How do we fix PNDL?

The National Program for Local Development (PNDL) has been a constant topic of public discussion in recent years. Most of the time the emphasis was put on politicization and inefficiency of the program. It is clear that PNDL has been the main source of funding at the local level, with small and medium-sized projects for many of the local authorities in Romania; we do not dispute the need for these investments. The two stages of the program so far could cover projects of up to 50 billion lei (10 bill. EUR). However, previous EFOR reports, media inquiries and reports published by the Court of Accounts have highlighted systemic problems with the scheme and raised questions about the allocation of funds, project management and procurement, all under the responsibility of controlled municipalities and county councils. The latter has shown in several reports that the PNDL suffers from structural deficiencies in implementation and needs to be modernized and made more efficient.

In this report, we started from the famous statement of the former prime minister Viorica Dăncilă: “with the help of PNDL projects, we raised the country out of mud”. We will show exclusively, using data from the Ministry of Public Works, Development and Administration (MDLPA), what is the degree of implementation of the program, which are the local authorities that have not asked or received reimbursements more than four to five years after the start of projects and which are the obstacles faced by both local authorities and the MDLPA. Finally, we formulate our own conclusions and recommendations, a possible starting point in the discussion for PNDL 3.

“When we think about PNDL 3, we think of it with a few simple things – it must be a complementary program to the programs that benefit from European funding and it must respond to real needs that exist in the rural communities for which we will launch the call. The selection of projects must be done less through the subjectivity of a minister, but must be done on the basis of a methodology, a set of criteria, which we will agree together, obviously, with the representatives of the Association of Communes, so that we have the guarantee that the projects we finance are necessary projects, are projects that really lead to the increase of the quality of services ” (Ludovic Orban, designated Prime Minister, February 2020)

 

 

See here the interactive map of allocations and reimbursements

 

Main conclusions:

Implementation of the program 

• Records of the implementation of the projects are deficient and IT systems for the data collection process are missing.
• For the most part, records are kept on paper. The data from the beneficiaries are collected on paper, and officials from the ministry enter them manually in the database.
• Reports from beneficiaries may be delayed, incomplete or even missing, so there is no accurate picture of the program implementation.
• Between April 2015 and December 2020, contracts were signed with local authorities for 11,753 projects, of which 4,511 in PNDL 1 and 7,242 in PNDL 2. The two stages of the program involve projects worth almost 50 billion lei. From PNDL 1 81% was settled, and from the second stage 59%
• Most funds from projects were directed to communes, i.e. 72%. County councils received 15%
• The most common projects are those related to communal roads and streets, for sewerage, county roads, water supply.

 Champions: who received the most money?

• The counties that received the most money from the two stages of the program were Bihor (1.5 billion), Timiș and Suceava (1.4 billion), Iași, Giurgiu, Olt, Vaslui and Neamț, with 1.3 billion each. .
• Out of the total of 3,186 municipalities in Romania, 3,056 (96%) accessed projects, 130 localities did not receive money in any of the 2 stages of PNDL. Most localities that have not accessed funds from PNDL are located in counties such as Prahova, Dolj and Bihor.
• As an absolute number of projects, most went to CJ Neamț, i.e. 63. Sector 3 in Bucharest, received 62 projects – 114 million lei for several projects for the renovation of some educational units; in comparison, the whole Dâmbovița county received 334 million lei.
• The average value of a project (median) was 1.8 million lei. Although the amount allocated for a project is relatively low, most being financed with less than 10-15 million lei, there were also municipalities that received much larger amounts. For example, CJ Satu Mare and CJ Gorj received 2 projects for the modernization of roads for 122, respectively 121 million lei, for which they reimbursed 40%, respectively 60%.

Project implementation

• 5,989 projects have been fully reimbursed. Almost 3000 are completed in a percentage between 50-99%
• The average implementation period (median) is 2 years. For at least 9 projects the implementation lasted more than six years, and 169 projects were implemented in five years. On the other hand, we have another 768 projects – excluding those signed in 2020 – with no reimbursement, of which 403 projects had allocations of more than one million lei. The champion counties with the most projects signed before 2018, but in which things are still are Iași, Vaslui, Botoșani, Brașov and Neamț
• The settlement ratio taking into account the political color of the beneficiaries is relatively uniform. In some cases, the mayors of UDMR may have difficulties in settling

Public procurement

 ”A significant number of municipalities did not request amounts for reimbursement in 2019 (3,499, approximately 30% of the total number of objectives financed by PNDL) which indicates vulnerabilities and difficulties of the beneficiaries in formulating such requests from the budget respectively, difficulties in meeting the deadlines assumed for the completion of investment objectives. Municipalities are responsible for conducting public procurement procedures. These, in many situations, take a long time, due to lack of offers, lawsuits or other problems encountered in the public procurement process ”(Court of Accounts Report 2019)

• Beneficiaries are responsible for procurement procedures. There is no centralized list of all procurements, and the ministry does not have such statistics, as it does not monitor the way public procurement is carried out.
• EFOR created a database with 5832 public procurements, for which we developed a collection of scripts for cleaning and gathering data from different sources. We mention that we are not confident that the analyzed information is completely correct, however it reflects in a relevant way the general situation.
• In the official procurement portal (SEAP) we found procurement with the same name as the analyzed projects dating from 2007 or 2008; we can suspect that in some cases the projects are very old and the beneficiaries have submitted proposals for their continuation. This could indicate inefficiency and a significant lack of capacity, if minor infrastructure projects take so many years to implement.
• The report’s conclusions largely confirm the results of previous EFOR reports, which had been carried out on a smaller sample of procurement procedures.
• Three quarters of the procedures were carried out through a simplified procedure, a quarter through a call for tenders, the rest being carried out through internal simplified procedure, open tender and negotiation without prior publication.
• EFOR analyzed the first 30 companies as the value of the contract, from PNDL procurement – see the profile in the report. All of them had significant turnovers in recent years. Some of them had even 3-4 times increases in turnover, including in 2020, a pandemic year. Most of them have been registered over 10-15 years ago and have a significant number of employees, in the hundreds and seem to have the ability to implement works.
  However, in the case of most of the companies listed above, there are obvious links to political life, such as owners who are or have been party members or have held leadership positions in public institutions or who are in affinity relationships with such persons. At the same time, we identified companies that were involved in criminal cases as legal entities or in which partners, shareholders or administrators were investigated, most of them related to tax evasion, corruption or fixed procurement; in some cases courts pronounced final conviction decisions, in others the proceedings have not yet been finalized.
• For some of the companies listed above, we identified either joint management (a shareholder or associate), degrees of kinship or affinity between owners or other interest-based ties, which may indicate a certain degree of monopoly of procurement in certain regions, with the same family running several winning companies.
• Most companies signed contracts in the county where they are based or in neighboring counties in the region. Few companies from the analyzed data have signed contracts with municipalities from remote counties, but there are also cases of large companies such as Coni, Strabag, Hidroconstrucția, Dugaro that have reached most regions of the country.
• In most cases, a small number of companies (4-5) earn percentages between 40-70% of contract funds, reported to 100 to 200 contractors per county. We reiterate that it is not an exhaustive image of the procurement from PNDL, but it reflects an important part of the money contracted in a representative number of counties. Among the counties where, according to the existing data, higher percentages are observed compared to a smaller number of companies, there are Vaslui, Sălaj, Neamț, Mehedinți, Ialomița, Harghita, Bihor or Bistrița-Năsăud. In Galati, four companies mentioned above received 50% of the money.
• Purchases with one and two offers predominate. We emphasize, however, that the small number of bidders is not necessarily a sign of monopoly (although it is a serious indicator to take into account), as it may also be an indicator that some companies do not want to participate in procurement procedures funded by PNDL given program instability. Out of 3811 procurement analyzed, made between 2015 and 2020, 30% had a single bidder, 15% two bidders and 9% three bidders.

Recommendations:

1. Realistic budgeting, ensuring funding sources for PNDL projects and avoiding budget supplementation through the Reserve Fund or other means of improvised financing 
2. Increasing the financial, human and technical capacity of MLPDA to monitor and control project implementation
3. Increasing reporting efficiency by developing online platforms that collect data from beneficiaries and allow their dissemination to the general public in a timely, consistent manner.
4. Amend legislation to strengthen the obligation to report in a timely manner and by electronic means; increase sanctions for non-compliance
5. Publication of submitted projects
6. Publication of approved project lists with unique numbering (to allow tracking) and evaluation scores
7. Increasing the capacity of authorities implementing projects from these funds, in order to avoid irregularities and possible fraud attempts.
8. Carry out comprehensive analysis on public procurement and amend legislation to allow centralization and publication of data by MLPDA.
9. Abandonment of old projects, which have not started implementation or where implementation is in its early stages
10. Regulating minimum cost standards to reduce the risk of artificial price increases
11. Carrying out and publishing an analysis that reflects the reasons why some projects are significantly delayed 
12. Publication of an evaluation regarding the implementation of PNDL 1 and 2 for the elaboration of PNDL 3
13. Elaboration of a future stage of PNDL in a transparent way, through public consultations

Data about PNDL 

Download the database with allocations, reimbursment and procurement (xls)

Event organized within a project funded by the Bureau of International Narcotics and Law Enforcement Affairs (INL), implemented by the Expert Forum in partnership with CEELI Institute (Czech Republic) and the International Foundation for Electoral Systems (IFES).