The NEN tool cost CZK 230 million and was launched 2.5 years behind schedule; only few public contracts have been awarded so far

PRESS RELEASE on Audit No. 15/10 – April 18, 2016

The Supreme Audit Office (SAO) scrutinized the Ministry of Regional Development and funds, which were utilized for development of the national infrastructure for electronic tenders (NIPEZ). Auditors aimed at the national electronic tool for awarding of public contracts (NEN), which is one of the NIPEZ features. The development of the NIPEZ cost around CZK 700 million.

Originally, it was supposed that electronic tenders would bring CZK 50,000 million of savings annually as well as improve the transparency of public procurements. However, the task of improvements and cost-reductions of tender procedures, which had been set by the Government’s Strategy for Computerisation of the Contracting Process, was not achieved. The second main task of the said Strategy aimed at development of the national electronic tool for awarding of public contracts (NEN). According to the Ministry of Regional Development, the NEN would generate savings in the amount of 5,000 million in 2015. The NEN has indeed been working since August 2015, but many serious problems occurred during its development, launching, and test-operation phases.

The NEN was launched two and half years later than originally planned. The Ministry of Regional Development spent more than CZK 230 million for its development and additional CZK 4 million for each month of its operation. Planned savings in the amount of CZK 5,000 million have not been generated. As contracting authorities are not obliged to use the NEN, they have rarely applied the system so far. Only seven public contracts were published in the system within two months of its operation, and many registered contracting authorities are using the NEN only to publish their obligatory disclosed information.

Launching the NEN fell behind the schedule namely because the supplier did not deliver the prototypes for testing by the pre-set deadlines. For example, the second out of all six prototypes was delivered as late as in December 2012, when the whole NEN should have already been finished. The testing phase took eighteen months, during which it could not be used for procedures for the award of public works contracts. Nevertheless, the Ministry of Regional Development had to pay CZK 46 million for its operation during this phase. The NEN was finally put into service in August 2015. In spite the high costs, the Ministry failed to impose the obligation to use the NEN for public procurements, not even within the Ministry itself. Private companies used delays of the NEN’s development to bring own tools into operation, which are actually used by many public contracting authorities.

Auditors warned of data incompleteness, duplicities, and errors in the e-markets, which had also been criticized in the previous auditing operation that had pointed out that there were too many e-marketing platforms. To date, only two e-markets have been operational, which are to cease their operations in 2017 since the Ministry expects they will be fully replaced with the NEN by then. There is a risk that the Czech Republic will have to pay back funds received from the EU because of violation of the so-called project sustainability condition, which requires further 5 years of continuing operation after the project has been implemented. Data contained in Public Procurement Bulletin as well as in Public Procurement Informational System are of poor quality, which reduces the transparency of public procurement procedures.

Auditors also concluded that the Ministry of Regional Development had violated the budgetary discipline in the amount of CZK 267.6 million in relation to the NIPEZ and the NEN. The Ministry also violated the Public Contract Act as well as conditions for co-funding the projects from the EU. For example, the Ministry unjustly awarded a contract without tendering and significantly altered the conditions pre-set in the tender documentation and in the agreed subject-matter, which could have negatively affected the selection process.

In 2015, the European Court of Auditors (ECA) aimed at awarding of public contracts and recommended greater use of electronic tools. For example, the ECA pointed out that out of 700 contracting authorities in Cyprus, more than 500 registered for e-procurement. By the end of June 2016, public procurement should be fully electronic in Cyprus.

For the first time, the SAO published the full data collection related to public contracts included in Public Procurement Informational System within the frame of the auditing operation, so that it is possible to identify any data changes in the future.

Communication Department
Supreme Audit Office

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