Procedures of Public Procurement in Albania

62 Pages·2017·1.43 MB·English

by  Alfred Zylfi

REPUBLIC OF ALBANIA
HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
Adresa: Bulevardi “Dëshmorët e Kombit”, nr. 3, Tiranë; Tel-Fax: [phone]
E-mail: [email protected]; Web-site: www.klsh.org.al

P A R
ERFORMANCE UDIT EPORT
Procedures of Public Procurement in Albania

Report audit performance Auditimi “Procedures of Public Procurement in Albania” Was
drafted after the audit carried out on the basis of the audit program approved by the Chairman
of the Supreme Audit Institution no. 1226/1, dated 02.12.2016.
The report has been drafted by the audit team in accordance with the standards and guidelines
for performance audit, namely: INTOSAI Auditing Standards and Field Experience,
Performance Audit Guide ISSAI 3000-3100, Performance Audit Department Manual,
Performance Indicators, Also the Institutional Interior Regulation.
The drafting of the program, audit, draft report and report of this audit was carried out with
the assistance and collaboration of SNAO (Sweden), ECA (European Court of Accounts)
specialists based on the regional PPA performance audit project II on "Public Procurement",
where SAI engaged with SAI of the region (Bosnja, Kosova, Maqedonia, Mali i Zi, Serbia,
Turqia) in order to carry out joint audits as an excellent opportunity to advance in performance
audits to further deepen regional co-operation and profitability From common experiences to
improve the quality of this audit.
HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

 CONTENT
1. BACKGROUND, MOTIVES AND MAIN MESSAGE ................................................................ 4
1.1 AUDIT PROBLEM ....................................................................................................................................... 5
1.2 AUDIT OBJECTIVE..................................................................................................................................... 5
1.3 AUDIT SCOPE ......................................................................................................................................... 5
1.4 AUDIT CRITERIA ....................................................................................................................................... 5
1.5 AUDIT METHODOLOGY ................................................................................................................... 5
1.6 AUDIT INCLUDED INSTITUTIONS AUDIT AREA ......................................................................... 6
2. QUESTIONS…………………………………………………………………………………………………………………………………………..6
3. EXPLANATION OF QUESTIONS/FINDINGS/CONCLUTIONS / RECOMMENDATIONS ... 7
3.1. DOES APP HAS IMPLEMENTED MONITORING FUNCTION PROPERLY FOLLOWED THE PROCEDURES OF
PUBLIC PROKUREMENT? ................................................................................................................................ 7
3.1.1. Does APP has monitored technical criteria set by competitive procurement Authority which have
passed the pricedure (negotiated without prior puplication of a contact notice), before and after the
transition? ................................................................................................................................................... 7
3.1.2. Does APP has monitored argument “emergency” use of negotiated procedure without prior
publication of a contact notice? ................................................................................................................ 28
3.1.2.1. Does APP has proven in field emergency for this procedure? ....................................................... 28
3.1.2.2. Is there a legal basis leading to creating fictitious emergency for this procedure?........................... 36
4. REFERENCE/ANEX .................................................................................................................... 53
4.1. REFERENCE ........................................................................................................................................... 53
4.2. ANEX ..................................................................................................................................................... 57
5. AUDIT TEAM ............................................................................................................................... 62

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

 LISTA E SHKURTIMEVE

SAI High State Control
INTOSAI The International Organization of High Audit Institutions
EUROSAI European Higher Institutions
ISSAI International Standards of Supreme Audit Institutions
PPA Public Procurement Agency
MOH Ministry Healthy
MTI Ministry of Transport and Infrastructure
UHT University Hospital "Mother Teresa" Tirana
ARA The Albanian Road Authority
INSTAT Institute of Statistics
MSA Stabilization and Association Agreement
BB World Bank
UNESCO United Nations Educational, Scientific and Cultural Organization
USAID United States Agency for International Development
UNDP United Nations Development Programme
OECD Organization for Economic Co-operation and Development
BE European Union
NS National Strategy
SDI Strategy for Development and Integration
NPEI National Plan for European Integration
CMD The Council of Ministers Decision
LPP Law on Public Procurement
PM Procurement Manual
PA Procurement Advocate
PPC Public Procurement Commission
CA Contracting Authority
OE Economic Operator
STD Standard Tender Documents
PAB Public Announcement Bulletin
TI Tender Invitation
PO Procurement Order
TS Technical Specification
EPS Electronic Procurement System
BEC Bid Evaluation Commission

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

1. BACKGROUND, MOTIVES AND MAIN MESSAGE

Nowadays, the challenge in drafting effective procedures in public procurement has to do with
the growing need for more transparency, public trust and minimum abuse potential, because in
many cases the performance of public procurement is measured in figures, thus forgetting the
real thing, which is how the contracting authorities deliver the procurement of goods, services
and public works.
HSC is engaged in this specific performance audit to generate recommendations on how to
improve and modernize the system of public procurement procedures, using the least amount
of public funds and avoiding abuse in favor of private operators, because the current system
does not fully reflect the selection criteria of winners in line with:
1. Non discriminating and equal treatment policies of private operators;
2. Transparency in the public procurement procedures, and;
3. Equality in treating the demands and responsibilities of applicants.
The main pillars of public procurement, stated in our Law, are: competitiveness, equal access,
nondiscrimination and transparency, in order to guarantee that the optimal public goods,
services and works are delivered with the best prices, not affecting their quality.
Although these changes have been for the best, still a lot of issues remain present, like:
 Frequent changes of the law on public procurement;
 Opportunity to interpret the law in different ways, thus affecting the responsibility of
civil servants engaged in the process;
 Using different procedures when procuring the same goods in different time-periods for
the same institutions or in different institutions but for the same time-period;
 Problems in deciding the upper spending limit;
 The professionalism of staff appointed to set up the technical criteria and the staff who
evaluates the offers against those criteria;
 The lack of expertise in planning and executing the tender procedures;
 High turnover of staff throughout public administration;
 Managing the electronic public procurement system;
 Training of civil servants engaged in public procurement procedures.

Main message of this audit is: "The Public Procurement Agency, in cooperation with field specialists,
legislative institutions and interest groups, has to creates confidence through the dynamic process of drafting the
policy of public procurement process" Negotiation without prior notice of contract notice "for the reduction of
abuses and guarantee of public funds.

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

1.1 AUDIT PROBLEM
Is the performance assessment of the public procurement procurement procedure without the
announcement of the contract notice, the modernization and standard setting, the increase of
public confidence, business and other stakeholders for this public service.

1.2 AUDIT OBJECTIVE
It is an objective analysis of the instruments that state structures have available to increase
institutional and personal responsibilities in the public sector to stimulate free economic
initiative and fair competition.

1.3 AUDIT SCOPE
Is to improve transparency in using the negotiation procedure without prior announcement of
the contract notice by ensuring compliance with public procurement procedures in accordance
with the law and ensuring optimal use of the budget in the public interest.

1.4 AUDIT CRITERIA
Political criteria: The Constitution of the Republic of Albania; The law "On the organization and
functioning of the Supreme State Control"; Law "On public procurement"; Decisions;
Instructions; etc.
Monitoring and reporting criteria: Analysis of the activity of the Public Procurement Agency;
regulation; manual; Guidance on the selection of public contracts; Public Procurement Manual;
Guidelines and Performance Audit Manual of SAI and SAI;
Technical criteria: Monitoring reports; methodology, technique, monitoring the use of electronic
procurement system;
Other criteria/best practices: Indicators of Performance, SNAO, ECA; Reports with the best
international experience; SAI audit reports, the Ministry of Finance and Internal Audit

1.5 AUDIT METHODOLOGY
In this performance audit, the audit team selected as the most appropriate audit oriented
approach to the outcome. Consequently, the methodology used is normative and contains
evaluation, comparative, analytical and recommendation elements.
The methods used to support the selected methodology are as follows:
 Collecting and reviewing documentation and physical evidence;
 Study of organization and the whole process;
 Study of domestic and foreign legislation, as well as regulations, manuals referred to;
 Interviews and open questions, qualitative and quantitative analysis and analysis of their
responses;
 Verbal interviews with managerial staff and employees, getting their opinions;
 Direct observations in public procurement units;
 Closed questionnaire; Processing and qualitative and quantitative analysis of the
answers to the questionnaires;
 Evaluating the public procurement system provided and comparing with national
standards or best practices;

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

1.6 AUDIT INCLUDED INSTITUTIONS AUDIT AREA
o Public Procurement Agency;
o Albanian Road Authority and Regional Directorates;
o General Directorate of the "Mother Teresa" Hospital Center Tirana;
o Regional hospitals (Shkodra, Kukës, Debar, Berat, Saranda,);
o Municipalities with the largest funds procured and the most prominent
phenomena encountered during the audit and specifically (Lezha, Vlora,
Fier, Korça, Gjirokastra)

2. QUESTIONS

1. Main Question: Does APP has implemented monitoring function
properly followed the procedures of public procurement?
(Case study: Albanian Road Authority and the Regional Directorates, the Directorate General Hospital
Center "Mother Teresa" of other regional hospitals, municipalities with larger funds procured).

1.1 Does APP has monitored technical criteria set by Competitive
Procurement Authority which have passed the procedure (negotiated
without prior publication of a contract notice), before and after the
transition?
1.2 Does APP has monitored argument "emergency" use of the negotiated
procedure without prior publication of a contract notice?
1.2.1 Does APP has proven in field emergency for this procedure?
1.2.2 Is there a legal basis leading to creating fictitious emergency for this
procedure?

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

3. EXPLANATION OF QUESTIONS / FINDINGS / CONCLUTIONS /
RECOMANTIONS
3.1. Does APP has implemented monitoring function properly followed the procedures
of public procurement?
Some history; The Public Procurement Procedure in our country is an early recognition since
the first legal beginnings date back to the mid-30s, which give off to exist after the mid-40s,
emerging after the 1990s. The public procurement procedure is tightly linked to the political
history of the country.
The footprints of these first procedures are contained in a separate chapter of an act published
in the Official Journal on May 22, 1936, pages 3-9, where it is shown that through a
competitive procedure the realization of public contracts by the state administration for private
entrepreneurs for the purchase of goods, Services or works. Also in this chapter are the types
of contracts allowed and the legal form to enter into these contracts. According to Article 19 of
this Act, contracts awarded by the state administration for its needs for goods, services, works,
sales, and concessions shall be considered as legal only if they are granted according to the
following processes:
 by public auction;
 by invitation to bid
 by private agreement.
In this act, the criterion for selecting one of the procurement procedures (either by a general
public auction or by a less transparent procedure such as a private bidding offer) was in essence
similar to those foreseen by current public procurement legislation . Light change is more of a
terminology term than the content of the rules.
With the change of the system at the destination of liberation, the coup was nationalized by
being centralized in a single, for a period of about 50 years, the public procurement procedure
ceased to exist. By prohibiting private acquisition, the system did not allow the concept of
public procurement, which essentially is a contract between a public entity and a private entity.
After 1990, with political changes in the country, there was a return to the "private" or private
property concept, which inevitably restored the concept of "public procurement procedures".
So for the first time this procedure was sanctioned by DCM no. 400, dated 17.11.1990 "On the
purchase and realization of services outside the state sector", which stipulates that enterprises
and institutions for the fulfillment of their assets should be allowed to purchase the first assets
such as equipment, goods, materials and payment services, where The valuation criteria were
either the price previously approved, or the lowest price, evaluated by a commission
established within the institution.

With the passage of the first phase of transition, the evolution of economy, the free market and
the development of private entrepreneurship, time also required an evolution of the legal
framework that regulated the public procurement system in Albania. Thus, DCM no. 191,
dated 22.03.1993 "On the Public Procurement System and the Acquisition and Services
Activity of Enterprises and Institutions Financed with the State Budget", the provisions and
detailed rules for the purchase of goods and services were provided, but it should be
emphasized that the term "Public procurement" has not yet been presented.
However, this act mentioned for the first time the foreign private economic entities, which
were presented as potential entrepreneurs to win public contracts from state institutions. Also,

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

this decision would also define other elements as the criterion of valuation, which in this case
were the lowest bid price and evaluation by the Bid Evaluation Commission. Particularly of this
phase is the fact that public works (public constructions) do not mention the deeds that
envisage the process Of awarding a public contract. The term "Procurement", referring to the
purchase of goods, works and services, is used for the first time by the DCM no. 467 dated
17.08.1993 "On procurement procedures with public funds".
Through this decision is regulated in more detailed and complete procedure of public
procurement. In this decision, investments are mentioned for the first time, stipulating that the
selection of private contractors for contract award should be made through a public
procurement process. The decision gives a clear definition of the procurement processes with
all its elements where are emphasized for the first time different procurement procedures. This
decision is of great importance for the time, as it is the pre-normative act, which foresees and
regulates fully the public procurement system in Albania.
Realizing the great importance of public procurement procedures and the development of the
market economy, it was important to have a law existed. In this context, the law no. 7971 dated
26.07.1995 "On Public Procurement". This law created the first normative ground on which
public procurement practices were based. Despite the shortcomings and ambiguities it
contained, his camera in sanctioning some basic principles that would be repeated,
strengthened and supplemented by the emerging legislation.
Since 2006, public procurement procedures in Albania are regulated by law no. 9643, dated
20.11.2006 "On Public Procurement", as amended, and bylaws for its implementation. With
the ongoing legal changes and arrangements in the field of public procurement it is important
to apply in practice its important principles such as transparency, equality, competition Free
and non-discrimination in the public procurement process to ensure the efficient use of public
funds, and on this basis an e-procurement platform has been established, a system that is fully
functional since 2009. With the introduction of electronic procurement of all procurement with
Worth more than € 3,000 has been considered by the European Union and other international
institutions as one of the greatest achievements since 1990. For this achievement in 2010, the
United Nations lists the Public Procurement Agency as the country's winner Second prize for
2010 for the Public Services Prize in the category "Improving it Transparency, accountability
and accountability in the Public Service ", due to the results achieved by the implementation of
the e-procurement system.
The implementation of legislation on public procurement is exercised through:.
 Public Procurement Agency, which is the central body for coordination of the public
procurement system in the country, and support for the implementation of
procurement procedures.
 Public Procurement Committee which is responsible for reviewing the complaints
against procurement procedures. Public Procurement Agency
The Public Procurement Agency was established for the first time by Decision no. 496 dated
18.09.1995 "On the functioning of the Public Procurement Agency", pursuant to Law no.
7971, dated 26.07.1995 "On Public Procurement" as a central body subordinate to the Council
of Ministers for the coordination and improvement of the procurement system, with nine total
employees.
Public Procurement Agency with the approval of law no. 9643 dated 20.11.2006 "On Public
Procurement" was consolidated as the main institution in the field of public procurement
where its activity is sanctioned in Article 13 of this Law, which provides for the main

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

competencies as a central body, a public legal entity, subordinated to the Prime Minister ,
Funded by the State Budget. The Public Procurement Agency from 2009 is also responsible for
the administration and maintenance of the electronic procurement system, which enables the
electronic execution of the procurement procedures in Albania.
Also the PPA exercises its competences not only in the field of public procurement, but also in
the field of concessions and public auction:
 in the field of concessions, carries out duties as provided in Article 6 of Law 9663/2006
"On Concessions" and with the repeal of Law 125/2013 "On Concessions and Public
Private Partnership", the competences are re-dimensioned in Article 11 his.
 in the field of auctions, exercises powers under Article 7 of Law 9874/2008 "On Public
Auction".

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HIGH STATE CONTROL
DEPARTMENT OF PERFORMANCE AUDIT
PPA II / REPORT “PROCEDURES OF PUBLIC PROCUREMENT IN ALBANIA”

3.1.1. Does APP has monitored technical criteria set by Competitive Procurement
Authority which have passed the procedure (negotiated without prior publication of a
contract notice), before and after the transition?

Public procurement is the process of selection by the Contracting Authorities, through a public
competition process, of the economic operators with whom it will enter into a public contract
for the provision of goods, services or works, against payment of public funds. This
competition process, being directly related to public funds, is developed according to some
rules sanctioned in public procurement legislation.
The main purpose of the public procurement process is the cost effectiveness and value for
ALL. Public procurement is an economic activity that aims to use / spend taxpayers money in
the most effective way possible, while value for money in the context of public procurement is
the best quality for a reasonable price in a timely manner. Meanwhile, the quality of the public
procurement system is directly related to the smooth running of the entire procurement cycle,
which must be timely, properly and in compliance with the applicable public procurement
legislation. In order to carry out a procurement procedure, all elements and parties in a
procurement process should exist at the same time. So, public procurement performance is not
only measured in figures (money-saving value ???), but the way procurement of goods, works
and services is carried out reflects on the social issues of citizens and taxpayers to;
 fighting corruption,
 Ensure optimal use of public budget in the public interest,
 Increase institutional responsibility;
 Increase personal accountability in the public sector,
 stimulate a sound business environment, free economic initiative and fair
competition.
Law no. 9643, dated 20.11.2006 "On Public Procurement" in its Article 33 defines the use of the public
procurement procedure "Negotiation, without prior notice of contract notice" and specifically "the
Contracting Authority for contracts with value above or below the low monetary threshold , May use the
negotiated procedure without prior notice of announcement, only in special circumstances, in accordance with this
Article and in the public procurement rules. The use of this procedure should not lead to the avoidance of
competition or the discrimination of candidates ... ", also following it are given all the cases when this procedure
can be used which are not few but 12 possibilities of its use .
For the foregoing and if we refer to the law, it makes a definition of the negotiation procedure
without announcement and use cases. If the law and procurement rules were read carefully it
would be concluded that there is a procurement procedure, which is less transparent than the
others, does not allow publication, does not allow broad participation of economic operators,
the use of Her by contracting authorities may become abusive and lead to avoiding
competition or discrimination of candidates and as such, it should not be the preferred
procedure. Under these conditions we consider that it should be one of the most monitored
procedures and analyzed by the Public Procurement Agency, so that this procedure can be
used only for the sake of extreme need, caused by unforeseeable events by the contracting
authority.

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