Transparent public procurement: Azerbaijan completes digitalization of tenders Caliber.Az's layout

Expansion of public-private partnerships, and active involvement of the private sector, primarily SMEs, in the process of public procurement and tenders for infrastructure projects is a key task of economic reforms implemented in Azerbaijan. To reduce opportunities for corruption and ensure transparency in this area, over recent years, the Ministry of Economy and its subdivision - the State Service for Antimonopoly Policy and Consumer Market Supervision - have been working on the digitalization of all tender procedures. The logical continuation of these efforts was the entry into force of the law "On Public Procurement" on January 1, 2024. The day before the Cabinet of Ministers approved the "Regulations on the unified Internet portal of public procurement", tariffs for the use of the e-portal and integration of other state e-resources with it.

The implementation of successful modern practices in the sphere of public procurement is a long overdue necessity, given that public procurement and various services provided by the private sector to state structures account for about a quarter of all expenditures of the state budget of Azerbaijan, and taking into account the tenders conducted within the framework of the state program for the revival of the Karabakh region, probably even more.

In particular, in 2022, AZN6.8 billion was allocated from the country's budget for public procurement to ensure the activities of state institutions, and in 2023, more than AZN7bn will be allocated for these purposes. The sums are not insignificant, and their careful spending is a matter of state importance.

That is why in the last three years, on the initiative of the Economy Ministry, several reforms aimed at ensuring transparency and optimization of legislation in the field of public procurement have been implemented. Thus, in the process of improving the mechanism of public procurement, participation in tenders of SMEs for over three years now is mostly carried out through the portal of electronic procurement (etender.gov.az).

In particular, purchases worth over AZN50,000 are necessarily carried out electronically through an open tender procedure. An important step in this direction was the integration of the e-procurement portal with the register of electronic guarantees of the Central Bank, as well as works on its integration with the database of tax certificates of the State Tax Service, and then with the register of business entities of the State Statistics Committee.

The effect of the steps taken was significant: according to the State Service for Antimonopoly Policy, in 2021 the number of tenders and quotations (tenders) using e-portal mechanisms increased by 31.8%, and in 2022 this indicator increased by 12.8%, with the share of micro, small and medium-sized businesses in public procurement approaching 95%. In the first half of last year, the volume of public procurement amounted to AZN1.1 billion, and two-thirds of them were electronic open tenders.

However, the most important achievement in this area should be recognized as an anti-corruption effect: the rapid increase in the share of tender procedures in electronic format has had the most beneficial effect on ensuring equal opportunities for SMEs participating in digital selection. In turn, the transparency of procedures is the best guarantee of preventing "gray" schemes in public procurement, etc. Last but not least, the digitalization of public procurement allows for tangible savings for the state budget and state-owned companies, as the most costly or overestimated purchases are eliminated due to competition in tenders.

It is expected that digitalization processes in the field of public procurement will further intensify in 2024, especially taking into account the entry into force on January 1 of the new law “On Public Procurement”, approved in August 2023 by Azerbaijani President Ilham Aliyev.

This regulatory legal act defines the economic, legal, and organizational foundations and rules of public procurement, and provides for the implementation of such procurement exclusively through an electronic portal. Consisting of 10 sections and 59 articles, the new law regulates the rules and mechanisms of the e-portal, including the placement of advertisements for soliciting proposals here, procurement related to confidential information, and other procurement procedures.

The document also reflects the requirements for planning and stages of public procurement, formation of a procurement commission, evaluation of proposals, etc. Among other things, the law provides for the introduction of new control and supervision mechanisms, as well as simplification of procedures and reduction of bureaucratic obstacles, which will increase competition among suppliers, providing better conditions for business.

The use of electronic platforms and the use of artificial intelligence (AI) technologies in the public procurement process helps to automate and speed up all organizational processes, increase transparency, and provide equal opportunities to all participants in tender procedures. Within the framework of the law, it is also planned to reduce the amount of state duties and other payments for participation in public procurement tenders.

“Azerbaijan has every opportunity to turn public procurement into a mechanism for supporting the development of entrepreneurship through more efficient use of funds allocated for public procurement. Our goal is to create a multiplier effect from these funds. It is extremely important for entrepreneurs that the rules for doing business are clear, stable, and transparent,” said the head of the State Service for Antimonopoly Control, Mammad Abbasbayli, during a seminar held in November last year on the implementation of the new law.

According to him, the application of the law “On Public Procurement” will become a powerful incentive for the development of entrepreneurship, and will also lead to qualitative changes in the field of public financial management.

Ensuring transparency in the field of public procurement is extremely important given the massive involvement of entrepreneurs in various contracting works and procurement in the Karabakh region.

“If Azerbaijani entrepreneurs want to work in the territories of Azerbaijan liberated from occupation, they must actively participate in government tenders,” Ahmad Hasanov, head of the public procurement control department of the State Service for Antimonopoly Supervision, recently said.

“All government procurement in Azerbaijan will be carried out through a single electronic portal, in a transparent manner.” As the head of the department noted, since the beginning of 2023, training on public procurement in digital format for entrepreneurs has been regularly held in Shusha, Zangilan, and other territories liberated from occupation.

This work will be further intensified in 2024. In particular, to apply the new legislation on public procurement, the Cabinet of Ministers yesterday approved the “Regulations on the Unified Internet Portal of Public Procurement,” which defines the rules for conducting electronic procurement.

In particular, the decree of Azerbaijani Prime Minister Ali Asadov approved the “Limits for the integration of information resources into a single Internet portal of public procurement”.

Under the document, the Ministry of Digital Development and Transport was instructed to integrate a single Internet portal of public procurement into the Electronic Government system, ensuring its functioning in real-time during tender procedures.

Another step by the government in this direction was the approval of the tariff for using the unified Internet portal of government procurement, as well as the number of fees for participation in procurement and submission of tender proposals. Thus, the fee for using the portal for one purchase is 25 manats, then this fee varies depending on the period - from 120 manats per month, and up to 950 manats per year.

In turn, prices for submitting tender proposals depend on the cost of the procurement proposal: according to the tariff scale for proposals worth AZN5-100,000, you need to contribute up to 0.2% of the proposed amount, this amount progresses step by step, and at a maximum for proposals over AZN10m reaches 0.015% of its amount (but not more than AZN10,000).

Thus, the formation of the entire necessary regulatory framework and ensuring transparency in the field of public procurement through their complete transfer to digital format will save huge budget funds, stimulate business, and provide the Ministry of Economy structures with an effective tool for monitoring and punishing those guilty of violating the laws.