The University of Tartu must pay back €1.5 million in support used for building an IT center which opened nearly a year ago, due to violations of public procurement law, the Ministry of Finance says. The university rejects this, saying its procurement process was in line with requirements.
At stake primarily is wording in the procurement documentation which stated that electrical work should be carried out by contractors with national certification and whether foreign contractors – none reportedly bid for the tender in fact – would have understood that their own national equivalent certification may have been a sufficient equivalent.
The bulk of the support, €1.35 million, used for constructing the Delta House, a digital technology, analytics and economic ideas complex capable of hosting around 3,000 people, came as EU money. This only represents 10 percent of the EU money granted for the purpose, and the requirement to repay it comes from the Estonian finance ministry rather than from the European Commission, though the latter had previously expressed concerns about the procedures.
Kaur Siruli, Head of the Financial Control Department at the finance ministry, says that both local and foreign parties who have an interest in procurement must be treated equally, in other words there must be no requirements in the procurement conditions which only Estonian firms can meet.
Siruli said: "In this case, we found that, unfortunately, one domestic requirement had been overlooked. The bidders were required to have certified Estonian electricians."
More specifically, the paperwork should have been a Class A Estonian certificate of electrician competence, the ministry said, which could exclude firms from outside Estonia from taking part.
The issue could have been resolved by two words having been inserted after the domestic certification requirement: "or equivalent [to the Estonian certificate]", Siruli said.
"That is the dumbest thing about it," he said.
"As a reminder to all contracting authorities, if you are procuring internationally, just in case, you should have the words 'or equivalent' next to all requirements and standards.
University rejects claims
The university disagrees with these findings.
Tuuli Ilula, head of its procurement department, said that all the university desired was an electrical contractor who had all the necessary skills and qualifications, noting that the Electrical Safety Act requires a Class A certificate, though a foreign equivalent would have been acceptable.
Participants in the procurement process, regardless of where they were from, should get acquainted with Estonian regulations if they were to carry out the work here, she said.
"In fact, we expect all participants in the public procurement process to get acquainted with both the basic documents of the procurement and Estonian legislation, so that later on, construction work can be done in accordance with Estonian laws and requirements."
The university also says that even if there had been an error in procurement conditions, they should not be asked for a refund. The alleged infringement had no material effect on the tender results, the university adds, saying that no foreign companies had applied and that even if they had, it would have been unlikely that they would have undercut a local supplier.
Kaur Siruli at the finance ministry nevertheless said that the phrase should have been present in the procurement paperwork.
"Having to surmise it from somewhere is not something that bidders for the tender should be required to do," he said.
This is also a European Commission requirement, he said. If the phrase "equivalent" is not spelled out, the commissions says that foreign companies may be excluded, and that five percent of state support would have to be repaid and ten percent of European money withheld.
The commission applied its regulations strictly, and had encountered such arguments (that potential tenders should figure out the "equivalent" requirement themselves) before, Siruli went on.
Timeline of Delta House procurement process
In summer 2017, the University of Tartu started its procurement process for a new IT center on the banks of the Emajõgi River.
The building's construction cost almost €24 million, with €13.5 million of this coming from the EU.
The Archimedes Foundation, the national agency of the European Union's education, youth and sports program, reportedly noticed that there could be irregularities in the procurement process in fall of 2018, which was when 25 percent of payments of EU money to the university began to be withheld, Tuuli Ilula said, adding the university provided its explanations and it was found the procurement had been carried out in accordance with the law, hence the payments were restored.
Estonian construction firms Rand and Tuulberg and Ehiutustrust completed the work by January 2020, which was around the same time the construction contract had been inspected by finance ministry auditors, leading to the requirement to pay €1.5 million.
Refund can also come from state budget coffers
The fact that the university is required to refund the €1.5 million does not necessarily mean the university must provide this money itself, the finance ministry went on.
The state support services center (RTK), the body tasked with distributing the EU money and under the finance ministry's auspices, has until the end of March to make a decision, though preliminary indications show that while the center agrees with the auditors' conclusions that the university violated legal requirements, recovering the money may be unconstitutional since the procurement process began before January 2018, which was when the European Commission started to apply its requirements more strictly.
While Kaur Siruli at the finance ministry says this argument is unlikely to hold water either, saying what the university has done contravenes the Public Procurement Directive, he said the university may be able to have the €1.5 million paid off from the state budget.
This would require a decision from the Ministry of Education and Research in that case, Siruli said.
Editor: Andrew Whyte