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23 December, 2011

Tender Thugs

Those in power can easily prove the legality of any scam

Estonian businessmen found themselves kicked out of a public tender after they failed to supply a signed anti-corruption commitment. The Ukrainian winners ended up looking so squeaky clean in contrast that they seemed better suited to EU membership than the Estonians. The Ukrainians taught their foreign guests a thing or two about doing business without a hint of corruption.

The Department of Gas and Natural-Gas Condensate Processing at UkrGazVydobuvannia, a state-owned company for gas extraction and subsidiary of Naftogaz Ukraine, decided to buy several tons of materials for production purposes. The purchase list included pour-point depressants, demulsifiers, inhibitors and more. Following the law, the Department published an announcement of the upcoming tender in the Public Procurement Newsletter and a copy in an international newsletter.

This piqued the interest of an Estonian company hoping for a chance to rake in some cash in Ukraine. Thus, Indore Chemical, a joint-stock company, appeared before the tender committee of UkrGazVydobuvannia in Bazylivshchyna, a village in Poltava Oblast.

Could there be any better way to advance toward European integration? Not likely! Yet, the foreigners’ visit hardly impressed the Ukrainians, who graciously arranged a festival of legality for their international guests. After closely scrutinizing their tender bid through an anticorruption microscope, Ukrainian clerks uncovered terrible things indeed!

As Estonian businessmen arrived for the tender, their minds simmered with criminal intentions. According to the protocol of bid disclosure, Indore Capital failed to provide 10 of the required certificates. These included a written pledge not to enter into a price conspiracy with other participants of the procurement procedure, whether intentionally or not.

Moreover, the Estonian company failed to submit nine more papers that, if provided, would have secured them a reputation as a reliable partner under Ukrainian law. The EU businessmen had no certificates to confirm that they had the proper material and technical resources, or staff with the necessary skills and expertise, nor did they provide a statement proving that their representatives in the Ukrainian tender had never been jailed for corruption.

Can you believe these presumptuous and arrogant Estonians? Barging in with their products priced in Euros, and without a single certificate! Thus lacking documentation, let justice prevail!

In firm compliance with the law on public procurement, Poltava gas dealers listed all crimes committed by the Estonians in the protocol. Once they were done with the international racketeers, a good old perfectly legitimate, well-balanced tender began. All the gas dealers had to do after kicking out the foreign villains was choose a chemical supplier from the remaining participants. In the end there were just two—the minimum number of contenders required for an open bid tender, namely Ched-Nasad LLC and RaiAgroStroy-Perspectyva LLC.

These competitors are seasoned public procurement participants. They knew perfectly well from previous experience which pile of paper they had to present before the legal crusaders on the tender committees to come out as clean as a whistle—and the trick worked.

The Poltava gas peddlers scrutinized the piles submitted and decided to choose between the two Ukrainian suppliers, dropping the Estonians like hot potato. In the process, they even forgot to list the price the foreigners had requested for their supplies in the protocol. It was apparently such an outrageous sum that the tender guys thought it would be too embarrassing for the foreign swindlers.

By contrast, the Ukrainian competitors were ideal tender participants. They had all the required documents, and both were registered in Simferopol. Both had Kharkiv-born owners and statutory capital worth UAH 50,000 (US $6,250) and UAH 42,000 (US $5,250) respectively. With such a wide range of choices, the decision naturally hinged on the better price offer. Thus, the gas dealers ended up with Ched-Nasad, a company that was set up just one year ago. With statutory capital worth UAH 50,000, it won with an estimated offer of UAH 5,556,777 (US $649,597), just UAH 493 or US $66 less than an offer by RayAgroStroy-Perspektyva, founded back in 2007 with comparatively “miserable” statutory capital.

The mere 0,009% difference in the competitors’ prices did not scare their government clients. The Kharkiv-based Crimeans provided certificates pledging not to arrange a price conspiracy, and the rest is irrelevant since the law does not say anything about 0.009%.

Today’s officials can easily prove the legality of any scam. Indeed, it’s not their fault that some EU dummies came to bid in a Ukrainian tender oblivious to local legal requirements aimed at thwarting corruption. As a result, the winners grabbed 5.5 million hryvnia in strict compliance with the law. And who cares about things like Doing Business 2012, an index of business friendliness in the world, where Ukraine ended up 30 countries from the bottom at 152nd place, while Estonia rests 24th from the top. Meanwhile, the President can keep showing an insulted grimace to a Europe that is reluctant to accept Ukrainians the way they are. After all, it was Europe who sent their certificate-less charlatans to the perfectly law-abiding country of Ukraine.


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