Pilot Project of the State Broadband Infrastructure Program in Ozurgeti

News | Media, Internet and Innovations | Blog Post 13 May 2021

In 2018, Article 17 of the updated Constitution of Georgia received a new amendment, according to which "everyone has the right to access the Internet and use the Internet freely". As such, the amendment means that the state has a positive obligation to make the Internet widely available. IDFI actively advocated for this amendment to the Constitution of Georgia.

 

Prior to the amendment, Bidzina Ivanishvili, the former prime minister and former leader of the ruling Georgian Dream party, voiced the idea of universal internetization. In 2015, the NNLE "OpenNet" was established under the Ministry of Economy and Sustainable Development, which was tasked with the development of broadband infrastructure in Georgia. The goal of the $150 million project was to lay an 8,000-kilometer optical network by 2020 and introduce high-speed internet in up to 2,000 settlements. A list of 473 settlements included in the first phase of the project was also announced, but the construction of infrastructure has not yet begun. According to the then Minister of Economy and Sustainable Development, Dimitri Kumsishvili, and other officials, the project was to be funded by the Cartu Foundation. Since the founding of “OpenNet”, the internetization project was stalled until 2020, and in October 2020, the construction of a pilot network began. However, as far as it is known, the current pilot project is being implemented with the funding of the World Bank instead of "Cartu".

 

In August 2020, NNLE "OpenNet" signed a simplified purchase agreement worth over 10 million GEL with "Parvus Group" Ltd. The subject of the agreement is the implementation of the pilot project of the state program for broadband infrastructure development in Georgia approved by the Resolution N375 of the Government of Georgia of July 28, 2016, and in particular, the planning and construction of infrastructure in the target geographical area of ​​Ozurgeti. According to the contract, the planning and construction works were to be completed and registered in the public registry by December 28, 2020. Later, the contract was amended, and the deadline was extended until February 28, 2021. However, the contractor was not able to complete all stages of the project and register it even within the extended deadlines. The delivery and acceptance acts were published on the State Procurement website on April 8 and 12, respectively. According to the letter of “OpenNet”, the company was fined, with the receipt document showing that Parvus Group was fined 0.02% of the maximum value of the contract (GEL 10,037,606.97) for each overdue day, or GEL 2,007.52, which amounted to GEL 76,285.76 for the period between 01.03.2021 and 07.04.2021 (38 days). The final total value of the contract, factoring in the fine, amounted to GEL 9,785,197.94.

 

Sulkhan Zumburidze and Mamuka Papuashvili each own a 50% share of Parvus Group Ltd. Zumburidze was previously the Chairman of the Board of Directors of the state-owned Georgian State Electrosystem Ltd., and Mamuka Papuashvili was a member.

 

It is important to note that “Parvus Group” received its first public procurement contract within 2 months of its establishment. At this stage, the company has won a total of 4 million 700 thousand GEL worth of e-tenders and has received more than 11 million GEL worth of simplified procurement contracts.

 

It should be noted that in both e-tenders, Parvus Group amended the offered low price after winning, and as a result, in one case the contract amount was almost equal to the initial estimated amount, while in the other case it even exceeded it. In particular, in the e-tender of the S.S. Energy Development Fund of Georgia, the initial cost of which was 3,089,000 GEL, Parvus Group submitted the lowest bid, which was only one GEL below the next bidder.

 

 

The contract was signed with Parvus Group for GEL 2,916,016 (plus VAT). Later, the contract was amended, and its value was set at GEL 3,065,316, with the final amount paid being GEL 3,042,541, almost 127 thousand GEL more than the initial amount of the contract and close to the estimated maximum value of the purchase.

 

A similar development took place in the case of the second tender. Parvus Group made a bid of 1,489,428 GEL for Dusheti Municipality’s tender of 1,505,000 GEL. The contract was awarded, and later its value was changed to 1,600,655 GEL, which is about 111 thousand GEL more than the initial estimated amount of the purchase. However, the amount actually paid by the buyer amounted to GEL 1,420,412, which is GEL 60,000 less than the original value of the contract.

 

Despite Parvus Group's limited experience, “OpenNet” has awarded the company with a simplified procurement contract worth more than GEL 10 million, through a direct procurement procedure, in an attempt to avoid delays for the state-owned project. Bases on the argumentation of the simplified procurement request placed in the electronic system of public procurement, it is clear that "Parvus Group" was selected on the basis of market research. The documents supporting this have not been uploaded in the electronic public procurement system, and therefore this information was requested by IDFI from “OpenNet”. According to the information provided, the market research was conducted twice. In particular, in the first stage, a notice was sent to 5 companies, none of which expressed interest in participating in the program. Later market research papers were sent to 17 companies, of which only two offered a bid. The mentioned companies were "Parvus Group" Ltd and "Veziri" Ltd. The final estimates provided by them were GEL 10,037,606 and GEL 18,432,000, respectively. Based on the above, Parvus Group Ltd. was selected as the construction company for the pilot part of the state broadband infrastructure development program. As for “Veziri” Ltd, according to the data posted in the electronic public procurement system, the company has been winning government tenders and has been receiving simplified procurement contracts since 2013. The estimated total value of these contracts exceeds GEL 13 million.

 

In addition, on April 26, “OpenNet” announced an electronic tender without an auction for the planning and construction of broadband infrastructure in the target geographical area of Kobuleti within the framework of the state program for broadband infrastructure development in Georgia. The estimated cost of the tender is GEL 2,055,000, and the bidding will end on May 17.

 

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This material has been financed by the Swedish International Development Cooperation Agency, Sida. Responsibility for the content rests entirely with the creator. Sida does not necessarily share the expressed views and interpretations.

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