadequate and susceptible to misuse[4].   Additionally, in the last couple of years, it became very common to award public contracts in insufficiently transparent manner[5]. What’s more, the agreements in question are not available to the public.

Misuse of public procurement procedures has a negative impact on competition. If you go to the store to buy a TV, would you be happy with only one or two options, or would you prefer to have the choice of more? Would you buy the cheapest option, or would you try to buy the one which offers the best value for money? I believe we both know the answer to these questions. The same goes for public procurement – it’s better to have more bidders, and it’s good to buy those goods which offer the best possible value for the budget at disposal. Unfortunately, Serbia is in a situation where the choice is on average made between two to three options, compared to 18 years ago when it was a choice between eight or nine offers^[6]. In only one out of 10 cases^[7] do the buyers use the best price-quality criterion, which means that the government usually buys the cheapest goods. And you know what they say – if you buy cheap, you buy twice.

The good that comes out of Open Contracting

So where do we see open contracting in this equation? Let’s take two relatable examples to showcase the power of the open contracting data standard (OCDS). Six years ago, Ukraine, which is often taken as an OCDS success story, faced problems with corruption in medical procurement. But Prozorro, an e-procurement system introduced in Ukraine in 2016, made a positive change. The result was more than impressive – savings of 6% on the previous prices for medicines, which equals 12 million US dollars annually.^[8] Prozorro, which operates along OCDS, is used as a tool for planning and document repository for tender documentation, supplier proposals, and signed contracts. Furthermore, all the changes made to the documentation are visible through the system to everyone online. This creates the possibility for analysis and spotting red flags. Neat, right?

Our next stop is Slovakia, which has also had immense problems with corruption. During the bidding process, some participants were excluded from the tenders because the conditions of participating in the tender were illogical or unclear (such as requiring experience in fields that were not related to the award). However, in 2010 Slovakia introduced procurement reforms, including OCDS. The results were rewarding – a doubling of the average number of bidders and a decrease in the number of tenders with limited possible suppliers, contractors or service providers, and tenders which include solicitation and negotiation with only one source from 21% to 4%.^[9]

Story takeaway

The question following these examples is: can we see something like this happening in Serbia? The answer is: yes, it's only a matter of time. One of the reasons for optimism is the strong commitment from the Public Procurement Office to raise the efficiency of public procurement and to increase the competition, where OCDS can be of great help.

Let's circle back to our current challenges – the limited possibilities for large, and especially small players on the market, to sell their goods and services, an atmosphere of distrust among citizens and the government, low competition, and the rare use of the best price-quality criterion. OCDS can shed light on the whole public procurement process, which is important not only from the perspective of transparency, but also for citizen participation – everybody is welcome on board to work towards the mutual goal of purchasing better and cheaper, and with more choice.

With the right and quality data, additional external expertise, complementing the government one, can also be engaged to assist the public procurement process. Various free of charge tech tools, which can incorporate public procurement data in open contracting standards and offer quick analysis, can also be of great help.

From the perspective of the civil society, and media, they could use this window of opportunity to ask for continuous improvements of the public procurement system in Serbia, once it becomes accessible and transparent. And the good thing with open contracting is – that window of opportunity is always open.

***

The introduction of open contracting in Serbia is supported by the Ministry of Finance of the Slovak Republic and UNDP.

[1] https://www.open-contracting.org/impact-stories/

[2] https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/serbia_report_2020.pdf

[3] http://www.ponudjacisrbije.rs/razmena-iskustva/intenzitet-konkurencije-u-javnim-nabavkama

[4] https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/serbia_report_2020.pdf

[5] Report on the purposefulness, control, and implementation of public procurement in Serbia, Anti-Corruption Council, 2020, http://www.antikorupcija-savet.gov.rs/Storage/Global/Documents/izvestaji/REPORT%20ON%20THE%20PURPOSFULNESS,%20CONTROL%20AND%20IMPLEMENTATION%20OF%20PUBLIC%20PROCUREMENT%20IN%20SERBIA.pdf

[6] http://www.ujn.gov.rs/wp-content/uploads/2018/11/Izvestaj_2003.pdf

[7] https://www.naled.rs/vest-polovina-nabavki-samo-sa-jednim-ponudjacem-petina-bez-ponuda-4742

[8]https://www.open-contracting.org/2021/02/22/fight-for-life-how-ukraine-is-fixing-medical-procurement-and-serving-patients-better/

[9] https://www.open-contracting.org/2013/08/14/case_study_open_contracting_in_the_slovak_republic/