Open procedures and dividing public works into separate lots help fight against corruption and excessive costs of construction services in Germany
Press Release – November 7, 2013
The Supreme Audit Office (SAO) together with the Bundesrechnungshof (BRH, the supreme audit institution of Germany) worked out a joint report on a parallel audit of public building procurements. Auditors aimed at public building procurements in both the countries and underlined the fight against corruption. “In the Czech part of the report, auditors aimed to answer the following question: Why motorways in the Czech Republic are more expensive than in Germany (by one-fourth)? In the report, they tried to describe the differences between Czech and German procedures and methods of utilisation of public funds in large-scale construction projects, as well as why the building costs can be kept at minimum and how corruption can be prevented in the frame of public contracts awarding in Germany“, said president of the SAO Mr Miloslav Kala.
In Germany, open procedures are preferred with public building procurements. For instance in 2011, open procedures were used in 80 % of German federal road and building constructions, while in the Czech Republic, open procedures were used in 65 % of public contracts for supplies, services and construction works. On the basis of the information compiled about more than 16,000 contract award procedures, the BRH found that bid prices quoted in restricted procedures and negotiated procedures were 6–10% higher than those quoted in public procedures. “The parallel audit operation offered a great learning opportunity to both audit institutions. Auditors could compare various awarding methods as well as different legislation related to the topic“, said Andreas Rahm, Senior Director of Audit Division V of the BRH.
Another significant difference between the two countries is that in Germany, public works are divided into lots whenever possible. By awarding separate contracts for the lots, as many enterprises as possible are given the chance to compete. Thus there are more competitors and small & medium companies get the chance too. Better competition also helps decrease the bid prices. An example was described by the SAO auditors, who analysed three major road constructions included into the project of the ring road around Prague: Auditors estimated that at least CZK 790 million from the total implementation price in the amount of CZK 15,500 million could have been saved had the works been awarded by lots (i. e. for each individual building) in open procedures.
The joint report describes more differences between the two countries, which increase the costs of building and road constructions in the Czech Republic. In Germany, contracting authorities use central databases for objective setting estimated public works’ prices. There are no central databases in the Czech Republic. (In the Czech Republic, the databases are used only in the area of road construction, but they are not an efficient tool as yet.) In Germany, the bid price is compared with estimated unit costs, while in the Czech Republic only the total prices are to be evaluated. Czech contracting authorities usually fail to define the right evaluation criteria, which would help in the selection process.
In the Czech Republic, requirements for proving the bidders’ previous experience were sometimes exaggerated. For example, in an open procedure for a motorway construction project, the contracting authority required the bidder to have finished at least three road constructions, each worth CZK 700 million at minimum. There are only nine companies in the Czech Republic, which could fulfil such a requirement. These parameters were the reason why in the period 2008–2009, two-thirds of amounts designated for building construction projects (i. e. contracts worth CZK 62,500 million in total) were awarded to five individual companies. With 46 contracts worth CZK 13,200 million, there were only two bidders, even sometimes only one bidder.
Communication Department
Supreme Audit Office