Belgrade Waste Contract Leaves Law in Dumpster

The tender awarded by the city’s public utility company, Gradska cistoca, worth around €6 million, breached the Public Procurement Act. | Photo by Aleksandar Djordjevic

While Belgraders get used to their new underground waste containers, 1,800 of which are being set up round the city, BIRN can reveal that the tender awarded by the city’s public utility company, Gradska cistoca, worth around €6 million, breached the Public Procurement Act.

The first violation was that only two bids were submitted for the tender issued in March 2011, one of which was deemed inadequate.

Although the Public Procurement Act from 2008 obliges the procuring entity to issue a new tender in such cases, Gradska cistoca nevertheless opened negotiations with the other bidder with which it finally signed a contract.

The deal went to a consortium comprised of two companies, a Belgrade-based company, Blok, which had no previous experience in this field, and Blagojevica from Mladenovac, which did have some experience but was founded by an owner of numerous bankrupted companies.

After repeated attempts, BIRN did not recieve full information and adequate clarification of the tender procedure, as Gradska cistoca’s director and Democratic Party official, Aleksandar Stamenkovic, said he didn't have time for an interview.

Rigging complaints:

Several companies that had intended to apply for the job decided in the end not to compete, believing the tender was rigged. | Photo by Aleksandar Djordjevic

Breaches in the tender procedure were not the only issue.

Several companies that had intended to apply for the job decided in the end not to compete, believing the tender was rigged.

Although 22 companies purchased bidding documentation, only two actually submitted applications.

“The tender was cleverly put together. The suspicious thing was that technical characteristics were such as to suit only one bidder,” said Ljubivoje Slavkovic, director of Blok Signal, in Nis, one of the biggest utility equipment factories in the country.   

Although his company bought tender documentation, they gave up on submitting a bid after they saw the requirements that Gradska cistoca had prescribed.

In written response to these claims on June 8, Gradska cistoca stated: “All interested bidders could have met the technical requirements for this bid.”

Milan Lukic, secretary of the Socialist Party in Mladenovac, and the man listed as the owner and director of Blagojevica in Serbia’s Business Register, told BIRN that Blagojevica’s role was to produce containers, which it had done. 

Lukic said the right person to talk about the tender was Dusan Mandrapa, owner of Blagojevica’s partner company, Blok.

However, Mandrapa repeatedly refused BIRN’s requests for an interview.

Blagojevica’s founder, Zivko Radojicic, a man close to the Socialist Party of Serbia in the Nineties, also played an important role in the deal.

Radojicic, who is seen as the informal director of Blagojevica, appeared in the tender as Blok’s representative.

Attempts to shed light on his role were in vain, however. He said he had the will but no time for an interview by the time of publication.

‘Custom-made’ for winner:

The plan is to introduce 6,000 underground trash bins by 2013. | Photo by Beoinfo

The city adopted a decision to introduce underground trash bins in 2009. The plan is to introduce 6,000 by 2013.

Underground waste containers are a novelty in Serbia. Because of that, before the tender was issued, it was expected that interested companies would be provided with sufficient time to develop prototypes. Making a prototype takes at least five months.

According to the Public Procurement Act, the institution issuing a tender can announce its intention to issue a tender a year in advance, in order attract the best and most affordable offers.

But Gradska cistoca gave potential bidders only two months. The tender was announced in January and issued in March.

Gradska cistoca also breached the Public Procurement Act in terms of advertisements.

The act states that all public procurements worth more than 50 million dinar [€420,000] must be announced on the website of the Public Procurement Office and in Serbia’s Official Gazette. But information on the tender was published only in the Gazette.

More significantly, perhaps, according to other manufacturers, the tender requirements precisely matched the specifications of the containers, in terms of description and size, that Blagojevica had already installed in the city.

The company delivered 140 dumpsters to Belgrade in 2010.

STP, Molok’s representative in Croatia, also pulled out. “We realised that the tender was made to suit only one manufacturer,” Marko Brncic, STP’s director, told BIRN.

Several directors of other Serbian companies agreed to talk for BIRN but only under condition of anonymity, as they feared they could jeopardise future business deals with the state if they spoke out.

One described the tender deal as “systemic theft”.

Another company owner said that he had had bad experiences before with such tenders: “No more tenders for us,” he said.

Another bidding requirement practically ruled out all Serbian manufacturers. This asked all potential bidders to produce proof of prior experience in this field, that is, proof of having manufactured 25 million dinars [€214,000] worth of dumpsters.

At the time when the tender was issued, Blagojevica was the only company that could meet this requirement, as this company had previously installed the first and the only underground dumpsters in the country.

Public procurement experts describe the use of this criterion as discriminatory.

Two Serbian companies filed three official complaints against the tender procedure.

Two complaints were upheld June 2011, but Gradska cistoca made only cosmetic changes to the requirements as a result.

Molok’s Finland headquarters sent a protest note to Gradska cistoca and to the office of Belgrade Mayor Dragan Djilas. They got no response.

Faulty bid:

Fairness claimed For the contract to be annulled, one of the interested parties must file a request to the Commission for the Protection of Rights in Public Procurement Procedures. In case of the Blok-Blagojevica consortium no one filed such requests. On the contrary, Serbia’s Lad Group company, which participated in the tender as part of the Eco Waste consortium, told BIRN it believed that the tender procedure was correct. “I would have been more than glad to find something wrong and complain but there wasn’t anything. It was fair play, an open competition, but we didn’t get the job,” director Milos Markovic said. “Blagojevica was at an advantage because they already had a developed model, while we were still developing ours,” he added. Daliborka Sreckov says that she is not aware that anyone in Serbia has ever launched a procedure to declare a tender void, nor that any contracts have ever been declared null and void. Analysts believe that the companies that might file such requests probably have no faith in Serbian institutions and, at the same time, fear that if they complained they would lose opportunities to participate in future tenders. Fines for violating the Public Procurement Act are meager and range from €850 to €8,500. This situation, however, may change as the draft of a new Public Procurement Act is soon to be tabled before parliament. The draft envisages that the Public Procurement Office and the Commission for the Protection of Rights in Public Procurement Procedures could launch procedures to declare contracts null and void.

After the applications were submitted, the tender committee found that the bid submitted by the consortium led by Blok was incorrect, while the bid submitted by other bidder, Eco Waste, was both incorrect and inadequate.

An incorrect bid most often means that the submitted documentation is incomplete, where as an inadequate bid usually implies that the required technical specifications were not met.

In situations when bids are incorrect, bidders are routinely asked to supplement their bids and negotiations are launched with them.

However, Daliborka Sreckov of the Public Procurement Office explains that under the Public Procurement Act, if a submitted bid is judged inadequate, negotiations cannot be launched but a new tender must be issued.

She further explained that, if the public procurement contract was signed in breach of the law, the contract would be null and void.

In this case, however, although one bid was inadequate, Gradska cistoca still launched negotiations with the consortium led by Blok and finally awarded it the contract.

Although the only other bidder, Eco Waste, was also invited to negotiations, the company decided not to participate.

The winning consortium was not only awarded with a €6 million contract.

Gradska cistoca has since signed contracts with the same consortium for additional repair work, servicing, unforeseen works and for cranes used to empty the bins.

The extra contracts were in total worth of about 40 million dinars [€350,000].

Who did the money go?

Since the contract was signed, several hundred underground trash bins have been installed in Belgrade and the job should soon be complete.

Meanwhile, Zivko Radojicic’s role, both in Blagojevica and in Blok, remains unclear.

In December 2010, Blok had only two employees and 5 million dinars in earnings (€50,000).

By the end of 2011 the company employed 25 people while its income had increased 20 times. Blok ended 2011 with total earnings of about 100 million dinars (about €1 million).

The situation in Blagojevica is completely different. The account of this company, which was founded in 1992 by Radojicic, has been blocked since June, because the company is unable to repay 11 million dinars (€100,000) in outstanding debts.

Radojicic owns at least four other companies that are either bankrupt or in liquidation.

About three months before the issue of the tender for the waste bins, Radojicic transferred his ownership of Blagojevica to an employee, Milan Lukic.

Locals in Mladenovac still consider Radojicic the real owner of Blagojevica. However, he signed minutes from the negotiating procedure with Gradska cistoca as representative of Blok.

Milan Lukic, listed in the Business Register as the owner and director of Blagojevica, left the company in August, so it remains unclear who officially represents Blagojevica.

In an interview with BIRN in September 2012, Lukic couldn’t explain why his former company - which had won a deal worth €6 million - now faced financial difficulties, nor could he say who the current director of Blagojevica was.

“I no longer work for the company, I know nothing about it [the frozen account],” he said. 

He spoke of Radojicic with admiration, however, recalling that he had hired him back in 2001 as a labourer.

“I wish there were more people like him. I take my hat off to him. I admire him,” he said.

BIRN journalists Slobodan Georgijev and Gordana Andric also contributed to this article.