[Interview with Vitaliy Leonidovich Bakhvalov, chairman of Committee of Chechen Republic Government for State Orders, by Andrey Pilipchuk, personal correspondent, in Groznyy; date not given: "Vitaliy Bakhvalov: 'We Will Strive To Give No One Any Reason To Call Chechnya a "Black Hole" in the Future'"]
Acting President Sergey Abramov of the Chechen Republic issued an edict adding two new executive agencies to the Chechen Government. One of them is the Committee of the Chechen Government for State Orders. It is headed by experienced Moscow financial expert Vitaliy Bakhvalov. Mr. Bakhvalov discussed the reasons for the creation of this committee and the functions it will perform when he was interviewed by the Strana.Ru correspondent.
[Pilipchuk] Vitaliy Leonidovich, why was your committee for state orders created?
[Bakhvalov] The committee was set up for the more economical use of budget resources and for the prevention of abuses in the sphere of state orders. To put it more simply, it was set up for the prevention of corruption. I should stress that we are not planning to assume responsibility for state purchases. We will only organize this process.
[Pilipchuk] Tell us what you plan to do first.
[Bakhvalov] The creation of the committee and the start of its activities were divided into several stages. The first stage consisted of the organization of committee activities; the creation of the committee as an agency of the executive branch of government; the coordination of estimates and organizational-legal documents; the creation of a body for the processing of clients' orders and suppliers' bids; the determination of the committee's rules of operation. The second stage entails the alteration of the composition of the competitive bidding commission (the committee chairman will be the commission chairman, and the commission will consist of deputy ministers, judging by the list of commission members). Furthermore, until the committee takes over, the commission's work will be overseen by the Economic Ministry. The purpose is the continuous oversight of purchases of goods, work, and services. The third stage will entail the conclusion of agreements with major producers in Russia and the countries of the near abroad. This will enable us to reduce purchasing costs by 30 percent and reduce delivery time to the republic. During the fourth and final stage, a computerized trade system, "State Orders of the Chechen Republic," including order selection software and an Internet site, will be developed and established. We have almost reached a decision on the group of software developers.
[Pilipchuk] How will this benefit the republic?
[Bakhvalov] It will expedite the whole purchasing process and improve its quality, secure the most effective use of budget resources, isolate "dummy organizations," and eliminate the need for a large staff from the start.
The main thing, however, is that it will help us secure the total transparency of competitive bidding and attract the maximum number of suppliers. In general, the committee's compilation of a summary state order for budget-funded entities at the end of the fiscal year will facilitate the management of the process during the next year.
[Pilipchuk] Please explain how the process works and how it is regulated.
[Bakhvalov] There is no question that RF Presidential Edict No 305 of 8 April 1997 "On the Primary Measures for the Prevention of Corruption and the Reduction of Budget Expenditures During the Organization of Purchases of Goods for State Needs" radically changed the system of budget-funded purchases of goods, work, and services by state clients. In the past six years, the new system, despite numerous shortcomings, proved to be irreplaceable in saving money and securing the more efficient use of budget resources by state clients.
The fundamental rules governing official competitive bidding sessions for purchases of goods for state needs and governing the conclusion of state and municipal contracts on this basis are recorded in the previously mentioned edict, the budget and civil codes of the Russian Federation, and the Federal Law "On Competitive Bidding Sessions for the Distribution of Orders for Goods, Work, and Services for State Needs."
According to existing laws, competitive bidding sessions are required for all state contracts for amounts in excess of 2,000 times the minimum wage. State clients frequently misinterpret this requirement and base their calculations on the minimum wage of 450 rubles (as of 1 May 2003) recorded in the law "On the Minimum Wage," although Section 5 of this law stipulates that payments to cover civil-legal obligations are to be calculated on the basis of a minimum wage of 100 rubles, which creates a discrepancy of 700,000 rubles in the determination of transactions requiring competitive bidding sessions.
[Pilipchuk] Will you be working with commercial entities?
[Bakhvalov] The state as client is the ideal partner for commercial entities, because this minimizes their commercial risks. They understandably want to sign contracts with the state client. What is more, after going through the competitive bidding procedure just one time, they automatically gain preferential status during the selection of suppliers of goods for state needs.
We have to admit, however, that state contracts frequently are signed without sufficient substantiation of the choice of suppliers of goods and the performers of work and services. Information about competitive bidding sessions frequently is not published in the new media, and this puts the conclusions of the competitive bidding commission in question.
I know that the competitive bidding process can be chaotic in other regions of the federation, and not just in Chechnya. The commissions in RF regions usually consist mainly of officials, for example, with no knowledge whatsoever of the goods being purchased and of pricing practices. In some cases, commission members are representatives of the client with an incentive to lobby for a specific group of suppliers.
Here is another example. According to the RF State Statistics Committee, a high percentage of purchases can be traced to a single source, and this is responsible for most of the corruption in this sphere. Precise analyses of purchases are not possible because state clients and the people disbursing financial resources do not know enough about state contracts and do not keep records of them.
[Pilipchuk] How can this be corrected?
[Bakhvalov] Audits and monitoring operations should focus on deliveries of goods from middleman-organizations lacking the necessary equipment and specialists for the production of these goods. Most of the violations in this sphere of purchasing occur in the absence of strict compliance with the principle of interaction between the state client and the immediate producer of the goods. In these cases, the value of the state contract and the quantity or quality of the goods supplied are overstated.
Besides this, goods often are purchased from patently unscrupulous suppliers. This is common in the RF regions and is particularly injurious to the state when the client fails to file claims for damages.
The validity of the prices charged for purchased goods, work, or services can be checked by using the records of state statistics agencies and learning the average market price in the region (using the records of the Ministry of Economic Development and Trade and the RF Chamber of Commerce and Industry) to determine their actual value. Purchases of foreign goods must entail proof of expediency, which will exist only if no resident of the Russian Federation produces comparable goods. Otherwise, expenditures on these goods will be categorized as the inefficient use of budget resources. In these cases, closer attention should be paid to the mechanism of efficiency oversight (the efficiency audit), which must include a thorough analysis of existing legislation in this sphere.
Some of the provisions of the legislation on competitive bidding for state purchasing contracts must be clarified for the maximum deterrence of abuses in the sphere of state purchases and for the reduction of budget expenditures for these purposes. Statements pertaining to the limited number of suppliers of technically complex goods, work, and services must be more specific. Advance payments on state contracts by the official state client must be prohibited, as they were in RF Finance Ministry Order No 55n of 23 July 2001 "On the Approval of the Procedure for Using Federal Budget Resources To Fund the Federal Targeted Program for the Restoration of the Economy and Social Sphere in the Chechen Republic in 2001." The client's guarantee should assure the supplier that he will be paid.
Commission members should be chosen on professional grounds. The mechanism for challenging or invalidating competitive bidding sessions inflicting losses on the state must be perfected and centralized.
In short, we have many ideas, and I think we will be able to act on them. We will strive to give no one any reason to call Chechnya a "black hole" in the future, and we will use all of our strength, experience, and knowledge to give people good reason to refer respectfully to the republic as a flourishing region of the North Caucasus.
[Boxed item: Vitaliy Leonidovich Bakhvalov was born in Moscow on 25 October 1975. After graduation he was admitted to the Law School of the Moscow Liberal Arts Institute. He simultaneously attended classes in the Management School of the Economics Academy imeni Plekhanov. After he earned a degree from his first higher academic institution, he enrolled in the Moscow Academy of Economics and Law for correspondence courses in law. He was the legal counsel of a commercial bank from 1997 to 1999 and had a private law practice from 2000 to 2001. He headed the Administration of Chechen Republic Ministry Affairs from 2001 to 2003 and was an inspector in the RF Comptroller's Office from 2003 to 2004. He was appointed chairman of the Committee of the Chechen Republic Government for State Orders on 10 June 2004.]
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