The New Public Procurement Rules

02_The New Public Procurement Rules_march, april, may_2012_KG

The Bulgarian Government has recently proposed amendments to the Public Procurement Act (PPA) in line with the Concept on the 2011 Changes of the Public Procurement Legislation adopted by the Government on 12 January 2011. The main objective of that Concept was to identify measures for improving the public procurement process and creating prerequisites to enhance the absorption rate of EU funds.

The implementation of the Concept was envisaged in two stages. The first stage covered amendments to the legislation in accordance with the planned measures. Those amendments were voted by the National Assembly on 11 November 2011 and entered into force on 26 February 2012.

The second stage was related to the fulfillment of the obligation of the Republic of Bulgaria as an EU Member State to transpose the requirements of Directive 2009/81/EC of 13 July 2009 on defence and sensitive security procurement. In this connection, on 14 December 2011, a new amending bill to the Public Procurement Act was tabled to introduce uniform rules in sectors that are characterized by a number of exceptions to the general rules of the internal market and various national pieces of legislation, as well as to create preconditions for the conduct of fair and transparent award of contracts, while taking into account the specific features of the defence and security sectors. These amendments will be voted at second reading in the National Assembly and they are expected to enter into force on 1 March 2012.

One of the most essential amendments to the Public Procurement Act of 26 February 2012 is related to the reduction of the types of procedures and the number of regimes for the award of public procurement (PP) contracts in the country. This has been achieved through the repeal of the Ordinance on Small Public Procurement Contracts (OSPPC) and the procedures envisaged therein. The PP contracts at the values under the existing Ordinance will be awarded through the procedures laid down in the law with some concessions. These amendments are reflected in the new wording of Article 14 PPA. In accordance with its provisions, PP contracts are divided into three groups in terms of their value.

The first group consists of PP contracts having values equal to or above the European thresholds, to which the rules of the relevant Regulation apply in accordance with Directives 2004/17/EC and 2004/18/EC.

The second group encompasses contracts at values on the basis of national thresholds to which the same rules and procedures apply but there are some concessions, such as the option for the contracting authority to refrain from asking a participation guarantee or a performance bond, the shorter time limits for sending the notice and others (Article 14(2) PPA). In fact, these are the procedures which are currently within the scope of the OSPPC. The difference lies in the fact that the law envisages increase of the value thresholds by 20 percent.

The third group of PP contracts covers the lowest values under Article 14(4) PPA. These contracts continue to be awarded freely with the only requirement to have the contract in writing when the public procurement involves construction works.

There is an intermediary group under Article 14(3) PPA with PP contracts for which the contracting authorities may decide not to hold the statutory public tendering procedures but have the obligation to apply the terms and conditions laid down in Chapter Eight A, i.e. award of public procurement contracts through a public invitation. Actually, these are the thresholds to which the provisions of Article 2 OSPPC have applied so far. Similarly to these rules, the award of contracts under Chapter Eight A will continue to be outside the scope of the appeal provisions of the Public Procurement Act.

The amending bill to the Public Procurement Act that will enter into force on 1 March 2012 supplements and specifies the provisions of Article 14 PPA, defining the thresholds above which any PP contracts under Article 3(3) PPA (works, supplies and services contracts awarded by contracting authorities in the defence and security sectors) must be awarded under the terms and conditions set out in the Public Procurement Act.

There is also an amendment to Article 12 PPA, creating opportunities for direct award of public procurement to companies related to the contracting authority that is a regional or local body of state power under exhaustively listed terms and conditions. These opportunities concern only utility contracts for services within the objects of activity of the respective company in accordance with its Articles of Association, whereby the would-be contractor should be fully owned by the respective municipality under the Municipal Property Act and to be subject to the same control which the respective regional or local authority exercises over its own structures. A further requirement for the company is to generate at least 90 % of its annual turnover from the contracts awarded by the same contracting authority.

Another substantial amendment refers to the opportunity for one-off change of the notice and/or tender documentation of the public procurement procedure through “a decision on modification or corrigendum”. That option is the result of legislative borrowing from the acquis communautaire. Earlier, such an opportunity did not exist at all and if there were gaps or discriminatory criteria, the contracting authority had no other choice but to terminate the procedure.

The amendment enables the contracting authority to modify the subject-matter of the public procurement procedure in view of ensuring its full compliance with the law, rectifying omissions and obvious factual errors within 14 days of the publication of the notice. After the expiration of this time limit, the corrigendum mechanism can be applied only to renew the deadlines in the procedure.

The corrigendum may be introduced at the initiative of the contracting authority or at the proposal of a party concerned provided that the proposal is filed within 10 days of the publication of the notice on the opening of the procedure. The modifications may refer to any part of the notice and the documentation, with the exception, of course, of the activities and/or supplies envisaged in the subject-matter of the public procurement.

The deadline for asking the contracting authority to provide written clarifications has also been amended. Until now the parties willing to obtain such clarifications could use that opportunity within 10 days prior to the deadline for submission of the bids or the applications. The deadline has been changed and now clarifications may be requested until the expiration of the time limit within which the tender documentation is to be purchased or received. The deadline for the contracting authority to reply is four days after it has received the request.

Furthermore, the lawmaker has recognized the possibility for delay of the requested clarifications, indicating that if there are less than six days (or three days respectively in the case of national thresholds) from the date of their submission to the deadline for bids or applications, the contracting authority has the obligation to renew the deadline for bids and applications by as many days as the days of the delay.

The new Article 36a sets out the right of the contracting authority to exercise control over the work of the evaluation commission and to give mandatory written instructions to remove irregularities. In the exercise of these control powers, the contracting authority checks only the content of the protocols drawn up by the commission for its compliance with the statutory requirements and the public procurement conditions announced in advance. Should irregularities be observed in the work of the commission and these irregularities can be eliminated without the need for termination of the procedure, the contracting authority gives instructions in writing to eliminate them. These instructions are binding on the commission.

Next, another essential amendment to the Public Procurement Act is the new ground for modification of a public procurement contract under Article 43(5), allowing renewal of supplies or services contracts of periodic or continued nature under terms and conditions enumerated exhaustively in the law. This amendment may be applied in the cases, in which six months prior to the expiration of the term of the contract the contracting authority has opened a procedure with the same subject-matter for a subsequent period that cannot be completed with selection of a new contractor within the term of the existing contract, while any discontinuation of the supplies or services will create difficulties or lead to unjustified risks for the contracting authority or violate the requirements of a legislative act. These are some cases related to the physical security of premises, supply of foods, insurance services, and others. The amendment is intended to ensure their continuation when the contracting authority has taken timely measures to open a new procedure. In such cases the deadline may be renewed until the selection of a contractor but for not more than six months.

The new amending bill to the Public Procurement Act, which will enter into force on 1 March 2012, takes into account the specific features of public procurement in the defence and security sectors and therefore Article 43(2)(6) envisages a special ground for modifying a public procurement contract worth more than BGN 50 million. It is applicable to new circumstances that could not have been foreseen as of the time of the conclusion of the contract, as a result of which the legitimate interests of any of the parties are affected.

The provisions of Article 70 PPA have been amended, too. In accordance with the wording of 2010, a prerequisite for justification to be required is the existence of a proposal that, depending on the selected evaluation criterion, is more than 30 percent more favourable than the average value of the proposals contained in the other bids. The amendment to the Public Procurement Act of 26 February 2012 has changed the wording once again, reducing the 30-percent threshold to 20 percent and specifying that it does not relate to any proposal contained in the bids but only to those which have numerical value (which was anyway clear in the previous wording, as well). The lowering of the threshold under Article 70 is substantiated in the reasons of the amending bill to the PPA with cases in which public procurement practice has borne it out, especially in the construction sector, that unjustified proposals exist even with smaller deviations from the average level.

The entirely new Chapter Eight A regulates the award of public procurement contracts under Article 14(3) through a public invitation. The procedure involves collection of bids by publishing an invitation in the public procurement portal and in the profile of the buyer. There are specific requirements to the content and manner of submission of the bids, whereby they are examined and evaluated by officials designated by the contracting authority, who determine the way in which bids are examined and draw up a protocol to report the results. The protocol is subject to approval by the contracting authority. The latter is free to award the contract even in the cases, in which only one bid has been submitted.

The new amendments of 26 February 2012 have introduced a new paragraph 3 to Article 120, creating the opportunity to appeal against certain actions and inactions of the contracting authority, which are not directly related to the decision-making process in the public procurement procedure but they affect or impede the participation of parties concerned in the procedure. As to the award of special public procurement contracts, the previous arrangements have been changed with the new amending bill of 1 March, envisaging appeals in the defence and security sectors under the terms and conditions laid down in the Public Procurement Act. This amendment is in compliance with the requirements of Directive 2009/81/EC which introduces rules identical to those contained in Directive 2007/66/EC transposed in the Public Procurement Act. The same arrangements have been introduced also with regard to the decisions of the contracting authorities to reject the proposed sub-contractors.

Pursuant to the amended paragraph 4 of Article 122quinquies, the Competition Protection Commission will have the powers to impose a sanction of 10 percent of the value of the public procurement contract, where the Commission has established unlawfulness of the award decision, including the cases, in which preliminary implementation has been allowed but subsequently it has established breach of law affecting the complainant’s access to the procedure or to the selection of a contractor. Another novelty relates to the powers of the Competition Protection Commission to rule on the liability for costs.