Op-Ed

Suspicions of Bid Rigging in Prizren Municipality Is a company with abnormally low prices being favored for a 100,000 euro tender?

A tender issued by Prizren Municipality for contracting a company to design school projects has sparked controversy, with accusations of bid rigging as a company with extremely low prices was awarded the contract. The case has twice reached the Procurement Review Body (PRB), raising concerns about the process’s fairness, as Prizren Municipality continues to support the same bidder.

In March this year, Prizren Municipality opened a tender for a 100,000-euro project with a 12-month timeframe to meet the needs of the Education Directorate.  This contract aims to cover the needs of the Education Directorate, with the company undertaking the preparation of projects for the construction of school annexes, renovations of existing school facilities in any space where the need arises within the territory of the municipality.

To evaluate bids fairly, the municipality applied a weighted price scheme across three categories (A=50%, B=30%, C=20%), covering 11 items in total. Price scoring as a tendering procedure is a method used to evaluate economic bids based on a pre-defined scheme, assigning a specific weight to each key element.

The contracting authority defines the categories and weights, dividing tender positions into three categories, each with a specific weight: Category A (50%), Category B (30%), and Category C (20%). These categories are determined based on their importance and impact within the tender. Each bid is evaluated in each category, calculated as a percentage of the total points assigned to that category. The points are then calculated for each bid based on the prices offered for the items in the three categories. For each company, these points are summed and weighted according to the specified scheme, resulting in a final score that reflects the most favorable price-based offer.

This public procurement procedure is regulated by the Public Procurement Regulation, enacted in November 2022. As outlined in Article 17, Paragraph 35 of the regulation: “Whenever the Contracting Authority does not know the indicative quantity, unit price contracts, the CA must determine weighting based on the importance of each ‘category of service’ or ‘item’ or ‘group of items’ so that the contracting authority can determine the bid with the lowest price based on scoring, such as maintenance of vehicles, maintenance of generators, etc”.

Of the eight companies that submitted bids, Fst Engineering garnered the most attention, winning the tender with a bid of only 1.65 euros per unit.

Abnormally Low Prices: Evaluation by Prizren Municipality

The bid of 1.65 euros per unit by Fst Engineering, which was recommended for the contract, raised concerns due to its stark contrast with other bids. For comparison, the offer from the group of companies Geoplan & Consulting Group was 245.50 euros per unit, while the company Arhiko Ing offered a unit price of 521.50 euros, or 310 times more than the offer of Fst Engineering.

This significant difference led competitors like Arhiko Ing to file a complaint with PRB, accusing the municipality of bid rigging and implicating the procurement office in this scheme.

The contracting authority (Municipality of Prizren) did not request a clarification of the tender dossier, because it was known that (the operator recommended for the contract) would automatically be eliminated from the evaluation process, and with this, we believe that the Procurement Office is involved in rigging the tender,” – it is stated in the appeal that this company filed with OSHP on May 17 of this year.

Earlier this year, PRB review expert Mr. Naser Fejzullahu investigated complaints by Arhiko Ing regarding a nearly identical contract titled “Designing Various Conceptual and Main Projects for Construction and Renovation as Needed by DPMS in Prizren Municipality.” In his report (case number 2023/1034), he found that Prizren Municipality acted discriminatorily by favoring one economic operator while evaluating abnormally low prices, thereby violating core procurement principles[1].

The reviewing expert noted that the Municipality of Prizren discriminated during the assessment of abnormally low prices, favoring an economic operator, thus violating the fundamental principles of procurement.

“The question arises, is it possible for this economic operator to implement a contract at a price of 0.05 euros? No, therefore I believe that the responsible persons of the contracting authority (Municipality of Prizren) may have colluded with the economic operator, or with some official, since it is evident that (the economic operator) has been favored in two activities,” was written in his report, which was submitted to the review panel of PRB. On February 7, 2024, PRB confirmed the review expert’s findings, ruling that Prizren Municipality did not adhere to public procurement regulations.[2]

How Did Fst Engineering Arrive at a Price 316 Times Cheaper?

A detailed review of Fst Engineering’s offer reveals unusually low prices for certain items in the tender. For example, the price for “geomechanical surveys – report” was set at just €0.05 per square meter, significantly below the standard market rate. An invoice obtained for the preparation of a geomechanical report at the Law Faculty of Prizren shows a cost of 50.00 euros per square meter, or 1,000 times more than the price offered in this position by Fst Engineering.

Similarly, for the service of “geodetic measurements – project preparation,” the company offered a price of 0.70 cents per square meter, another example of a very low price compared to market rates. In the third category of the bill of quantities, representing 20% of the scoring value, the company offered €0.50 for the completion of documentation for the legalization of educational facilities. This documentation required several items, including: a copy of the plan and a property certificate no older than six months, a detailed technical description by a professional that includes details on the time, area, flooring, dimensions, and function of the building, a structural stability report prepared by an engineer, a professional report on the safety and stability of the unauthorized building, reports on the installation of water supply and sewerage, an electrical installation report, and a fire protection report. Based on an analysis of a contract concluded by the Municipal Assembly of Klinë/Klina in February of this year (contract no. 005-2024), the preparation of the fire protection report alone had cost 350.00 euros, or 700 times more than the price offered in this position by Fst Engineering.

Despite these complaints and differences in prices, the Municipality of Prizren defended its decision, saying that the prices offered by Fst Engineering were reasonable. The Municipality decided that the appeal of the Arhiko Ing company against the decision of the Municipality of Prizren was unfounded, describing the recommended price for the contract as “in order.”

“The evaluation commission has analyzed all prices for the items offered by the economic operator proposed for the contract and has concluded that the prices offered per unit by the economic operator proposed for the contract are in order (i.e. the commission and the procurement office do not consider these prices to be abnormally low)” – it is stated in the review decision dated May 10, 2024.

However, based on Article 61 of the Public Procurement Law, the municipality was obliged to seek written explanations for prices that appear abnormally low, but did not do so. On July 3, 2024, PRB annulled the decision of the Municipality of Prizren, considering that the contracting authority had not acted in accordance with the legal provisions on public procurement and the requirements of the tender dossier, returning the case for reassessment. Decision 2024/0431 confirmed that the Municipality of Prizren, during the evaluation of the offers, had accepted abnormally low prices in many positions that were evident in the description of the prices.

Although the Municipality of Prizren initially complied with the decision of PRB, returning the case for reassessment, it engaged the same evaluation commission as the first time. The reassessment commission’s report was signed by its members, and on July 9, 2024, it was uploaded to the E-Procurement electronic platform. This report again recommended Fst Engineering for the contract.

In the decision to reject the appeal of the reassessment commission’s decision, published on July 22, the Municipality of Prizren stated that the recommended prices were within the average range for performing these services.

“The new commission has researched comparable prices for the services outlined in the Tender Dossier and found that these prices align with the average market rates for such services. The contracting authority will uphold this process with integrity. Defending the responsible offer with the lowest price is crucial. If, however, the contract were awarded to the highest bidder, it would call into question the integrity of the procurement officer and the entire project team,” stated the decision.[3]

Due to the prolonged suspension of the case, the Municipality of Prizren, on July 4th, requested via the E-Procurement electronic platform that companies extend the validity of their offers for 90 days and their offer security for 120 days. Upon analyzing the offer, it appears that the company Fst Engineering met the legal requirements of the Municipality of Prizren, by extending the validity of its offer and its security, but both were extended for a period of 120 days, a fact that contradicts Article 28.6 of the Public Procurement Regulation, which requires that the tender security remain valid for a period of 30 days after the expiration of the validity period of the tender.

PRB intervened for the second time on September 25, annulling this decision as well and warning that if the municipality does not comply with the legal provisions, it would be forced to initiate procedures for the annulment of the procurement manager’s certificate, as this issue had already been judged once as “res judicata”.

The repeated interventions of PRB to annul the municipality’s decisions indicate the problems that have characterized this procurement procedure, as the contract signing is still far away when more than 7 months have passed since the opening of this tender.

As of the time of publication, the Municipality of Prizren has not responded to questions regarding the Arhiko Ing company’s accusations of tender rigging. Meanwhile, Arhiko Ing has stated that they are awaiting a final decision, as the tender has been returned for reassessment.

 

 

Disclaimer:

This article was produced under the project “Encouraging transparent, accountable and efficient public money spending through public procurement in Kosovo” funded by the European Union and implemented by Democracy Plus (D+). Its contents are the sole responsibility of the author and do not necessarily reflect the views of D+ or the European Union.

 

 

[1] Article 7 of the Public Procurement Law concerning the equal treatment of economic operators and Article 61 regarding abnormally low prices. Link for access: https://gzk.rks-gov.net/ActDocumentDetail.aspx?ActID=2772

[2] Decision of the Public Procurement Review Body dated 07/02/2024 Found on page 5 of the review panel’s decision chaired by Vedat Poterqoi. Link for access: https://tinyurl.com/4ce6y67m

[3] The decision of the Municipality of Prizren dated July 22, 2024. Found on page 55 of the Arhiko Ing appeal to the Procurement Review Body.” Link for access: https://tinyurl.com/4xu8zsxv