March 6 2001

TURKEY

DRAFT

COUNTRY PROCUREMENT

ASSESSMENT REPORT

VOLUME I

March 2001

EUROPE AND CENTRAL ASIA REGION

THE WORLD BANK

TURKEY

COUNTRY PROCUREMENT ASSESSMENT REPORT

FINDINGS AND RECOMMENDATIONS

Table of Contents

Page

Acronyms..…………………………………………………………………………………………. iii

Preface: Date, Basis and Purpose of Report……………………………………………………….. iv

Acknowledgements…………………………………………………………………………………. v

Executive Summary vi

Part A : SUMMARY OF FINDINGS - STRENGTHS AND WEAKNESSES

OF PRESENT PROCUREMENT SYSTEM

Public Sector

1. Legal and Regulatory Framework 1

1.1 General 1

1.2 The Legislative Framework in Turkey 1

1.3 Primary Legislation on Public Procurement 1

1.4 The Government Procurement Law under Revision 2

1.5 Scope of the Procurement Legislation 2

1.6 Associated Aspects of Procurement 3

2. Procedures and Practices 3

2.1 Procurement Planning 3

2.2 Qualification of Bidders 4

2.3 Participation of Foreign Bidders 6

2.4 Procurement Methods 8

2.5 Important Topics Relating to Bidding Process 19

2.5.1 Advertisement 19

2.5.2 Standard Bidding Documents 21

2.5.3 Bid and Performance Securities 22

2.5.4 Bid Opening 23

2.5.5 Evaluation and Comparison of Bids 24

2.5.6 Award, Conclusion & Entry into Effect of Procurement Contracts 25

2.5.7 Contract Implementation 25

2.5.8 Implementation Delays 26

2.5.9 Payment 26

2.5.10 Bid Protest 27

3. Organization and Resources 28

3.1 Roles and Responsibilities 28

3.2 Public Procurement Training 28

3.3 Development of the Procurement Profession 29

3.4 Relations between Government and Business Community 29

4. Audit and Anti-Corruption Measures 29

4.1 Audit 29

4.2 Current Anti-Corruption Measures 30

5. Public Sector Management Performance 32

5.1 Performance of the Public Procurement System 32

6. Performance on Bank-assisted Projects 34

6.1 Procurement and Portfolio Performance 34

6.2 Decentralization of Procurement Function 34

6.3 Organization of Procurement under Bank-financed Projects 35

7. General Risk Assessment 37

Private Sector

8. Commercial Regulations 39

9. Commercial Practices 41

Part B: RECOMMENDED ACTION PLAN

10. Strategic Approach 43

11. Measures to be Taken by the Government 44

12. Measures to be Taken by the Bank 44

13. Technical Assistance 44

14. Timetable 44

15. Recommended Bank Approach for Supervision 44

Attachments

1. Action Plan - Recommendations for Improvement in the Public Procurement System

2. Checklist comparing National Competitive Bidding Procedure and world Bank Policy

CURRENCY

Currency Unit = Turkish Lira (TL)

US$ 1 = 623,507 (average for 2000)

ACRONYMS

BAFO Best and Final Offers

CEN European Committee for Standardization

CENELEC European Committee for Electro-technical Standardization

COM Council of Ministers

CPAR Country Procurement Assessment Report

DDK State Audit Board

EU European Union

GOT Government of Turkey

GPL Government Procurement Law

ICB International Competitive Bidding

MOF Ministry of Finance

MPWS Ministry of Public Works and Settlement

MTI Ministry of Trade and Industry

NCB National Competitive Bidding

OCSPR Operations Core Services/Procurement, World Bank

SBD Standard Bidding Documents

SIS State Institute of Statistics

SEEs State Economic Enterprises

SPO State Planning Organization

TCA Turkish Court of Accounts

TGNA Turkey Grand National Assembly

TL Turkish Lira

TSI Turkish Standard Institute

YDK High Audit Board under the Prime Minister’s Department

TURKEY

COUNTRY PROCUREMENT ASSESSMENT REPORT

(CPAR)

PREFACE

Date of the Report

This report was completed on March 6, 2001.

Basis of Report

This report is based on the findings of a Bank mission to Turkey from October 16 to November 3, 2000, and on the analyses of the materials and other information collected before and during the mission. The mission comprised Mr. Naushad Khan, Senior Procurement Specialist, (CPAR team leader); Mr. Shaun Moss, Senior Procurement Specialist, Ms. Elmas Arisoy, Procurement Specialist, World Bank Office, Ankara, and Mr. Yasar Mutlu (consultant). The Bank team conducted its assessment in close collaboration with the counterpart team appointed by the Government of Turkey (GOT). The Turkish team consisted of Messrs. Hakki Ustaomer, Mahmut Kucuk, Ismet Hatipoglu, High Technical Board, Ms. Yasemin Meric, General Directorate of Technical Research and Application, Ministry of Public Works and Settlement (MPWS); and Mr. Sami Kaplan, General Directorate of Budget and Fiscal Control, Ministry of Finance (MOF). The report follows the instructions issued by OCSPR on June 1, 1998.

Purpose of the Report

An assessment of the public and private sector procurement environment in Turkey was conducted in 1997. As a result, a country procurement assessment report was prepared, submitted to the Government of Turkey, and finalized after discussions with the Government of Turkey. The 1997 report made numerous recommendations for improving the transparency, economy and efficiency aspects of the Turkish public procurement system. Unfortunately, these recommendations were not implemented.

The World Bank has since revamped the CPAR tool in 1998 and has been undertaking assessments of the procurement environment, covering both public and private sectors in borrowing member countries as per the new tool. The objective of this assessment is to determine the existing status and build the capacity of the national public procurement procedures and practices, the compatibility of national public procurement law and practices with the principles of economy and efficiency and with international procurement practices. The findings and recommendations of this work not only help the Bank ensure that sound procurement practices are followed in the projects that the Bank finances, but also enables it to provide valuable feedback to member countries regarding the strengths and weaknesses of their public procurement systems. For this purpose, an action plan, including the necessary measures for capacity building, is agreed between the Government and the Bank. The implementation of the agreed action plan enables member countries to improve the transparency of the procurement process and enhance efficiency of public spending.

Acknowledgements

The Bank team is grateful to the Undersecretariat of Treasury, especially to Ms. Aysen Kulakoglu, Head of Department, General Directorate of Foreign Economic Relations, and the Turkish counterpart team for their full co-operation and valuable contributions to its work through participation in the assessment. The team also acknowledges the extensive cooperation and assistance received from officials and staff of the public and private agencies visited. Finally, the team is thankful to Ms. Hulya Bayramoglu of the World Bank Office in Ankara for the effective organization of its program in Turkey and for collecting relevant laws and other materials used for this assessment.

Executive Summary

This includes all categories of institutions, even the ones not covered by the Government Procurement Law (GPL). It is, therefore, important for the country to have a sound public procurement system that promotes economy and efficiency in public spending.

In 1997, the Bank staff prepared a country procurement assessment report on Turkey and after a joint review of its recommendations by the Bank staff and the GOT, the report was finalized on May 30, 1997. The basis of the assessment was also the current GPL. The 1997 CPAR included a long list of provisions in the GPL which were inconsistent with the international procurement practices. The major issues related to the lack of transparency of the bidding process, restrictive conditions on the participation of foreign bidders, lack of a complaint resolution procedure, absence of a central procurement body for ensuring compliance with the GPL , etc.

The findings of the consultant that the Government hired under the Bank-financed technical assistance component of the Public Financial Management Project were identical to those of the Bank. It appeared from the joint review discussions that the GOT had made commitments under bilateral financing agreements with other governments to make needed changes to its procurement practices by the year 2000. While the Ministry of Finance (MOF) was of the opinion that a complete overhaul of the GPL would be a good solution, the Ministry of Public Works and Settlement (MPWS) - the main author of the GPL - believed that amending the existing laws based on the recommendations of the Bank, would accelerate the change process. In October 2000, the Bank reviewed the draft revised procurement law prepared by MPWS and found that the recommendations of the 1997 CPAR were not considered. Turkey is not yet a signatory of the WTO Agreement on Government Procurement.

In the meantime, the Bank has revamped its CPAR tool in 1998 which focuses on building country procurement capacity and compatibility with the international procurement practices. Given the importance of the CPAR, the present review was carried out based on the new CPAR guidelines.

The Need for Improvement in the Procurement Legislation

Since the introduction of the GPL in Turkey in 1983, many laws have been enacted and several decrees and regulations passed which directly or indirectly impact the conduct of public procurement. The procurement legislation is voluminous as, in pursuance of the stipulations of the GPL, separate laws and decrees had to be prepared on the topics which were only briefly dealt with in the GPL. While the GPL itself is not comprehensive and the system is rather copious and cumbersome, the procurement legislative development in Turkey shows no lack of efforts in this regard on the part of the Turkish government. It is, however, the quality of the procurement legislation, especially of the GPL, that needs immediate improvement in order to optimize economy and efficiency in public procurement expenditure.

There is need of improvement in the procurement legislation of Turkey to expand its scope to cover all procuring entities who use public funds regardless of the budgetary sources; to enhance competition by removing restrictive and discriminatory requirements; to make the procedures and practices transparent to ensure objective and fair competition; to eliminate or limit the excessive discretion that the current legislation allows to the public procurement officials; to enhance competition by improving bidders’ confidence in the system and by putting in place appeal and protest mechanisms; to improve the enforcement of the legislation by creating a public procurement office and by building a public procurement profession in the country; and finally to improve the accountability of public officials by introducing regular and clear audit and anti-corruption practices.

In order to deal with these issues and to align the Turkish public procurement legislation to that of the European Union (EU) in light of its application for membership, in particular, and to that of the international community, in general, the GOT has been preparing a new draft of GPL. In that context, the findings and recommendations of this report are timely, as, it is hoped, these would be taken into consideration in the new draft law (See Section 1, para 1.4).

It is worth noting here that because of the lack of a participatory approach to drafting the GPL, the current GPL is heavily tilted towards the procurement of works and is marked by the absence of the appropriate provisions for the procurement of consultant services. It is, therefore, recommended that an inter-ministerial committee, including key ministries, be established with the responsibility of appointing a group of experts for drafting the revised GPL with a view to ensuring that the new draft deals with procurement of goods, works and services, in an equitable and comprehensive manner and thereafter reviewing and approving the draft revised law before it is submitted to TGNA. The committee should be assisted by legal experts with experience in public procurement legislation. Furthermore, the views of all the important stakeholders, including those of the private sector, should not only be collected but also taken into account in preparing the new draft GPL The drafting group should also be responsible to draft a detailed procurement guideline based on the revised GPL once it is passed by TGNA.

Given its experience in several central and eastern European countries where the Bank assisted member countries in establishing sound public procurement systems, including Hungary and Poland, this report recommends that the GOT consider adapting the relevant provisions from the UNCITRAL model law for its draft law.

Key Recommendations on the scope of GPL and availability of budgetary resources to procuring entities

Extend the scope of the GPL to cover all public procurement for which budgetary resources (such as the general and annexed budgets) and extra-budgetary resources are used. As a result, the GPL would apply to all institutions and agencies, including the non-commercialized SEEs (State Economic Enterprises), which conduct procurement with public funds;

Include in the budget law assurances of budgetary approval for multi-year projects for later years, accompanied by suitable criteria to be met by procuring entities for such approval.

Make budgetary funds available to procuring entities promptly after the budget is approved, and ensure constant flow of authorized budgetary allocations to procuring entities for timely payments to providers of goods, works and services; and

The Need to Improve the Public Procurement Environment and Practice

Key Recommendations on the Reform of Carnet System

Reform the Contractors Certificate (carnet ) system by (i) making carnets non transferable so that only those contractors who actually possess the required qualification are qualified and (ii) by defining new criteria to be met for obtaining a carnet; and

Apply pre-qualification only for large and complex procurement contracts and include a pre-qualification procedure in the GPL.

The GPL provides for closed and sealed bidding procedure which is open tendering. However, it does not mandate its application for all public procurement except for the cases where other less transparent and less competitive methods, such as selective restricted tendering, public bidding, etc., may be used. Even for the closed and sealed bidding procedure, certain requirements of the GPL affect the economy, efficiency and transparency aspects of the system, resulting in uneconomic prices in public contracts. (See Section 2). Furthermore, the closed and sealed bidding procedure and the selective restricted tendering procedure are not suitable for the procurement of consultant services for which separate provisions should be included in the GPL.

Key recommendations on procurement methods

(i) The closed and sealed bidding procedure

Make the use of closed and sealed bidding procedure mandatory and include conditions for use of the other methods of procurement, i.e. restricted tendering, etc., in the GPL; and

Prepare standard bidding documents and improve the quality of existing ones.

Include detailed provisions in the GPL requiring use of complete and clear bidding documents, including unambiguous technical specifications, designs and drawings, etc.

Allow bidders at least 45 calendar days for bid preparation from the issue of bidding documents;

Include in the GPL a procedure for evaluation committees to determine substantially responsive bids. Bids should not be rejected for minor deviations and mistakes, including arithmetical mistakes;

Allow bidders to seek clarifications of bidding documents; to make modifications in their bid or to withdraw their bid before the deadline for bid submission;

The GPL should require that bids be opened immediately after the deadline for submission;

Discontinue disclosure of estimated costs and mandatory requirement for bidders to offer discounts against these estimates; and

The practice of re-bidding or negotiations when after bid opening prices are found to be "inappropriate is an entirely non-transparent provision and should be corrected and conditions for re-bedding or negotiations should be included in the GPL.

(ii) Selective Restricted Tendering Procedure

The GPL should include the conditions under which Selective Restricted Tendering can be used; and

In cases where there are only a limited number of bidders for a particular contract, all bidders should be invited to participate in the bidding process.

(iii) The Negotiated Procedure

Eliminate the Negotiated Procedure altogether, or at the very least shorten the list of situations where it can be used).

Key recommendations on opening procurement to international bidders

Remove bidding conditions that discourage or restrict participation of foreign bidders; and

Establish thresholds in terms of estimated contract values above which tender notices should be published in international press and bidders from any country should be able to participate.

Bid Protest: Bidders have very little confidence in the fairness of the public procurement system in Turkey. This is the result, among others, of the absence of a well-structured and expedient complaint mechanism (para 2.5.10). Bidders rarely complain to procuring entities and other authorities but reportedly such complaints rather than resulting in acceptable solutions, lead to worsened relations with procuring entities. As a result bidders even if they feel that their bid has not received a fair treatment, hesitate to complain for the fear of affecting their business because of bad relationship with those responsible for public procurement. The CPAR mission learned from the interviews held with public and private officials that these bidders find other ways and means, such as connections with public officials which is evidenced by the public officials’ interference in the procurement process, and even use "facilitation payments" for such favors.

Key recommendation on bid protests

Provide for a well-structured bid protest mechanism. Any bidder should be able to lodge a complaint against the bidding process first with the procuring entity, and if the procuring entity is unable to resolve the protest, to an independent, non-judicial body which should be nominated in the GPL to undertake administrative review of complaints. This body could be the office of public procurement. Consequently, the office of public procurement should have the capacity and capability to resolve bid protests, i.e., it should have e qualified staff to manage this activity. The GPL should include detailed procedures for bid protest resolution.

The Need to Build Strong Institutions

The enforcement of the procurement legislation is almost non-existent. Although several agencies are involved in checking different aspects of public procurement, there is no independent procurement body to ensure an effective implementation of the GPL through supervision and monitoring and support to procuring entities, such as building procurement capacity, collecting and disseminating information on best procurement practices, managing the bid protest resolution process, etc. (See para 3.1).

The Bank has consistently advised member governments, and recommends to the GOT, to provide in the law for the creation of a public procurement agency, staffed with experienced professionals, and reporting directly to the Prime Minister. This agency would not serve as a central tender board, i.e., it would not take procurement decisions, but it would essentially be responsible for procurement policy, for overall monitoring of compliance with the public procurement law and regulations, drafting regulations and standard procurement documents, for collecting and disseminating procurement information, and often also for reviewing complaints against the procurement entities' procurement decisions. We recommend that provisions be included in the draft law for such an agency.

Developing Human Resources for Procurement. To date, procurement is not recognized as a function in its own right in Turkey; rather, it is a task which public officials generally perform as an adjunct to their regular civil service jobs. To promote the development of procurement as a profession, this report recommends that the GOT should add procurement to the other civil service professions. This move should encourage civil servants to develop the specialist skills needed to conduct procurement effectively and to follow a graduated career path, including appropriate training courses. (See para 3.4). Currently, the public servants when made responsible for procurement learn it on the job in the absence of a government training program. In order to ensure efficiency in procurement and compliance with the procurement legislation, there is an immediate need of preparing and implementing a national procurement training program.

Key Recommendations

Develop a national training strategy for procurement, with the central objective of building a self-sustaining training and accreditation system over the long term; and

Mainstream the procurement function by adding it as a profession in its own right to the Turkish civil service system.

A national training program for public servants responsible for procurement both at national and local levels should be prepared and implemented immediately. For this purpose, the GOT may consider t he use of the services of the Turkey and Middle East Public Administration Institute. Eventually, the office of public procurement should be responsible for this activity.

Relations between Government and the Business Community: The World Bank has previously held seminars to raise the awareness of the Turkish business community of business opportunities under Bank loans. Similar efforts are essential for the GOT to establish relationship between procuring entities and providers of goods, works and services throughout the country. There is a pressing need educate the business community and to train them in the preparation of technical and price bids which are responsive to the requirements of the bidding documents. It is recommended that program of dissemination of information, including short seminars, on public procurement requirements be prepared and implemented by the office of public procurement.

Audit. The Turkish Court of Accounts (TCA) is the Supreme Audit Institution of Turkey. It has two main functions judicial and auditing. TCA is independent of both the legislative and executive branches of the government. Audit provisions to promote compliance with the GPL and to identify and take action on breaches of the provisions of the GPL should be improved by the following measures (See para 4.1):

Key Recommendations

The resources and investigative powers at the disposal of the Turkish Court of Accounts (TCA) should be increased and the mechanism for applying penalties for breaches of the procurement laws should be reinforced; and

TCA should regularly publish the results of procurement audits.

Anti-Corruption Measures. While combating corruption in public procurement would rely critically upon the Government's impending strategy in this regard, there are also specific measures which the Government should take to improve procurement-related measures. Primary among these are (See also para 4.2):

Key Recommendations

Include provisions in the GPL relating to consequences for breaches of the GPL and other procurement-related pieces of legislation, or at least include a comprehensive list of breaches in the GPL and cross references to the other laws which include provisions on the consequences of breaches;

Introduce a Code of Ethics specifically for government procurement officers and require all public officials handling public procurement to adhere to it;

Introduce into all bidding and contract documents specific prohibitions against fraudulent and corrupt activities by bidders;

Put in place an administrative procedure for debarring from participation in public procurement all firms and individuals who have engaged in fraudulent or corrupt activity and publish the list of those debarred in the Official Gazette.

FINDINGS AND RECOMMENDATIONS

A - SUMMARY OF FINDINGS

STRENGTHS AND WEAKNESSES OF THE PRESENT PROCUREMENT SYSTEM

Public Sector

1. Legal and Regulatory Framework

1.1 General. Turkey is a civil law country. In 1926, Turkey adopted the Continental System, based on the Napoleonic Code with some modifications. Other elements of its law were based on the laws of certain countries: the civil code was taken from Switzerland; the administrative law from France, and the penal code from Italy. According to the 1982 Constitution, only the Turkey Grand National Assembly (TGNA) has legislative power. Either the deputies of the TGNA (550 in number) or the Council of Ministers (COM) may propose a draft law to the TGNA president. The president passes the draft law to the relevant parliamentary commission. Following the commission’s approval of the draft law, it is presented to the TGNA and, if passed by the TGNA, the law is submitted to the President for approval. If the President approves the law, it is published in the Official Gazette and becomes effective from the date indicated in the publication. The COM may also pass decrees, and ministries may issue administrative regulations, circulars, etc.

1.2 The legislative framework in Turkey is comprehensive. As for its clarity, the Government of Turkey (GOT) has embarked upon a program of modernization of its legislative framework with a view to gradually harmonizing it with the European Union (EU), and to align it better with the international community. Turkey is a candidate for EU membership. On December 1, 1964, EU and Turkey signed an Association Agreement. This agreement committed Turkey to take steps towards customs union, harmonization of agricultural policy, elimination of protectionist policies, encouragement of importation of goods and services, and the free movement of private capital. However, the EU report on Turkey’s progress towards harmonization during the year 2000, states the following: "In the field of … public procurement, no progress can be reported...new legislation is being prepared by the Ministry of Finance. The present public procurement system should be made more transparent and accountable."

1.3 The primary legislation on public procurement in Turkey is the Government Procurement Law (GPL) No. 2886 of 1983 as amended by Law No. 2990 of 1984. Since the GPL came into force, and in pursuance of the stipulations of the GPL itself, the Council of Ministers (COM) has passed a number of decrees which provide a detailed treatment of several provisions of the GPL. In addition, the Ministry of Finance (MOF) and the Ministry of Public Works and Settlement (MPWS) have issued several administrative circulars on the subject..

1.4 The Government Procurement Law (GPL) is under revision. The MOF and the MPWS are responsible for preparing the new draft law. An earlier version of the draft revised GPL was circulated to public and private sector agencies. However, government officials from several ministries and administrations, who were interviewed for this CPAR assessment, appeared unaware of the existence of a new draft procurement law.

Some private sector entities, such as the chambers of commerce and industry, were requested to review and provide comments on the draft law. While the overall response has been disappointing, one private sector entity, in response to a government request, conducted a detailed review of the draft GPL and made numerous suggestions for improving its transparency, economy and efficiency aspects. It is not known whether the GOT will take these comments into consideration.

Because of the absence of a participatory approach to preparing the draft procurement law, the current GPL is heavily tilted towards procurement of works. While the basic principles of works procurement are compatible with that of goods, these are inappropriate for the procurement of consultant services. The GPL includes no specific provision on the selection methods for consulting services.

Recommendations

An inter-ministerial committee, including key ministries, be established with the responsibility of appointing a group of experts for drafting the revised GPL with a view to ensuring that the new draft deals with procurement of goods, works and services, in an equitable and comprehensive manner and thereafter reviewing the approving the draft revised law before it is submitted to TGNA. Furthermore, the views of all the important stakeholders, including those of the private sector, should not only be collected but also taken into account in preparing the new draft GPL; and

Once the revised GPL is approved, the drafting group referred to above should also draft a detailed procurement guidelines based on the revised GPL.

1.5 Scope: The GPL covers all purchases, sales, services, construction, leasing, exchange, establishment of incorporeal rights on property and transportation. The GPL applies to procurement of goods, works and services for the procuring entities at the central level, including their regional and local subdivisions, financed with the general budget; annexed budget, municipalities, other local administrations, and revolving funds established by these administrations and special funds established by other laws. The general budget relates to allocations directly from the central budget. The annexed budgets covers the administrations which have their own revenues in addition to the budget allocation from the central budget. The revolving funds are established by the administrations either under the general budget or annexed budget and the special funds are created by special laws for special purposes. The GPL is not applicable to procurement subject to international agreements.

One of the major problems in Turkey is the lack of knowledge of this provision by the procuring entities who apply the GPL and local regulations in contracts financed by IFIs. There is a need for the Government to inform all concerned about this legal status of IFI-financed procurement and application of their guidelines and procedures rather than that of the GPL. Otherwise, many cases of mis-procurement are likely to arise.

The GPL does not apply to State Economic Enterprises (SEEs). SEEs have the right to conduct procurement in accordance with their internal procurement regulations. Although the internal regulations of most of these enterprises are based on the GPL, there is little emphasis put on transparency of the procurement process. For example, several SEEs, not subject to the GPL, apply the selective restricted bidding method more frequently and invite only those contractors and suppliers known to them to participate in bidding. Some SEES do not require even public bid opening. This leads to uneconomic use of public funds.

Recommendation

To ensure economy in public procurement, it is recommended that the scope of the GPL be extended to cover all public procurement for which budgetary resources (such as the general and annexed budgets) and extra-budgetary resources are used. As a result, the GPL should apply to all institutions and agencies, including the non-commercialized SEEs, which conduct procurement with public funds.

1.6 In Turkey, there are several laws and decrees that regulate the associated aspects of procurement. These, among others, include the commercial code, the law on obligations, the civil procedure code, law of civil servants (dealing with the code of conduct for the civil servants), the criminal law (bribery and anti-corruption provisions), the customs law, the banking law (covering foreign exchange transactions, bank guarantees, etc.), the law on standards and accreditation, the law on international arbitration, the Council of Ministers’ decrees on import regime and on statistics, among others. See sections 8 and 9 for a brief discussion of some of these laws.

2. Procedures and Practices

2.1 Procurement Planning: The State Planning Organization (SPO), screens and approves proposals of government agencies for annual investment programs. The proposed programs are submitted to the High Planning Board and COM for approval. These investment programs become effective upon the passage of the annual Budget Law by the TGNA and its approval by the President. An investment program lists all projects and their budgetary allocations. Any increase in a project allocation needs the approval of the SPO and High Planning Board. Payments beyond a fiscal year are not authorized. This makes the procurement process for long-term contracts uncertain on the part of both the administration and contractors, and this uncertainty results in uneconomic and inefficient procurement.

While tentative plans and cost estimates are prepared every year for the purpose of budgeting, procuring entities finalize procurement plans only upon approval of the Budget Law, in accordance with the timetable for the disbursement of the budgetary funds. These plans include the description of contracts, their cost estimates and implementation period.

Implementation of procurement plans is ineffective because of the budgetary constraints, including the requirement that a procuring entity should receive at least 10% of the approved budgetary allocation before launching a new tender. In order to meet this requirement, procuring entities deliberately understate cost estimates which results in poor contract performance and a large number of contract variations, adjustments and claims.

Recommendations

Make budgetary funds available to procuring entities promptly after the budget is approved, so that procuring entities can initiate procurement process based on realistic cost estimates and in a timely manner;

Ensure constant flow of authorized allocations to procuring entities so that payments to contractors and suppliers are not delayed and contracts are performed according to their completion/delivery schedules; and

In order to enable procuring entities to ensure economic and efficient procurement for multi-year contracts, include in the budget law assurances of budgetary approval for later years, accompanied by suitable criteria to be met by procuring entities for such approval.

2.2. Qualification of Bidders. Turkey has a general qualification system. Contractors who apply for general qualification and submit information about their work experience, financial capacity, personnel, equipment, etc., are issued "Contractor Certificates" (Carnet) by the General Directorate of Technical Research and Implementation, MPWS. The carnet system applies only to civil, mechanical and electrical works and is based on the value and type of work. There are six categories of contractors denominated A through H, A being the highest rating. The higher the category of a contractor’s certificate, the higher the value of contract which it is certified to perform. Foreign contractors are not required to obtain contractor certificates to participate in bidding. They have to include in their requests for authorization to bid documents certifying that they have completed a comparable works contract.

This general qualification process is tainted by the misuse of Contractor’s Certificate (Carnet) issued by the MPWS to construction professionals, among others. The construction professionals (engineers, architects and technicians) may obtain a carnet without considering their real experience but based on the numbers of years passed after graduation from school. These professionals may also obtain a carnet based on their employment history (public or private), and the value of project they were involved in. Higher public officials easily get unlimited A category carnet, which is the main requirement for qualification for large-value construction projects.

This contributes to substandard construction of structures which became evident when schools, hospitals, and other public buildings collapsed in the recent earthquakes. These public buildings were constructed by "qualified" contractors under the management and supervision of public administrations. It can therefore be inferred that the misuse of carnet system impedes the objective pre-qualification of contractors.

Article 16 of the GPL allows bidding documents to list the qualification that the bidders must possess in order to participate in tenders (at least 20 documents are requested for qualification of a bidder and many of these documents are irrelevant and make the qualification procedure cumbersome). Instead of being in the form of pre or post-qualification, this process takes the form of a two- envelope (envelope within envelope). The outer sealed envelope contains the required qualification documents. The inner closed envelope includes the bid price. The qualification documents from the outer envelope are used for screening of applicants by a qualification committee comprising of at least four members. This committee is established by the procuring entity. Screening is conducted according to criteria listed in the bidding documents. If the qualification of the applicant is acceptable, the applicant is given permission to continue participation in a given tender; if the qualification application is not acceptable, the applicant discontinues his participation.

The qualification committee decides on the acceptability or otherwise of the applicant’s qualifications to perform a contract on the basis of a merit point system. The committee has to give its decision on various applicants before the date of bid opening. The decisions of the qualification committee have to be approved by the department head to be final. Only those bidders who have been declared qualified are allowed to submit the envelope containing their priced bid; other bidders are requested to leave the bid opening with their envelope unopened.

This is a subjective method and, given the degree of discretion allowed to the qualification committee, has the potential for abuse. According to the provisions of the GPL, a proper method of pre-qualification is only possible under the Selective Restricted Bidding procedure. However, instead of advertising for pre-qualification applications, procuring entities prefer to prepare a shortlist of firms based on their own experience which is again non-transparent and not fair.

Recommendation

Reform the Contractors Certificate (carnet) system by (i) making carnets non-transferable so that only those contractors who actually possess the required qualification are qualified and (ii) by defining new criteria to be met for obtaining a carnet;

Apply pre-qualification only for large and complex procurement contracts;

Include pre-qualification procedure in the GPL, i.e., advertisement for pre-qualification, preparation and issue of pre-qualification documents; pre-qualification evaluation criteria, evaluation of pre-qualification applications by an evaluation committee, etc. Also, prepare standard pre-qualification documents;

Use objective criteria for pre-qualification, including annual turnover, similar experience, financial capacity, personnel and equipment. A bidder meeting these requirements should be qualified. A point system of evaluation should not be used but instead a pass/fail criteria should be adopted..

For contracts not subject to pre-qualification, include post-qualification requirements in bidding documents and ask bidders to submit information on their qualifications as part of their bid. Conduct preliminary examination of all bids to determine responsiveness of bids to the commercial, legal and technical requirements of bidding documents. If a bid is not responsive do not evaluate it; if it is substantially responsive, evaluate it along with other such bids to prepare a ranked list of bidders; apply post-qualification to the lowest evaluated bidder in order to ensure that the selected bidder meets the qualification requirements as set out in the bidding documents; and if the selected bidder does not meet the requirements apply the test to the second lowest evaluated bidder and so on until the bidder selected meets the qualification criteria.

Provide in the GPL for the establishment of evaluation committees - rather than qualification committees - comprising three to five members, including at least two members expert in the field of procurement being conducted. This single evaluation committee should be responsible for the whole evaluation process.

2.3 Participation by Foreign Bidders and Application of Domestic Preference. The Regulation published in the Official Gazette No:18293 dated January 26, 1984, provides for the following tender notice procedure in case a procuring entity considers the participation of bidders in foreign countries useful:

The procuring entity shall send the notice and the relevant documents to the Turkish embassy in the country from which it decides to solicit bids;

The notice shall include the nature, place and cost of the bidding documents; the place, date and time and method of procurement; estimated value, if any, and the amount of bid security; the list of documents required, and the deadline for bid submission in case of sealed and closed bidding;

The tender notice shall be in the language of that country and published in that country’s press, and a copy of the notice shall also be sent to the relevant professional associations in the country; and

The notice shall be sent to the Turkish embassy sixty days before the deadline for bidding and shall be published no later than 45 days before the deadline for bid submission.

The COM Decree No. 85/9342 dated March 27, 1985 on the basis for International Bidding, stipulates the following:

The invitation of international bids for a contract shall be subject to the permission of: (i) head of the procuring entity if the value of the contract is up to TL 2 billion (US$3,200); the concerned Minister if it is up to TL 20 billion (US$32,000); the Council of Ministers if the value above TL 20 billion (US$32,000);

All firms, local or foreign, and all partnerships of local and foreign firms shall submit bids in the currency specified in the bidding documents, showing separately the foreign and Turkish Lira portions;

For evaluation purposes, bid prices in foreign currencies shall be converted to TL using the buying rate of exchange established by the Turkish Central Bank and in effect on the date of bid opening;

Contract payments will be made in bid currencies;

In international bidding, no price escalation formula will be used;

A margin of preference of up to 15% may be granted in favor of local firms in determining the winning bid. However, this and the rate of margin (and also the system to apply in the case of a partnership of local and foreign firms) must be indicated in the bidding documents.

There is no requirement of a local agent, but, according to Article 3 of the Standard Bidding Documents for Works and the same Article in SBD Goods, all bidders must have an address in Turkey for receiving notices. Bidders must also submit a certificate of membership from a Turkish chamber of commerce and/or industry.

As is evident from the above-mentioned requirements for participation of foreign bidders in bidding, the GPL and the implementation practices in Turkey reflect the fact that the Turkish procurement system operates mostly in the domestic market. This domestic market includes a large number of foreign firms represented in Turkey in different forms of associations, dealerships, joint ventures, etc. There is very little participation by international bidders in bidding for works contracts. Recourse to foreign firms is made only when the sources of the required supplies are not available in Turkey and even in that case, invitation to tender is limited to a particular country or sometimes to a group of countries. Slow payments to contractors and suppliers, use of inadequate price adjustment mechanisms or a lack of them for long-term contracts, etc., also discourage foreign bidders’ participation.

Recommendations

Remove bidding conditions that discourage or restrict participation of foreign bidders, e.g., requirement that a foreign bidder must have a contact address in Turkey and must be a member of a Turkish chamber of commerce or industry;

Develop standard bidding documents in a major international language of trade suitable for participation of foreign bidders;

Prepare clear requirements for bid and performance securities, which should be acceptable from any reliable source in or outside Turkey, and their timely release;

Include in the GPL a clear procedure for the application of domestic preference, including requirements to be met by bidders;

Apply domestic preference only to local inputs, not local bidders; and

Establish thresholds in terms of estimated contract values above which tender notices should be published in international press and bidders from any country should be able to participate, as opposed to the current advertisement of such notices in a particular country.

2.4 Procurement Methods. Article 35 of the GPL includes the following methods of procurement:

(i) Closed and Sealed Envelopes Bidding

(ii) Selective Restricted Bidding

(iii) Public Bidding (oral/verbal bidding)

(iv) Negotiated Procedure

(v) Competition

(vi) Other procedures in the GPL

Although there are no data available on the use of these methods, the Closed and Sealed Bidding and the Selective Restricted Bidding (especially by SEEs which are not subject to the GPL) are the most commonly used methods. The negotiated procedure is also used frequently. The public bidding and the competition procedures are reportedly the least used procedures.

It is recommended that the procurement methods and the conditions for their use should be included in the GPL. The use of closed and sealed bidding procedure should be made mandatory and conditions for use of the other methods of procurement, i.e., restricted tendering, etc., should be included so that procuring entities may use them only if the procurement requirement meets the conditions specified. Inclusion of procurement methods such as request for proposals for small value contracts, should also be considered. Furthermore, for the procurement of consultant services, separate suitable provisions should be included in the GPL.

Each of the above-listed procurement methods is discussed in detail in the following paragraphs.

2.4.1 Closed and Sealed Bidding: This procedure is an open tendering method. Under the Closed and Sealed Bidding procedure, the procuring entity advertises an invitation to bid (See para 2.5.1 on advertisement requirements). Bids for works contracts with an estimated cost of less than TL 160 billion (USD256,000) are required to be submitted in two envelopes (envelope within an envelope) by a specified deadline. Bids are placed in an outer envelope which is closed and sealed. This outer envelope contains the required qualification documents and the required bid security and an inner closed and sealed envelope containing the bid price. At the public bid opening, the outer envelope is opened and the qualification documents and the bid security are examined and evaluated by a procurement committee. The bidders whose documents are not complete are asked to leave the bid opening and their priced bid envelopes are returned unopened. Then, the committee opens the other priced envelopes and announces the prices. The award is made to the lowest priced bid.

For works contracts over TL 160 billion (USD256,000), procuring entities consider the qualification of bidders at the first of a two-stage bidding process. The tender notice specifies the conditions of qualification and two deadlines, to submit qualification documents and price envelopes. At the first stage, the qualification documents are submitted and there is no public opening. The qualification committee (See para 2.2. above), using a merit point system, determines whether a bidder is qualified. The qualification committee places the list of qualified bidders in a sealed envelope and hands it over to the procurement committee. Every procuring entity is required to have a procurement committee to conduct its procurement.

At the second stage, bidders without knowing whether they are qualified or not, submit their priced bids at the deadline specified for bid submission. A public bid opening is held at which the procurement committee opens the envelope received from the qualification committee and announces the names of the qualified bidders. It returns unopened the priced bids of the unqualified bidders and opens the sealed bid price envelopes, announces the bid prices and then evaluates the bids of the bidders assessed as qualified.

The evaluation methodology for works contracts over TL 160 billion (US$256,000) combines the bidders’ qualification scores (points out of 100) with their bid prices to arrive at a "suitable price". For works contracts of a value lower than this, procuring entities may award a contract to a bidder who has offered the lowest price or "suitable price" as stipulated in the bidding documents. Bidders’ bid prices are expressed as a proposed percentage discount from a pre-disclosed cost estimate and bracketing is used to eliminate bids determined to be outside an acceptable range, if suitable price approach is used.

Some procuring entities also invite bidders to quote their prices without pre-disclosing a cost estimate and, in these cases, a contract is awarded to the lowest-priced bid. For goods contracts, procuring entities generally make awards to the lowest priced bid, while for consultants contracts, they apply both these methods.

Closed and Sealed Bidding

Strengths

Although the method aims to achieve a degree of national competition transparency, procedures transparency, although there are factors (see weaknesses) render the system untransparent;

Standard bidding documents are used.

Weaknesses

Bid or performance security must be from designated sources in Turkey;

The award is made to a firm offering "a suitable price " not exceeding the estimated value (obligatory for works contracts over TL 160 billion (US$ 256,000)) and it is also used for consultants contracts too at the discretion of the procuring entity;

Use of inadequate price adjustment mechanisms or lack of them restricts competition;

There is no requirement for the publication of important contract awards;

Bid preparation time of 10 days is too short;

Bids can be rejected for minor irregularities or mistakes;

Bid modifications, withdrawals, and clarifications are not permitted before bid submission;

The estimated value of the contract must be included in specifications;

Bidders are asked to express their bid prices as discounts against pre-disclosed estimated contract value;

In case of the lowest identical bids, bidders are asked and allowed to change their bid prices;

Bidders not present at public bid opening cannot object to the conduct of the bidding process and its results;

If after bid opening, bid prices are found to be "inappropriate", the procuring entity decides either to rebid or resort to the "Negotiated Procedure" (see below para. 2.1.14) within 15 days;

The GPL does not require that bids be opened immediately after the deadline for submission;

Two-envelope bidding system with merit points makes the procurement process subjective;

If the same price is offered by several bidders, the contract is awarded to the bidder who is present at the bid opening, and if there are more than one bidder involved, they are asked to submit new bids. If prices are still identical, the winning bidder should be decided by drawing lots. This provision is not in the public interest and may lead to bid collusion and uneconomic procurement.

The same procedures apply to procurement of goods, works and consulting services;

The decisions of the bidding commission are taken by a majority vote.

Recommendations

Bid and performance securities should be accepted from any reliable source in or outside Turkey;

Bid preparation time should be at least 45 calendar days from the issue of bidding documents;

No bid should be rejected at bid opening. All bids received before the deadline should be opened unless previously withdrawn;

The GPL should include a procedure for evaluation committees to determine substantially responsive bids, given the fact that no bid is 100 percent responsive to the requirements stated in the bidding documents. Only substantially responsive bids should be considered for evaluation. That means bids should not be rejected for minor deviations and mistakes, including arithmetical mistakes;

Objective criteria, such as annual turnover, experience, financial capacity, personnel and availability of equipment should be used to post-qualify the lowest evaluated bidder;

Both the GPL and the standard bidding documents should include provisions which allow bidders to seek clarifications of the bidding documents; make modifications in their bid before the deadline for bid submission; and to withdraw their bid up to the bid submission deadline. Similarly, procuring entities should be allowed to seek clarification of bids in writing for responsiveness and evaluation;

Bidders not present at public bid opening should receive a copy of the minutes of public bid opening and should have the right to protest any aspect of the bidding process in case they feel that they were not treated fairly and equally by those responsible for conducting procurement;

The GPL should include criteria on the basis of which a procurement committee may decide not to make a contract award. Furthermore, such a decision should require the approval both of the head of the procuring entity as well as that of the Office of Public Procurement if such an office or authority would exist;

The GPL should require that bids be opened immediately after the deadline for submission;

Identical bid prices being offered by bidders appears to be a frequent occurrence in public procurement in Turkey. This may be attributed to the disclosure of estimated costs and mandatory requirement for bidders to use unit rates determined by the MPWS. Prices will not be identical so frequently if these two practices, i.e., disclosure of estimated cost of a contract and the mandatory use of government established unit rates, are discontinued;

If after bid opening bid prices are found to be "inappropriate", either re-bidding or negotiations may take place. This is an entirely non-transparent provision and should be changed. First of all, the GPL should include a definition of "inappropriate", e.g., "substantially higher than the estimated value". The GPL should also state that in such a situation a contract can be negotiated, as an alternative to re-bidding, only with the lowest evaluated bidder, rather than any other bidder or new bidder(s). Such negotiations should focus on amending the scope of works in order to bring it within the cost estimate and not on reducing the lowest evaluated bidder’s unit prices;

The GPL should include conditions in which re-bidding can be held, such as a tender was launched at least twice but no bidder responded. However, before such re-bidding is approved, a review of the bidding documents, technical specifications as well as market conditions should be made and the necessary revisions made to the bidding documents to yield positive results; to justify re-bidding if an award is not made;

Same procedures (i.e., sealed and closed bidding, restricted tendering, etc.) as applicable to goods and works are not suitable for the selection of consultants. The GPL should include appropriate provisions for this purpose;

The requirement that every bidder must have a legal domicile in Turkey is restrictive for foreign bidders. This should be deleted from the GPL to promote broader competition; and

The decisions on awards should be a function of the evaluation of substantially responsive bids and not subject to the decision of the procurement committee by majority vote. To procure economically with public funds, it is essential to be transparent and fair to bidders. Therefore, the bidding documents must include objective evaluation criteria to determine the lowest evaluated bidder.

2.4.2 Selective Restricted Bidding. According to Article 44 of the GPL, procurement of aircraft, warships, war ammunition, military installation and supplies, dams, power stations, harbors, docks, railways, highways, bridges may be conducted through the restricted tendering procedure.

Under this method, the procuring entity may decide to advertise for pre-qualification. If it chooses not to advertise, the procuring entity may invite directly a minimum of three bidders whom it considers to be qualified for the assignment. Because firms are directly invited, there is usually no assessment of their qualifications. Award of contract may be either to the lowest-priced bid or to the bid offering a "suitable price". It is obligatory to use the suitable price method for works contracts over TL160 billion (USD256,000) with discount from estimated contract price.

The administration may also invite fewer than three bidders, although this requires the approval of both the MOF and COM. In this way, the Restricted Bidding method may also be used as a form of Single Source, with no financial limit applied to it.

As no data are collected or published on the application of the different procurement methods in Turkey, it is difficult to assess how widely this method is used. However, according to the officials of the public and private sector, this method is frequently used by all procuring entities, especially by municipalities.

While the use of this method is essential in certain cases, such as availability of only a limited number of bidders, or emergency needs in case of natural disasters, etc., this method lacks transparency as the number of bidders to be invited is generally determined in an arbitrary manner. Consequently, the use of this method does not lead to the desired economy and efficiency in public procurement.

Selective Restricted Tendering

Strengths

For the use of this method approval of the Minister concerned must be obtained;

For inviting fewer than three bidders, approval of the Council of Ministers is mandatory.

Pre-qualification procedure is possible under this method.

Weaknesses

No clear criteria, for the use of this method, are included in the GPL including the criteria for inviting a limited number of bidders without advertising ;

A procuring entity may limit without any justification the number of bidders to three;

The procuring entity has the discretion to invite a minimum of three bidders who are known to it;

The GPL also gives discretion to the procuring entity to decide whether or not to pre-qualify bidders for this procedure. However, the GPL does not include clear pre-qualification criteria. As a result procuring entities generally prefer to prepare a list of bidders from their own records instead of pre-qualifying bidders in a transparent manner.

Recommendations

The GPL should include the conditions under which Selective Restricted Tendering can be used; for example, availability of limited number of bidders for a specialized piece of equipment, etc., in which case a procuring entity should be required to invite all those bidders. The application of this method should also be allowed in cases of emergencies, such as natural disasters where certain goods and works have to be procured without delay;

In cases where there are only a limited number of bidders for a particular contract, the procuring entity should not have the discretion to limit the number to three. It should be required to advertise and pre-qualify bidders to maximize competition. All pre-qualified bidders should be allowed to participate in bidding;

All other conditions should be the same as for the closed and sealed bidding procedure, including standard bidding documents (See recommendations above for improving that procedure).

2.4.3 Public Bidding (oral-verbal bidding). Those contracts whose estimated value does not exceed TL 120 billion (US$192,000 established for 2000), may be procured through public bidding. Under this procedure, first offers are made in writing and announced by the bidding committee in a meeting attended by the procuring entity and all interested bidders. Then the committee asks the bidders present for their new quotations. Any bidder who can offer lower than the lowest price announced stays in competition. This procedure continues until the lowest price is reached.

Weaknesses

This procedure is similar to auctioning;

This procedure may result in unrealistically low prices and may lead to non-performance;

Open to collusion among the invited bidders.

Recommendations

It is recommended that this procedure, which is used for low-value procurement, should be replaced with request for quotations (a minimum of three) for off-the-shelf goods, etc. with written invitation to quote documents and quotations ; and

Threshold for the use of the recommended method, i.e., request for proposals, should be lowered.

2.4.4 Negotiated Procedure: Article 51 of GPL includes 15 situations in which this procedure can be used without any Limit. In addition, the contracts whose estimated value does not exceed the thresholds established by the budget law (TL 6 billion for the year 2000 equal to US$9,600) may also be procured through this procedure. One of the items, which can be procured through negotiated procedure without any threshold limit is consulting services. For some items, including consulting services, there is no requirement to prepare formal bidding documents, determine the estimated price, request performance securities or even to sign a formal contract. Under this method, verbal or written bids are invited from several bidders and the administration may negotiate freely with all bidders. There is no written rule for negotiations.

This procedure is non-transparent, which promotes misuse of discretion by public officials, and is not in the public interest. The situations where this non-transparent method may be used are excessive in number. What makes it worse is that the GPL does not include a provision that at the end of the negotiations, each bidder has to submit in writing his best and final offer by a specified date, and the award is then made on the basis of this best and final offer (often called BAFO). While not entirely excluding misuse of discretion on the part of the public officials, the BAFO approach will certainly make it more difficult. According to the officials interviewed, procuring entities use this procurement method frequently. The TCA recommends that the number of situations in which this procedure can be applied should be reduced.

Weaknesses

Sixteen (fifteen of them have no threshold) situations are given in the GPL in which the negotiated procedure may be used, which is an excessive number;

Broad authority is given to military and security services to use this procedure, including those requirements which should be procured through normal procurement methods; and

Given the weak provisions in the GPL against breaking down procurement requirements to avoid use of the Closed and Sealed Envelopes procedure and the wide discretion given to the administration in how this procedure is conducted, the negotiated procedure is clearly open to manipulation.

Recommendations

It is recommended to eliminate the Negotiated Procedure altogether, or at the very least to shorten the list of situations where it can be used, and then to introduce the BAFO.

The GPL should include clear provisions prohibiting procuring entities to split their requirements in order to avoid the use of the competitive procurement procedures, such as closed and sealed bidding.

2.4.5 Competition: The competition procedure is used for study, planning and project works and works related to fine arts. Under this method, on the basis of a competition a unique design is judged and selected as the winning design, and the subsequent procedure follows the negotiated procedure. The "Competition" procurement method is generally used for specialised services, such as architectural competitions. This procedure is used less commonly for the procurement of services and if the recommendations in para 2.4.7 below, relating to the inclusion of specific provisions for the selection of consultants, are implemented, this method will not be necessary.

2.4.6 Other Procedures in the GPL: In addition to the above procurement methods, the GPL provides that;

(a) procuring entities falling within the scope of the GPL may procure any goods and services from each other by appraising the value after the MOF agreement. In this case, production and execution of goods and services under the contracts have to be done by the public entities (as suppliers) themselves.

It is understood that the use of this provision is not frequent. However, it is worth mentioning here that most procuring entities for their purchases of off-the-shelf goods, such as office equipment, vehicles, furniture, etc., are taking advantage of this provision and buying their needs from the State Supply Office, which is an SEE and which is not governed by the GPL.

The State Supply Office being an SEE has its own internal procurement regulations. Although these regulations are based on the GPL, these do not require the use of the closed and sealed bidding procedure. The standard method of purchase for this entity is selective restricted tendering. As a result, the procuring entities which are governed by the GPL order the State Supplies Office to procure their needs on their behalf. As a result, these entities are failing to take advantage of competition that the closed and sealed bidding procedure may provide. In addition, they have to pay a commission for the services of the State Supplies Office (up to 10 percent of the contract value). In other words, the public procuring entities are using this SEE as their procurement agent which is not obliged to apply the economic and efficient procurement methods.

Recommendation

The State Supply Office when procuring on behalf of public procurement entities should be required to apply the provisions of the GPL regardless of whether it is subject to the GPL or not.

(b) The GPL lists 16 categories of construction works (Article 81 of the GPL), which a procuring entity may carry out through force account commissions composed of the labor force of the procuring entities. While some of these works fall in the category of force account, the purpose of inclusion of this provision in the GPL is unclear. For the works for which a procuring entity has the capacity and the capability, it would request budgetary resources to execute such works itself rather than have them carried out through contractors.

The same article of the GPL provides for the hiring of casual labor and "subcontractors". As there are no subcontractors if there are no prime contractors (and as a procuring entity cannot act as a contractor), the purpose of this provision is not comprehensible. Furthermore, according to the public officials interviewed, the force account provision of the GPL is most frequently misused by procuring entities.

A number of the items listed in this clause, such as emergency works where there is danger of loss of life, would be justified cases for direct contracting rather than of the force account.

Recommendations

The GPL should include a direct contracting method of procurement for works and supplies of proprietary nature, emergency nature, justified extension of existing contracts. For the other cases, one of the procurement methods listed in the GPL should be used. Works or activities to be executed by the procuring entity’s own resources should be executed by the procuring entity itself with its own staff and within the framework of its annual work program and budget.

(c) According to Article 89 of the GPL, in the following cases, the provisions of the GPL may be disregarded by the COM upon the proposal of the Minister concerned. The procedures and rules to be applied in such bidding are determined by the concerned procuring entity and become final after the approval of the Minister:

(i) in the cases when it is not feasible to enforce the provisions of the GPL;

(ii) procurement for the reorganisation of national security and modernisation of weapons; and

(iii) procurement of goods and services required to achieve the strategic objectives of the Turkish Armed Forces.

Recommendation

It is recommended that the possible situations when it is not feasible to enforce the provisions of the GPL should be listed. For procurement in the situations to be listed in the GPL, the Minister’s approval should be enough; for those situations not listed in the GPL, the approval of the COM should be mandatory.

2.4.7 Public-Sector Selection of Consultants. While all five of the primary procurement methods available under the GPL may be used for the procurement of consultants' services, none of them is well suited to this purpose. The methods most commonly used for services are the closed and sealed bidding, restricted bidding and the negotiated procedure.

The qualification criteria used are largely irrelevant to the technical quality of the services offered, as they include criteria such as the bidders' access to bank credit and the number of computers which it owns, the latter having to be evidenced by notarized documentation. Only for the largest, most complex assignments are bidders required to submit a technical methodology; in the great majority of cases, there is no technical evaluation of bids at all. As a result, well-qualified consulting firms frequently decline to participate in such open tenders and firms which lack the necessary technical qualifications often win important contracts.

There are several other aspects of the application of these procedures which are unsuitable for the selection of consultants. These include requirements for bid and performance securities - which are inappropriate, given the intellectual nature of consulting services - the use of standard bidding documents and forms of contract developed primarily for the procurement of construction works and payment terms based on unit of output, for example unit rate per meter of tunnel design.

Recommendations

It is recommended that a new procurement methods specifically for consultants' services should be introduced into the law and that this should be supported by an implementing regulation detailing clearly how the methods should be applied. Such methods should place greater emphasis on the technical quality of the services offered and, in all cases, firms should be required to submit a technical proposal covering its experience, methodology and curricula vitae of proposed consultants, etc., which should be evaluated first employing a two-envelope system and after the technical evaluation is completed, open price proposals, to combine the technical and price scores when weight for technical will be much higher to ensure that quality remains paramount.

Given the special, intellectual character of consultants' services, the Government should also develop separate procurement documents and forms of contract which more accurately reflect the nature of these services. Furthermore, it is recommended that the criteria used for qualifying consulting firms to bid or to be short-listed should emphasize the firms' reputation and relevant technical experience, rather than physical resources. Also, the current practice of combining the results of the assessment of the bidders' qualifications with the evaluation of their bids should be discontinued. Instead, only qualified consulting firms should be invited to bid and the methodology employed for evaluating their bids should reflect the paramount importance of the technical quality of the services. (Also see recommendation above).

2.5 Important topics relating to the bidding process: The following is a detailed discussion of the important topics in the bidding process:

2.5.1 Advertisement: Except for procurement to be conducted through negotiated procedure (and if not deemed necessary for selective restricted bidding), all tenders, regardless of the estimated value of the intended procurement, have to be advertised twice in daily newspaper(s) in the town or city where bidding is to be held (Article 17(1) of the GPL), not later than ten days before the bid opening for the first and not later than five days before the bid opening for the second advertisement. If there is no local newspaper in the town, the advertisement has to placed on the notice board of the procuring entity. All procurement notices for tenders whose estimated values are above limits determined by the annual budget law, in addition to the advertisements required by Article 17(1) of the GPL, the procurement must be advertised in a daily newspaper of major cities at least ten days prior to the date of bidding. Works contracts whose estimated value exceeds three times the threshold amount announced in the annual budget law will be published in the Official Gazette 10 days prior to bid opening date.

The Official Gazette is published daily and is available to the general public. Depending on the importance of the procurement, procuring entities may also publicize tenders through national and international media (Article 17). Advertisements can be made in foreign countries to ensure sufficient competition for contracts where participation of foreign bidders is deemed necessary and advantageous by the administrations concerned. Such advertisement is made at least 45 days before the date of the bidding.

The following details have to be included in the advertisements: (a) nature, place and amount of the subject-matter of bidding; (b) where and under what conditions the specification and its enclosures can be obtained; (c) the place, date, time and method of procurement; (d) estimated value, if any, and the amount of bid security; (e) the documents that the bidders are required to present; and (f) for contracts for which bidding is to be held by submitting bids in sealed and closed envelopes, the deadline and time for submitting bids.

The GPL does not require the publication of contract awards. The publication of major contract awards provides information to other participants who may decide to protest an award if they feel the process was not fair. This also serves as a means of information for other suppliers and contractors to serve as subcontractors to the selected bidder. For those participants who may not attend the public bid opening this publication is their only source of information.

Recommendations

The bid preparation period (10 days) from the date of the publication of the notice is too short. This period should be at least 45 days before the deadline for bid submission which should itself be calculated from the date the bidding documents are made available to interested bidders. Where international firms are likely to bid a longer period of time should be allowed;

A provision should be included in the GPL to require that all major contract awards (for which thresholds should be determined by the annual budget law) are published in the same manner as the relevant tender notice is published, i.e., the same newspaper, etc.

It is recommend that the public procurement should have a public procurement bulletin where all tender notices, contract awards should be published. The bulletin can also be used as a means of dissemination of information on public procurement both to procuring entities throughout the country and to suppliers, contractors and consultants. The bulletin can also be used for publication of guidelines, explanations of regulations, etc. Given recent developments in Internet technology, it is also recommended that an Internet version of this bulletin eventually be launched which will further enhance access to information on public procurement.

2.5.2 Standard Bidding Documents: Standard bidding documents for works and consulting services include "Instructions to Bidders" for Closed and Sealed Bidding and Selective Restricted Bidding methods and are used with the General Conditions Applicable to Works and Services Contracts attached to COM Decree No. 84/8520 published on October 09 , 1984. A similar document (Instructions to Bidders) is also available for goods contracts.

There are no standard bidding documents for different procurement methods and the current ones are not suitable for all types of procurement, such as consulting services. Special conditions can also be included. Sections such as bid data sheets are not used. Therefore, these documents are not easily adaptable to different contract situations.

Standard bidding documents for goods and works, rather than requests for proposals, are used, for the procurement of consultants. These documents clearly specify the procurement method to be used and, at least at the level of State administrations, include the evaluation criteria. However, the evaluation criteria are invariably inappropriate for the evaluation of consultants’ services.

Technical specifications, which are an important part of the bidding documents, are poor for all types of procurement, in general, but in case of works contracts, in particular. Procuring entities prepare technical specifications for the procurement of goods without considering their real needs. There is no concern for the standardization of equipment. For example, health equipment procured by an hospital can be found non-responsive by another hospital, even though both hospitals use similar technical specifications and they use these equipment for the same purpose.

It is a well known fact that the technical specifications for works contracts include only preliminary designs, not the detailed designs and drawings, which result in a large number of contract variations and contractor’s claims during contract performance. This, among other factors, results in exorbitant price rises in works contracts.

Experience in other countries reveals that the absence of complete and clear standard bidding documents, including technical specifications, which should be suitable for different types of procurement, i.e., goods, works and services, is a major cause of poorly prepared and ambiguous bids, and large number of complaints from bidders because of rejections of the incomplete and poor-quality bids. Frequently, because of the poor contents of the bidding documents and the resulting bids, contract performance is delayed.

Recommendations

A complete set of standard bidding documents should be prepared separately for pre-qualification, goods, works and consultants’ services and made available to all procuring entities. These documents should include instructions to bidders, conditions of contract, contract forms and other necessary form), and sections for technical specifications. Each document should include a detailed guideline on how to prepare the different sections of the bidding documents;

In order to ensure user-friendliness of the standard bidding documents, it is recommended that these should be divided into two parts: a fixed part, and a variable part. This will allow the procuring entities to complete only the variable part for every contract package.

Standard technical specifications for goods and works should be prepared in cases where this is feasible and these standards should be distributed to procuring entities. Bidding documents for works contracts should include detailed designs and drawings.

2.5.3 Bid and Performance Securities: A bid security is required in the amount of three percent of the estimated cost of the contract or the bid price, if no estimated cost is given in the bidding documents. The amount of performance security is set at six percent of the contract value. For variable-price contracts (and for additional works after contract award), the performance security has to be increased during implementation proportionately to the increased cost of the contract (Articles 25, 54-55). In the case of works and consulting and engineering contracts, the bid security may be converted to performance security and the difference between them made up by retaining 10 percent of periodic payments due to the consultants and/or contractors (Article 55).

Bid and performance securities may be waived for several categories of procurement through Negotiated Procedure, among which are: (a) all types of services, including engineering, consulting, supervision and testing of the work involved; (b) goods and services that are proprietary; and (c) goods, works and services including transportation and insurance, which have to be obtained from abroad because of the characteristics of the goods, works or services involved (Article 51), etc.

The following are accepted as bid and performance security: (a) Turkish currency in circulation; (b) unconditional bank letters of guarantee, without any limit of validity period, issued by banks determined by the MOF; and (c) government bonds and bonds guaranteed by the Treasury (Articles 26-27). Bid and performance bonds are not acceptable.

Recommendations

Bid security should be in the range of 2-4 percent. Higher percentage should be used for small value contracts and vice versa;

Performance security should be in an amount equal to 6 -10% of contract value;

Bid and performance securities should be released in a timely manner upon a bidder or contractor have fulfilled their obligations;

Bid and performance securities for consultant contracts are inappropriate and therefore should not be required;

The formats of bid and performance securities should be revised to include clear provisions.

2.5.4 Bid Opening: Article 39 makes public bid opening mandatory. For contracts estimated at less than US$256,000, equivalent, bids are required to be submitted in two envelopes (envelope within an envelope). The outer sealed envelopes contains the required qualification documents and bid security and another sealed envelope with the bid price in it . First, the outer enveloped is opened to ascertain whether the bidder has submitted all of the required documents, including the bid security. Late bids are not opened.

If the outer envelope does not contain the required documents and bid security, the inner envelope, i.e., the price envelope, is not opened, and bidders presenting such bids are requested to withdraw their bids and leave the room, as their bids are rejected. There are no provisions for registering bid modifications and withdrawals, since bids cannot be modified or withdrawn after bid submission (Articles 33, 37 and 39).

For contracts estimated to cost over US$256,000 equivalent, a two-stage procedure is used. At the first stage, only the qualifications of a bidder are received in a closed and sealed envelope. This envelope is not open in public. The qualifications are evaluated by a qualification committee which prepares a list of qualified bidders and passes the list on to the procurement committee in a sealed envelope. At the second stage all bidders submit their closed and sealed price bids at the deadline set for this purpose. These bidders do not know whether or not they have been found qualified by the qualification committee. A public bid opening is held at which the procurement committee opens the envelope received from the qualification committee and announces the names of the qualified bidders. Only the price envelopes of the qualified bidders are opened, and the other envelopes are returned unopened.

After the opening of the price envelopes and announcing them to those present, minutes of bid opening are prepared and signed by the chairman and members of the procurement committee. Bidders who are not represented at the bid opening session cannot challenge or protest any actions of the procurement committee (Article 34).

The committee may decide the following: (i) the contract is awarded subject to the approval of the competent authority; (ii) additional time needed for completing evaluation, but not exceeding fifteen days; or (iii) not to award the contract. The GPL does not contain a provision requiring the opening of bids immediately after the deadline for bid submission, but the common practice is to open bids immediately after bid submission. Also, in most cases decisions on award are made during public bid opening.

Recommendations

This bid opening procedure is not transparent and open to abuse. Bid opening should only require opening of bids rather than evaluation whether a bid complies with the requirements of documentation. Moreover, certain bids that are substantially responsive may not be opened on trivial grounds and economy and efficiency may be affected. All bids (other than the late bids and those bids withdrawn prior to submission) must be opened .

2.5.5 Evaluation and Comparison of Bids (for Closed and Sealed Bidding and Selective Restricted Bidding): There is no requirement for a step-by-step examination and evaluation of bids. In most cases, decisions on awards are made at the public bid opening. A point-system is used for qualifying bidders (for works contracts over TL160 billion (USD256,000). The estimated costs are disclosed to bidders and bidders have to bid by way of discounts against these estimated costs. After the opening of the bids, the award is made either to lowest price or suitable price bid which is determined through the use of a formula. For works over TL 160 billion (equivalent of US$256,000), a suitable price bid is determined through bracketing. For other contracts, it is at the discretion of the administration to adopt suitable price or lowest price. If the unit prices are not available for the subject procurement, the bidders are asked to quote unit prices in their bid and award is made to the lowest priced bid.

Practice differs from administration to administration. In some administrations, the assessment of bidders' qualifications is done by members of the Bidding Commission acting individually and the results of this assessment are averaged. In others, particularly at municipal level, commissions vote and decide on the basis of a simple majority. In respect of the evaluation of bidders' qualifications, which contributes to the bidder's overall score (in case of bracketing system), the evaluation is based on the bidders' ability to meet pre-defined qualification criteria, though they are usually irrelevant to consultants' services (e.g. number of computers owned, access to credit).

During the bid opening, evaluators do complete their own evaluation sheets but, because of the evaluation methodology employed, these are highly mechanized, reflecting only qualification points and price. Under the two most widely-used procurement methods, "Closed and Sealed Bidding " and "Selective Restricted Bidding" decision on selection of a bidder and contract award is made during the bid opening ceremony. The contract is awarded to the bidder who wins on the pre-defined qualification/discounted price methodology. (See para 2.4.1).

Recommendations

Bidding documents for every contract should include objective evaluation criteria;

Decisions on awards should not be made at the public bid opening. A step-by-step approach to reach this decision should be followed. This approach includes first the preliminary examination of all bids to determine their substantial responsiveness, then to evaluate only the substantially responsive bids with a view to establishing their ranking, and finally to apply post-qualification, if pre-qualification has not been applied.

Merit-point system should not be used, except for the selection of consultant services;

Use of evaluation factors not pre-disclosed to bidders in the bidding documents should be forbidden;

Collect objective evaluation methods and disseminate them to procuring entities for use through a detailed procurement guideline.

2.5.6 Award, Conclusion, and Entry into Effect of Procurement Contracts. The bid committee prepares and signs the decision and announces to those present at the bid opening. The decision of award is either approved or cancelled by the head of the procuring entity within 15 days. The award decision if approved is notified to the successful bidder within 5 days. If the award decision is not approved, then the bidder is notified in the same manner.

The successful bidder should convert the bid security to performance security and submit the notarized contract to the administration within 15 days from the date of notification of award or within 15 days after the MOF clearance if required. The contract comes into effect immediately after the notification of registration by the TCA. However, in some cases, contract signing, bid and performance security may not be required.

Recommendations

Publish contract award decisions in the same manner as tender notices;

2.5.7 Contract Implementation: Works, goods and services contracts are supervised as described by the regulation issued by MPWS at May 09 , 1979. The preliminary and final acceptance of contracts are carried out in accordance with the regulation issued by COM at June 10, 1985. The regulation of supervision of contracts describes the duties and responsibilities of supervisory staff and documents to be prepared on site. This document is mainly prepared for works contracts but is applicable for all types of contracts. The regulation for preliminary/temporary and final acceptance of contracts describes how the contractors requests’ for preliminary/temporary and final acceptance will be processed. The formation and responsibilities of acceptance committees, the approval of the certificates etc. are also defined. The CPAR mission learned from the interviews about some weaknesses in the contract implementation supervision practices, especially in the case of works contracts in local administrations.

Recommendation

The Government should review the current contract supervision practices and strengthen them as necessary.

2.5.8 Implementation Delays: Since the funds allocated to the projects are much lower than the requirements, the delays in implementation is inevitable. The total funds allocated to 5321 projects (excluding the projects of local administrations and non-budgeted funds) in the year 2000 was TL 5 905 trillion. The total cost of all these projects was TL 86 219 trillion. The total expenditure for these projects until the end of 1999 was TL 26 125 trillion and the remaining portion is TL 60 094 trillion. If the investment allocations will remain the same in the following years and no new project is added to the investment portfolio the existing projects can be completed in 10.2 years. It is noted that each year a lot of projects are included into the investment program without considering the priorities.

The lack of detailed designs and sound cost estimates is one of the main reason for implementation delays and cost overruns. Contractors are required to prepare detailed designs during contract performance. During this process, they change the conceptual design in order to establish new unit rates without competition. The lack of necessary surveys and investigations also increases the estimated cost of the investment such as unexpected soil conditions etc. As a result, a large number of contract variation orders are issued during performance and completion periods are extended unreasonably and frequently. Furthermore, every year the MPWS revises the unit rates for works. These rates become applicable to all ongoing works contracts automatically in the beginning of the year. As a result, the contractors receive an automatic raise in their unit rates. This encourages contractors to slow down their contract performance towards the end of the year so that they can automatically benefit from the increases in MPWS unit rates. This seriously affects contract implementation and results in high price rises for the Government.

Recommendations

The GOT should take measures to ensure constant flow of budgetary funds so that providers of goods, works and services are paid and the need of undue annual price adjustments is obviated; and

A provision should be included in the GPL to require procuring entities to invite tenders for works contracts on the basis of bidding documents which include detailed designs and drawings. Surveys and sight investigations should also be completed prior to the initiation of the bidding process.

The GOT should review the practice of annual revisions to the unit rates and introduce the practice of objective price adjustments in long-term contracts.

2.5.9 Payment: Payments are made after the receipt of statements and related invoices. The contractors, suppliers and consultants complain of delays in their payments. In the contracts, there is no mechanism for interest payments for delayed payments. However, the rights of contractors are defined in Law of Obligations (see also 8.2 below) in case of delays. Generally, in order to keep good relations with the employers and clients, contractors do not resort to legal proceedings.

Recommendations

Standard Bidding Documents should address payment procedures and interest applicable for delayed payments.The reasons for delays (mainly budgetary constraints) should be addressed up front and funds received before award of contract, i..e., availability of funds should be assured well in advance.

2.5.10 Bid Protest: One of the major elements of a transparent procurement law is a complaint mechanism allowing aggrieved bidders to have their complaints against procurement officials for failure to comply with the law dealt with in a speedy, transparent and efficient manner. Having such a mechanism will increase the bidders' confidence in the fairness of the system, and therefore would lead to economic procurement. In the GPL there is no well-structured administrative review/appeal process.

A bidder can complain to a procuring entity, to the MOF (that exercises control over the procuring entities’ contracting procedures and gives visa to procuring entities before signing a contract) or to the Court of Accounts. If the bidder is not satisfied with the response of the procuring entity, MOF or the Court of Accounts, he can file a suit in a court of law. The court may decide to suspend the procurement process, otherwise the administration can continue with the contract award and implementation.

If the court decides in favor of the appealing party in the course of the contract performance, different consequences may arise, such as the contract is cancelled and the remaining works awarded to the appealing party or the administration pays the losses of the appealing party according to the decision of the court. Should the court make such a decision after the contract performance has been completed, the appealing party receives compensation decided by the court.

Recommendation

Provide for a well-structured bid protest mechanism. Any bidder should be able to lodge a complaint against the bidding process first with the procuring entity, and if the procuring entity is unable to resolve the protest, to an independent, non-judicial body which should be nominated in the GPL to undertake administrative review of complaints. If stipulated in the GPL, this body could be the office of public procurement. Obviously, the office of public procurement will have to have the capacity and capability to resolve bid protests, i.e., it should be required to have a number of qualified staff. The GPL should include detailed procedures for bid protest resolution.

3. Organization and Resources

3.1 Roles and Responsibilities: The GPL established a decentralized procurement system under which the procurement of goods, works and services is the responsibility of government entities at national and local levels according to the provisions of the GPL. According to these provisions, the procuring entity should establish a procurement committee comprising at least two staff of the entity itself and one MOF representative. The chairman of the committee is always an employee of the entity responsible for procurement. The procuring entity is responsible for determining the number of the members of the committee and to designate them. The MOF representative is designated according to the MOF procedures.

A meeting of the procurement committee needs full quorum. The committee decides by majority vote. The head of the procuring entity must approve the decision of a procurement committee to be effective. For contracts exceeding certain thresholds (excluding the contracts awarded by the special provincial administrations and municipalities) included in the annual budget law the MOF clearance is also mandatory. There is no entity with oversight responsibilities. MPWS and MOF are responsible for preparation and harmonization of rules, but they do not monitor compliance, except for the MOF which clears procurement contracts from a budgetary point of view. The signed contracts are also sent to the TCA for registration.

The Bank has consistently advised member governments, and recommends to the GOT, to provide in the law for the creation of al public procurement agency, adequately staffed with experienced professionals, and reporting directly to the Prime Minister. This agency would not serve as a central tender board, i.e., it would not take procurement decisions, but it would essentially be responsible for procurement policy, drafting regulations and standard procurement documents, for collecting and disseminating procurement information, and often also for reviewing complaints against the procurement entities' procurement decisions. We recommend that provisions be included in the draft law for such an agency.

3.2 Public Procurement Training: Since its first involvement in implementing projects in Turkey, the Bank has regularly delivered procurement training courses for implementing agency staff involved in Bank projects. While these courses have focused on the Bank's Procurement Guidelines, they have also raised the skills of Turkish procurement personnel in competitive procurement and international best practice. There have also been training initiatives in procurement undertaken by other organizations.

These efforts have undoubtedly improved the level of procurement expertise among Turkish staff, especially in the main urban centers, the GPL has created a situation where an increasingly complex legal and other requirements are being applied by large numbers of mostly untrained public officials at both the national and local levels of administration. The training requirement is, therefore, massive and still largely unmet.

It is recommended that the Government prepare a procurement training strategy for public officials at all levels of administration. This will ensure effective implementation of the GPL. This strategy should have, among its objectives, self sustainability over the medium- to long-term, identification of education and training institutes which could deliver procurement training and accreditation of the courses offered by an appropriate authority.

A national training program for public servants responsible for procurement both at national and local levels should be prepared and implemented immediately. For this purpose, the GOT may consider the use of the services of the Turkey and Middle East Public Administration Institute. Eventually, the office of public procurement should be responsible for this activity

3.3 Development of the Procurement Profession: To date, procurement is not recognized as a function in its own right in Turkey; rather, it is a task which public officials generally perform as an adjunct to their regular civil service jobs. To promote the development of procurement as a profession, this report recommends that the GOT should add procurement to the other civil service professions. This move should encourage civil servants to develop the specialist skills needed to conduct procurement effectively and to follow a graduated career path, including appropriate training courses.

In addition, a scheme to accredit public officials to work as procurement professionals should be prepared and implemented.

3.4 Relations between Government and the Business Community: The World Bank has previously held seminars to raise the awareness of the Turkish business community of business opportunities under Bank loans. Similar efforts are also essential for the GOT to establish relationship between procuring entities and providers of goods, works and services throughout the country. There is a pressing need to inform the providers of goods, works and services and to train them in the preparation of technical and price bids which are responsive to the requirements of the bidding documents. It is recommended that program of dissemination of information, including short seminars, on public procurement requirements be prepared and implemented.

4. Audit and Anti-Corruption Measures

4.1 Audit. There are three audit bodies in Turkey: Turkish Court of Accounts (TCA); High Audit Board under the Prime Minister’s Department (YDK); and State Audit Board under the Presidency (DDK). The first two report to Parliament. TCA on the general and annexed budgets, revolving funds, special funds, municipalities and special provincial administrations and YDK on SEEs. However, there are many laws which exclude the general and annexed budget administrations and funds from the TCA audit.

The Turkish Court of Accounts is the Supreme Audit Institution of Turkey. It was established as a court in the last century and operates under the Constitution. The Constitution requires it to audit the government accounts relating to revenue, expenditure and property financed by the general and annexed budgets on behalf of the Turkish Grand National Assembly (TGNA). TCA has two main functions: judicial and auditing. The judicial work is carried out by specialized chambers in which court members try accounts and either acquit or hold liable those responsible for them. The audit work is carried out by auditors. TCA is independent of both the legislative and executive branches of the government.

TCA has a president, a secretary general, 56 members of the court and about 1,500 employee including about 600 auditors. As the supreme audit institution of Turkey, TCA aims at promoting improved public sector accountability, control and management. In the context of performance audit where it strives to report authoritatively on the economy, efficiency and effectiveness of selected government activities, TCA conducts audit of procurement actions of entities covered by the general and annexed budgets the administrations.

Audit provisions to promote compliance with the GPL and to identify and take action on breaches of the provisions of the GPL may be improved by the following measures:

Recommendations

The resources and investigative powers at the disposal of the TCA should be increased

The mechanism for applying penalties for breaches of the procurement laws should be reinforced.

TCA should regularly publish the results of procurement audits.

In order to increase the accuracy and reliability of audit findings on procurement, training courses in the application of the public procurement laws should be developed specifically for the auditors of the TCA throughout the country.

The internal audit functions of procuring entities operating under the public procurement laws need to be strengthened specifically to conduct regular audits of public procurement.

4.2 Current Anti-Corruption Measures. To date, the GOT has not drawn up a comprehensive anti-corruption strategy. Provisions relating to bribery, conflict of interest, fraud in procurement process, etc., are included in the commercial law, criminal law and in the civil servants law. Section 4, Articles 26 through 31 of the Civil Servants Law (No. 657) covers the conduct of civil servants and lists the prohibited acts. The punishment for violation of these provisions are described in Criminal Law No:765 (Section 3 Articles 202 through 281). The articles directly related to fraudulent actions in tendering and bribe are Articles 205 through 219, 366, 367 and 369.

The GPL lists a whole series of "prohibited acts and dealings" by bidders, and provides that such activities will lead to blacklisting for up to one year. This period seems too short, and indefinite blacklisting should also be provided. More importantly, the provisions are entirely silent about acts of fraud (including misrepresentation), collusion and corruption, both during the bidding process and during contract execution. This is dealt with in the Criminal Code, but there should be a cross-reference in the GPL, and the possibility of imposing permanent blacklisting should be stated in the GPL.

Turkey has ratified by law the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the law came into effect in February 2000. Turkey has not yet signed the Council of Europe Conventions on the subject.

The private sector on its own has been undertaking surveys and studies on corruption. For example, following the surveys on corrupt business practices conducted by the World Bank in 1997, the Ankara Chamber of Industry has conducted such surveys on its own among its members and has updated the results of the 1997 surveys and published them. The major findings of these surveys indicate that the frequent changes both in the government and in the legislation impact the business environment/ According to the responses of the members of the Chamber to the survey questions, it is necessary to bribe public officials to conduct business; procurement practices lack transparency so much so that before the bidding is started the result is already fixed, i.e., the selected bidder is already decided upon; payments in the form of donations to political parties, especially the ones in power, in the amount of up to 15% of the contract value, ensures that a contractor wins; since bidders have to bid in the form of discounts against the disclosed contract value, a bidder giving a large discount may win the contract but does not deliver; contract performance is affected because government does not pay contractors on time; since bidding is conducted on incomplete bidding documents, contract variations in work contracts is the most serious problem.

While combating corruption in public procurement would rely critically upon the Government's impending strategy in this regard, there are also specific measures which the Government can take to improve procurement-specific measures. Primary among these are:

Recommendations

Include provisions in the GPL relating to consequences for breaches of the GPL and other procurement-related pieces of legislation, or at least include a comprehensive list of breaches in the GPL and cross references to the other laws which include provisions on the consequences of breaches;

Introduce comprehensive anti-corruption and conflict of interest rules, sufficiently tailored to the procurement context.

Introduce a Code of Ethics specifically for government procurement officers and require all public officials handling public procurement to adhere to it.

Introduce into all bidding and contract documents specific prohibitions against fraudulent and corrupt activities by bidders.