Center for Economic and Social Development

CESD held Oil Transparency Conference in Baku on December, 14, 2010 with participation of various stakeholders

The Center for Economic and Social Development (CESD), with support from the US Embassy in Azerbaijan, is carrying out the monitoring of tenders that are financed by oil revenues. Round-table discussions with participation of representatives from government, non-government, international organizations, mass-media were held in December 14, 2010. Representatives of State Oil Fund, State Irrigation Committee, World Bank, different embassues, Oil Research Center and other organizations attended the round-table discussions.

Vugar Bayramov, chairman of CESD, mentioned that the aim of the project is to support the more efficient use of oil incomes and to raise the level of transparency in this field. This is the reason why the monitoring of tenders financed by the Oil Fund has taken place.

Leyla Aliyeva, Project manager, said that during the monitoring, it was discovered that while selecting bidders, the authorities have, in most cases, not followed the demands of the “Law on State Procurement.” In the official documents, it is declared that 7 tenders for the reconstruction of the Samur-Absheron irrigation system and 10 tenders for the construction of the Oguz-Gabala-Bakı irrigation system were to be held.

But the press announcements regarding these projects do not match the number of contracts that were signed. This means that contracts have not been signed as the outcome of procurements. The increasing values of such projects and the prolongment of the period of implemenation have discouraged transparent tender processes to be carried out.

For example, the construction of the Oguz-Gabala- Baku irrigation system is continuing 3 years into the project. Even though it was said that it would be completed in November, the works have not yet been finished. International tender experience shows that the tender is awarded to the organization offering the lowest cost budget and the shortest implementation period.

The most interesting thing about the Oguz-Gabala-Baku irrigation system is that the contract was signed with an inactive organization. That is why the demands of the “Law of State Procurement” were broken. This is because the professionalism, technical and financial opportunity, management, and reliability of the organization in this field have been defined as the main priorities during tender selection. However, we cannot discuss the professionalism, experience, and management skills of an organization that is not active.

Among the projects funded by the State Oil Fund, the most critical situation about the tender transparency is in the area of improving the social welfare status of refugees and internally displaced people. Until 2007, the 3 client organizations for these project were the State Committe on Deals of Refugees and Internally Displaced Persons, the Social-Development Fund of Displaced People, and the Agency of the Reconstruction and Rebuilding of the Occupied Territories It has resulted that these organizations did not take their responsibility for the tenders.

The monitorings that we conducted show that there is not any legal base considering the timing of the tenders, about the names of the participants that were selected, about the sharing of the incomes according to the districts, and about the technical-economic justification of said project. Because, in reality, tenders are not held by these organizations. 10-15 tenders are organized in all 100 work. Up to this time, the work is divided between the same organizations. Of the 16,051 homes that have been built, there is still no information about which organisation built them, if they were selected by tenders or not, what the condition of the tender was, and the mechanism of the spending of such incomes.

The procurement of the execution of the works for the joint Baku-Tbilisi-Kars railway project of three countries –Turkey, Azerbaijan, and Georgia, was held according to the legislation of Georgia and Turkey. That is why these tenders are different from the project tenders that are funded by the State Oil Fund. Thus, there are tender announcements about the project. These announcements also show the materials that should be bought, the volume of the work that should be done, the technical parameters of the project, and the volume of the cargo that should be carried by the railway in the first stage.

The most important thing is that the “Marabda-Kartsaxi Railway LLC”, which is responsible for the execution of the project from the Georgian side, implemented seperate tenders in different service sectors. Nevertheless, according to the project of the construction of the Oguz-Gabala irrigation system, the rebuilding of the Samur-Absheron irrigation system, and the improvement of the social welfare status of refugees and internally displaced families, there are no tender announcements related with account and sevices like this.

The negative sight of the tenders implemented according to the projects is keeping the technical parameters a secret. If a transparent tender process were to be held, the technical parameters of the projects would be known.

The length of the Oguz-Gabala-Baku water pipe is not clear. The contractor organizations show one number and the client shows a different number for the length. In the project of the rebuilding of Samur-Absheron irrigation system, technical parameters are not shown. During the implementation process of the project of the improvement of the social welfare status of refugees and internally displaced persons, several works were postponed. For example, there are no bath–houses in most settlements.

On the other hand, executive organizations assigned to the projects are institutions which have close relations with the the government. Only the organisations that are very close to governmental bodies are permitted to implement tenders. Other organisations are not allowed to participate by different pretexts. Though they are allowed to the tender with great deprivations, again, the winners of the large projects are the organizations that are close to the governmental bodies.