Companies face new bureaucracy when selling to public institutions

by Robert Wylot

"This amendment may in the short term eliminate many small companies from the market"Public institutions are now feeling the consequences of last year's amendment to Poland's procurement law, with some officials claiming that new regulations not only boosted red tape but may even seriously hurt Poland's small- and medium-sized enterprises (SMEs).
"This amendment may in the short term eliminate many small companies from the market while causing a further expansion of big enterprises," said Maciej Nowicki, president of ECOFUND, which spends zł. 164 million ($40 million) annually to promote environmentally friendly projects in Poland.As the total amount of money redistributed by public institutions in Poland amounts to nearly 40% of gross domestic product (GDP), even relatively small changes in the procurement law may substantially affect the economy, officials said.
Public institutions, which are now planning their 2002 spending, have to apply much more complex procedures to the procurement process following legal changes made last year. More tenders, longer appeal procedures and more documentation required from bidders will be necessary when selecting suppliers.
"Before that amendment, if a university, a gmina, a ministry or a fund like ours needed furniture, equipment or even paper, they could simply send someone to buy them in a shop," Nowicki said. But that will no longer be possible, he said.
Legislators, however, defend their efforts to safeguard public money."Despite all the differences between individual cases, price should be the dominant criterion," said Zdzisław Kałamaga, a Democratic Left Alliance (SLD) MP, who was one of the amendment's sponsors.
But Nowicki said the new requirements would eliminate small firms from the contest, as it is only big companies that will be able to offer the lowest price.
"At the same time, quality will suffer, as it is not possible to predict the quality of service in advance," he said.
Independent gas stations will be among the SMEs to suffer most, according to Nowicki.
"A public institution like a ministry or my fund will now have to sign contracts with big chains of fuel stations, as we drive across the country and our cars are now only allowed to tank at one previously selected company," he said.
Kałamaga said the amendment was inevitable as Poland adjusts procurement law to European Union (EU) standards in anticipation of the country's EU accession.
Nowicki said the EU argument does not take into account the structure of Poland's economy."In Poland, where state involvement in the economy amounts to as much as 40%, such regulations have a much stronger impact on the economy than in the EU," he said. "The threat to SMEs is much more serious here."
Piotr Węgleński, the rector of Warsaw University - another institution that will have to abide by the new rules - said the EU sets a poor example for Poland's procurement efforts.
"The European Union may be haunted by an immense bureaucracy, but I would expect our authorities to protect us from red tape," Węgleński said.
The amendment obliges public institutions to spend their funds centrally, which, according to Węgleński, is boosting bureaucracy at his university.
"Each faculty now has to double-check what all other faculties are ordering, so we don't place two orders for toilet paper at the same time," he said. "It's a step back toward the regime we were subject to under communism, when universities were managed centrally."
Although Kałamaga admitted that "plenty of institutions" asked for an exemption from the new law, he said that transparency in public procurements is the law's main objective and ultimate result.
"I am aware that it leads to greater bureaucracy but the very sense of the procurement law is to make public institutions work out in the open," he said.