Entrepreneurs increasingly eager to challenge public procurements

Photo: Margus Ansu

Last year, entrepreneurs contested public procurements, vital for their income, by a fifth more than in 2013 – resembling the explosive growth of challenges during financial crisis.

Due to the diligent challenging, important procurements are often delayed and in some cases, such as building this year’s world Expo pavilion, questioned in very outcome.

Meanwhile, as evidenced by public procurements database, the challenges market – one to increase the turnover for law offices – swelled at the same speed of number procurements raising: last year, 9,107 public procurements were organised, of which 331 were challenged. Both numbers are nearly twice the amount of 2008.

«Though the amount of challenges is remarkably up due to the increased competition, essentially the battle has not intensified,» observed public procurements challenging committee chairman Taivo Kivistik.

Last year, the numbers of challenges were boosted by essentially similar procurements organised by sub-areas. Tallinn, for instance, organised identical street cleaning procurements in five areas. Therefore, one challenger filed five applications and not just one.

Utilities procurements being organised for several years at a time, such growth of challenges comes in waves as the terms draw to an end.

According to Mr Kivistik, the challenges are becoming increasingly competent. During the eight years of the Public Procurement Act, lots of simple cases have gone up to Supreme Court and the law offices advising the enterprises are already experts in what is worth challenging and how to do it.

The effect of Tallinn to the increase was also confirmed by waste treatment firm Ragn-Sells, a leading challenger last year.

«No company will easily contest a procurement as it comes with high legal costs. In waste handling, challenges abound due to organisation of unsubstantiated procurements,» said Ragn-Sells executive manager Agu Remmelg – like one for transportation of waste and another separately for handling, last year.

To cut the rise of challenges, Mr Remmelg suggests having no procurements at all in waste handling: consumer might agree the conditions with company directly.

The building company E&G, famed for contesting construction procurement of the Estonian Expo pavilion, said the volumes would come down by thinning the ranks of officials organising the procurements.

«The main reason for the challenges is the wording of the documents, inaccurate and allowing multiple interpretations,» explained E&G chief Artur Fjodorov. «Omitting preliminary works, the contracting entities produce stereotype procurements not considering the specific details and differences of each object.»

«I’m amazed that to this day the state has not moved to bring clarity. For four years, I attend the Äripäev building seminar, and every time I hear these same problems.»

In the opinion of Mr Fjodorov, the mess is not intentional and ill willed, just resulting from work not done by the state. «All the parties involved know it, the mess is bad for all, it is constantly talked about, and I do not understand why they do not tidy it up,» said Mr Fjodorov.

Last year, the procurements most challenged were those by Tallinn utilities department. The reason brought by its head Ain Valdmann was deficiency in state regulations. «It would be easier for local governments to organise procurements if the norms set by the state would leave us more freedom,» said Mr Valdmann. «As things stand, important aspects are left unsolved by law and the local governments are trying to find these solutions themselves.»

As an example of that, Mr Valdmann brought the Tallinn street cleaning procurement, to organise which the utilities department had to wait extensively for specifications from economy ministry regarding option to set extra requirements. The issue was maintenance of the close to 50 streets in Tallinn that are uphill. «For instance, we cannot afford the slopes on Tartu Highway or in Nõmme undergo regular maintenance as in case of unexpected snowfall these places will very quickly become dangerous for vehicles,» explained Mr Valdmann.

According to Mr Valdmann, the challenges are not caused by the quality of procurements, rather by the intensifying competition – regarding small objects there are no challenges, even though these competitions are organised exactly like the big procurements. 

Comment

Kristiina Uuetoa-Tepper, sworn lawyer

Challenges of public procurements are caused by shrinking of the market and toughening of the competition. While in 2008 challenging a procurement was rather the rare exception, as 2009 arrived the crisis made it the only way to survive for many entrepreneurs. Surely, the amount of challenges is up due the newly offered opportunity to question suspiciously cheap offers. In near future, nothing points to fewer challenges as the market situation will not improve and, for a long time, the state will be the chief contracting entity in construction.