Issues of favoritism, corruption, and lack of fairness persist in Latvia's public procurement, claim investors

In the Baltic region, concerns about the fairness and transparency of public procurement processes are more pronounced in Latvia compared to its neighbours Estonia and Lithuania, according to FICIL, a Latvian non-governmental organization focused on fair competition and public procurement.

One of the key issues highlighted by FICIL is the tendency for companies operating in sectors related to natural resources, such as energy, telecommunications, and transport, to face a higher risk of favouritism in public procurement. This assertion is backed by a recent finding that in 2021-2023, the winner of 73% of procurements in Latvia was selected solely based on the lowest price.

The total value of public procurement contracts in Latvia in 2023 was EUR 5.4 billion (excluding VAT), representing approximately 14% of the country's GDP. This significant sum has led to increased scrutiny over the processes involved, with cases such as the direct contracting of the University of Latvia Productivity Research Institute "LU domnīca LV PEAK" by the Latvian Ministry of Education and Science without a tender raising concerns.

FICIL has approached both the Ministry of Economics and the Ministry of Education and Science regarding contracts with the University of Latvia Productivity Research Institute "LU domnīca LV PEAK", but has yet to receive a response from either party. The institute has a history of long-term cooperation with the Ministry of Economics, which has led to concerns about potential conflicts of interest due to employees working simultaneously at both institutions.

FICIL questions the necessity and independence of projects involving the University of Latvia Productivity Research Institute "LU domnīca LV PEAK". Māris Butāns, FICIL's fair competition and public procurement expert, emphasizes the importance of protecting institutions from political pressure to ensure neutrality and objective assessment.

Another example of potential favouritism in public procurement is the case of a telecoms procurement in Sigulda municipality, as highlighted by FICIL. Foreign investors have expressed concerns about long-term partnerships between state institutions and specific companies/institutions, as such partnerships can undermine independence and objective assessment.

To address these issues, FICIL calls for reforms to make public procurement in Latvia more transparent, efficient, and competitive. The goal is to attract more foreign investment and strengthen Latvia's long-term growth. The challenges of the public procurement system in Latvia include complex and fragmented rules, insufficient professional capacity, lack of transparency, inconsistent practices, and a tendency to choose low price over quality.

The Ministry of Transport in Latvia is currently planning to extend the rights to provide Universal Postal Services to the existing partner (VAS "Latvijas Pasts"), a move that foreign investors and the Association of Postal Merchants (PKB) believe restricts competition and prevents other market participants from offering potentially better services and parcel delivery solutions. This is another example of the concerns surrounding public procurement in Latvia and the need for reform.

Issues of favoritism, corruption, and lack of fairness persist in Latvia's public procurement, claim investors