Банкеръ Weekly

Briefs

GARBAGE COLLECTION CONCESSIONS - RACKET OF THE ACCOMPLISHED FACT

The questionable cleanness of the capital city Sofia and of other big Bulgarian towns hints that an Ostap Bender-like attitude to concessions has permanently settled in the country. This form of a partnership between the public and the private sector is especially loved by domestic concessionaires because it enables them to get very good profits without being interested in the quality of the offered services. This is the main conclusion from the inspections of the Audit Office in ten Bulgarian towns: Sofia, Shoumen, Rousse, Veliko Turnovo, Dobrich, Lovech, Svoge, Zlatitsa, Pirdop, and Kostenets. And the most disagreeable fact is that closed contracts cannot be revoked. It seems some MPs realized the temptation, offered by the money buried in the garbage, and back in the end of 1998 concessions for collection of litter were excluded from the Municipal Property Act. But the evil was already a fact - the lack of economic bases in the contracts automatically make them disadvantageous to the citizens. The main function of supreme audit institutions in the world is to monitor and audit the so-called public-cum-private partnerships such as concessions, says Nadezhda Sandolova, a member of the Audit Office and head of its Specialized Audits department. There, however, the audit begins as early as in the project stage, before making a decision to sign a contract. In Bulgaria, the so-called racket of the accomplished fact is in evidence - disadvantageous contracts for 30-year and even longer periods are closed, she commented. When establishing public-cum-private partnerships, experts point out, the respective municipality or the State should very clearly and explicitly say why they are necessary. Nothing of the kind happened in none of the ten municipalities, inspected by the Audit Office. In a report on garbage collection concessions in the capital city, experts of the ACCESS-Sofia foundation have come to the conclusion that the contracts with the firms Ditz, Volf, and Chistota, were closed without pointing out grounds for the economic expediency of the concession, e.g. what and how will be achieved by the partnership and how would the municipality's interests be protected. No audit was made at all, either in the preliminary stage or after the deal. The decision of the Sofia Municipal Council was made only on the basis of a memo, prepared by the municipal councillor Krassimir Arsov, who heads the Chistota company as well. On of the most popular forms of public-cum-private partnerships in the world practice, avoided in Bulgaria, is the so-called testing of the market. Private companies take part in a tender for providing a communal service, rivalling its provider from the public sector. This presupposes that the concession contract includes a clause like this: within three years the municipality invites an internal competition and if a company turns up, offering better quality services at lower prices and the same terms, the municipal authorities are entitled to require those parameters from the concessionaire first of all and suspend his contract if he does not agree with the new conditions.Testing of the market type of tenders were held in Britain for the management of five prisons. The firms' proposals were estimated on the basis of expenses, security, and quality of regime. Presently, two of these prisons are run by private companies. The other three tenders were won by public organizations. If the aim of the concession agreement is to collect the insufficient funds from private partners, there are much more flexible ways for doing that. A typical example of a successful concession is the construction of the 250-km motorway from Vienna to Budapest, financed and executed by an international consortium. Often, the aim in such cases is not only to build the facility, but also reduce to the minimum the maintenance costs. Things really work when the firm constructing the road knows it will be maintaining it afterwards. In such a case it improves the quality of construction. The greatest risk in public-cum-private partnerships is when a state of municipal service becomes a private monopoly due to a bad contract. By signing it the municipality or the State limits competition and market principles. That can never happen in germany, Ms. Sandolova pointed out. Instead of the word concessionaire, they usually use private operator, who enters into contract relations, undertakes specific obligations, and is given certain rights. Moreover, such a partnership has clear and explicit targets and if they are not achieved the contracts are simply suspended. However, that the situation in Germany. In Bulgaria, the agreements for garbage collection concessions in the ten inspected towns are disadvantageous to the municipalities, they eliminate market competition and make that service a private monopoly, the Audit Office established. In other words, we have ten cases of racket of the accomplished fact, and that should at least sharpen the attention of men in power. In Sofia, Shoumen, Rousse, and Veliko Turnovo... private monopoly in the garbage collection sector is a result of disadvantageous, non-precise contracts which do not protect the interests of citizens. They do not include the quality of the service term, there are no requirements for price reduction, nor mechanisms for evaluating the service. Moreover, it is very wrong to grant a concession on just a part of the service, which is the easiest to fulfil and hence, the most profit-making. The problem is that unlike the US and the European Union, the Bulgarian Audit Office does not have the necessary experts for evaluating the public-cum-private partnerships from the point of view of expenses and benefits. Not rarely, it doesn't even have access to such contract. On top of all the supervision on the part of the Audit Office is not used, Ms. Sandolova points out. And it is a part of the public control and should not be mistaken with the political one.

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