PUBLIC PROCUREMENTS OF THE CITY OF BANJA LUKA Machinations for 'Hidrosplet' on the Banks of the Vrbas River

When the mayor of Banja Luka, Draško Stanivuković, along with a group of bidders led by 'Hidrosplet' from Laktaši, concluded a contract worth 725,733.63 marks for the development of a sports and recreational centre on the banks of the Vrbas River, it was just one in a series of contracts awarded to this obviously favoured bidder.

Written by: Miljan Kovač

The fact that "Hidrosplet" was awarded a lucrative contract from the city of Banja Luka for the development project on the Vrbas River banks was seemingly prearranged, as indicated by the public procurement procedure itself. As an example, one of the conditions for participating in this public procurement, stated in the tender documentation, required that the bidder has successfully completed a maximum of three contracts related to the development of riverbanks or similar projects in the last 5 years, with a total value of at least 550 thousand marks with VAT.

"Hidrosplet," or the group of bidders associated with this company, has indeed fulfilled these conditions in its business dealings with the city of Banja Luka in recent years.

The procedure for public procurement itself serves as evidence that this time as well, everything was prearranged for "Hidrosplet" to secure a lucrative contract from the city of Banja Luka. Unlike many cases where "Hidrosplet" appears as the only bidder in tenders issued by the city of Banja Luka, this time there was competition. The criterion for selecting the most favourable offer was the "lowest price." The bid submitted by a group of bidders led by the company "Egić-kop," which was only 220 marks lower than "Hidrosplet's" bid, was rejected for formal reasons. The choice came down to two bids, with the chosen one being about 500 KM lower than the bid submitted by "Gradip" from Prnjavor.

On April 27th of this year, the city of Banja Luka concluded a public procurement contract with a consortium led by "Hidrosplet" for the development of a sports and recreational area on the banks of the Vrbas River, from the City Bridge to the Green Bridge. The contract's value without VAT is 725,733.63 KM. The criterion for awarding the contract was the "lowest bid price."

Three bidders applied for the tender, but it was determined that one of the offers was unacceptable for formal reasons. Interestingly, this was the lowest bid submitted by the group of bidders led by "Egić-kop" from Banja Luka, while the bid from the company "Gradip" from Prnjavor was about 500 KM higher than the chosen bid.

It's indicative that the group of bidders around "Egić-kop" did not file a complaint regarding the public procurement procedure, even though they were eliminated from such a lucrative project due to a trivial mistake. This deficiency could have been easily rectified, as the contracting authority, in accordance with the Law on Public Procurement, could have requested that the bidder correct the deficiencies within three days.

However, according to experts in the field of public procurement, the fact that this involves a minimal difference in bid prices, as well as the fact that these are bidders who have been receiving lucrative contracts from the same contracting authority for years, raises the possibility of collusion – mutual agreement among the bidders, and often with the contracting authority.

This suspicion is further supported by the fact that "Egić-kop," in parallel with this public procurement procedure, received lucrative contracts from the city of Banja Luka. On April 20th, this company concluded two contracts worth around 93,000 KM with the city, involving the construction of children's playgrounds. "Egić-kop" was the sole bidder. In early June of this year, the company secured another contract for the construction of a playground in the Starčevica neighbourhood worth 35,890 KM.

Last year, "Egić-kop" concluded several contracts with the city, including a contract for the construction of a water supply system in Goleši worth 179,149.58 KM.

On the other hand, "Gradip" from Prnjavor is an essential partner in the public procurement procedures of the city of Banja Luka. Their most significant project received from the city was the reconstruction of the "Kuća Milanovića," valued at 4,275,500 KM without VAT.

Furthermore, neither "Egić-kop" nor "Gradip" have experience in the development of riverbanks, a requirement for projects exclusively awarded to "Hidrosplet."

"Hidrosplet" Always Wins

Mayor Stanivuković, in conjunction with a group of bidders led by "Hidrosplet," concluded a contract for the development of the Vrbas Riverbank in the Srpske Toplice neighbourhood on August 12th of last year. Although the total value of the work, as stated in the tender documentation, was estimated at 145,226.50 KM, an offer worth 184,644.32 marks submitted by a group of bidders led by "Hidrosplet" was accepted.

Damjan Ožegović from Transparency International BiH points out that before amendments to the law (in September of last year), there was a possibility to conclude a contract at a higher price than the estimated value.

"However, only under the condition that the contracting authority later secures the funds. But that would undermine the procedure itself, as the contracting authorities should check market prices before concluding, i.e., how much a particular procurement would cost, and then lower that price through competition in the further process. So, it doesn't make sense to conclude a contract at a higher value. Because the point is to estimate the maximum in order to narrow the choice down to the minimum afterwards," says Ožegović.

The competition was absent once again, but unforeseen work emerged. Therefore, a contract worth 36,765.02 marks for unforeseen work on the development of the Vrbas Riverbank in the Srpske Toplice neighbourhood was concluded with this bidder on March 17th after a negotiated procedure. On the same day, but based on a competitive request, the city of Banja Luka concluded a contract worth 74,943.75 KM with "Hidrosplet," which covered "subsequent work on the development of the Vrbas River."

One of the most profitable projects that "Hidrosplet" received from the city was the development of a public thermal water bath, also in Srpske Toplice. A contract worth 428,846 marks was concluded on April 27th of this year.

The bidder from Laktaši submitted an offer that was only slightly higher than 100 marks above the estimated value. There was no need to worry about competition, as once again there was none. A condition stipulated in the tender eliminated competition: the bidder must have successfully completed one or a maximum of two contracts related to the procurement subject, with a minimum value of 500,000 marks including VAT.

The city, as the contracting authority, had no doubt about who met this condition – they had precisely signed those contracts with "Hidrosplet."