Rubizhne City Council procurement results found unlawful

Actions of local councils/municipalities: Other actions Lugansk region

Complainee: The Department of Education, Department of Healthcare of Rubizhne City Council
Complaint in brief: The Council received a complaint from a private heat supplier in Luhansk Oblast. The company complained of violations committed by Rubizhne City Council during heat energy procurement.
In late 2018 the Department of Education of Rubizhne city announced a heat energy procurement tender. The Complainant submitted its proposal. However, the tender was not held because the bid was received only from one company – our Complainant. Shortly afterwards the State customer announced a new procurement in the form of a negotiating procedure. Such a procedure does not envisage open reception of bids and is appointed in cases where the customer, in particular, argues there is competition on the market. In this case, the customer pointed out the absence of technical competition – its heating networks were hooked up to Supplier 2 networks.
A week later, the story repeated with another state object. The customer announced the tender again, received a bid from our Complainant and the tender was not held. The negotiating procedure was performed. The Supplier 2 was announced the winner.
Simultaneously, the Department of Healthcare of Rubizhne city decided on the contractor for heat energy supply. The Complainant also attended the tender, but its bid was rejected and a negotiation procedure was carried out. This time the negotiating procedure was applied because of force majeure circumstances – winter frosts. The procedure winner was Supplier 2.
Based on tenders results, tender proposals were at a lower price than of the Supplier 2. Realizing that structural subdivisions of the city council violated public procurement, the Complainant addressed the Council. It asked to initiate a check of the actions of the city council by the State Audit Service (SAS).
Actions taken: The Council’s investigator analyzed the circumstances of the case. He drew attention to the fact that use of negotiation procurement procedure in that case was premature because there is competition between heat suppliers on the heat supply market. The Supplier 2 also violated the law after it had been announced the winner. It did not produce heat independently, as stipulated by law, but only acted as an intermediary. It purchased heat from another company and resold it to a state customer. In addition, in accordance with the law, winter cold, which allegedly made the customer apply a negotiating procedure, was not a reason good enough.
The Council addressed the SAS with these and other arguments in writing asking to properly and impartially consider the company’s complaint.
Result achieved: The SAS examined the Complainant’s appeal and checked public procurement procedure circumstances. As a result, the audit service discovered a violation of the law in the course of the procurement process and published a solid opinion thereon in the Prozorro system. It means the customer has to either cancel bidding results on its own or the Court has to bind it to. The Complainant thanked the Council for assistance. The case was closed.

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