Hidden costs

True story accompanying image

When the phone rang, it was clear the caller was scared. He worked in the government, he said. He had information on a huge public tender that he needed to share. He had tried to complain to his superiors about the bidding process, but they had rebuffed his allegations. Now he wanted to speak out, but his identity had to remain secret.

The man who called our office in the Czech Republic was referring to ‘the ecotender’, a massive public contract to clean up pollution and waste across the country. Like much of Eastern and Central Europe, the newly-reborn state had been left with huge environmental damage after the collapse of communism in the 1990s. The government tried for over a decade to fix the problems with small clean-up contracts, but they were often delayed and overpriced. In 2008, they decided to create one single mega tender to tackle all the remaining sites. According to government estimates, this big clean would cost €4.5 billion. According to the caller, the sums were false.

An employee from Transparency International eventually managed to meet the whistleblower in a deserted shopping mall car park. Without getting out of his car, he passed several documents through the window. The paperwork was explosive – it showed the actual costs of the clean-up were far less than the official estimates claimed.

Transparency International used the documents to publically lobby the Czech government for more information about the bidding process. Their questions struck a nerve. Addressing the media at a public press conference, the Minister of Finance accused staff of being anarchists and cigarette smugglers.

“It was a climate of fear,” according to one Transparency International employee. The amounts of money being discussed were so high that the contract had become a major political and financial issue for the Czech Republic. Amid rising controversy, the initial round of bidding was thrown out.

In 2010, the government decided to restart the tender. The Finance Ministry asked several major auditing firms to come up with new estimates and reopened the bidding process. Despite coming in at €2.3 billion, more than €2 billion less than in 2008, the new lowest bid still exceeded the auditors’ calculations. Under the glare of public scrutiny, the government cancelled the tender.

And it has not ended there. Following the scandal, the government introduced major amendments to public procurement legislation, bringing in more disclosure, transparency and efficiency to ensure the episode is not repeated.

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