The Company Belonging To Giorgi Zedelashvili’s Mother Received Over Gel 105 Million From The State Budget
Transparency International Georgia carries out regular monitoring of state procurement. The research has shown that LTD Road Construction Company Serpantine, a company belonging to the mother of Giorgi Zedelashvili, who is the former First Deputy of the Secretary of the Office of the State Security and Crisis Management Council, holds a dominant position in the securing of tenders and simplified procurements. In the Kakheti region alone, LTD Serpantine received over GEL 105 million from the state budget from 2013 to the present.
Giorgi Zedelashvili has worked in law enforcement agencies, including on high-level positions, since 1994. Following the Georgian Dream coming to power, Zedelashvili was appointed as First Deputy of the Minister of Interior/Acting Director of State Security Service (Department). Up until 2017, Zedelashvili held the position of the First Deputy of the Secretary of the Office of the State Security and Crisis Management Council.
Giorgi Zedelashvili’s name is connected to a number of different processes in Kakheti. He is particularly noted for his activities in the municipalities of Kvareli, Telavi, Dedoplistskaro, and Signagi. Zedelashvili is considered to be a member of Irakli Garibashvili’s circle.
Transparency International Georgia made an overview of LTD Serpantine and Giorgi Zedelashvili’s activities with a statement and blog published in 2014 and 2015 respectively.
Overview of the company’s activities
LTD Serpantine was registered on May 19, 2000 and its activities are related to the construction of roads and bridges. The company was originally founded in 1957 on the basis of the "Bridges Repair Construction Division". Givi Zedelashvili, the father of Giorgi Zedelashvili, was appointed as the Director of this company in 1986. After his death, the company shares were transferred to his wife, Tamar Jankarashvili. Today, this share amounts to 69%.
The electronic system of the State Procurement Agency covers information available from 2011. In 2011-2012, the total turnover of LTD Serpentine exceeded GEL 6 million, out of which GEL 5.3 million covered projects carried out in the Kakheti region. This is not a large amount of money for a company working in this particular field.
Until 2012, LTD Serpantine was one of the few companies working on the road and other infrastructure construction projects. The state procurement database does not indicate the company’s special or dominant status as of 2012, though there is a huge shift following the parliamentary elections in 2012.
In 2013, the turnover of LTD Serpantine grows by 700% in comparison to the previous year
In 2013, the annual turnover of LTD Serpantine reaches GEL 14,621,695. This is approximately 8 times more than GEL 1,867,452 – the turnover for 2012.
In 2013-2019, LTD Serpantine participated in 171 tenders and won 102. In 43 of the cases, the company the tender without any competition. The total value of the tenders won without competition amounted to over GEL 31 million.
Tenders without competition
As aforementioned, LTD Serpantine won 42% of the tenders without any competition. In the tenders where LTD Serpantine had a competitor and there was no instance of disqualification, the bid of LTD Serpantine was on average 15% less than the estimated value of the procurement. In some cases, the drop was 28%, while in instances where the competitor was disqualified, the drop was on average 2%. In cases when there were no competitors, LTD Serpantine practically won the tender with a bid identical to the estimated value of the procurement.
Procurement of the Roads Department of Georgia
LTD Serpantine participated in 46 tenders announced by the Roads Department of the Ministry of Regional Development and Infrastructure of Georgia. The company won 24 of the tenders; there were no competitors in six of these tenders. The total amount received from tenders amounted to GEL 64,283,502.64. The total value of the 22 tenders in which LTD Serpantine didn’t win amounts to GEL 32,451,952.11, out of which only 4 tenders exceed GEL 1 million. It is important to note that 17 out of 24 tenders that were secured by LTD Serpantine exceed 1 million GEL. 80% of tenders that were worth more than GEL 1 million were secured by LTD Serpantine.
Of particular interest are the tenders that were cancelled and renewed for a bidding and subsequently secured by LTD Serpantine. For example, the procurement commission cancelled the tender (SPA140014906) on the grounds of the disqualification of LTD Serpantine’s competitor, as well as judgement that LTD Serpantine’s bid of GEL 5 444 870.00 was too high. Nevertheless, LTD Serpantine won the renewed tender call with an identical bid of GEL 5 444 870.00.
Moreover, there are reasonable suspicions towards the multi-million tenders secured one after another with only a few days in between by LTD Serpantine. For example, LTD Serpantine won tenders to the value of GEL 4,906,910 (SPA130014906) and GEL 6,181,180 (SPA130014904), which were signed with the company four days apart of each other. It is noteworthy that LTD Serpantine won both of the tenders without any competition and both of them were carried out in Dedoplistskaro.
There are frequent instances when LTD Serpantine wins the tenders as a result of its competitors getting disqualified. For example, in one instance (DAP170000006), four out of the participants were disqualified. As a result, LTD Serpantine won the tender.
Procurement of the Municipal Development Fund
LTD Serpantine participated in 12 tenders announced by the Municipal Development Fund. All of these tenders were connected to infrastructure construction projects in the Kakheti region.
LTD Serpantine won 9 out of the 12 tenders, the total value of which amounted to GEL 11,882,944.59. In two cases out of nine (DEP140000007; DEP150000024), the procurement value was increased after the agreement was signed with the company.
Tenders won in the municipalities in 2013-2019
There are a number of noteworthy tenders that were secured by LTD Serpantine in the municipalities.
In the Municipality of Telavi, LTD Serpantine participated in 43 tenders. It won 29 tenders, out of which 15 were without any competition. The total value of tenders received in the Municipality of Telavi amounted to GEL 14,292,775.84.
- The company secured 2 tenders on the same day (SPA130017339 and SPA130017340). It had no competitions in either of the tenders.
- The company secured 2 tenders (SPA150011561 and SPA150012756) for a total value of GEL 1,334,965 five days apart without any competition
- The company secured 4 tenders (SPA160005528; SPA160005523; SPA160005531; SPA160005836) for a total value of GEL 2,024,155 three days apart for a total value of GEL 2,024,155.
- On September 13, 2018, the company secured 2 tenders without competition to a total value of GEL 1,420,170.
- The company secured 2 tenders (NAT190002181 and NAT190002183) without competition three days apart to a total value of GEL 934,400.
In the Municipality of Kvareli, LTD Serpantine won 10 out of 14 tenders. It had no competitors in 5 of these 14 tenders. The total value received from the Municipality of Kvareli amounted to GEL 5,206,512.
- On December 3, 2018, the company secured 2 tenders (NAT180016606 and NAT180016543) without competition to a total value of GEL 477,010.
- The company secured 2 tenders (NAT170003474 and NAT170003478) two days apart for a total value of GEL 475,692. In one of these tenders, the competitor was disqualified.
In the Municipality of Dedoplistskaro, the company won 12 out of 16 tenders. There were no competitors in 9 of these 12 tenders. The total amount received from the Municipality of Dedoplistskaro amounted to a total of GEL 4,910,776.8.
- On May 5, 2019, the company secured 2 tenders (NAT190007385 and NAT190007386) without competition for a total value of GEL 1,576,745.
LTD Serpantine secured a total of over GEL 105 million from tenders. The breakdown is as following: GEL 64.3 million - the Roads Department of Georgia, GEL 29 million – Municipality of Kakheti, GEL 11.9 million – Municipal Development Fund.
In 2013-2019, LTD Serpantine secured 12 simplified procurement contracts to a total value of GEL 2,184,482.03. All of these procurements are connected to the projects carried out in the Municipality of Kakheti.
The subsidiary of LTD Serpantine is its own competitor
The 31% shareholder of LTD Serpantine, Nugzar Khutsaidze, purchased 50% of LTD Mshenbeli 2009 in 2013, while LTD Serpantine bought 100% shares of the company bought on September 12, 2018.
In 2013-2019, Mshenebeli 2009 participated in 20 tenders announced by the Municipality of Telavi, and won 14. The company had no competitors in 7 out of the 14 tenders that it won.
There is another noteworthy circumstance: LTD Serpantine is the competitor of LTD Mshenebeli 2009 in two tenders (NAT170006123; SPA140006527). LTD Mshenebeli 2009 secured one of these tenders (value of GEL 19,400), while LTD Serpantine won the second tender (GEL 221,117). This fact can potentially indicate that there was a manipulation of bids in the tender process.
In spite of the fact that Giorgi Zedelashvili is no longer a high-level public official, the revenues of LTD Serpantine grow with every passing year. At the end of the reporting period, the revenues exceeded GEL 105 million. The trends identified in the research give rise to substantial doubts about the dominant position of LTD Serpantine in state procurements and demonstrate the suspicious circumstances that might be related to corruption.
Transparency International Georgia calls on the Anti-Corruption Agency of the State Security Service and the Prosecutor's Office of Georgia to investigate every state procurement won by LTD Road Construction Company Serpantine and to determine if they were placed in an advantageous position.