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Overlooking oversight: Lithuania’s EU Presidency is high in No-Bid contracts

  • 2013-08-08
  • By Linas Jegelevicius

Agne Bilotaite: “We tend to review things after they are over. Not in the pipeline or through the process.” The practice very much undermines corruption prevention.”

VILNIUS - A month into the presidency of the Council of the European Union, Lithuania is awash in public tenders, for everything from engraving ballpoint pens to providing logistics for thousands of expected guests. However, slightly over 60 percent of them are unannounced tender contracts or no-bid contracts, funneled to a select group of well-connected companies, according to an analysis of public tenders by 100Reporters and this The Baltic Times correspondent.

The number of no-bid contracts and single-bidder contracts is expected to rise, as the ruling Social Democratic coalition moves to speed up the awarding of contracts surrounding the EU Council Presidency by streamlining procurement rules.
Public tenders awarded without bidding, or reserved for a single company, can be a sign that connections, not public interest, are at play in the awarding of government contracts. Lawmakers and anti-corruption watchdogs fear that the EU Presidency will be a Trojan horse for looming large-scale corruption in Lithuania that may endure long after the country’s stint as president ends. The risk is aggravated by lax oversight of funds budgeted for the rotating council presidency.

With a considerable part of the $85 million in EU-presidency related spending still to be awarded, “the battle for the money will only intensify,” said Agne Bilotaite, a lawmaker and member of the parliament’s Anti-Corruption Commission.
In addition to the spate of no-bid contracts, transparency advocates say there have been other red flags. Litexpo, a company that had won a major catering contract, suddenly gave it up. The contract then went to a firm with close ties to government officials. And the government has concentrated all EU-related events in the capital, shutting out second-tier cities like Kaunas in central Lithuania.

Much is at stake for Lithuania, the first Baltic State to have been granted the right to host the EU Presidency. Its leadership will increase Lithuania’s visibility on the continent, boost national pride and, importantly, the economy, pumping over $85 million into the local economy, one with 13.1 percent unemployment and one of the highest rates of emigration in the EU.
Lithuania’s six-month commitment for the 28-member state European Union - the biggest confederation with the second-largest economy in the world in 2012 - will serve as a unique opportunity to draw the EU’s attention to the small Baltic country’s most important issues: energy security, relations with Russia, control of the EU’s outer borders, cooperation in the larger Baltic Sea region and cyber security.

But transparency advocates say its turn at the Presidency risks throwing Lithuania back to the early 1990s, when rampant corruption gripped the state.
According to an analysis by 100Reporters, of some 46 public contracts for work connected to Lithuania’s Presidency of the EU, 20 of them, or 43.3 percent, were handed to companies through unannounced tenders. i.e to without bidding. In comparison, of all 13,258 national public tenders in Lithuania during the same period, 2,317, or a little bit less than 16 percent, were unannounced tender contracts.

Another 10 contracts for work tied to Lithuania’s EU Presidency, or 21 percent, were let through simplified bidding procedures, raising the risk of corruption. In comparison, 3,538 national public tenders, or 29 percent, involved only single bidder tenders during the same period.

Naglis Puteikis, a Conservative member of parliament, said he was not surprised by the findings. “It’s common knowledge that no-bid tenders, or limited ones, increase steeply the possibility of corruption and getting kickbacks,” Puteikis said. “But who cares when, after greasing the right person’s palm, you get a luscious contract?”

Valentinas Mazuronis, Minister of the Environment, said the spate of no-bid contracts were not a sign of corruption, but of the need for speed. “I don’t care as much about the form of the tenders as about having a successful Presidency of the Council of the European Union,” Mazuronis said. “Why doesn’t anyone contemplate what would have happened if, with the dozens of tenders to be organized in a short time, we’d have got backlogged, perhaps putting the Presidency in jeopardy?”

Mazuronis had proposed streamlining the bidding process, and said he still supported limiting competition for public tenders. “The simpler procedures will make the whole process easier and more effective,” Mazuronis said. “And, I am sure, transparency won’t suffer.”

If corruption does contaminate contract awards, the EU is unlikely to find out on its own. The EU exercises virtually no oversight of funds that go for the rotating Presidency. Rather, member states that hold the Presidency are expected to use national institutions to exercise oversight.
Speaking in general of EU funding use in the country, Bilotaite said the lack of independent oversight by the EU leads to a disregard for overspending at the national level: “C’mon, it is European money,” she quoted fellow lawmakers as saying. “Don’t worry too much about it.”

Contract surrendered
Darijus Aleknavicius, the former director of Litexpo, recalled painstaking work to win a major $1.6 million catering contract for events in Lithuania during the country’s Presidency. After winning the contract, however, the company mysteriously gave it up, saying that its kitchen facilities were not up to the task.
In stepped the tender’s runner-up, Taurakalnis, a company with ties to influential Social Democrats in the government and parliament. Taurakalnis already handles the government’s catering needs for employees.

“It might be just a mere coincidence, but still it raises some questions,” said Sergejus Muravjovas, director of the national affiliate of Transparency International.
Meanwhile, Bilotaite has launched a parliamentary investigation of the procurement, but with the parliamentary holidays until mid-September, the probe will evidently drag on, and the outcome remains vague.
“The argument of improper or missing kitchen facilities cannot be taken seriously. At this point, it isn’t clear what made Litexpo relinquish the lucrative contract to a rival with ties to the ruling Social Democrat Party,” Bilotaite noted. She says a new tender should have been posted after Litexpo withdrew.

“It simply relinquished the right to the runner-up. The Public Procurement Law has obviously been violated, but it seems to me it had been pre-arranged in case the initial tender turned up another winner,” said the Lithuanian lawmaker. “This is a clear example of corruption.”
She has sought to place the case on the agenda of the Anti-corruption Commission, but in vain.
“I cannot think of any other so urgent question in terms of corruption as this one. But I failed to get it into the agenda as the chairman of the commission, representing the ruling coalition, refuses to do it, citing the triviality of the issue,” Bilotaite said.

The chairman, Vitalijus Gailius, could not be reached for comment.
Contacted for the story, Aleknavicius refused to discuss the tender. Earlier, he had suggested that he quit the company after facing “big political pressure” to create a new deputy director post at Litexpo - a common scheme in Lithuania and elsewhere, to give the ruling party a hand in the company’s management and a share of its contracts and spoils.
Aleknavicius’ successor, Aloyzas Tarvydas, is a seasoned Social Democrat with close ties to a number of top Social Democrats in the government and Lithuanian parliament.

Irena Cereskiene, whose Taurakalnis took over the catering contract from Litexpo, also has long-standing ties with top officials of the Social Democratic Party. “When I was at the helm of Litexpo, we’d done everything that we could for the tender, to win it and to fulfill the contract,” Aleknavicius said. “It sounds incredible that with the huge investment done, an argument of improper or missing kitchen facilities was raised to explain ceding the contract.”
Public Procurement Service director Zydrunas Plytnikas has refused calls to start his own investigation of the contract. Some suggest the results of such an investigation - should they find improprieties in the procurement service - could cost Plytnikas his job.

Cities shut out
Unlike previous EU Presidency hosts, Lithuania has given the coveted Presidency activities only to its capital, Vilnius. The city has turned into an enormous construction site. Large hoardings in and around the Old Town hide the ear-shattering clatter and roar of jackhammers. Commuters scurry along, some cursing, through clouds of billowing dust.
The last time Vilnius saw public works projects on such a vast scale was “in the Soviet era, before a visit of the Soviet Union Communist Party’s General Secretary,” said Mantas Varaska, a member of the Lithuanian Parliament. “But will freshening up the Old Town conceal the grim picture of pothole-ridden streets, cracked pavements and rust-gnawed streetlights just a few kilometers away?” he asked.

Officials in other cities complain they have been shut out. “We’ll have only little crumbs from it,” said Andrius Kupcinskas, mayor of Kaunas, Lithuania’s second-largest city.
Expectations in Kaunas had run high. “Just a year ago, invited to the Ministry of Foreign Affairs for a hearing on the preparation for the mission, we heard assurances that Kaunas qualifies for hosting all D-level events that involve events organized by Commerce and Trade Chambers, universities and non-governmental organizations. In just a year, it’s all turned around,” the mayor complained.

In letters, the Foreign Ministry and Brussels gave city officials a single explanation: Kaunas’ infrastructure was inadequate. The mayor expressed shock, noting that Kaunas had already hosted a number of European-wide events, including the European Youth Track and Field Championship and qualification games of the 2011 European Men’s Basketball Championship.

“I couldn’t believe it,” Kupcinkas said. “It’s not a matter of insufficient infrastructure. Vilnius lobbyists and authorities had planned on taking away the EU Presidency from us long ago,” the mayor fumed. “When it comes to events like the EU Presidency, things should not be done this way.”
In Ireland, which held the presidency over the last six months, guests mostly used public transport and reserved eco-friendly vehicles only for ministerial-level events. In Vilnius, 160 BMW luxury cars - the dominant brand in the Lithuanian parliament’s fleet - will provide transportation services.

Vytautas Sileikis, director general of Kaunas’ Industry and Trade Chamber (KITC), said the city was sidelined because of only a “few lobbying efforts and a reluctance to grease palms.” He declined to elaborate.
As a member of the Enterprise Europe Network (EEN), a European body at the European Commission (EC) created to help small businesses through the European Union, “we were quite confident that Kaunas will be granted rights to host the EEN’s three-day annual conference,” Sileikis said. “That would have pocketed the city $2 million. But it did not happen.”

And there have been numerous hints not to apply, as the events had been already slated for Vilnius.
But impartiality in sharing the rest of the Presidency pie may be just one piece of a larger picture, said Pranas Zeimys, a Lithuanian legislator. He is particularly concerned by a bill the Social Democrats are pushing to streamline EU-related tenders.

“We’ll have a slew of no-bid contracts,” said Zeimys. “They would ostensibly relieve pressure on the EU Council Presidency, but the Presidency cannot be a sacred cow when it comes to accountability and corruption.”
Puteikis is stunned by a sudden 60 percent hike in the government budget for travel abroad during the EU Presidency half-year, to $35 million from $22.7 million. “Alarmingly, public tenders are not required for these services,” the legislator said. “That is the creek where corruption will spawn.”

Bilotaite is convinced that the extent of corruption will surface only after Lithuania’s stint in the Presidency ends and the damage is done. “That is how it usually is in Lithuania,” she said. “We tend to review things after they are over. Not in the pipeline or through the process.” The practice, she said, “very much undermines corruption prevention.”