The audit carried out by the National Audit Office revealed that the main shortcomings in the organisation of public procurements in public undertakings and public foundations are problems relating to the interpretation of law, the inconsistent implementation of law in practice and insufficient experience or capability, especially in the case of smaller contracting authorities.
The inadequate supervision exercised by the Ministry of Finance over the organisation of public procurements is also a significant systematic problem.
The Public Procurement Board that operated in the area of government of the Ministry of Finance terminated its activities in 2010 and its duties were transferred to the Ministry of Finance from 1 July 2010. The goal of these changes – to improve the efficiency of supervision – has yet to be achieved. For example, the Ministry of Finance has not carried out any supervision activities in public undertakings and public foundations. So far the ministry has only carried out supervision on the basis of applications for initiation of supervision proceedings. The ministry has not performed any scheduled supervision in the area of public procurement, but in the opinion of the National Audit Office this would help to reduce the number of breaches considerably and even prevent their occurrence. The ministry also failed to notice that five public companies had not presented information about their procurement activities to the Public Procurement Register.
The audit also revealed that not all public undertakings define themselves as contracting authorities for the purposes of the Public Procurement Act and therefore do not organise their procurement activities pursuant to this act. There are five undertakings that do not regard themselves as contracting authorities: Lennuliiklusteeninduse AS; KredEx Krediidikindlustus AS; Teede Tehnokeskus AS; AS Eesti Vanglatööstus; and AS Eesti Loto. These undertakings claim that the nature of their main and secondary activities is industrial and/or commercial, and not related to the public interest.
The National Audit Office is convinced that these five undertakings are contracting authorities for the purposes of the Public Procurement Act. All of the undertakings were established in the public interest and perform tasks related to the public interest to a greater or lesser extent, the state is interested in maintaining control over the provision of their services and the management of the undertakings as a whole is controlled by the state.
The audit also revealed that not all undertakings and foundations have established internal procedures for the organisation of procurements and the procedures of those who have established them are inadequate. 49 of all 84 undertakings and foundations have established internal procedures. The National Audit Office is of the opinion that the procedures of 15 undertakings and foundations are inadequate. Thinking the organisation of public procurements through and establishing appropriate procedures is necessary to ensure that the agreed organisation of work and rules of conduct are consistently followed, that laws are adhered to and that all activities are transparent.
The National Audit Office is of the opinion that in addition to the general principles set out in the Public Procurement Act, adequate internal procedures must also contain a clear distribution of the agreed tasks, responsibility and authority; appropriate inspection measures; and inspections by management.
Undertakings and foundations justified the absence of public procurement procedures with claims that they only organise small-scale public procurements and/or proceed directly from the Public Procurement Act when procuring things or ordering services. However, the most common reason was that they were not aware of the requirement to establish a procurement procedure and organise purchasing processes that are transparent to the public.
The audit also revealed that the Public Procurement Act is not adhered to in the organisation of public procurements and that established internal procedures are not followed in practice. The National Audit Office found omissions in six of the nine audited undertakings and foundations. Four undertakings and foundations had failed to carry out the required procurement procedure. It emerged that procurement procedures are not documented as required; the information submitted to the Public Procurement Register is misleading; public procurement reports and their annexes are not submitted or are submitted later than required; and written contracts are not entered into with suppliers.
The National Audit Office made recommendations to the Minister of Finance and the audited undertakings and foundations as a result of the audit. The National Audit Office advised the Minister of Finance to improve state supervision of public procurements; undertakings that do not regard themselves as contracting authorities to start organising public procurements and create the competency required for this; and undertakings and foundations to establish or update their procurement procedures.
Head of Communication Service, National Audit Office
Organisation of public procurements in public undertakings and public foundations