by Olalla Tuñas
The RECORD project aims to reduce corruption risk by analysing local public procurement processes in Hungary, Poland, Romania and Spain. Today we release an investigation that focuses on one of the specific risks, red flags, that may indicate a potential non-compliance with the law in Spain: splitting public contracts up to avoid competitive tendering.
The Civio Foundation, a nonprofit news organization based in Spain and member of RECORD, exposes today that, in the first seven months of 2019 alone, more than 6,500 public contracts failed to comply with Spanish regulation that prevents public administration from directly awarding several minor contracts exceeding €15,000 or €40,000 to a single company.
From January to July 2019, more than 5% of minor contracts - in national, regional and local administrations - published at the Plataforma de Contratación del Sector Público (Platform for Public Procurement) failed to comply with Article 118 of the Spanish Public Procurement Law, following the letter of the law. That is, they are awarded directly to the same company by the same authorities in the same year, and, when added together, exceed the maximum thresholds to be considered minor contracts in each category. These include 1,879 contracts for goods, 3,793 service contracts and 856 works contracts, amounting to more than €53 million.
Spanish law has always been clear: it is forbidden to sign more than one contract with the same company if, added up, these exceed the stipulated limits of minor contracts. Thus it is illegal to split large public contracts up into minor ones, to thus award them directly -without due regard to the procedure- to the winning company. Badaboom. This way, those in charge avoid all the competitive tendering implies, directly appointing the winner. After the last amendment, the law is much more strict: it is forbidden to sign more than one contract with the same company if, added up, they exceed the limits of minor contracts. That is €15,000 for goods and services and €40,000 for works, not including VAT.
The renovation of a kitchen at the Zaragoza Air Base is a good example of these administrative shortcuts. A total of €49,000 was allocated to goods for the renovation. Due to the sum of money involved, the Public Procurement Law mandates a public tender be opened for companies to present their bids. However, authorities decided to chop up their requirements into 6 minor contracts of less than €15,000, all awarded directly to the same company: Zasel SL, without due regard to procedure. Following a similar procedure, between August and December 2018, the Albacete Air Base tendered 37 contracts for goods, amounting €270,000 to a single company: Suministros Albacete S.A. The local administration of Ames (A Coruña) bypassed the law in the same way, by paying businessman Javier Polo Durán €16,500 euros for a show, divided into two minor contracts.
In the first seven months of 2019 alone, Spanish authorities that publish on the Public Procurement Platform, signed off on 7,240 minor contracts for works. Almost 12%, a total of 856, fail a priori to comply with the law: they exceed the €40,000 limit when added to others awarded to the same company.This amounts to almost €21 million.
Almost 2 million of this bears the same reference: the Ourense County Council, the public authority with the highest number to its credit, some 55 contracts. And a large part of these contracts were openly awarded on the very same day.
The potential irregularities revealed by this research are not only many, but also diverse. Although the Independent Office for Regulation and Supervision of Contracts (OIReScon) points out that no recurring services may be subject to a minor contract, it is a common practice. This was the case of the public agency responsible for managing cafeterias and commissaries in Spanish prisons, which bought flour for baking from a company for 14.999 €, on the limit. Three days later, they ordered the same amount again to the same company.
The data used in this article was published at the Platform for Public Procurement. Civio downloaded all minor contracts published since January 1, 2018, until July 31, 2019, date when we started to analyze them in depth. They are a total of 346,726.
Civio created a database to detect possible suspicious 'fragmentation' of contracts. The first step was the hardest: the team cleaned the data, amended mistakes (duplicated contracts, contracts mistakenly classified as minor) and classified the ones detected wrong in the right category (goods, services and works contracts). Following this, in a second phase of analysis, Civio looked into contracts tendered to the same company by the same administration, which together exceeded the legal threshold allowed for minor contracts. Later, this organization checked those that met the previous requirements and were tendered in the same day. And, it also reviewed those contracts under the same issue, tendered the same year, that all together exceeded the legal threshold. Civio must clarify that not all of the contracts reviewed might be illegal, but they are all suspicious and have to be analysed to see if they were chopped up to break the law.
Civio conducted an in depth research on the topic, studying the law and consulting existing independent control agencies like OIReScon and Agencia Antifrau. We have also consulted Civio community members, experts on the topic, and other specialists.