The first law on public procurement in Azerbaijan was approved by Decree No. 524 “Regulation on procurement of goods (works and services) by budget organizations” signed by the president on December 19, 1996. On February 11, 1997, the Law of the Republic of Azerbaijan No. 247-IQ “On Tender” came into force with the decree No. 570 of the President of the Republic of Azerbaijan dated April 7, 1997. The Law of the Republic of Azerbaijan “On Public Procurement” dated December 27, 2001, No. 245-IIQ was enacted by the President of the Republic of Azerbaijan with Decree No. 668 dated January 29, 2002 (amended on 28.05.20) and repealed the Law of the Republic of Azerbaijan “On Tender”. The existing Law has been amended on various dates.
According to the Law of the Republic of Azerbaijan “On Public Procurement”, this law determines the economic, legal, and organizational principles of public procurement in the Republic of Azerbaijan, the principles and rules for the efficient and economical use of public funds during the tender, and is based on competition and transparency for all suppliers (contractors), provides an environment of equal competition.
In the Republic of Azerbaijan, tenders are held every year in various fields. A tender is a competition to select one or more of the bidders based on a contract for the most efficient and cost-effective performance of any job or service and to give that job (service) to that bidder(s).
It is possible to follow the held contests, the name of the purchasing organization, the winner, the sender’s taxpayer identification number, the price of the offer, and the date of the tender through the Etender.gov.az website. Articles related to corruption, fraud, and non-transparency in the tenders held in Azerbaijan in recent years have been published both in the independent press and in other media outlets. We often come across cases such as newly created, inexperienced companies or companies registered in the name of a person at the same address winning tenders announced by government agencies, or in many cases companies specializing in a different field winning tenders unrelated to the type of activity. In addition to these, there are cases in practice where a company that was founded a day ago or a company with a charter capital of 10 Azn won the tender, as well as a company with tax debt participated in the tender and won.
In addition, this blog represents the collection of researches and published articles on corruption and fraud cases in the tenders held in Azerbaijan in the last 2 years and the opinions of the experts who researched them.
One of them is an article shared on the website of dia.az (World Information Agency) on October 13, 2021. The headline of the article is “Fruit and tea cultivation institute’s fraud in tenders reaches its peak”. Here experts are talking about the tender procedures conducted by the Scientific Research Institute of Fruit and Tea Cultivation of the Ministry of Agriculture and violations of the law on tender. It is reported that “BABİL CONSTRUCTION AND PROCUREMENT” Limited Liability Company was announced as the winner of the tender held by the Scientific Research Institute of Fruit Growing and Tea Cultivation for the purchase of virus-free planting material in fruit growing by an innovative method. And on 03.08.2021, information on the conclusion of a procurement contract in the amount of 1,199,540.8 manats was posted on the single internet portal of state procurement. However, placing the information about the concluded contract on the mentioned portal again on 15.09.2021 is one of the noteworthy points.
“In the data of State register of legal entities of a commercial institution, it is indicated that “BABIL CONSTRUCTION AND PROCUREMENT” Limited Liability Company was registered with the State Tax Service under the Ministry of Economy at the Main Department of Local Revenues of Baku city on 15.09.2020. According to the register data, the legal address of the LLC with a charter capital of 100 manats is BAKI CITY SABUNCHU DISTRICT, PIRSHAGI, S. JAFAROV, house 9A, m. 2. Bakhishov Iskender (father name Mukhtar) is mentioned as the legal representative.
The first information posted by the Scientific Research Institute of Fruit and Tea Cultivation on the single internet portal of state procurement was dated 03.08.2021. As can be seen from the information included in the register of the State Tax Service, “BABİL CONSTRUCTION AND PROCUREMENT” Limited Liability Company was registered only 11 months ago. In the legislation, there should be information on the activities of contractors for at least one year. The second information about the conclusion of the contract was placed on the portal by the Tender Commission of the Scientific Research Institute on 15.09.2021. Because in the first information, it was obvious that LLC’s activity was less than one year. The second information coincides with the same day (15.09.2020) when the LLC was registered on the portal, and the date (15.09.2021) that indicates the conclusion of a new contract”, we read in the above-mentioned article.
Corruption and bribery in tenders can be found in the article published on Apa.az on July 27, 2022. The headline of the article is ” 25 million manat project was awarded to a company that violated tender rules.” It is reported in the article that the representative office of Shabran District Executive Authority for Shabran city has finalized the tender for major road repair works and “Shabran-D” LLC was selected as the winner of the tender and a contract worth 25.5 million manats was signed with the company. According to the contract, it is planned to lay asphalt on 18 streets in the city of Shabran by the end of 2022.
The article stated that “in 2019, a serious financial conflict arose between the head of Shabran-D LLC Jalal Badalov and the former 1st deputy head of the Shabran Executive Power, Mehdi Balabeyov, and a court dispute of 227,000 manats. Jalal Badalov, in his statement to the media and his appeal to the law enforcement agencies, announced that he had given 227,000 manats to Mehdi Balabeyov in order to get approval to participate in the tender for construction works and new projects in Shabran district, but he did not get a successful result in the tender. In other words, Jalal Badalov, the head of “Shabran-D” LLC, admitted that he violated the rules regarding participation in tenders.”
However, according to Article 6 of the Law “On Public Procurement” on qualification requirements, persons who violate tender rules may be excluded from procurement for a period of 5 years.
Abzas.org, one of the independent media outlets, regularly investigates and publishes articles on corruption, fraud, and violations of tender laws in tenders. One of them is slightly different from the above articles. This article is about a company with a tax debt winning a tender.
It is mentioned in the article that on 07.07.2022, Azerbaijan Technical University signed a purchase agreement with “Mən-A” LLC with a financial value of 54,800 AZN (54,800 manats). According to the official information of the State Tax Service as of July 13, 2022, “Mən-A” LLC has a tax debt of 2505.95 AZN to the state. According to the requirements of Article 6.2.5 of the Law “On State Procurement”, companies with tax debt are prohibited from participating in the tender.
According to the experts, “in the register data of the State Tax Service under the Ministry of Economy, it is shown that “Mən-A” LLC with a charter capital of 100 manats was registered on 27.01.2012. The legal representative of LLC is Balazadeh Sahil (father name Kamil), born in 1991, who graduated from this university in 2013. Balazade Sahil is the head of the information technology and public relations department of the Youth Foundation of the Republic of Azerbaijan. In the “Customers” section of the “iam.az” website, which is the official website of “Mən-A” LLC, it is noted that the Youth Foundation of the Republic of Azerbaijan is one of the company’s customers. In other words, the Youth Foundation gave some works to the company of Sahil Balazade, the head of the fund’s information technology and public relations department, according to the announced tender.”
It is not a coincidence or rare event that companies with tax debts win the tender. For example, on May 21, 2022, an article was published on the Qafqaz.info website about the signing of 13 tender contracts in 20 days by a holding with a large amount of tax debt. In that article, it is noted that “MSDIS Holding”, operating in Azerbaijan, has a large amount of tax debt to the state. According to “Qafqazinfo”, the company’s tax debt is 375,240.74 manats.
Although the participation of companies with tax debt in the tender is not possible due to the requirements of Article 6.2.5 of the Law “On State Procurement”, but the company signed 13 tender contracts in May of this year alone. 5 of these contracts were signed with Khojavand District Communal Enterprises Combine. 3 of them took place with an interval of three days (May 17-20). The last contract signed between Khojavand District Communal Enterprises Combine “MSDIS Holding” coincides with May 20.
It should be noted that the CEO of MSDIS Holding, which has been operating for two years, is Nagiyev Mirfayyaz (father name Oktay). The holding specializes in the construction, manufacturing, and gas filling sectors. Currently, the holding has 5 areas.
State procurement expert Vugar Huseynli says that there are certain gaps in the legislation related to state procurement. The most important of them is related to the financial supply system. According to him, transparency should cover all stages of the supply chain. The supply chain must be fully transparent from beginning to end of the process. Also, the activities of all institutions involved in procurement should be regulated in some way by law.
“For example, our antimonopoly service controls state purchases, but the activity of the antimonopoly service regarding the control of state purchases is not sufficiently reflected in the law. However, they have great authority and make great interventions. However, as this is not reflected in the legislation, it can lead to abuseFirst of all, the activities of all institutions involved in procurement, primarily antimonopoly service, should be regulated by law.”
Vugar Huseynli also notes that another gap in public procurement is related to complaints. According to him the complaints mechanism in the field of public procurement is very weak. This complaint mechanism should be entrusted to some independent institution.
“Currently, there is such a situation that the institution that carries out the control also examines the complaint, which leads to non-objective results. If this will be a legal process, the legal process takes quite a long time, and public procurements, tenders must be carried out within a year. That is, no one can appeal to the court and win it and carry out the work within a year.”
Author: Sakinakhanim Mammadova
The blog is produced within the Economic Policy Research Center’s (EPRC) project ACTION -Activating Civil Society Organizations through Training and Inclusive Operational Network. The project is implemented with the support of the Swiss Agency for Development and Cooperation.
The views expressed are those of the author’s and do not necessarily reflect the views or positions of EPRC and Swiss Agency for Development and Cooperation.