Prearranged billions from Istanbul Metropolitan Municipality

Aykut Küçükkaya

 
In the report in which tenders with a total value of five billion lira were closely scrutinised, the Auditing Commission’s CHP member, Tarık Balyalı, has pointed out that tenders were conducted on a ‘prearranged’ basis. In particular, Beyaz Holding, mentioned in court statements as being the company to which money collected in Germany in the Lighthouse scandal was transferred in Turkey, obtained tenders valued at 818 million Turkish lira from Istanbul Metropolitan Municipality. Former Chair of the Radio and Television Supreme Council, Zahid Akman, once part of President Tayyip Erdoğan’s closest circle, numbers among this company’s shareholders; this shareholding provoked considerable public debate.
Contained in Balyalı’s report are astonishing findings such as that, with reference to approximate costs set prior to tenders, ‘They are not correctly calculated, do not remain confidential and are leaked to companies; the company compiling the approximate cost even participates in the tender and the figure is knowingly inflated.’ Balyalı, pointing out that tenders are broadened in scope by being made into amalgamated tenders with the result that the environment of competition is eliminated, contains harsh criticism that companies close to the ruling party are acquiring cartel status.
BEYAZ SCOOPS UP 818 MILLION LIRA IN ONE YEAR
Notable sections from the report
On 9 January 2017, Osman Gökçebaş and Erdal Yılmaz from the AKP and Tarık Balyalı from the CHP were elected to the Istanbul Metropolitan Municipality Assembly Auditing Commission, created to ‘audit Istanbul Metropolitan Municipality’s income and expenditure and its accounts and transactions in 2016.’ Balyalı drew up an eighteen-page dissenting statement to the Auditing Commission’s report on 31 March 2017. Included in Balyalı’s dissenting statement are some most astonishing findings, harsh criticism and recommendations concerning tenders valued at billions of lira. Istanbul Metropolitan Municipality held 637 tenders and made 432 direct procurements in 2016. The monetary value of the tenders ran to 11,080 million Turkish lira. The Auditing Commission, for its part, examined 62 tender and direct procurement files from 2016. The monetary value of the examined tender files was 4,606,693,000 lira. There follows a summary of notable sections included in the report into the tenders valued at nearly 5 billion lira:
ISTANBUL METROPOLITAN MUNICIPALITY COMPANIES THE SOLE PARTICIPANT IN LARGE TENDERS
‘... In the examinations we have conducted, we see that our subsidiaries were the sole participant in a significant portion of in particular high-value tenders. In these tenders in which competition does not come into play for various reasons, our subsidiaries win tenders at slightly below estimate. Also, in the examinations we have conducted, we have established that, in some of the tenders won by our municipal subsidiaries, the technical specifications were drawn up in a manner that precludes competition and prevents other companies from participating.’
THREE CONUNDRUMS WITH APPROXIMATE COST
1 It is not calculated correctly ‘The approximate cost is the forecast procurement price of goods or services to be procured by the administration or construction works to be commissioned by it. Statistical studies made into tenders reveal to us that there is a problem in correctly forecasting approximate costs in works that are awarded at 31% or more below approximate cost in works in which the open tender procedure is used. In 167 tenders held by Istanbul Metropolitan Municipality in 2016, the price was 30% or more below approximate cost price. This amounts to one-quarter of tenders.’
2 It does not remain confidential and is leaked ‘The approximate cost should remain confidential until the tender is concluded. We see that the approximate cost price is very easily guessed particularly in tenders in which companies that price the approximate cost when the approximate cost is set and submit bids are the same.’
3 The amount is knowingly inflated ‘We frequently witness in many tenders that Istanbul Metropolitan Municipality holds that the companies pricing the approximate cost and those participating in the tender are the same. In this situation, we see that certain companies that are well connected to the authority attempt to raise the approximate cost above the market price.’
COMPETITION IS PRECLUDED
‘In the examinations into tenders we have made in the course of our auditing work, we have seen that certain works are combined and made into a single tender. This situation, along with causing an increase in the prices of tenders and a reduction in the number of companies participating, constitutes a factor that stifles competition.’
THE SAME COMPANIES KEEP ON WINNING
‘The Beyaz Holding companies undoubtedly head the list of those that win such heavyweight tenders in terms of volume and amount. The Beyaz Holding companies, which for years have won certain tenders such as the Istanbul Metropolitan Municipality Lifelong Learning Centre without difficulty, generally participate on their own in these tenders and win them at slightly below estimate. Beyaz Holding won tenders valued at 818 million lira in 2016.’
SOME COMPANIES ARE ACQUIRING CARTEL STATUS
‘In tenders held by Istanbul Metropolitan Municipality, the company Platform Turizm A.Ş. has for years been constantly winning certain tenders over which a virtual cartel has come into being. The staff transport service tenders in which it bid and that were examined by us were all won by the said company on its own. The companies participating in the tenders in question were eliminated either for missing documents or arithmetical errors in the price table. Consequently, all these tenders were concluded without a genuine atmosphere of competition being created. The company forming part of the Platform Turizm A.Ş. group obtained tenders valued at a full 238,750,000 lira.’
STRIKING EXAMPLES FROM FOUR TENDERS
Tender scandal involving one and a half billion
A SINGLE FIRM PARTICIPATED IN A TENDER VALUED IN THE HUNDRED OF MILLIONS
1 The municipal company Sağlık A.Ş. obtained a tender whose approximate cost was 96,510,000 lira for 95,531,000 lira. Many companies purchased the specifications but no company other than the Istanbul Metropolitan Municipality company Sağlık A.Ş. participated due to the special provisions in the specifications. The Istanbul Metropolitan Municipality subsidiary won the tender in which it was the sole participant at one per cent below estimate.
HOW WAS İSFALT ELIMINATED FROM A TENDER VALUED IN BILLIONS?
2 The approximate cost of the ‘Istanbul Overall Road Construction Works’ tender was set at 1,799,409,000 lira. The tender was awarded at 1,584,119,000. In the tender, in which six companies participated but only five companies’ bids were valid, the municipal company İSFALT A.Ş. submitted the lowest bid at 1,580 million lira. İSFALT A.Ş. was eliminated due to an arithmetical error, and the company making the second lowest bid won the tender. Thanks to a simple error by İSFALT officials, funds of 1,580 billion went to a company external to Istanbul Metropolitan Municipality.
HAMİDİYE WATER NOT EVEN INVITED!
3 The approximate cost of the ‘2017 Water and Mineral Water Procurement’ tender was 7,502,000 lira. It was awarded at 6,955,000 lira. The municipal company HAMİDİYE A.Ş., Istanbul’s largest water producer, was not even invited to this tender over the procurement of water and mineral water for Istanbul Metropolitan Municipality. At the conclusion of the tender in which three companies participated, the tender in question was awarded to a company that is a dealership of HAMİDİYE A.Ş.
PROVIDED APPROXIMATE COST ITSELF THEN CLINCHED THE TENDER
4 The approximate cost of the ‘Sabiha Gökçen Airport-Kurtköy Junction Railed System Metro Line Implementation Basic Finalised Project Services Works’ tender was 7,666,000 lira. The tender was concluded at 2,120,000 lira. Bids were obtained from six companies at the approximate cost setting stage of the said tender. At the tender stage, four of these six companies also bid. The company that priced the approximate cost at 6 million lira won it at the price of 2,120,000 lira.
 ‘Not tenders but flows of funds’
The CHP’s Tarık Balyalı, one of three members of the Auditing Commission that audited Istanbul Metropolitan Municipality’s 2016 affairs, assessed the report and his dissenting text for our newspaper. Balyalı commented:
‘These are open tenders that are conducted for the sake of appearance by Istanbul Metropolitan Municipality. But, when the heart of the matter is looked into, ‘prearranged’ tenders are conducted in the guise of open tenders. In virtually all of the tenders in question, the winning bidders were the sole participants in the tenders and the tenders were concluded at slightly below estimate. As a result, the tender price is set by itself in these tenders in which competition plays no part. Conditions must be created whereby competition comes into play and there is participation in a greater number of tenders for public bodies to benefit from such tenders. Istanbul Metropolitan Municipality must immediately abandon the method it uses at present and open tenders to competition...’