Centralized public procurement system soon in Serbia - costs and corruption reduction

(Predrag Jovanović)

- By the end of the year, Serbia may have a clear vision about how its public procurement system will look like and whether and in which way it will be centralized - Predrag Jovanović, the Director the Public Procurement Administration of the Republic of Serbia, told eKapija.

The centralized system is introduced with the aim of standardizing public procurements and, thus, reducing the possibility of corruption. On the other hand, the budget expenditures would be cut significantly.

The centralized system, within the framework of which all entities in similar business have the same supplier, is introduced with the aim of preventing the situations when, for example, a ministry or its sector places an order for computers with one manufacturer, while the other sector places an order with the other manufacturer, just because the person in charge of procurement thinks that "it should be done that way".

If a company, for example, wants to procure a special type of monitor, it must have a strong reason why it decided to choose some other supplier.

In order to hear the experiences of their Italian counterparts, who were among the first to implement such system, and learn what they can expect and how to avoid making some mistakes, the representatives of the Public Procurement Administration of Serbia and the Public Procurement Agency of the City Administration of Belgrade organized round table "Centralized Public Procurement - Pros and Cons" today (February 9th, 2010) in association with the Embassy of the Republic of Italy.

– Improvement of the public procurement system represents a strategic task for the city of Belgrade. Formed last year by the Decision on City Administration, the Public Procurement Agency implements the public procurement procedures for number of clients, unlike the previous public procurement agency. That is an organizational unit of the City Administration, as well as the city boroughs and public companies and institutions founded by the city of Belgrade. About 1 billion RSD worth of 50 public procurements were carried out last year, which led to achievement of about 200m RSD worth of savings. The experiences from Italy will significantly help us make the public procurement procedure even more economic this year – said Branko Janković, the CEO of the Public Procurement Agency.

The main lecturer at the round table, Gian Luigi Albano, the manager of the research and development sector in Italian Public Procurement Agency (Consip S.p.A), presented the advantages and risks of introduction of centralized procurements and practical solutions that proved functional in Italy and can be applied in Serbia.

Concerning the fact that 97% of companies in Italy are small and mid-sized enterprises (SME), the question emerges how the centralization of procurements and bigger contracts affect small enterprises as potential suppliers.

- Nothing much was changed before and after the introduction of the centralized public procurement system when it comes to SME and their businesses because there are few levels of centralization. It is true that we first made the contracts on procurement at national level and SME, really, did not have the capacities to compete, but we later fragmented those contracts, partially according to geographic position and partially according to the nature of products - Gian Luigi Albano told eKapija.

Similar is the opinion of Predrag Jovanović, the CEO of the Public Procurement Administration of the Republic of Serbia.

- Centralized public procurements lead to bigger contracts and, therefore, represent a risk to small and mid-sized enterprises. In order to reduce that risk and enable them to bid on the tenders, two mechanisms are developed. One of them is to divide the procurement into parts, smaller contracts. For example, if food needs to be procured for kindergartens, special contracts are made for procurement of milk and dairy products, baked goods, fruits, vegetables... Without that fragmentation, only the wholesalers would be able to offer all at once and, thus, limit the competition in a way.

According to Jovanović, the other mechanism is to stimulate small and mid-sized enterprises to join into consortiums and submit joint bids.

The experiences in national public procurements will soon be also presented by the representatives of Austria, Slovenia and Great Britain, which has well-developed practice in that field.

- Upon collecting the information from our European counterparts, I expect that we will have the developed concept of how the public procurement system should look like and how big the authorizations of the Republic Public Procurement Administration and local self-governments should be – Jovanović told eKapija.