Main Developments Since the Last Assessment (May 2011)
There has been no major change in the legislative framework for awarding public contracts in Bosnia and Herzegovina (BiH) since the last assessment. Despite numerous attempts made in the last three years, all of the initiatives undertaken to substantially modernise the Public Procurement Law (PPL) have failed to be accepted by parliament as a result of a political deadlock (conflict between representatives of the Republika Srpska (RS) and the Federation BiH (FBiH) regarding central procurement institutions: RS wants the procurement institutions (especially the Procurement Review Body) to be located at the entity level, while FBiH defends the current set-up (at the state level only). Currently, the Public Procurement Agency (PPA) is finalising a new draft Public Procurement Law (PPL) aimed at closer alignment with the EC Directives. The 2011 draft PPL is much better than the 2004 PPL in terms of promoting efficiency and harmonisation with the EU. The draft was made available for public consultation in June 2011 and is expected to be delivered to the Council of Ministers for approval at the beginning of 2012. The prospects for its adoption nevertheless remain unclear. Since all of the factors that, in the past, led to the rejection of the previous draft PPLs by parliament are the same factors now in effect, it is not certain whether the current attempts to improve the legal framework will be successful.
The most important institutional pillars of the public procurement system remain the Public Procurement Agency (PPA) and the Procurement Review Body (PRB). There have been no important changes in the internal organisation of those institutions or in terms of the number of staff, except for the appointment of a new Board of the PPA in November 2011. Few positive steps have been made with regard to improving co-operation between the PPA and the PRB.
The GO-PROCURE electronic system (https://goprocure.javnenabavke.gov.ba) – which ensures the technical facilities for publishing notices by electronic means – has been functional since September 2011. The launch of this system is the most significant improvement in recent months, even though the expensive publication of notices in the paper-based Official Gazette remains the main official method of publication. The other electronic system, WisPPA (https://wisppa.javnenabavke.gov.ba) – established for the delivery of statistical data and reports by contracting authorities to the PPA – is also in function.
The PPA organised some training activities in the past year and has placed greater emphasis on the monitoring activity, in particular with regard to procurement notices.
Despite some improvements, many of the activities set out in the Strategy for Development of the Public Procurement System and Action Plan 2010-2015 (adopted by the BiH government in September 2010) have been delayed. Inertia persisted in 2011 (as in the previous years since 2004), and the main reason for this “freezing” is the lack of political capacity to find the proper compromises that would make it possible to move forward with the development of the public procurement (PP) system.
Main Characteristics
The public procurement system in BiH has been stagnating for several years. Although the BiH public procurement system was developing in the right direction in 2004, when the PPL was adopted and its implementation launched, obvious signs of weakness and inertia have dominated since 2004.
Public Contracts – Legislative and Institutional Framework
The current BiH PPL generally complies with the main principles of the EU public procurement system but is mainly modelled on the old Directives: 92/50/EEC; 93/36/EEC; and 93/37/EEC (services, supplies and works contracts awarded by public authorities), with some elements from Directive 93/38/EEC (utilities). The Public Procurement Directives currently in force in the EU (2004/17, 2004/18, 2007/66 and 2009/81) have not been transposed.
The most significant differences with EU public procurement law include:
existence of mandatory domestic preferences for local companies offering locally produced goods and using a local workforce (10% price preference), except for companies from Central European Free Trade Agreement (CEFTA) countries, which have enjoyed preferential treatment since May 2010;
lack of the new procurement techniques and instruments that were introduced in the EU in 2004 (framework agreements with several suppliers, competitive dialogue, electronic auction, social and environmental considerations);
non-transposition of the new provisions regulating the review system (Directive 2007/66) and defence procurement (Directive 2009/81);
slightly different scope of application (private utilities operating on the basis of special or exclusive rights are not included);
lack of a more flexible system for the utilities sector, as allowed by EC Directive 2004/17; differences in some procurement award procedures (e.g. the restricted procedure, accelerated
procedures).
In terms of institution-building, a positive aspect is the fact that two separate institutions have been established for (i) regulating and monitoring the public procurement system – the PPA; and (ii) resolving complaints – the PRB.
Most of the activity and energy of the PPA have focused in recent years on futile attempts to pass new legislation, and as a result the operational aspects of the system have somehow been neglected. In 2011 the PPA gave more attention to monitoring activity by verifying all of the notices published in the Official Gazette. The Council of Ministers adopted a Decision that obligated the PPA to organise seminars for the staff of BiH institutions four times a year on the premises available in Sarajevo, Mostar and Banja Luka. Accordingly, the PPA held four seminars simultaneously at all three locations, which were attended by 75 representatives of BiH institutions.
Review System
The public procurement review system remains a key concern. Some improvements have been seen in the past year, but the system is still criticised by both contracting authorities and economic operators for being overly bureaucratic and time-consuming. In the opinion of business organisations, the decisions of the Procurement Review Body (PRB) are often too superficial,
overlooking the real irregularities and focusing instead on irrelevant formal considerations, which are sometimes unclear and inconclusive. There are also several examples of inconsistent decisions (contradictory rulings in identical or similar situations). Only in December 2010 (five years after its establishment) did the PRB start to publish its decisions online, but this activity stopped in April 2011.
Operational Practices
On the operational side, the bureaucratic and simplistic nature of procurement practices in BiH (for instance, unnecessarily detailed requirements for the qualification of suppliers and the frequent rejection of tenders for formalistic reasons, without an analysis of the content) adds to the cost of participation in public tenders for economic operators, and thereby reduces competition. Unharmonious regulations at the entity and canton levels and the lack of mutual recognition between them create an additional layer of obstacles. In many procedures, the criterion of the lowest price is used. The reluctance to use the most economically advantageous criterion appears to be undermining the effectiveness and economy of public procurement by neglecting quality and long-term costs. Many organisations, although clearly well intentioned, regard procurement as merely a process to be followed rather than as a way of seeking a best-value outcome.
The administrative capacity of contracting authorities and the professional ability of procurement officers to properly implement public procurement procedures remain unsatisfactory. BiH’s business community perceives the practice of public procurement as being frequently unprofessional and prone to corruption and political pressure. Apparently there is no political will in BiH to undertake serious efforts to curb corruption – for example, the establishment of the Anti-corruption Agency, foreseen in 2010, was delayed by several months.
The implementation of the Strategy has been delayed, partially due to the failure to adopt a new Public Procurement Law. One of the activities that has been successfully implemented was the start of the electronic publication of notices on 1 September 2011. To date 3,804 notices have been published (equivalent to the total number of notices published as from 1 September 2011). At the same time, there has been a price reduction on the publication of notices in the Official Gazette, which are completed and submitted electronically, but the cost (for contracting authorities) of publishing contract notices in the Official Gazette remains disproportionally high (notices are still published both in paper form in the Official Gazette of BiH and electronically on the portal).