The state procurement system in Georgia: Companies’ views (Part 1)

The Unified Electronic System for State Procurement was introduced in Georgia in 2010. The system aimed to simplify the state procurement process and make it transparent. According to the State Procurement Agency, “Every year, the state spends hundreds of millions of lari on procurement of different kinds of goods, services and construction. … Accordingly, private companies ought to be interested in state procurement as an important potential source of increasing their incomes.” However, according to the findings of a Survey of companies on the state procurement system conducted by CRRC-Georgia for Deloitte Consulting LLP and USAID in August 2016, a majority of companies do not actively participate in the state procurement process. Based on CRRC-Georgia’s report on the subject, this blog post discusses problems with the system in the companies’ views.

According to the State Procurement Agency’s 2015 annual report, 15.6% of active companies have bid on state procurement tenders (pg.17). On CRRC-Georgia’s survey 17% of companies report taking part in the state procurement process, and approximately half of these companies report doing so only sometimes or rarely. Seventy-three percent of companies report not being registered in the Unified Electronic System for State Procurement (UES), which is a requirement for bidding on state procurement tenders.

Note: 2% of companies, whose representatives answered “Don’t know” to the question: “Is your company registered in Unified Electronic System for State Procurement?” were excluded from the analysis. 

The results of the survey provide some insight about why companies do not participate in state procurement. Most frequently (56%), a lack of interest in participating in the state procurement process was mentioned as the main reason for not participating. We do not, however, have any information about why there is a lack of interest. The second most common reason company representatives mentioned for not participating was that the tenders announced are not applicable to the company’s field of activity (27%).

Note: Only answers of the representatives of companies that are not registered in the Unified Electronic System for State Procurement (73%) are presented in the chart above. 

A majority of companies (64%) report having no information about the announcement of state procurement tenders. Given this general lack of information, it is not surprising that their representatives found it difficult to assess how fairly different types of tenders are conducted. Notably, representatives of 76% of the companies report they have not heard about seminars which the State Procurement Agency conducts with the aim of increasing the knowledge of business people about the state procurement system.

Note: The chart shows distribution of answers of the 83% of companies that have not participated in state procurement system. Companies whose representatives answered “Refuse to answer” to the question are excluded from analysis. There are five types of state procurement tenders in Georgia: simplified procurement, simplified electronic tender, electronic tender, consolidated tender and contest. Definitions of each type of tender are available here.

It is possible that the lack of information is an obstacle to greater participation in state procurement processes. Thus, the State Procurement Agency should better inform companies about its activities.

The second part of this blog post, which will be published next Monday, shows how representatives of companies assess the state procurement system based on whether they have or have not participated in the state procurement system.