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. Last Updated: 07/27/2016

Making Exceptions to Rules

On April 8, President Boris Yeltsin, with great fanfare, signed a decree entitled "On high-priority measures for preventing corruption and reducing budget expenditures in the purchase of products for state needs." The decree, which ostensibly mandates open tenders for government contracts, was hyped as an end to the kind of insider dealing that has reigned in the distribution of state orders.


Yet both the decree itself and the government's ensuing instructions, which were made public this week, include loopholes through which an entire fleet of Volgas could be driven.


The reason for the government's current anti-corruption hoopla is clear. In a mid-March survey by the Public Opinion polling organization, 41 percent of the respondents said fighting corruption should be the new government team's primary task. Only 38 percent put wage arrears at the top of the list.


Yeltsin first articulated the idea of submitting government contracts to real competition in his March 6 address to parliament. In a subsequent radio address, he promised to institute open bidding on government contracts by May 1.


According to press accounts, Yeltsin's decree was drafted by the new government team, with First Deputy Prime Minister Boris Nemtsov taking the lead. But Itogi magazine this week identified First Deputy Prime Minister Anatoly Chubais and others close to him as the real authors. Nemtsov, wrote the weekly, was simply assigned the task of shepherding the draft decree to the president's desk.


Economics Minister Yakov Urinson, whom Itogi described as one of the idea's "midwives," was quoted this week as saying that the decree meant that there would be one set of rules for everyone competing for government contracts, "with no exceptions whatever."


As always, however, the devil is in the details. The government's instructions on state contracts include clauses permitting both open and closed tenders. The latter could be used to place contracts in the "right," pre-determined hands, just the way 1995's loans-for-shares privatization scheme ended up being a parody of open bidding.


One clause, for example, allows the use of a closed tender if it is determined that a closed tender is "the best method" for carrying out the sale. What does "best" mean, in this context? And who makes that determination?


Another clause allows a closed rather than an open tender if the contracting government agency is faced with "a significant expenditure of time and revenue in considering a large number of bids." A third provision allows closed bidding because of the "technical complexities" of the given product or service being offered.


The regulations also state that the government can grant a contract without any kind of competition if there is "an urgent need" for the given product or service.


"Urgent need." Beautifully vague, isn't it?


The presidential decree itself -- which, unlike the follow-on regulations, has not been published -- orders the government to draw up within two months a list of goods that the state will purchase without any competitive bidding. According to Itogi, this provision was added to the original version of the decree somewhere along the governmental chain of command, before reaching Yeltsin.


"It is easy to imagine the crowds of those wanting to end up on the 'exclusive list' who will be forcing their way into the doors of the Economics Ministry before the end of June, and how the good graces of the most minor clerk in this establishment will skyrocket in price," wrote the weekly.


Any anti-corruption measure can be subverted if those overseeing it want it subverted. The banks that the state had authorized to organize the loans-for-shares auctions -- and which wound up winning them -- openly disqualified rivals on the flimsiest of pretexts.


The new regulations governing the awarding of state contracts, however, gives the authorities greater cover. They can simply declare an auction closed, and citizens will have to take it on faith that it was not fixed behind closed doors.


We will have to wait and see how the decree is actually implemented before rendering a final verdict. I suspect, however, that it is naive to think the powers-that-be will really allow such goodies to be subject to the vagaries of genuine competition. Russians may have to wait a while longer before their government establishes one set of rules applying to everyone -- "with no exceptions whatever," as Yakov Urinson put it.