State tenders and Navalny’s crusades

Another repost of something I’ve done for work (hence the less frank tone of the post, although I added some notes in italics in parentheses).

On March 5, the Ministry of Economic Development published the conceptual framework of the draft federal law On the Federal Contract System, a proposed conceptual framework to replace the current On State Tenders law  (Law 94-FZ), which was adopted in 2005 but has been repeatedly amended since. The new law seeks to standardize, systematize, and centralize the current law, as well as to soften some provisions that have been viewed as overly rigid and unfair toward honest bidders.

The current state tenders law requires that a rigid procedure be used for all state procurements, a volume that totaled 5 trillion rubles ($176.7 billion) in 2010.  To do so, the conceptual framework proposes extending the list of types of state tenders by including open as well as closed two-phase tenders, online auctions, one-phase tenders with preliminary qualification selection, and “competitive negotiations.” Aleksandr Shamrin, pro-rector of the Higher School of Economics (which provided expertise and research for the new law) noted that the conception is premised on the “presumption of honesty of the customer,” and argued that the proposed law would not only reduce corruption, but also increase quality of service and save budget funds.

However, the conceptual framework and especially its “presumption of honesty of the customer” have drawn strong criticism from representatives of Gaidar Institute for Economic Policy, who argued that, if one assumes such honesty on the part of all customers, no state procurement bill is needed at all, as its functions would be fulfilled by the Civil Code. The Gaidar Institute representatives went on to argue that it is the rigid part of the current state tenders law that helps fight corruption and prevent economic abuses during the state tender process.

The well-known whistleblower and anti-corruption activist Aleksey Navalny also argued on his blog that the proposed bill would dramatically increase corruption in the area of state tenders. Specifically, Navalny sharply criticized the proposed introduction of “pre-qualification” phase for several types of tenders and tenders in the form of “competitive negotiations.” (Navalny hilariously proposed to call “competitive negotiations” “placement of order by sitting in a restaurant and drawing the kickback scheme on a napkin”.) As a result, rector of the Higher School of Economics Yaroslav Kuzminov invited Navalny to participate in an open discussion, which took place at the Higher School of Economics on March 18. Even though the discussion lasted 3.5 hours, analysts felt that it lacked economic substance.

(I also want to add that there is a whole class of people on the Russian blogosphere who, despite being generally open-minded and democratically inclined, dislike Navalny because they simply cannot believe that he is doing his anti-corruption activities just because he likes it, and they continuously try to expose his “bosses” and “who’s paying him”. Literally, there is a top-rated post on the Russian-language segment of LiveJournal almost everyday that reads something like, “Navalny’s bosses uncovered!”. I have a little more faith in Navalny’s good intentions and clean conscience, and the main problem I have with him is his nationalist inclinations, which he never tried to hide, but which, fortunately, faded into background lately.)

In response to the criticisms, the Ministry of Economic Development on March 17 published a revised version of the conceptual framework; however, the new version mainly elaborates on the old principles without changing the overall direction. Analysts have pointed out that the Ministry of Economic Development slightly differs from the Higher School of Economics on the issue of tenders, as the former calls for creation of a self-regulating system that would be transparent for the government, though not for the public, whereas the latter seeks to implement the “presumption of honesty of the customer,” along with external and administrative controls.

It remains to be seen which procedure for state tenders will be eventually adopted. The Ministry of Economic Development states that negotiations with “federal executive entities, as well as representatives of the Russian Federation subjects, business and expert community” are underway, which hints at the possibility of collaboration between society and the decision-making community.


About Allantoin

A Fierce Russian's Perspective is a blog about the world as seen by a Russian immigrant (yours truly).
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