1 THE EVALUATION OF STATE PROCUREMENT SYSTEM Joint Stock Company «National Power Network of Kyrgyzstan» Experts: Bazakeeva Zhyldyz Zhamanchaevna Abdymomunova Saina Ryskeldievna

2 Overview of the obtained information  In the course of investigation documents of 17 tenders from the 18 made purchases in 2010 have been studied by experts.  Due to lack of access to documents, the experts did not consider cost estimates, the list of fixed assets and payments on the contracts.

3 The diagram of State Procurement in JSC “NPNK”, 2010

4 The diagram of State procurement in the section of goods and services of JSC “NPNK” in 2010.

5 Procurement of works, goods and services (from one source)  with the consent of the Authorized Agency (the Ministry of Finance of KR) was purchased only one item (in the range of entries from OOO "Mass") to the amount of soms (20%).  The remaining single-source purchasing to the amount of soms (80%), purchased without tender and without the consent of the Authorized Agency, which is a violation of the law in the area of ​​procurement.

6 State Procurement Plan  From January to October 2010 JSC "NPNK" worked without state procurement plan, in violation of applicable laws.  Public procurement plan in the physical and monetary terms within the allocated funds for 2010 was approved by only 8 October 2010.

7 Procurement Plan  The preparation of procurement plan does not need the study of works and services;  the technical specifications of goods are not specified ;  procurement for construction work is carried out simultaneously as one tender for design and construction;  Procurement plan for construction is prepared without making the project and without determining the price of the object.  for the same type of goods and services several methods of procurement from a single source such as unlimited trading, quotation are provided;  single-source procurement and process of conducting are not specified.

8 Potential of purchasing organization (Procurement Department and Tender Boards )  Procurement department of JSC “NPNK” includes 6 people;  Each conducted tender has a separate board, however the tender board is created immediately prior to the tender, which is a violation of the law on public procurement;  The tender board included representatives of Ministry of Energy KR, representatives of Pervomayskiy raigosadministration.

9 Potential of procuring organization (results of questionnaire)  As a part of the study, the experts conducted a survey of the procurement department of 5 employees and 4 members of the tender board. In the questionnaire, respondents rated their knowledge of state procurement as: ◦ good - 3 (33%), all members of the procurement department; ◦ satisfactory - 4 (44%), the procurement department - 2, the tender commission – 2; ◦ weak - 2 (23%), all members of the tender board.  7 out of 9 respondents were trained on procedures for state procurement. However, the study documents (tender documents, reports of opening of tenders, procurement protocol, the evaluation of tenders) in the course of the study showed that employees of the procurement department and members of tender boards qualifications in the field of public procurement is low.

10 The Organization of tender  None of the tender did not establish conditions of delivery dates, dates of commencement of construction, services, payment terms, termination of the contract completion, date of service, delivery of goods and construction.

11 The Organization of tender (announcement of tenders )  In the published announcements there is not enough information (there are no contacts of responsible persons for the procurement);  Direct invitations to tender are not practiced, which means a lack of awareness of potential contractors;  There are cases of reduction of tender period from 28 to 20 days with no excuses, besides, the changing of deadlines and requirements in the tender document was not published.  Only one item of procurement is published in the announcement, and additional works are indicated in tender documents.

12 Estimation and Comparison of proposals  Documents do not include the evaluation sheets of tender board members.  Winners of "NPNK" are selected only by the presence of certain documents at the lowest price, as tender documents did not specify the criteria for evaluation of tenders.  In some tenders, in violation of Article 27 of the Act, when assessing the proposals of participants, the tender board rejected proposals by unidentified evaluation criteria in the tender documents.

13 Estimation and Comparison of proposals  There is a solution in the documents, where by the request of the Tender Board a participant paid off, and the tender board subsequently recommended it for the contract.  According to paragraph 3 of Article 27 of the Act, the tender board had no right to conduct any negotiations with the applicant in respect of tender submitted.  To participate in the tender participant should made tax liabilities and payments to the Social Fund. The action of the tender board has led to a breach of the principle of fairness to other participants

14 Examples of proposal evaluation Three tenders for Design and Construction to the amount of million soms JSC"NPNK" assigns :  Design and construction to the Contractor. The Contractor shall determine the price of the object by himself, and he also builds the object.  All winners of the tender had no license for the design.  Any participant of the design and construction does not appear in the list of 33 organizations that have licenses for the construction of high voltage transmission lines, and 12 organizations that have licenses for the design of high voltage power lines, issued by the State Agency for Architecture and Construction under the Government of Kyrgyz Republic

15 Examples of proposal evaluation At the tender for the procurement of design and construction of double circuit 110 kV. Alai - Kadamjai with length of 38 km with an amount of million soms:  In the tender of JSC "Kyrgyzelektrosetstroy" (winner of the tender) a contract from June 21, 2010 for the development of project documentation is attached.  This fact indicates that the JSC "Kyrgyzelektrosetstroy" knew that it would be the winner of the tender and at the beginning of the tender has already signed a contract to complete the task of designing the object.  Without the project of construction, the applicant composed the bills of work volume for construction to the amount of million soms.

16 Examples of proposal evaluation Design and construction of single circuit 110 kV. Greenhouses Tepekurgan with approximate length of 8.5 km:  In the tender LLC "Mehkalonna extreme system of matching" (winner of the tender), there is a contract for the development of project documentation. The date of commencement of work on the design immediately after signing the contract is indicated in the contract.  The participant of tender created the bills of work volume for construction to the amount of 12.0 million soms. It should be noted the winner only registered on March 20, 2010, that does not meet the requirements of the customer, has experienced at least 3 years.  The selected winner of the tender has the license to build, but does not have a license to design.

17 Examples of proposal evaluation In the tender for the purchase of licensed software for two lots.  Despite the fact that, in accordance with the tender documents, the participants pointed out the price of two lots separately, Tender board members evaluated the proposals based on the total amount of bids.  In accordance with Article 27 of the Act, the tender board shall evaluate proposals only by the set of participants in the tender documents requirements. The tender board had to make a recommendation to the procurement department at the conclusion of the contract at the lowest price for each lot: Due to improper selection of the winner in the tender JSC "NPNK” had losses to the amount of thousand soms.

18 Examples of proposal evaluation Design tenders for the reconstruction of the PS /6 square. Shekaftar with installation of T-2:  The winner was “Energoproject”. JSC "NPNK" referring to the provided privilege in the amount of 10%, requests to reduce the price by 10%. In accordance with the law, the privilege provided in the tender documents is not to reduce prices, but for comparison when assessing the proposals by domestic contractors compared to tenders of foreign firms.  For example, the tender price of the Kazakh LLP «Selara» amounted to million soms, the tender price of "Energoproject“ is million soms. Subject to the application of benefits should take 10% of the price of Kazakh companies in the amount of 345,400 soms and subtracted from the price of Kyrgyz company 3,585, ,400 soms, the price of Kyrgyz company is 3,239,600 soms, and in comparison with the Kazakh company is below. But the contract is concluded with the amount of the proposal. At the request to reduce the price, "Energoprojevt" gives consent, and reduces the price by 10%, and the final amount of the proposal is million soms.

19 Examples of proposal evaluation  At the tender with quotations in the amount of 3.0 million soms for the purchase of footwear. Company "A new format of Bishkek" offered a discount of 15%, the tender board takes its discount and determines the price of the proposal for 2.7 million soms, thus violating the principle of law, fair treatment of all participants.  By providing the equal conditions, the winning applicant was to be the LLC «At empire», whose price was $ 2.4 million soms. The estimated over expenditures of public funds due to the weak capacity of procurement and the tender board has made thousand soms.

20 Conclusion of contracts According to the Article 31 of the Act, "NPNK" must sign the contract on the terms of the tender winners. There are differences in the contract in the amount of down payment, the penalties (instead of 10%, indicated in the special cases of contract, determined 5%).

21 Conclusion  JSC "NPNK" did not reach the following main purposes of the Act in the process of procurement :  Ensuring the maximum efficiency and effectiveness of procurement. Just as an example of one purchase, namely the tender for the purchase of "Design and construction of double circuit 110 kV. Alai - Kadamjai length 38 km”, to the amount of million soms, which is 40% of the total purchases, revealed inefficient use.

22 Conclusion  Increasing the participation and competition between suppliers (contractors) in the procurement process. Procurement Department do not create the database of manufacturers of inventory, the owners of the exclusive rights of suppliers / contractors with a license for work and \ or services.

23 Conclusion  The direct invitation to tender is not practiced. The tender documents do not establish requirements for the qualification, there is no delivery terms, payment terms, it is possible resulted in a lack of potential suppliers / contractors who are interested in the ongoing procurement.

24 Conclusion  Ensure equitable treatment of all suppliers / contractors. During tender discounts not specified in the tender documents are accepted. Self-giving discount is a factor to discriminate others. This fact is found in the tender for the purchase of footwear. Improper selection and provision of equal conditions for all bidders, led to the alleged damages to the amountof 596,600 soms.

25 Conclusion  Ensuring transparency of procurement procedures. From the detailed study of single- source procurement the following is detected: in accordance with the laws only 20% of the total amount of purchases from one source is bought. The remaining 80% purchased without tender and without the consent of the Authority (the Ministry of Finance of KR).