Massive eco-tender raises questions

Three bidders are left standing in the lucrative and protracted eco-tender process, which will eventually dole out tens of billions of crowns in state money to one company for the cleanup of hundreds of sites around the country contaminated by toxic waste.

The bids were opened Sept. 13 and will be reviewed by the Finance Ministry, but critics say none of the competing companies is up to the task and that the sheer size of the tender and lack of transparency in its execution have created a corruption risk.

The state contract will include more than 500 sites damaged by various types of industrial waste dispersed prior to 1992, including a chemical spill in the Labe River from the Spolana chemical plant 25 kilometers north of Prague. In the late '60s, the plant produced dioxins and herbicides that were sold through back channels to the U.S. military for production of Agent Orange, a chemical used to defoliate the jungle canopy during the Vietnam War.

Other polluted locations in the tender include chemical companies near Pardubice, east Bohemia, and one called Spolchemie in Ústí nad Labem, north Bohemia, which Greenpeace Czech Republic Director Čestmír Hrdinka says has a mercury spill in an aquifer nearby.

Hrdinka expressed frustration that so many sites have been sitting contaminated for nearly 20 years, and admits some concern over the qualifications of the bidders.  

"The bidders should have a good reference list of similar actions in the past so we can be assured they know what they're doing," Hrdinka said. "It's believed by many that the job may be too much for one company."

Two of the companies bidding for the tender seem to have been created expressly for the purpose of competing for the contract, the value of which has been estimated at anywhere between 40 billion and 125 billion Kč. Marius Pedersen Engineering is a subsidiary of French company Veolia Environment, with a background in waste management and construction, but nothing on the scale of the Czech tender. A second competitor is a company called Environmental Services. Set up in 2009, the sole shareholder of Environmental Services is Czech-Slovak company J&T Finance Group, a financial services company. The third bidder, Geosan Group, is a Czech construction company with a small environmental services division.

According to the Finance Ministry, the successful bidder must prove it has provided similar services like waste disposal and pollution cleanup within the past three years and must demonstrate adequate technical knowledge and manpower.

In addition to questions about the qualifications of the current pool of bidders to handle the massive cleanup, critics say such large tenders are vulnerable to corruption simply because of their size.

"When public tenders are of such a large size, it increases the chances of secret deals between the bidders, which also tends to increase the cost of the winning bid," said Michael Smith, a sociologist at the Czech Academy of Sciences who researches transparency issues. "If the government wants to be fiscally conservative as well as fight corruption, which seem to be its main political mantras, then it has no other option than to stop the tender."

Three companies were excluded in the first round of bids conducted in January, with financial group PPF's bid blocked after accusations from then privatization czar Tomáš Ježek that PPF pressured him to render a favorable expert opinion. PPF then filed a complaint with the Anti-Monopoly Office over its elimination, further delaying the process.

Transparency International has also called for the tender's cancellation, saying the corruption risks are too great, as is the potential taxpayers could be saddled with an unfair price for the contract, the parameters of which lack specificity.

"When you don't know if you're buying five cars or 10 cars, it's difficult to come up with the real price," said Radim Bureš, a project director with Transparency International. "The main risk is that the whole price will be much higher than it need be, and the surplus can be used to motivate those who promote this tender. There is no proof of the direct cash flow yet, but there is a risk the state will pay much more than necessary."

The end price of the cleanup is also connected to the size of the tender, critics say, in that if the state held smaller tenders for the cleanup of individual sites or groups of sites, the specific problems with those sites could be defined, leading to a more accurate estimate of the cost of cleanup. In terms of transparency and competition, Smith says more and smaller companies can participate in smaller-scale tenders, and that smaller contracts are easier for the government to monitor for efficiency.

"Those companies that perform worse or more expensively would have reduced chances of winning future competitions," he said.

Though anything short of a cancellation may not be enough to satisfy the tender's staunchest critics, Bureš says future public tenders may be more transparent if a proposal by the Regional Development Ministry on public tenders is passed. "The proposal should improve the situation because it enforces competition and transparency," Bureš said. "But it is important that it is not watered down as it moves through Parliament."

Emily Thompson can be reached at
ethompson@praguepost.com