It is necessary to improve the public procurement system and regulations in the interior sector and Latvia in general, as concluded in the audit reports “Challenges and opportunities for the development of public procurement” and “Effectiveness of public procurement in the interior affairs sector” by the Latvian State Audit (VK).
The Latvian public procurement system and regulatory framework should be improved in order to make the procurement process simpler and faster and the work invested by procurement specialists is commensurate with the result obtained, VK concluded.
According to auditors, efficient conduct of public procurements is hindered by the regulatory framework of public procurements of Latvia, which could be more flexible in several respects, hesitation to take decisive decisions for the development of centralization of public procurements, the undervalued position of procurement specialists, as evidenced by the uncompetitive remuneration of procurers and the insufficient advisory support and free training in insufficient quantities.
“It is important to ensure requirements of the mechanism, costs and benefits are balanced. In 2023, the total value of public procurements was EUR 5.4 billion (VAT excluded), which is equal to 14% of GDP. Last year, there were 11 252 procurement projects organised in Latvia. This volume of public resources requires maximum transparency, efficiency and focused action in order to achieve the best possible result.” A clearer and more flexible regulation would make its interpretation and application easier, as well as lower the possibility of mistakes and improve the overall procurement process, said VK board member Gatis Litvins.
Auditors add that Latvia’s procurement regulations are generally stricter that EU requirements. Procurement procedures are applied starting from significantly lower threshold limits than required by the EU directive. Although the rules for procurement below the European Union thresholds may be relaxed by a member state, the requirements of the Law on Public Procurement are not significantly simpler than those for procurements to which the Directive applies. At the moment, these thresholds do not correspond to the current economic situation, VK believes.
One of the most important and complex issues is the application of the supplier exclusion rules, VK stresses.
In a number of respects, the directive allows for a more flexible approach, for example on tax defaults. The fact that 90% of all excluded bidders are excluded for tax failure shows that the regulation is disproportionate, VK comments.
In general, those involved in the procurement process – both contracting authorities and suppliers – must be familiar with a large and complex regulatory framework and spend significant resources to apply it appropriately, VK concluded. 16.5% of clients of the Procurement Monitoring Bureau assess the application of the laws and regulations governing the field of procurement as understandable. The State Audit recommends that the Ministry of Finance carry out an “ex-post” assessment of the Public Procurement Law as soon as possible in order to make the regulatory framework for public procurement easier to apply. It could boost competition by reducing bureaucratic burdens and speeding up procurement.
The role of procurement specialists in public administration is underestimated, according to the VK. There are few professional procurement professionals in the public sector and, for many, procuring is only one of several job responsibilities. Furthermore, the remuneration of specialists lags significantly behind the salaries of equivalent positions in the private sector, as well as the circumstances to which they are subjected in the performance of their daily work duties are not fully taken into account: the risk of corruption and the restriction of rights after a decision has been taken on certain suppliers.
The VK complains of delays in optimising the public procurement process. The centralisation of public procurement would be an essential tool for reducing administrative costs and increasing efficiency, but its development is hampered by continuous fluctuations in decisions on the way forward. Since at least 2010, the centralisation of public procurement has been mentioned as one of the areas of public administration which, along with other support functions, needs to be centralised. In 2022, the centralization indicator of procurements to be announced at the European Union level for Latvia was the second best among the member states – 17%. On a national level, the level of centralisation across all procurement activities is around 10%.
In order to fully exploit the potential of centralisation, the number of procurement bodies should be reduced and qualified specialists should be concentrated in competence centeres with a clear specialization, urges the VK.
This would contribute to savings in administrative resources and better process management. It is also necessary to promote greater involvement of local governments in the centralization of procurements, since currently almost a third of municipalities do not carry out centralised procurements, invites the VK.
In its audit assessing the effectiveness of public procurement in the home affairs sector, VK concluded that the public procurement system set up in the sector needs to be improved in order to be able to meet the needs of the sector’s authorities in a timely manner and to the extent necessary. From 2021 to 2023, more than a third or 34% of the announced procurements or parts thereof have closed without result.
The audit of the State Audit Office has found that the most significant obstacles to the successful conduct of procurements at the moment are the low capacity of the staff involved in the performance of the function, which is influenced by a number of factors – workload, which varies significantly between departmental institutions, uncompetitive remuneration, as well as insufficient training. Deficiencies in staff capacity also have a negative impact on the planning and implementation of staff work in the field of procurement, i.e. on the ability to meet deadlines, to prepare high-quality procurement documentation, to raise awareness of procurement among suppliers, as well as to apply a more flexible framework for security procurement.
Five recommendations have been provided to the Ministry of Finance in order to make the regulation in the field of public procurement simpler, more understandable and more flexible, to increase the level of centralisation of procurements, to determine the remuneration of procurement specialists taking into account the risk of corruption and restrictions on rights.
The VK encourages ensuring that at least 90% of procurement specialists from central purchasing bodies working in the public sector attend a certain amount of training in the field of public procurement, as well as the chairpersons of the central procurement commission attend advanced training.