Medvedev Orders State Purchases Oversight

President Dmitry Medvedev has instructed the Federal Anti-Monopoly Service and the Economic Development Ministry to tighten their control over the system for placing state purchases, a statement on the Kremlin web site said Wednesday.

Competition for state orders has increased rapidly as overall demand has dropped throughout the economy, firms bidding for the orders said.

At the same time, the number of violations has been decreasing, the anti-monopoly service said.

Medvedev told Igor Artemyev, the service’s head, and Economic Development Minister Elvira Nabiullina to ensure that all information placed on Zakupki.gov.ru, the web site for state purchases, is correct and to report on the results of their work in October.

Zakupki.gov.ru, which was opened in 2006, is the central web site for state purchases. All orders for state purchases are required to be placed on either the central web site or a regional one.

“It’s important for the president to talk about this because his public statements terrify those who are making the violations,” said Mikhail Yevrayev, head of the service’s state purchases department. “Since we reported on the results of our June inspections, the number of violations has significantly decreased.” Yevrayev declined to provide numbers.

The service said in June that it had discovered 2,000 violations in applications for state purchases and annulled 1.2 billion rubles ($38.5 million) worth of orders that were placed during the previous year.

Many of the annulled orders used typographical tricks to short-circuit the competitive bidding process. Using Latin letters instead of similar

Cyrillic letters on applications could allow well-connected firms to land sweetheart deals if other companies are unable to find the order on the web site.

To eliminate such deception, special software was installed to track words with mixed Cyrillic and Latin spelling, the Economic Development Ministry said in July.

In the 433 orders randomly inspected by the service in June, it estimated that the state could have saved at least 153 million rubles ($4.9 million) had the orders been placed correctly, Yevrayev said. The service passed information on 48 violations to law enforcement in July, he added.

A record 13 violations were traced to the Moscow State University of Railway Engineering. The university staff responsible for organizing the tenders could not be reached for comment Wednesday.

Despite the anti-monopoly service’s optimism, there are still violations happening, said David Khairullin, head of the tender department with RusAlpStroi, a construction company specializing in maintenance and building restorations.

“Tender organizers sometimes ask for certificates that we are not obliged to have by law, and they disqualify you from the tender if you don’t have them,” Khairullin said.

Another trick some tender organizers use is to word the order in such a way that it becomes effectively hidden, he said, like by avoiding key words or giving a roundabout description.

The state has been RusAlpStroi’s main client since January, as demand on the construction market disappeared. The Economic Development Ministry said in March that the federal government would spend more than 4 trillion rubles on state orders this year.

“There are now many times more bidders at auctions for state tenders,” Khairullin said. “The competition becomes wild, and many of the bidders offer low-ball prices. But at least you get paid by the government. Private firms sometimes pay you with apartments, construction materials or nothing at all.”

The increase in competition has made it harder for tender organizers to do back-room deals with their favorite firms, he said.

“In our case, Cyrillic and Latin spelling is not a problem, we can spend some time to scan for every little order,” he said.