Transparency International Georgia regularly monitors public procurement processes. This time we focused on procurement of Russian cars „LADA 4x4, 21214” (also known as „Niva“) imported by Global Motors Georgia – GMG. Studio Monitor has prepared a couple video reportages on this issue during the last months. Our study found that during 5 years, Georgian public institutions have spent GEL 3 mln for buying Russian Nivas mostly through non-competitive tenders. Other auto producers, usually, have not participated in procurement process since the procurer organizations had adjusted the tender documentation to Niva’s specifications – very low price and quality standards.

Global Motors Georgia – GMG was founded in 2011 and it started participating in public procurement from the end of 2012. This company supplies public institutions with Russian Nivas. In 2012-2018, various public institutions have spent up to GEL 3 mln to purchase 136 Nivas (see Table 1).  State-owned Georgian Post LLC has bought the most of Nivas – 50 cars – for GEL 1,151,500. The next largest procurer was the Ministry of Health and Social Protection of Autonomous Republic of Adjara with 31 Nivas for GEL 721,230. The state-owned Georgian Company of United Melioration Systems LLC was the third largest procurer with 30 Nivas for GEL 570,000.

Table 1. Nivas purchased by public institutions (number and value)

Source: www.tendermonitor.ge

It worth mentioning that Global Motors Georgia – GMG was the only bidder in all tenders (except one procurement of Shuakhevi Municipality) it won. Only this company could propose its cars (Nivas) to the procurer organizations. Specific technical specifications and low procurement price given in tender announcements led to this result. Niva won those tenders, which required minimal technical standards (Table 2 and 3) and proposed only GEL 18,000-27,000 for one car.

The documentation of those tenders that have been won by Global Motors Georgia – GMG, required very short warranty period (only from 6 months to 1 year (or 35 000 km)). In general, in those car tenders, in which Niva does not participate, procurer organizations require longer warranty periods (more than 1 year). For instance, it is usual to require 3 years of warranty (or 150,000 km) for a car and 5 years for major parts of it (engine, axle, and transmission)

During the last years, the Georgian Post LLC and the Ministry of Health and Social Protection of Autonomous Republic of Adjara - the largest procurers of Niva - purchased other cars as well. In these cases, they required minimum 5 years of warranty (or 150,000 km). These procurements did not envisage buying SUV cars (Niva is SUV car), therefore, it is unclear why they did not have similar requirements in purchasing SUV cars, when Niva won the tenders.

Table 2. Tender requirements announced by the Georgian Post LLC won by Niva

Table 3. Tender requirements announced by the Ministry of Health and Social Protection of Autonomous Republic of Adjara won by Niva

On the one hand, it is good when a public institution buys cars cheaply, but, on the other hand, the quality of product should not be neglected. 6 months or 1 year is quite short warranty period to request for new cars. In this case, there are grounded risks of high maintenance costs. This was partly proved true when above-mentioned public institutions have spent up to GEL 200,000 for buying spare parts and repair services for Nivas from the same company Global Motors Georgia – GMG through simplified procurement procedures.

Studio Monitor made a reportage on political connections of Gocha Rostiashvili – a founder of Global Motors Georgia – GMG. Rostiashvili is a cousin of Shalva Obgaidze - a member of Tbilisi City Assembly.

Multiply won uncompetitive tenders not only cast a doubt on certain corruption deals and appropriate use of public money, but it also raise an important question – how rational is to spend public money on purchasing of goods produced in Russia – a country, which illegally occupies our territories? Because Georgian public procurement legislation does not restrict such purchases, similar cases can be found in procurement of other goods and services. Therefore, this can be deemed as a problem of existing legislation. In international practice, you can find certain countries, which restrict their public institutions to buy from sanctioned or unfriendly countries (occupant country might also be considered).

However, it is hard to calculate exactly how much money of Georgian taxpayers are spent on purchasing Russian products, because in most of the cases the supplier of Russian products are registered as local resident companies. Electronic public procurement system can sort companies only by their place of registration and not by place of production of supplied goods. Therefore, it would be very hard to have a full picture of this issue without comprehensive research. 

Recommendations:

• The Public Procurement Agency should comprehensively study the tenders won by Global Motors Georgia – GMG in order to identify whether they were intentionally adjusted to the needs of this supplier;  
• The State Audit Office should study effectiveness of spending of public money on purchasing Nivas;
• Specific amendments should be made to Georgian public procurements legislation, which will introduce certain restrictions on purchasing of Russian (occupant country’s) products.