Wednesday, 26 September

Taxpayers Lose: Procurement Process in Armenia Is Wasteful and Discriminatory

Opposition MPs in Armenia were angered when a member of the National Assembly’s Control Chamber’s Council, instead of its president, showed up at parliament to present the body’s 2013 annual report. (The Control Chamber in Armenia is akin to the Government Accountability Office in the United States.)

Feeling slighted, the entire tone of the session, which was supposed to look into the revelations of the Control Chamber, took a nasty turn. This was convenient for the political majority sand the public, in the end, never was informed as to what the Control Chamber uncovered two years ago.

Those revelations are still valid today given that little has changed in the state procurement process.

According to the Control Chamber, numerous violations and inadequacies of the procurement process were uncovered. Of special note was the process by which certain department heads responsible for making purchases displayed favoritism and allowed some companies to charge above market prices for goods.

The Control Chamber’s report points out that little attention was paid to see if the prices of various goods and services were indeed valid or inflated.

The report singles out the confusing price system used for purchases of items for public schools in the country.

One such example refers to a supplier called TISA CJSC. The company supplied beans to Yerevan municipal kindergartens at various prices – 850 drams per kilo to the Davtashen district, 987 drams per kilo to the Kentron, and 770 drams per kilo to Avan.

The report goes on to say that TISA supplied various foodstuffs at above market prices. (barley at 440-720 drams per kilo when the market prices was 300; potatoes at 146-220 per kilo when the market prices was 100; sugar at 435-496 per kilo when the market prices was 372.)

Also noted in the report is that on certain occasions the government did not enter into contract directly with manufacturers but with mediating bodies that have become so specialized in winning procurement tenders. These agents trade in almost every kind of item and, in the end, this leads to overpricing and inefficiency.

One example of cronyism cited in the report deals with contracts signed by Armenia’s Ministry of Agriculture and a company called Agro Air Service in 2012 and 2013. Agro Air was supposed to carry out the air spraying of pesticides and herbicides for the ministry.

Surprisingly, Agro Air owned no aircraft, not even a helicopter. Thus, the company signed another contract with an outfit called Arm Aero CJSC for the necessary aircraft.

It turned out that the director of Agro Air Service was an employee at the Ministry of Defense.

The Control Chamber revealed the 100% of Agro Air Services’ revenue in 2012 and 94.65% in 2013 derived from contracts with the Ministry of Agriculture.

Had the ministry signed the contracts on a non-mediated basis with the actual supplier of the services, it would have saved 45 million AMD.

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