Last year the “Center for Regional Development/Transparency International - Armenia” (CRD/TI - Armenia), a non-governmental organization, evaluated the existing risk levels for corruption when it comes to Armenia’s state procurement.

The evaluation was performed according to the methodology, comprising of more than 100 indicators, developed by the international organization “Transparency International”. These indicators were broken down into institutional, perception, performance and context categories. 

The first group - institutional indicators refer to the legal system in the field of public procurement - the laws and by-laws in force, institutions, planning of public expenditures, selection mechanisms, execution of contracts, control of procurement processes and access to information. The analysis of these institutional indicators resulted in an average risk corruption of 31.85%.

Sona Ayvazyan, Executive Director of the CRD/TI-Armenia, states that the essential problem related to institutional indicators is the planning of state expenditures. As a matter of fact, 
budgetary approval is not mandatory before initiating a public procurement process. The public is not engaged in the process of elaboration of programs and budgets. As a result the risk factor for corruption to occur at the planning stage of state expenditures was appraised at more than 66%.

However, assessed corruption risks associated with access to information, control of procurement, selection mechanisms and execution of contracts do not exceed 25%.

 The second group - perception indicators relate to the application of the law. The analysis of these indicators resulted in a positive assessment of the procurement process itself, in light of the gradual improvement witnessed therein, as well as the intention of introducing electronic procurement.

Sona Ayvazyan states that, “What was considered negative here is the misuse of single source procurement in fields of education, health and culture.” She adds that despite the data of the World Bank showing an increase in the number of open tenders in our country, this doesn’t necessarily mean that procurement is being adequately conducted. “It is possible that fake tenders take place with a purpose to formally recognize the already predetermined person to be the winner. In this way the manifestations of corruption are better masked.”

The issue of the conflict of interests is not regulated and this provides an opportunity to a member of the selection committee to abuse his/her authority for the sake of a friend or a relative. Provision of information regarding procurement was also assessed to be not fully adequate.

Sona Ayvazyan points out that in particular there’s an absence of information regarding procurement conducted within the framework of international programs. “ For example, we requested that one of the projects of the World Bank provide us with information. They refused, arguing that since there are already a plethora of entities reviewing their activities, they saw no need to provide data to us.” Procurement related to programs financed by international organizations is conducted on the basis of international agreements, while the access to information is guaranteed by the Constitution of the ROA. She adds that, “In particular, it’s absurd that the agreement signed with the Lincy Foundation is considered to be a secret. The entire document is confidential and thus we cannot monitor the procurement conducted within projects financed by the Lincy Foundation.

The assessment of perception indicators in the field of public procurement resulted in a corruption risk of 58.33%

Performance indicators (the third group) are the statistical data related to the practice of procurement. Data (presented for year 2006) was received from the ROA Ministry of Finance and Economy. Corruption risk amounted to 19.57%.

Thus, the assessment of institutional, perception and performance indicators of state procurement in Armenia showed corruption risks of 31.85%, 58.33% and 19.57% respectively, which might not appear that bad at first glance. But the fourth group of indicators related to the context, showed the worst result.

Context indicators characterize the overall picture of the corruption risk in Armenia. These data were taken from the 2007 reports of the World Economic Forum and the Fraser Institute that evaluated the political and judicial systems and the bureaucracy in Armenia. In particular, according to the World Economic Forum’s “Global Competitiveness Report”, our country’s political system was ranked 2.6 on a scale of 1 - 7, and the bureaucracy system was pegged at 3. In the Fraser Institute’s report entitled “Economic Freedom of the World”, the judicial system of Armenia received a rating of 4 on a scale of 1 - 10.

The analysis of these data show that the risk factor for corruption present in the Armenia’s political, administrative and judicial spheres is quite high, comprising some 69.26%.

Sona Ayvazyan concludes that, “We end up with the following picture. Even if the legislation on public procurement is good, the institutions are adequate and performance under control, there’s still a problem with the law enforcement that gets reflected within perception indicators. In addition to this the general risk for corruption in Armenia is quite high. Naturally, this cannot avoid affecting procurement, which functions within that environment.