Analysts Name Regions with the Most Efficient State Procurement

10 january 2018

The Ulyanovsk Region, the Kemerovo Region and the Khabarovsk Territory top the regional state procurement efficiency rating for H1 2017. As has become a tradition, the rating was compiled by the Analytical Center for the Government of the Russian Federation and Zakupki360.

The current leaders of the rating were rated 27th, 2nd and 6th respectively in 2016. Analysts say that the Ulyanovsk Region managed to climb to the top of the rating as a result of a significant decline in violations discovered by the Federal Antimonopoly Service of Russia: the region also went up 32 places in the conflict sub-rating calculated on the basis of the number of substantiated complaints lodged with the FAS of Russia. In addition, the position of the Ulyanovsk Region also improved as a result of changes in the calculation methodology that now puts more emphasis on competition during major biddings: in the competition sub-rating the Ulyanovsk Region went up a whopping 25 places from where it was in 2016.

So what has changed in the methodology? The analysts have replaced the average number of bidders with a weighted average number of bidders (with the maximum starting contract price being used as the weight). "This change not only allows us to better focus on the level of competition in major biddings but also helps reduce the weight of small-scale biddings held in remote areas. Now competition is assessed taking into account the value of the purchase, with the result that now the regions can get a much better idea of how effective their purchasing systems really are," explained Anton Volkov, expert of the Analytical Center for the Government of the Russian Federation.

It is noteworthy that the proposal to make the change came from the regions that view the rating as a tool for self-assessment and self-improvement. "For the entire period that we've been compiling the rating we've been seeing both the bidding organizers and the bidders adapt to the terms and conditions of the contract system, which also manifests in increased competition in biddings. On the other hand, there still remain quite a few significant problems in state procurement, including a high proportion of contracts with major suppliers and a relatively low level of planning on the part of bidding organizers, for example, on average we only saw 0.6 changes being made to the bidding schedules in H1 2017," Anton Volkov adds.

On the whole experts note positive changes in competition during state procurement procedures. The average number of bidders allowed to bid for regional contracts went up to 2.8 (From 2.7 in 2016). Real competition was noted in 64% of the biddings for which at least one bid was submitted (which is 3 percentage points more than in 2016). And that despite the fact that the state procurement market as a whole is characterized by very high concentration of the same companies that keep bidding time and time again with the result that contracts often get awarded to the same suppliers year in and year out: the top 100 largest suppliers in the region accounted for 75% of all purchases made in H1 2017 in money terms, the analysts stress.

The rating provides a tried and true tool as well as open data sets for analyzing the weaknesses and risks of the state procurement management systems used by constituent entities of the Russian Federation. "Our cooperation with regional representatives has led us to 2 basic conclusions. First, there has been an increase in the number of managers who understand that detailed analysis of information from a variety of sources is needed to achieve real growth and that requires some serious resources, and one way to save them would be by using off-the-shelf tested rating methodologies. Secondly, when it comes to the data that can be trusted in procurement management there is no such thing as too much. In the time we've had this rating we have encountered several cases when the perception of the state procurement system inside the region was for various reasons very different from how we assessed it using our methodology. But that's to be expected and is actually even a good thing: these discrepancies prompt inquiries into the cases and double-checking of the calculations. As a result, either a problem gets discovered and eliminated or a risk is accepted but in any case forewarned means forearmed. In this sense the rating can be regarded as a great help for analysts and managers alike when it comes to ensuring objectivity of assessments and results," believes Vladimir Ivichev, CEO of Zakupki360.

The rating is traditionally based on the database provided by Zakupki360, which contains information about state and municipal purchases published on the official portal of the Unified Information System in the area of procurement.

It should be reminded that Regional Procurement Efficiency Rating was designed by the Analytical Center for the Government of the Russian Federation and Zakupki360 Company and presented for the first time in 2016. It aims at assessing objectively the quality and efficiency of procurement organization and implementation by state bodies at the regional and municipal levels. The assessment of the regions is made by 5 main criteria: competitiveness (share in the final rating – 0.5), cost effectiveness (0.08), planning efficiency (0.12), conflict intensity (0.2) and suspicious purchases (0.1).