Bulgarian State Administration Ministry Announces the Biggest Corruption Deal in the IT-field

The Bulgarian Ministry of State Administration and Administrative Reform (MDAAR) just announced the news about the biggest corruption deal in the IT-field in Bulgaria. See the message (in Bulgarian at the original site, portions translation below):

Two participants – CAD R&D Center “Progress” Ltd (CAPK “Progress”) and consortium “Stack”, consisting Stemo Ltd. and Act Soft Ltd., have participated in the announced by the MDAAR procedure for choosing a company to provide a framework agreement for delivey of licenses for Microsoft software for PC and servers. CAPK “Progress” has offered price of Leva 68 760 000 (approx: Euro 34 M; 1 Euro is equal to 1.95 Bulgarian Leva by law) for 60 000 licenses for PC and Leva 2 674 100 for 2000 licenses for server operatins systems (OS). The Stack Consortium offered Leva 73 929 600 лв. for the PC software and Leva 4 142 400 for the servers. These prices do not include VAT (20 %).

Why this is the biggest corruption deal?

Look at the prices of Microsoft products (without VAT) at a normal Bulgarian computer shop (thanks to Yovko for the link):

MS WindowsXP Pro Bulgarian: Leva 219.
MS Office Basic 2007: Leva 295.
MS Office SB 2007: Leva 378.
MS Office Pro 2007: Leva 470.

Or in other words, the state rents from CAPK “Progress” software for Leva 1146 лв. (without VAT) or for 1375.20 лв.* (with VAT). If the same software was purchased from the shop, without the discount for such a huge number of licenses – 60000, the state would have paid Leva 30.8 M, or – depending on the version of the Office packet – Leva 35.8 M or even 41.3 M. But not Leva 68.8 M.

If the government has signed a deal directly with Microsoft, it would have received the software with a discount, which now is into the hands of CAPK “Progress”, given them by… Microsoft.

Or in other words – by using a third party, the MDAAR knowingly rents software at prices, which are substentially higher than the prices of the same software in the shop, and even more higher than the prices, obtainable by Microsoft in direct negotiations for 60,000 copies for the need of the state administration. Just to compare: many years ago, when I was working for a Microsoft competitor – Borland, which was selling the database dBase and the spreadsheet QuattroPro, the discounts in such cases could have reached up to 90 % of the street price. So, if there were real negotiations between the MDAAR and Microsoft, the price of the software could have been about Leva 4.1 M or the corruption effect from this deal is about Leva 55 Milion, give or take. Oh, without counting the VAT.

After the MDAAR accepts the price offer – and you bet, they would accept it! – we can’t do more but ask the Sofia Prosecution office, and the Chief Prosecutor (Attorney General) of Bulgaria to start an investigation, as there are enough data and proofs for criminal activity within the scope of art.art. 225 and 282 of the Bulgarian Penal code.

Mr. Kokinof (DA for Sofia) and Mr. Velchev (Attorney General) – I hope you will inform us about the steps you’ve taken to find out the responsible governmental officials for releasing such a bad for the country deal, accepting such bad and over-priced products and services, and we hope that finally there will be sentences for people involved in such corruption deals.

Oh, something else – the minister of state administration Nikolay Vassilev has said that the public bid was open for every European company, something which is not quite correct. Microsoft practice is NOT selling software in different countries in a country where they have a subsidiary through its subsidiary from a different country. Otherwise the country in which it is cheaper would be able to sell all over the European Union, and thus:
a) will undermine other Microsoft representatives (unfair competition), and
b) will bring less money to Microsoft (who would want that?)
Besides, how can another company participate in the bid, if they have read the requirements, and more specially this:

…Requirements:
– document for the registration of the foreign company,
– the participant should be able to prove sales more than Leva 5 M for the last three years of deliver of Microsoft products.;
– the candidate to be a partner of Microsoft and to distribute its products in the Republic of Bulgaria (proved by a letter, issued from Microsoft Bulgaria Ltd. and/or contract with Microsoft);
valid certificate under ISO 9001:2000…

Let’s see these four requirements in more details:

Foreign company are allowed, but they have to show sales of Microsoft software worth of Leva 5 M for the last 3 years. Why exactly 5 Million we could only guess, but we hope the prosecution will give us the right answer. But why exactly Leva?! Who is this “foreign company” who could prove sales in Leva?! There is no one! Therefore the bid is not open for all companies from all 27 EU member states. This is a lie.
What about the requirement for the letter from Microsoft Bulgaria Ltd? It only shows us that MS Bulgaria will issue only two such letters – to the company that is to win, and to the other, which participates in order to make the procedure legitimate.

You would think that this is enough to prove the case who was going to be the winner? No, to do that, something else was needed: valid ISO 9001:2000 certificate Why is it necessary to have a certificate for providing 60000 license numbers to the state? It is very simple why – so that another company that sells Microsoft software, but is not certified under ISO 9001:2000 could participate.

With this the puzzle is finally in place, and the only thing people can wonder is how insolent the MDAAR could be in their attempts to justify the need to sign such an unfavorable for the country deal? If you wonder who is to benefit of this contract, let us tell you: it is CAPK “Progress”

What company is CAPK “Progress”? See the “About” on their web site. We can see that the ISO standard is actually a BDS EN ISO 9001:2001, not the required ISO standard 9001:2000. We can also see that it has been issued for “design, development, installation and service of computer infrastructure and program systems based on DELL & Microsoft”.
Very good!
The only unclear thing is: are all 60000 computers in the state administration by Dell (in the certificate the name is misspelled with CAPITAL letters), because the certificate is not for “sale or rent of software”, or even only for software sale. If someone could find whether the BDS (БДС) EN ISO 9001:2001 standard is equivalent to any of the International Standards Organization ISO standards, and if yes, to which one; and if the Executive Agency “Certificate and testing” has the right to issue these ISO standards. May be also you could find out what are the requirements of this standard and if they are needed when a third party is renting software? If you think I am trying to be pain in the butt, it’s not that case – just in the CAPK site it says,

CAD R&D Center “Progress” is certified by the National Agency of Metrology and Standardization for correspondence with the introduced system of quality by BDS EN ISO 9001:2001.

While the standard itself claims to have been issued by the Executive Agency “Certificate and testing”, so there is something strange here.

You can read more about the same topic (in Bulgarian) in these 52 (fifty-two) articles published in the last seven years at Portal.bg.

In English there are several articles at my blog:
Another BSA report on software “piracy” in Bulgaria (with many links, including to articles in the New York Times, International Herald Tribune, etc.); this one was quoted in BoingBoing.net
Letter to the USTR against fake data from BSA
Microsoft WindowsXP does not recognize some Bulgarian and Romanian characters in Times New Roman and Arial
Another fault start for Microsoft: advertizes non-configured web portal

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* (for the US readers – the prices of the same software at CompUSA: Office2007 Pro is $ 500, WindowsXP Pro – $ 300, which means it is still cheaper than the price paid by the government – Leva 1375 equals approx. to $ 1000) I’ve deliberately chosen the most expensive versions of the software; Vista is right now quite cheap. Plus, all computers at the state administration currently have proper software installed, and under the contract the state could immediately buy all licenses at half the price paid until now, that is approx. $ 450 / computer. Without ANY discounts by Microsoft.

** Computerworld journalist Maria Maltseva writes in her blog that between opening the candidates’ offers and announcing the “winner” there were only 2 hours time. The offers were about 500-600 pages. She wonders how was the MDAAR able to check the validity of all documents, when in similar tenders it would take weeks to do so. We don’t wonder about it… We know – let the Chief Prosecutor takes in hands this case!