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Second chance for transparency

IBM wins in the second tender process for a database

By Bibiána Duhárová
Staff Writer, The Prague Post
October 8th, 2008 issue

Favoritism alleged in first tender

The process for the State Treasury tender has from the outset caused controversy. The government's Anti-Monopoly Office became involved in the process after allegations of favoritism. The tender was announced September 2007 as a two-step process, the first being a tender for accounting system software. The second would create a Budget Information System. In November 2007, the Finance Ministry committee accepted seven proposals.
At this stage, the Finance Ministry was accused of manipulating the competition to favor IT company SAP ČR. Their software was listed in the tender as one of the necessary components for candidates to have a successful bid. Software supplier Gordic was the only one to file a complaint to the Anti-Monopoly Office. Transparency International said it was discriminatory to require applicants to use the SAP software.
The tender was finally canceled in February 2008 by Finance Minister Miroslav Kalousek, who said the applicant dialogue had grown too complicated.

- Bibiána Duhárová

The company entrusted with building the government’s ambitious State Treasury project has finally been chosen after a nearly two-year process that stumbled in its first attempt. IBM, in an alliance with Hewlitt-Packard (HP), Logica and SAP ČR, won the tender to create a digital information system that will manage public finances.
Because of allegations of favoritism, the first tender was canceled in February this year, and the Finance Ministry announced a second attempt July 15. This second project combined the first’s two-step process that would have built an accounting and budgeting system separately. The project that the IBM alliance bid on is the Integrated Information State Treasury System, which combines the two.
The ministry required potential bidders to report a yearly revenue exceeding 2 billion Kč ($111.92 million) and proof of experience with similar projects in the past. The price of the project was capped at 2.5 billion Kč.
The government is currently going over IBM’s winning proposal, worth 2.19 billion Kč, before the final contract is signed.
“We are pleased the Finance Ministry’s commission recommended IBM to develop the State Treasury System. Since the contract is not yet signed, we have no further information to disclose,” said Vladimíra Pavelková, IBM’s communication manager.
IBM and HP submitted a joint proposal to the Finance Ministry’s commission, explaining that it was the best solution to handle such a diverse and technically demanding project.
“The project alliance consists of a team of professionals who have long-term experience with such projects. We chose the SAP software platform, because it is the proven information-economic system throughout Europe,” said Pavelková.
In September, only two applicants submitted final proposals for the new treasury. The alliance was led by IBM Czech Republic and the INDRA Czech Republic. The latter’s bid was discarded after a bizarre error made by the company led to an insufficient deposit.
“It was truly a quaint situation. INDRA was discarded because the company gave a deposit worth 4.5 million Kč when it should have been 45 million,” said Jakub Haas, spokesman for the Finance Ministry.
The government hopes to build a database that will streamline and speed up the administration of state-managed financing in a system that will simultaneously make it more transparent. The accrual accounting system, where actions are entered in the books as they happen, is expected to further this goal. The style of accounting records changes as they occur, unlike the double-entry accounting system where changes are recorded at predetermined times. The new system will also interconnect state government branches, so it will be possible to control their management in detail. According to the Finance Ministry, the current condition of state accounting does not paint a trustworthy picture of the management of the state budget.
“The main difference in the old system and the new digital one is that it is based on an accrual accounting principal rather than on the double-entry accounting system,” said Jakub Haas.
The digital Treasury System should be launched in 2010, and according to State Treasury Project Manager Pavel Nevšímal, it will be successful not just in the change it will bring to the system, but the money it will save.
“This system will save from 0.5 percent to 1 percent in the state budget, which comes down to almost 5 billion to 10 billion Kč a year,” said Nevšímal.           
Although so far the second attempt seems successful, the Anti-Monopoly Office (ÚOHS) is still keeping an eye on it.
“If anyone suggests we open the IBM case for anti-monopoly reasons, then we will take necessary steps. Unsuccessful applicants must first file their objections, after which there will be a 45-day period during which the ministry will not be allowed to sign the contract. At the moment, however, nobody has filed a complaint,” said Martin Pecina from the ÚOHS.

Bibiána Duhárová can be reached at bduharova@praguepost.com


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