METHODS USED FOR MANAGEMENT CONTRACT TENDERING FOR INTEGRATED WATER SERVICES IN THE PALERMO "ATO 1" AREA
PRESS RELEASE
PRESS RELEASE
WATER SERVICES IN THE PROVINCE OF PALERMO: ANTITRUST AUTHORITY DECLARES TENDER PROCESS IN SERIOUS BREACH OF COMPETITION RULES
Report submitted to the Palermo A.T.O., the President of the Region, the Government and the State Auditor's Department. Institutions urged to intervene to ensure a bidding process that allows genuine comparison of proposals.
The tender process for letting the contract for managing Palermo's A.T.O. 1 Integrated Water Services (SII) seriously violated the most elementary principles of fair competition and administrative efficiency. This is the position of the Italian Competition Authority as stated in a report approved on 19 April 2007. The Authority urges the institutions involved to intervene, by way of the administrative self-protection mechanism if necessary, to ensure that bidding for the Integrated Water Services management contract is based on a real competitive comparison, with the aim of furnishing the public with ever better services.
In its report, forwarded to the A.T.O. 1 Area Authority – Palermo, the Regione Sicilia and the competent local authorities, but also to the State Auditor's Department, the Ministers of the Economy, the Environment, Infrastructure, Transport, Agricultural Policies and Regional Affairs, the Antitrust Authority points out a number of elements that profoundly conditioned the outcome of the tender process.
First of all, the clause in the request for bids whereby the management company will be assigned 70% of the contracts for works associated with the management of the entity is considered strongly anti-competitive, given the number and value of the remaining works to be subsequently assigned by tender. In effect, the bidding process circumvented the public transparency procedures required for the assignment of public works associated with the SII. This is exemplified by the reference in the request for bids to the role of partners of the winning company, which presupposes that those participating in the bid will be grouped into a temporary consortium ("raggruppamento temporaneo di imprese " or RTI); this was indeed the case, given that the requester received only one single bid from an RTI made up of no fewer than nine firms (which became 10 when the management company was set up), one of which in its turn represented three further individual entities. The partners in the newly-formed common business created by the RTI then split up amongst themselves the various service activities and capital works relating to SII.
As for the RTI mechanism in general, the Authority took the opportunity of this report to emphasize that its effective compatibility with the principles of competition must always be assessed: in effect, it is a method of tendering that can lead to a reduced degree of competition if it allows companies that could have participated on their own to present a joint bid with their competitors, thus artfully reducing the breadth and effectiveness of competition.
A further anomaly noted by the Authority in this tender process was the decision by the Conference of Mayors and the President of the Province of Palermo to exclude the whole of the Municipality of Palermo from SII's management area in the Palermo A.T.O.: even though this possibility was specified in the request for bids, it introduced serious alterations to the competitive process and discouraged participation.
In its report, the Authority also urges the competent authorities, in order to support competition and the transparency and impartiality of the procedures, to avoid overlapping responsibilities between those tendering for public works and persons who have, or have had in the immediate past, a non-casual relationship with companies that are even only slightly involved in those matters. In this specific case, it turns out that approval of the tender process, the area plan (A.T.O.) and the terms of the contract with the management company were tasks assigned by the President of the Region – in his role as Water Emergency Commissioner – to an acting commissioner who, for the entire duration of this assignment, was at the same time a board member of one of the companies involved in the RTI which won the contract.
Rome, 27 April 2007