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This report has been published within the project BBi - Building Business Incentive for Fight against Corruption, implemented by Partnership for Social Development (Croatia) and financed by the Embassy of Switzerland in Croatia.

TITLE: An insight into Croatian public procurement through integrityobservers.eu

METHODOLOGY: Munir Podumljak

AUTHORS: Ana Hećimović, Munir Podumljak

EDITORS: Ana Hećimović, Iva Milanović-Litre, Sandra Gajić

LECTOR: Lea Šušić

PUBLISHER: Partnership for Social Development

DESIGN AND PRINT: ACT Printlab d.o.o. Čakovec

COPIES: 150 pcs

This publication has been produced with the assistance of the Embassy of Switzerland in Croatia. The content of this publication is the sole responsibility of the authors and does not necessarily reflect the official opinion of the Embassy of Switzerland in Croatia.

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IntroductionPublic Procurement Database integrityobservers.eu was released in March 2012.1 The Database enabled a revolutionary step forward in the analysis and monitoring of public procurement. It integrates all information and data related to public procurement procedures, collects them in real time and makes them systematic and easy to understand. It has been recognized by the Directorate-General Home Affairs (DG Home) already in its first phase of development, and cited as an example of good practice in the European Union2.

Two years later, the second phase of development3 is raising the database to a whole new level of potential benefits to society, which is almost unprecedented in the EU market. In addition to improvement of existing analysis modules, Database is also enriched with tools which could facilitate the participation of economic operators (business sector) in Croatian public procurement. It is upgraded also with special instruments for analysis of the public procurement market for economic operators, as well as with the instruments for assistance in application to tenders, all with the aim to enhance competitiveness within the tenders and therefore increase the efficiency of public procurement procedures. And once more, all of that in real time (as the data is available in the public sector system). Database and its tools are bilingual (Croatian and English) in order to be available to the international economic operators (companies outside of Croatia) during their participation in the Croatian market which shall ultimately benefit all - companies that participate, Croatian market, Croatian public sector and Croatian citizens as direct or indirect final beneficiaries of most of the procurement contracts.

In this report, we have tried to make the overview of public procurement in Croatia by using almost exclusively public procurement database integrityobservers.eu. Given that the Database disposes with the data from 1 January 2012 (when the new Public Procurement Act entered into force), this report covers the period from 2012 to present, concluding with 24 September 2014. The data used by 1 First version of PP Database was developed within the project Anti-Corruption Response to Implementation of the Procurement Policies (ACRIP) financed by IPA 2008.2 European Commission (2014) EU Anti-Corruption Report. Available at: http://ec.europa.eu/dgs/home-affairs/e-library/documents/policies/organized-crime-and-human-trafficking/corruption/docs/acr_2014_en.pdf. (Accessed 24/09/2014)3 The second phase of development of a PP Database -developed within the project Building Business Incentive for Fight against Corruption – Market Indicators, funded by the Embassy of the Swiss Confederation in the Republic of Croatia.

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Database is the official data of the Republic of Croatia: Public Procurement Electronic Advertiser of the Republic of Croatia (Narodne novine d.d.) and the database of the Financial Agency.

ChallengesCredibility and accuracy of data are priorities from the very beginning of the Database development. After the establishment of the first version, during the detailed analysis we have noticed some irregularities. Most irregularities have been resolved immediately, while the most demanding ones have been resolved in the process of this upgrading. It is the following: the first intervention on the database was the separation of contracts and framework agreements whose contracted value deviated +/- 30% from the estimated value. Although separated from the general statistics, such contracts are available and easily searchable. Pursuant to the Law on Access to Information, queries on whether there is an error or values are correctly stated have been sent continuously to the contracting authorities/entities. Only after receiving the confirmation of the correctness from the contracting authorities/entities, the contracts were “released” in the general statistics of public procurement in Croatia.

Technically more demanding intervention was the evidence system in the case of cancellation of contracts. We will explain this irregularity by using a concrete example: On 20 February 2012 Municipal Utility Company Vodovod Žrnovnica Ltd concluded a contract in the amount of 477,505 HRK with economic operator Zgo Limont from Vojnić for repairs on the roof of the administration building. The announcement on conclusion of contract has been published on Public Procurement Electronic Advertiser of the Republic of Croatia (EOJN) the day after the contract was concluded, on 21 February 20124. However, in the EOJN was also stated that the Contract Conclusion Announcement was followed by an Announcement of Additional Information, Cancellation or Correction - published two years after the contract was concluded (16 June 2014)5. In the Announcement

4 Public Procurement Electronic Advertiser of the Republic of Croatia (Narodne novine d.d.). Available at: https://eojn.nn.hr/SPIN/APPLICATION/IPN/DocumentManagement/DokumentPodaciFrm.aspx?id=170465. (Accessed 24/09/2014)5 Public Procurement Electronic Advertiser of the Republic of Croatia (Narodne novine d.d.). Available at: https://eojn.nn.hr/SPIN/APPLICATION/IPN/DocumentManagement/DokumentPodaciFrm.aspx?id=431490. (Accessed 24/09/2014)

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it was stated that the concerned contract is cancelled, although it is not clear why. The only link between the Announcement on Conclusion of the Contract and Announcement of Additional Information, Cancellation or Correction is the section IV.2.3 (Administrative data) from the Announcement of Additional Information, Cancellation or Correction, where is stated the number of Announcement on which this cancellation refers to. The only way to eliminate this and similar irregularities and cancelled contracts from the Public Procurement Database was to create a computer program check on every published Announcement of Additional Information, Cancellation or Correction, then to set aside all those which in section VI.1 have marked Cancellation of the Procedure, then to draw numbers of the announcements in section IV.2, and to ensure that they are removed from the overall statistics and the database. Considering the amount of data integrated in database, the process was a big challenge, which we (hopefully) managed to overcome.

However, even with all the efforts invested in detecting these and similar irregularities in reporting on public procurement, it is possible that some of the sources submitted wrong official data, or that there was an error in the transmission of the information to the database. Any such error can affect the overall calculations regarding public procurement, either by our Database or by public authorities, and can lead to misconceptions about the procedures and the results of public procurement as such. Therefore, we hope, and we invite our users, to inform us on any such irregularity they notice, so we could request from competent authorities for data corrections.

Your participation in the monitoring system is essential to establish reliable data on public procurement in the Republic of Croatia!

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Public Procurement in CroatiaPublic procurement is a market per se. In the EU public procurement average is app 20% of the countries’ GDP, while in Croatia in 2013 it amounted 12,08% of the GDP6:

Although Croatia records a slight positive trend in the share of public procurement in GDP since 2010, the forecast for 2014 is that it will decrease again.

According to the Public Procurement Database data, in 2014 (concluding with September 24), the total value of public procurement amounts to 12 billion and 304 million KN, while in the same period last year it amounted 13 billion and 497 million KN, representing a decrease of 8,8%.

6 Public Procurement Directorate. Yearly statistic report on public procurement 2008.- 2013. Available at: http://www.javnanabava.hr/default.aspx?id=3425 (Accessed on 24/09/2014)

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From 1 January 2012 to present, in the Republic of Croatia was signed a total of 26,192 contracts, including framework agreements. Their total value exceeds 38 billion and 414 million KN, and these contracts were concluded by 2003 contracting authorities. The total number of tenderers who were awarded a contract is 4684, which means that on average each signed five contracts. The contracting authority with the highest number of contracts is HEP - Distribution System Operator Inc, and Croatian Railways Passenger Transport Ltd is the client with the highest sum of the contracts’ value. The ratio between the contracting authorities and tenderers is 1-per-2.3; which means that on average there are two tenderers per 1 contracting authority in all public procurement contracts.

According to the Central Bureau of Statistics data, in March 2014 in the Republic of Croatia were active 159,764 legal persons7 and 83,426 economic operators in the field of trades, crafts and free professions8. Only 4684 of them took part in public procurement, i.e. only 1.9%. The tenderer with the highest number of contracts is INA - Oil Industry Inc, and the tenderer with the highest sum value of the contracts is Končar - Electric Vehicles Inc.

This is supported by data on the number of offers which contracting authorities receive during the implementation of public procurement procedures:

7 Companies, firms, cooperatives, institutions, bodies, associations and organizations.8 Croatian Bureau of Statistics (2014) Notice: Number and structure of economic operators in March 2014. Available at: http://www.dzs.hr/Hrv_Eng/publication/2014/11-01-01_01_2014.htm (Accessed 24/09/2014)

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These data are disturbing because they show that the Croatian public procurement is more likely characterized as closed, than “open, free and fair” system, which is the ultimate principle of market economy.

According to the number, framework agreement comprise 12% of public procurement. However, if we look at the value of contracts, their share increases:

According to the number and value of contracts and framework agreements most often procured were goods:

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Although the new Public Procurement Directives9 recommend most economically advantageous tender as a selection criterion which gives more responsibility to contracting authorities, encouraging them to purchase competing products, but also requiring them to spend extra effort to define technical criteria which, together with the price, must be taken into account in the selection process10, in Croatia this selection criterion is applied in only 1% of the cases:

9 Available at: http://ec.europa.eu/internal_market/publicprocurement/modernising_rules/reform_proposals/index_en.htm (Accessed on 24/09/2014)10 PSD, EFOR (2014) Anti-Fraud Measures in Public Procurement in the EU Single Market. Legal, Institutional and Technical Solutions. Available at: http://integrityobservers.eu/UserDocsImages/CRO.pdf. (Accessed on 24/09/2014)

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When it comes to the type of procurement procedure, it is an interesting fact that not a single contracting authority used the opportunities that are available in competitive dialogue procedures, open competition, and restricted tendering. The highest contract value was awarded in open procedures:

Electronic auction, i.e. the implementation of a part of procedure that is repeated and that includes an electronic system for presenting new prices, revised downwards, and/or new values concerning certain elements of tenders, which occurs after an initial full evaluation of the tenders, enabling them to be ranked by using automatic estimation methods, has not yet been used in the Republic of Croatia.

According to the value, and the number of contracts and framework agreements, works in construction far exceed other items of public procurement (specific CPV markings in accordance with the structure of the Common Procurement Vocabulary):

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The highest sum of the value of contracts and framework agreements were concluded by the tenderers of the following economic activities11:

11 National classification of economic activities 2007

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From 1 January 2012, 82 contracts and three framework agreements were financed from the EU funds. Their total value is 356 964 852 KN. The tenderer with the highest number of contracts financed from the EU funds is Hypo Alpe Adria Bank Inc. with 3 contracts, while the contract of the highest value (131,540,068 KN or 37% of the total value of contracts and framework agreements financed from the EU funds) was awarded to a Group of tenderers: EURCO Inc. and Osijek-Koteks Inc. for construction and reconstruction of sewage collectors, main water pipes and NUS water supply. Interestingly, this contract was subcontracted to a third party, in the amount of 1,052,320 KN excluding VAT, for a part of the assembly works. Name of the subcontractor is not listed.

When disposing of money from the EU funds, contracting authorities most often used the open procedure, although there is also a rather disturbing data on the application of negotiated procedure without prior publication:

Contracting authoritiesThe average number of contracts on a single contracting authority is 12, and framework agreements 5. Average contract value is 247 thousand KN, and the value of framework agreements 3 million. The highest frequency of the awarded contracts, i.e. the frequency of the contracts between the contracting authorities and tenderers, is between Croatian Roads Ltd as the contracting authority and Institut IGH Inc. as a tenderer. Regarding framework agreements, the highest frequency was noticed between HEP-ODS Ltd and a tenderer Elcon Ltd.

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Contracting authorities published 19,796 contracts worth 24,283,862,221 KN, while contracting entities have published 6,424 contracts worth 14,212,914,244 KN.

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TenderersThe average number of contracts per one tenderer is 5, and framework agreements 3. In public procurement participate mostly small businesses, private from establishment:

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Results of the work performance from 2013 indicate that a total of 70 subjects who have been awarded at least one public contract are blocked. These are the following:

PIN REGISTRATION NUMBER Name: Headquarters

01974889227 80501990 LMT LABORATORIJ MULTIMEDIJSKIH TEHNOLOGIJA D.O.O. ZAGREB

02861692008 40256051 TIM-KUŠAN D.O.O. GRIŽANE

03313428411 0 TRGOGRAD PAVIĆ ZAGREB

05881691349 90013688 INTEGRA METKOVIĆ

07790948983 80590573 HB KAMENOLOMI D.O.O. ZAGREB

08199614791 30074939 VUKOVIĆ-COMPANY D.O.O. VUKOVAR

09601780516 80003375 KOM.-ING. D.O.O. DONJI STUPNIK

10350279556 80444969 ALKA SCRIPT D.O.O. ZAGREB

10856232018 60031952 PERUN D.O.O. ŽRNOVNICA

11119953057 50031815 FENIX D.O.O. SLAVONSKI BROD

11247301096 50030832 FELIKS REGULACIJA D.O.O. SLAVONSKI BROD

11814245345 80101737 KUTRILIN D.O.O. ZAGREB

12278952172 80392880 ESOTEHNA D.O.O. KRAPINA

12853359071 30025834 LUBANJ D.O.O. ŽUPANJA

13868937119 50006869 GP GRADING D.O.O. CERNIK

14364100048 80433737 INTEGRALNI MARKETING I KOMUNIKACIJE D.O.O. ZAGREB

19674913073 60204035 OBALNA PLOVIDBA D.O.O. SPLIT

21301408703 80053680 MARĐINO D.O.O. ZAGREB

22025239366 60082006 RADION D.O.O. BENKOVAC

28335003995 80476690 MOSTPROJEKT D.O.O ZAGREB

29187952172 80685933 AZELIJA-KUPA D.O.O. ZAGREB

31167997184 80245217 ERASMUS D.O.O. ZAGREB

31390564839 80045684 BIOS INFORMATIKA D.O.O. ZAGREB

35629440413 70025494 NOVOGRADNJA D.O.O. VARAŽDIN

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35690885620 80262663 QUANTUM MEDIA DOO ZAGREB

36006149377 40178580 ATRIK-RI D.O.O. RIJEKA

37450963870 50030031 REGIONALNI VODOVOD DAVOR - NOVA GRADIŠKA D.O.O. DAVOR

38967655335 80019092 ŠKOLSKA KNJIGA D.D. ZAGREB

40049187588 80725024 STOLARIJA LOVREK DOO VELIKO TRGOVIŠĆE

40819225982 40014910 FINVEST CORP D.D. ČABAR ČABAR

44150572731 20034613 LIKA GRADNJA D O O PLITVIČKA JEZERA

45392055435 80604389 DOKUMENT IT D.O.O. ZAGREB

45549083404 40212203 KON.EL. D.O.O. RIJEKA

45672873416 80081504 M. MIKULIĆ D.O.O. ZAGREB

49557976962 70004696 CONING D.D. VARAŽDIN

50049153439 70071277 GEOPUT D.O.O. IVANEC

51470568169 0 SAMARDŽIĆ VINKO-ODVJETNIK SPLIT

53922627938 90028081 DOMINUS UBLE D.O.O. UBLE - LASTOVO

55598634637 80107332 PASTOR INŽENJERING D.D. BESTOVJE, RAKITJE

59110800788 50006375 ĐURO ĐAKOVIĆ-ZAVARENE POSUDE DIONIČKO DRUŠTVO

SLAVONSKI BROD

60472677029 100002887 TELEFON D.O.O. KNIN

62703987634 0 ODVJETNIK DENIS MARINKOVIĆ ZAGREB

64836214888 80406855 SYSPRINT D.O.O. ZAGREB

65139331160 80188651 GASPRA D.O.O. ZAGREB

69396371598 50002812 KOOPERACIJA KRIPP D.O.O. ČAGLIN

72078514204 80271004 VILLICUS D.O.O. ZAGREB

72653254879 80660984 ALATI I OPREMA D.O.O. ZAGREB

72919419273 80374766 PROMJER ZAGREB

73296358323 10063725 ABIES D.O.O. KRIŽEVCI

74608764830 80224341 GRUBING D.O.O. ZAGREB

74727865103 60262472 PAPIRNICA TEMPERA D.O.O. SPLIT

77302811021 30108773 RAJKOVIĆ GRADNJA D.O.O. NAŠICE

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78360592576 80526743 STRADA D.O.O. ZAGREB

79233297400 10059655 AKUSTIK-GRAĐENJE D.O.O. DARUVAR

80314740568 80295759 KOMUS D.O.O. U STEČAJU DONJA STUBICA

80344755075 60172662 BIMIKRON D.O.O. SPLIT

81056952558 60090870 MD/94 D.O.O. ŠIBENIK

82300671444 50033600 IZOTEHNA D.O.O. SLAVONSKI BROD

84765164046 30035792 VODOGRADNJA OSIJEK D.D. OSIJEK

85512018621 70004469 ZELENDVOR D.O.O. ZELENDVOR

88511810996 30121666 BIJELA LAĐA D.O.O. VINKOVCI

89300030527 30050101 INSTAL D.O.O. VUKOVAR

89901282042 60277069 ESTAVELA BUŠENJE D.O.O. SPLIT

90091420648 60183816 MUCIĆ & CO D.O.O. DUGOPOLJE

91362931926 80115726 VIDICOM D.O.O. ZAGREB

93319102292 50047326 BORIS NEKRETNINE D.O.O. STARO TOPOLJE

DONJI ANDRIJEVCI

93769356765 50027829 PLINEX D.O.O. SLAVONSKI BROD

96829768163 0 HORVAT GRAĐEVINSKI OBRT VL. TOMISLAV HORVAT ČAĐAVICA

97769180978 80767652 ‘HIDRO-TEHNIKA’’ D.O.O. OGULIN

99735641878 10083625 BAT D.O.O. SLATINA

Total 445 of economic operators participating in public procurement achieved a negative financial result12 at the end of 2013. INA - Oil Industry Inc., a company which has from 2012 till today signed contracts and framework agreements worth more than 565 million KN, recorded the most negative financial result - minus one billion and 633 million KN.

12 Difference between income and expenditure and deduction of income tax.

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At the “top” there are also:

PIN Name Total income Profit or loss for the period

27759560625 INA-INDUSTRIJA NAFTE D.D., ZAGREB 26.424.216.535 -1.633.468.532

29873381011 PRIRODNI PLIN D.O.O. 6.303.492.468 -802.851.768

70133616033 TELE2 D.O.O. 1.279.978.683 -449.941.490

80572192786 HŽ PUTNIČKI PRIJEVOZ D.O.O. 876.484.152 -365.159.608

44610694500 OSIJEK-KOTEKS D.D. 415.004.618 -335.728.762

24503685008 PETROKEMIJA, D.D. KUTINA 2.565.936.578 -327.382.823

08720210702 HŽ CARGO D.O.O. 884.060.858 -191.703.449

15907062900 HEP TOPLINARSTVO D.O.O. 835.330.826 -184.972.365

68289504926 ZAGORJE-TEHNOBETON D.D. 466.626.668 -148.819.633

40819225982 FINVEST CORP D.D. ČABAR 116.544.803 -95.748.537

35075764438 SLOBODNA DALMACIJA D.D. 127.350.136 -81.030.954

5 KEY POINTSWho?

Partnership for Social Development has from the very beginning participated in the process of drafting a new Public Procurement Act, and developing together with the Directorate for the Public Procurement System the models to protect the public interest in public procurement procedures. In doing so, it has focused its work on the development of modern technological solutions to monitor and control the transparency of public procurement of individual institutions.

What?

The result of this cooperation is the most advanced Public Procurement Act in Europe with the most advanced monitoring tool – Public Procurement Database integrityobservers.eu, which integrates and analyses all information related to implementation of public procurement procedures. 16 analysis modules enable an insight into procedures and contracts in real time as they are signed and published

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by the competent authority. Aside from this, it detects possible irregularities in public procurement, political affiliations, or other types of risks related to corruption. The database also contains special instruments for analysis of the public procurement market and offers assistance in the public procurement application procedures, and all of this with the aim to enhance competitiveness of the market and increase efficiency and effectiveness of public procurement procedures.

Database and its tools are available in two languages (Croatian and English) in order to help also international economic operators (companies outside of Croatia) in their participation in the Croatian market which shall ultimately benefit all - companies that participate, Croatian market, Croatian public service and Croatian citizens as direct or indirect final beneficiaries of most of the procurement contracts.

When?

In real time! The Database is updated with the latest data every 24 hours. The grounds for such a tool were set with the new Croatian Public Procurement Act adopted in 2011 because it is computer-literate. This means that all public procurement notifications must be published in the Official Gazette in a standardized form which allows the Database to pull out the data in real time and sort them out according to different parameters.

Why?

The aim of the Database is to create an environment for the implementation of public procurement procedures in a more transparent and accountable manner. It also aims at building an integrity system and implementation of specific and effective anti-corruption measures.

However, in addition to the above, the aim is to enable economic operators or business sector, information on trends in different parts of the market, and encourage them to participate in public procurement procedures. With access to specific market indicators, economic operators will be able to make informed and more focused decisions on whether they want to participate in a particular proceeding, and whether or not to target a specific strategic acquisition of the State.

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How?

1. Open Integrityobservers.eu web portal by clicking on www.integrityobservers.eu.

2. Choose the language in the right corner (CRO/ENG), then click on Login. When the window opens, if you are not a registered user, click on Register.

4. Choose the type of registration:

a) Regular (free of charge):

–– Fill in the form with requested information –– You will receive registration confirmation with a link to a Public Procurement

Database on your email–– Click on the link will open the home page of Public Procurement Database

b) Premium (with charge: 30 days of use = HRK 120; 6 months = HRK 600; 12 months = HRK 1,000):

–– Fill in the form with requested information –– Via payment slip or internet banking pay the amount indicated on the

selected subscription. When making payment make sure to use the following payment details:Partnerstvo za drustveni razvoj, Lomnicka 1, 10 000 Zagreb, HrvatskaAccount number: 2484008-1500160819Purpose of payment: Subscription to Business Premium categories of Public Procurement Database–– Upon receipt of payment, PSD will allow you the access to Premium

services during the period you selected.

5. There are 16 analysis module to which you can perform your search:

–– Statistics of contracts awarded–– Statistics of framework agreements–– Analysis of contracting authorities/entities:–– Analysis of tenderers–– Analysis of procurement by the type of procurement –– Analysis of procurement by award criterion –– Analysis of procurement by type of procedure–– Analysis of procurement by type of contracting authority

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–– Analysis by main activity of contracting authority/entity –– Electronic auction–– Analysis by main activity of tenderer –– Analysis of calls for competition–– CPV search and analysis–– Analysis of the market in which you operate–– Search of specific contracting authority/entity–– Search of specific tenderer

6. Furthermore, there are additional filters within each of the analysis modules:

–– Time period–– Contracts funded from EU funds–– Contracts with subcontractors–– Only contracting entities–– Only with potential error

7. If you find any irregularities in the Database or in public procurement procedures, please report it in the category: Irregularity Reporting.

Good luck with your research!

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