“Yerevan Bus” paid 1.5 times the market cost for GPS devices

In August of the previous year, it was reported at one of the working sessions of the Yerevan Municipality that the installation of GPS devices on the buses serving the capital has been launched. In this regard, acting mayor Tigran Avinyan stated:

“This is also one of the key reforms we promised in the field of public transport, because in the field of public transport, only replacement of the vehicles is not yet a reform. Simply eliminating the old Gazelles and bringing in new buses is not yet a reform. The reform comprises these systemic solutions: the integrated ticketing system, the installation of GPS devices on the fleet…”

In fact, however, there are a number of issues related to the procurement of installed devices, one of which we will address below.

The installation of these devices became possible due to the contract signed between “Yerevan Bus” CJSC and “HEXADA” LLC in July last year.

The product was procured at a significantly higher cost than the market price

The devices procured by “Yerevan Bus” CJSC are designed to be installed on the capital’s buses and to track their movement in real time. Although the announced tender was conducted through a tender procedure (electronic auction) which implies that competitiveness and the lowest price of the procured product should be ensured, however in reality it is not so definite.

Only two organizations participated in the tender, but during the reverse auction, one of the organizations, “GGE Holding” LLC, quoted a price nearly 10 times higher, AMD 600 million, as a result of which the other participant, “HEXADA” LLC, was awarded the contract with a bid of AMD 64 million 960 thousand.

About AMD 65 million was paid for the procurement of 448 devices, i.e., AMD 145 thousand per device.

Meanwhile, through a simple search on the Internet, we may find that the market price of the procured Teltonika RUT956 network equipment system ranges from AMD 90-100 thousand.

In this regard, we inquired from “Yerevan Bus” CJSC whether a market study was conducted before announcing the tender, and if so, we requested to provide the results of the study. According to the response, market study was conducted “in the form of phone calls, internet searches and verbal inquiries to determine the price and specifications of the product,“ however the results of these studies were never provided to us.

With the second inquiry, we requested to explain how it happened that the devices were procured at a much higher price despite the market study conducted. We also sent several links making it clear that the market price of the product was actually much cheaper.

“When importing the product, VAT and customs duty is to be paid, which you did not consider in your inquire. I should also inform you that the USD exchange rate in 2022 was AMD 440. Therefore, if we make a mathematical calculation, we get 100 thousand + VAT + customs duty and the USD exchange rate which equals to AMD 145 thousand,“ reads the response of “Yerevan Bus.”

Accordingly, we decided to follow the company’s advice and make a mathematical calculation.

Both the announcement of the tender and the acquisition of the devices were made not in 2022, but in the summer of 2023, and the USD exchange rate was AMD 385-390 in the summer of the previous year, that is, the mention of the 2022 exchange rate is not relevant to this case to say the least.

The PN EEA (product nomenclature of external economic activity) code for these devices  is 8517 62 000. And the products listed in this product group are exempted from VAT by law.

As for the customs duty, according to the customs rates set by the EAEU Customs Union, no customs duty is defined for this product group (0%).

In other words, the response of “Yerevan Bus” CJSC that the procurement of AMD 100,000 product for AMD 145,000 is based on the 2022 USD exchange rate, VAT and customs duty payments is not grounded in any way. These products are exempt from both customs duty and VAT payment. So, if we add up all these, we get:

100 thousand + VAT 0% + customs duty 0% + USD exchange rate (change: 0%) = AMD 100 thousand

And if we consider the statement of “Yerevan Bus” CJSC that a market study was conducted before the procurement of the devices, we can claim that the company was familiar with the market price of this product, which did not prevent the product from being procured at 1.5 times the market price.

By the way, this procurement was accidentally made on the eve of the Yerevan city council elections.

Sevada Ghazaryan