There have been some major changes in the legislative framework in the area of concessions as well as public-private partnerships (PPPs) since the Peer Review carried out in 2008/2009.
In the area of concessions, the Republika Srpska Concessions Law was amended in 2006 and 2009. The BiH Federation is about to enact a new Concessions Law; it has already been adopted by the FBiH government and is expected to be passed by the FBiH Parliament in the near future.
In the area of PPPs, the Republika Srpska adopted a PPP Law and relevant implementing legislation in 2009.
Whereas numerous concession contracts have been awarded by the RS authorities, the implementation of these concession contracts is hampered by serious obstacles (e.g. burdensome administrative measures and lack of proper award procedures). So far, no PPP contract has been awarded, but a couple of PPP projects are in the process of being developed. In the BiH Federation, the award of concession contracts occurs mostly at cantonal level. At the state level, so far no concession contract has been awarded.
No changes are to be reported at the institutional level.
Main Characteristics
The existing legal framework in the area of concessions and PPPs in Bosnia and Herzegovina, despite all recent changes, can only be described as fragmented. Unlike the PPL, the award of concessions and PPPs by those authorities is regulated in a number of concurring concessions laws and accompanying laws and decrees, which are in force simultaneously at state, entity and cantonal levels.
All attempts initiated by the State Concessions Commission in the past two years to align the various legislative frameworks in the area of concessions and PPPs in the territory of Bosnia and Herzegovina have failed. In particular, the Republika Srpska has vehemently opposed any attempt to harmonise legislative measures in the area of concessions and PPPs.
Amendments to the RS Concessions Law (in 2006 and 2009) and to the proposed new FBiH Concessions Law will lead to further disharmonisation of the legislative framework in the area of concessions. This is a step in the wrong direction. Originally, the concessions laws of BiH State and the entities were to a large extent harmonised, but this has ceased to be the case.
The main problems identified in the area of concessions are the following: Disharmonised concession laws;
Deficiency of certain provisions of concession laws in the entities (in particular, scope of the laws, delineation with public contracts, unsolicited proposals);
Ineffective implementation of concession contracts in the RS.
In the area of concessions, the room for improvement is immense. The characteristics of the BiH concessions system represent the first main challenge, which is the requirement to make a number of significant changes in the legal framework, the most important of which relate to transposing the EC Directives into national law. There is a general need to establish a sound and modern regulatory framework, enshrining basic EU Treaty principles in the procurement of all concessions and PPPs, including in areas not directly covered by the detailed provisions of the EC Directives. Such a framework should result in the use of competitive procurement as the norm for the award of concession and PPP contracts instead of the use of unsolicited proposals. Several legal acts regulate the procedures for awarding concessions: the BiH State Concessions Law, concession laws in both entities, and cantonal concession laws. It is obvious that the mere existence of several legal concession regimes in the territory of BiH at the same time – even if they differ from each other only slightly – constitutes a severe hindrance to the realisation of concession projects, as in the eyes of potential private investors and their financiers these projects extend to territories covered by different concession laws.
A second main challenge will be to establish an efficient and genuinely independent review mechanism that is in line with EU remedies requirements. The introduction of competitive processes as the standard procedure for the award of concessions and PPPs will mean a significant change in practice and in the roles of the participants in the process. Additional resources and training will be required for purchasing authorities (including in line ministries) and for concessionaires so as to ensure that all participants in the process are sufficiently well prepared to run competitive processes in an efficient and streamlined manner.
The establishment of this review mechanism links closely with the third main challenge, which relates to the future role of the Concession Commissions. A closer alignment of the roles of the Commissions
with the roles played by their European counterparts is recommended. This alignment would mean reducing the Commissions’ decision-making responsibilities while significantly increasing their roles to provide support in the preparation of projects, education and policy development, and to serve as sources of know-how and good practice.
The last main challenge is linked to the requirement for increased transparency and simplification in relation to the information available concerning concession opportunities and concerning the award of concessions. This challenge could be met by redefining the role of the BiH State Concessions Commission to the effect that, in addition to its regulatory functions concerning concessions awarded at state level, it would take the lead in collecting country-wide information on PPP/concession opportunities and awarded contracts, providing a central registry of statistical data related to concessions across the whole country, which would be available to the public. It would also implement a single system for advertisements and provide assistance to potential concessionaires. This change in the role of the BiH Concessions Commission would not necessarily deprive other levels of government (entities, municipalities, etc.) of their responsibilities and powers of decision-making in individual cases or in day-to-day operational activities.
Operational Practices
At BiH State level, no concessions have been awarded.
The practices in awarding concession contracts in the Republika Srpska were heavily criticised by the RS Auditor. By the end of 2011, the total number of concession contracts awarded in the RS exceeded 300; in 2011, between 50 and 60 concession contracts were signed. The Concessions Commission has been very active and, in addition to approvals for the award of contracts, it has provided numerous approvals for the negotiation and/or preparation of feasibility studies and for changes in the voting rights/ownership of concessionaires. Most of the concessions were awarded in the areas of agricultural and fishing territory (which for EU purposes does not fall within the area of concessions) and hydro-electricity plants.
In 2009 the RS Auditor carried out a performance audit on the award of concession contracts in the area of hydro-electricity plants. The report related to the activities concerned by the award of the concession contract and to the implementation of the contract, and it assessed the legal and practical consequences of the current state of affairs for the award of concession contracts in this area. The RS Auditor described the particular shortcomings that often accompanied concession award processes, such as the failure of the authorities to implement certain activities before awarding the concession contract, the lack of co-ordination between local authorities and the authorities responsible for awarding the concession contract; the Auditor criticised the use of the unsolicited proposal procedure rather than the public call for potential bids (i.e. not relying on unsolicited proposals).
Reform Capacity
Although Bosnia and Herzegovina’s public procurement system was developing in the right direction in 2004, no reform of the public procurement system has been successfully implemented since 2005. The main reasons for this failure may be found in BiH’s political deadlock and in the apparent lack of genuine political commitment to improve the quality of public procurement operations.
The finalisation of the work on drafting the new Public Procurement Law (PPL) is currently the main challenge for the Public Procurement Agency (PPA). The adoption of the new PPL will be a test for all decision-making institutions. It is also a precondition for technical assistance from the EU.
The current number of staff in the PPA is 21, but it seems necessary to increase the number of staff in order to carry out the activities envisaged by the Strategy for Development of the Public
Procurement System. The PPA is preparing to revise the Strategy and its Annexes as from 2012, and this task will be an integral part of the work programme of the PPA every year.
The PPA is currently participating in a regional IPA technical assistance project that is supporting public procurement training in the region. The project includes in-depth training of trainers and the publication of a comprehensive BiH Public Procurement Manual. These activities should contribute significantly to the capacity-building of the PPA.
A project to reform the public administration, organised by the German Agency for International Co- operation (GIZ) is now underway, and one of its components involves support to the development of the GO-PROCURE electronic system.
The current number of staff of the Procurement Review Body (PRB) is 17, six of whom are members of the PRB, seven are civil servants and four are employers. This staffing level is considered to be insufficient, taking into account the number of complaints received in 2011 (1736).
On the occasion of discussions concerning the Report on the Work of the Procurement Review Body in 2010, the House of Representatives of the Parliamentary Assembly of Bosnia and Herzegovina, at its 8th session held on 25 August 2011, adopted the following conclusions:
requested the Council of Ministers to set up a working group to analyse the situation in the PPA and the PRB and to propose solutions for resolving the problems in their work. The working group would include members of the Council of Ministers, the PRB and the PPA, as well as three representatives of the House of Representatives of the Parliamentary Assembly of BiH. The process of setting up this working group is underway;
requested the Central Election Commission to investigate possible conflicts of interest of members of the PRB. This procedure is still ongoing in the Central Election Commission.
There are positive signs that co-operation between institutions in the public procurement system was slightly enhanced in 2011 through the joint preparation of the draft PPL and through the resolution of some issues related to the harmonisation of positions in order to improve the public procurement system.
Recommendations
Short-term Reforms
Legislation and its Implementation:
adoption of a new Public Procurement Law (draft prepared by the PPA);
electronic publication of notices (free-of-charge) on the website of the PPA instead of in the paper-based BiH Official Gazette;
establishment of a new, less bureaucratic system for the qualification of tenderers.
Public Procurement Agency and other Relevant Institutions:
continued improvement of co-ordination and co-operation between the central procurement organisations (PPA and PRB) and other institutions relevant to the public procurement system (including the Anti-corruption Agency, State Audit Office, and Standardisation Body).
Review System:
publication without delay of all current PRB decisions (also including the older decisions, i.e. as far back as 2006) in a more sophisticated, searchable format so as to enable browsing for legal issues; improved quality and consistency and increased transparency and visibility of the work of the PRB; initiation of the use of oral hearings as a practical tool for clarifying certain aspects, at least
when complex cases have to be solved;
inclusion by the PRB in its Rulebook of the obligation of PRB decisions to provide references to other decisions that have dealt with the same legal problem (cross-referencing);
transposition of the new Remedies Directive 2007/66, in particular those provisions referring to time limits for applying for review, ineffectiveness of contracts (e.g. awarded without prior publication of a contract notice, direct award of contracts), and alternative sanctions.
Operational Procurement:
amendment of the National Strategy;
leadership of the agenda for improvement of public procurement by means of the organisation of a high-level forum, appointed by the government with representatives of all major stakeholders;
enlargement of the PPA’s current role by addressing the larger picture of procurement issues and playing a more central role for the procurement function;
elaboration of a procurement manual that would provide guidance on operational matters; increased focus of training activities on efficient procurement tools and techniques (e.g.
framework agreements, application of most economically advantageous criteria for contract award).
Concessions and PPPs:
harmonisation of concession laws with EU procurement law and further alignment: assessment of achievements and additional improvements;
increased use of competitive procedures for the award of concession contracts (lesser use of unsolicited proposals);
reduction of bureaucratic and administrative obstacles in the implementation of concession contracts in the entities;
co-ordination of activities of the Concession Commissions;
Medium-term Reforms
Legislation and its Implementation:
re-examination of the economic benefits of domestic preferences;
development of a coherent, efficient and transparent public procurement system set down by means of a clear definition of strategic goals, including realistic timetables for their achievement;
focusing of activities on shaping the general framework for the public procurement system, including legislative measures, but also by developing implementation tools, such as strategic documents, guidelines, standardised templates and model documents.
Public Procurement Agency and other Relevant Institutions:
strengthening of administrative capacity of relevant institutions, especially the PPA, by increasing financial resources and the number of staff but also by improving staff skills, mainly through adequate training;
establishment of analytically based monitoring to enable the systematic analysis of data (e.g. state audit reports, PRB reports) and identification of contracting authorities with the highest risk of irregularities; use of this monitoring system as the basis for other activities, e.g. planning of additional training;
leadership by the PPA of networking and dialogue among all stakeholders in the public procurement system; launch of various new forms of communication, e.g. roundtables, discussions and conferences on specific topics of interest to stakeholders.
Review System:
strengthening of the administrative capacity of the PRB by increasing financial resources and the number of staff, but also by improving staff skills, mainly through adequate training; allocation of adequate funds for external experts in PRB review procedures;
moderate increase of fees charged by the PRB in order to discourage ungrounded or abusive complaints, but not genuine complaints;
evaluation of the effects of automatic suspension of the contract procedure and broad discussions between all stakeholders;
organisation by the PRB of workshops and conferences to disseminate information to all stakeholders in the public procurement system.
Operational Procurement:
preparation and implementation of policy for preventing and combating corruption in the area of public procurement;
introduction by external audit of performance audit of procurement; certified training for a minimum of 50 hours for each procurement officer;
consideration of the establishment of an approved list of contractors. Concessions and PPPs:
harmonisation of concession laws with EU procurement law and further alignment: assessment of achievements and additional improvements;
evaluation of the effects of measures intended to reduce bureaucratic and administrative obstacles in the implementation of concession contracts in the entities;
further co-ordination of activities of the Concession Commissions and establishment of permanent working groups, training sessions and workshops to discuss and resolve practical problems in the award of concessions;
evaluation of the establishment of a sound and transparent review system in the area of concessions.