PUBLIC PROCUREMENT LAW Draft

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PUBLIC PROCUREMENT LAWDraft

• Public discussion
• 26 28 September 2007

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WHY? (1)

• Because we have to be accountable in spending of
  public finances there is considerable potential
  for budget savings/responsibility and vice versa
  across the board. A well-designed and managed PP
  system can result in significant saving of public
  finances and save taxpayers money.
• Boosting competition
• Building private sector
• Strengthening anti-corruption mechanisms
• Because we want to meet another requirement in
  the EU accession process - a transparent PP
  system

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WHY? (2)

• Countries striving for EU membership must
  establish transparent PP systems based on
  principles of open and equal competition,
  directed toward economically efficient
  procurement system, promotion of international
  trade and attracting investments.
• The EU has recommended that harmonization of
  legal frameworks in EU non-member states should
  take place at the stage when relevant laws are
  being adopted, and not after laws and bylaws have
  been enacted.

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PUBLIC MODERN SYSTEM OFPROCUREMENT
PUBLIC PROCUREMENT

• Procurement of goods, services and works by state
  bodies (municipalities, ministries), public
  enterprises and institutions (schools, hospitals
  etc.), accompanied with mandatory application of
  specific procedures stipulated by law

• Transparency of procedures, efficient system of
  protection of bidders rights and the principle
  that the best bid wins the competition for public
  contract for procurement of goods, services or
  works for needs of the government and other users
  of public funds

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EFFECTS OF PUBLIC PROCUREMENT IN THE EU

• Public procurement in the EU has increased
  considerably over the past few decades
• Around 30 of government spending in budgets of
  the EU member countries is intended for public
  procurement of goods, services and public works,
  which amounts to 16 of GDP
• Application of EU directives on the national
  level in EU member countries has contributed to
  increased transparency and competition over the
  past 10 years, which resulted in significant
  savings in public consumption (cost of goods and
  services dropped by over 30)

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EFFECTS OF PUBLIC PROCUREMENT IN SERBIA

• From 2002 to 2006, there were some positive
  developments in the area of public procurement
  and 300 million were saved
• In 2002, share of public procurement in Serbia
  and Montenegros GDP was 9, while today it is
  around 11 of Serbias GDP
• Changed ratio between competitive (open and
  restrictive) and uncompetitive (negotiating
  procedure) procedures, with uncompetitive
  procedures accounting for 2/3 of total number of
  public procurements in 2002, and only for ¼ in
  2005.
• Problem of insufficient number of bidders 7.5
  bidders per tender on average (2002) / 5 bidders
  per tender on average (2006)

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CHARACTERISTICS OF PUBLIC PROCUREMENT SYSTEM IN
SERBIA

• Decentralized PP system means that contracting
  authority is responsible for PU and use of public
  funds in line with the Law
• 12,000 buyers
• 80,000 candidates
• 250,000 public contracts annually
• worth 1.7 billion

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INSTITUTIONS RESPONSIBLE FOR PP IN SERBIA

• MINISTRY OF FINANCE Public Procurement Group
• PUBLIC PROCUREMENT ADMINISTRATION
• COMMISSION FOR PROTECTION OF BIDDERS RIGHTS
• MINISTRY OF FINANCE Budget inspection
• STATE AUDIT INSTITUTION
• ANTI-CORRUPTION COUNCIL
• MINISTRY OF INTERIOR Administration for Fight
  Against Organized Crime / Department for Fight
  Against Business Crime
• PROSECUTORS OFFICE
• JUDICIARY

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LEGAL FRAMEWORK FORPP SYSTEM

• OBJECTIVE OF REGULATION a legal environment
  that enables free movement of goods and services,
  competition and effective control (complaint
  procedure), and fight against corruption.

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LEGAL FRAMEWORK FOR PPSYSTEM IN THE EU (1)

• First EC directives in the early 70s to
  liberalize and remove discrimination in PP sector
• The EU Treaty does not regulate PP directly, but
  principles of free movement of goods, services
  and capital and freedom of establishment apply
  for PP also
• Basic principle of a single market any company
  from EU member countries can compete under equal
  conditions for public contracts if these
  principles are violated there is an efficient
  system of appeals
• The purpose of directives to harmonize national
  rules concerning award of public contracts in the
  EU (advertisement, transparency, technical
  specification, criteria for selection of
  candidates and award of contracts). Appeals
  procedure is also regulated.
• Simplification of legal frameworks and adjustment
  to electronic era.

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LEGAL FRAMEWORK FOR PP SYSTEM IN THE EU (2)

• Despite positive developments concerning PP, the
  EU is still dissatisfied with the degree of its
  success and results of internal harmonization of
  PP procedures. More than 25 years after adoption
  of the first directive concerning PP, it is
  believed that economic achievements and savings
  are still below expectations.

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LEGAL FRAMEWORK FOR PP SYSTEM IN THE EU (3)

• Directive coordinating procedures for the award
  of public supply contracts (93/36 EEC)
• Council Directive concerning coordination of
  procedures for the award of public works
  contracts (93/37/EEC)
• Council Directive relating to the coordination of
  procedures for the award of public service
  contracts (92/50/EEC, 97/52/EEC)
• Directive coordinating the procurement procedures
  in utilities sector (93/38/EEC, 98/4/EC)
• Directives concerning review procedures
  (89/665/EEC, 92/50/EEC and 92/13/EEC)
• New EU legislation the first three Directives
  concerning procurement of goods, services and
  works were consolidated in a new Directive
  2004/18/EC on the coordination of procedures for
  award of public works contracts, public supply
  contracts and public service contracts,
• Two directives concerning so-called special
  sectors were replaced by a new Directive
  2004/17/EC coordinating procurement procedures of
  entities operating in water, energy, transport
  and postal services sectors.
• In all EU member countries legal remedies must
  specifically include the option to undertake
  provisional measures (like suspending concrete
  public contract awarded), annulling illegal
  decision on award of a public contract and
  annulling discriminatory technical, economic and
  financial specifications, and also compensation
  of damages.

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LEGAL FRAMEWORK IN SERBIA

• PP mostly took place via negotiated procedure,
  which became a significant source of corruption
  in practice
• Early application of Public Procurement Law
  pointed to many problems in the PP system.
  Already in the early stages of PP Law
  implementation, the Public Procurement
  Administration adopted 5 bylaws to enhance
  operation of the new PP system.
• In order to (?) correct exposed deficiencies,
  and (b) further align the PP system with EU
  standards, the PP Law was amended and changed.
  Out of 150 provisions which the 2002 PP Law
  contained, around 60 were amended and changed.
  The activity concerning bylaws continued 5
  bylaws and 6 internal regulations were adopted.

• Till July 2002
• July 2002 July 2004
• July 2004 September 2007

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WHAT WE WANT TO ACHIEVE WITH THE PP SYSTEM

• Modern and completely operational PP system
  reduces corruption and eliminates discrimination
  / hidden trade barriers.
• Functional PP system one of the elements of a
  successful market economy (savings for taxpayers,
  reduced corruption, no discrimination, creation
  of new jobs).
• Prerequisite market competition and active
  functioning of the private sector in supplying
  offers for public contracts.

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THE NEW PUBLIC PROCUREMENT LAW

• QUANTITATIVE CHANGES
• QUALITATIVE CHANGES

• More than 2/3 of articles in the existing Law
  were changed.
• 4 groups of changes (?) formal (6), (B) reducing
  expenses and administration (2), (C) promoting PP
  procedures and its efficiency (3), and (D)
  control monitoring protection (4)

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(?) FORMAL CHANGES

• PP LAW SYSTEMATIZATION all exceptions form
  general rules are grouped in one place, which
  facilitates implementation and reduces
  possibility of error. All basics concerning
  application of negotiated procedure are situated
  in one article of the Law (23) / now in different
  chapters.
• DEFINITIONS OF BASIC TERMS IMPROVED for
  services listed in Annex 1B (e.g. legal
  services), regardless of their value, small-value
  procurement procedure applies. Unlike the current
  situation, where each contracting authority
  issues its own Rules of Procedure, which has lead
  to lack of standardization in procurements below
  RSD 2.5m, small-value procurements would in the
  future be regulated by single Rules of Procedure
  issued by the MoF
• EXEMPTIONS FROM PP LAW APPLICATION REDUCED
  confidential procurement, instead of being
  defined by internal documents of the contracting
  authority, are defined to be accompanied by
  special security measures
• PROVISIONS ON TECHNICAL SPECIFICATIONS AND
  STANDARDS ALIGNED WITH EFFECTIVE LEGISLATION to
  facilitate Law implementation
• INSTITUTION OF PUBLIC PROCUREMENT OFFICER
  INTRODUCED recommendation / precondition for
  professionalization
• INSTITUTION OF ALLOWED AMMENDMENT OF THE BID
  INTRODUCED whose objective is to correct formal
  deficiencies of the offer which should
  contribute to cost-effectiveness of PP, because
  bids will not be rejected for merely formal
  reasons (as was the case to date) and competition
  will consequently become stronger

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(B) REDUCED SPENDING AND AMINISTRATION

• ADVERTISING EXPENSES CONSIDERABLY REDUCED for
  procurements that exceed money limits, the
  requirement to advertise a public call in a daily
  paper was revoked. The requirement to advertise
  in the Official Gazette for procurement above
  certain value and on Public Procurement
  Administration website remains. Electronic
  advertising, instead of daily paper advertising.
  Proofs that requirements have been fulfilled are
  submitted as non-certified photocopies of
  certificates considerable reduction of bidders
  expenses.
• ANNULLED DECISION BY WHICH PP ADMINISTRATION
  NEEDED TO APPROVE CONTRACTING AUTHORITYS
  DECISION TO FORM A MULTY-SEGMENTED PROCUREMENT
  five-year practice to date showed that objective
  of the protection was not clear, while
  comparative law indicated there was no such
  control. Revocation of this provision reduces
  expenses and eliminates unnecessary
  administration.

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(C) IMPROVING PP PROCEDURE AND ITS EFFICIENCY

• REQUIREMENTS FOR APPLICATION OF RESTRICTIVE
  PROCEDURE REDEFINED CONSIDERABLY it will be
  easier than now (because of previously imprecise
  definition in the Law) to recognize cases to
  which restrictive procedure applies
• NEW PROVISIONS INCLUDED, TO CONTRIBUTE TO PP
  SYSTEM EFFICIENCY proposed solution that one
  valid bid is sufficient for awarding contract in
  open and restrictive procedure (instead of the
  previous solution two valid and independent
  bids) will considerably reduce the number of
  repeated procedures (when bidders are not
  interested to file an offer in response to
  advertised call) which will result in better
  efficiency and save time and money
• SIGNIFICANTLY REDUCED POTENTIAL TO LIMIT
  COMPETITION by reducing validity of list of
  candidates in restrictive procedure from 4 to 1
  year, with minimum competition requirement (3
  candidates on the list). The current solution
  does not specify the number of candidates, which
  in combination with validity of the list and
  impossibility to update it limits competition.

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(D) CONTROL, MONITORING AND PROTECTION

• SYSTEM OF CONTROL OF NEGOTIATED PROCEDURE
  IMPROVED AND ALIGNED WITH INTERNATIONAL STANDARDS
  existing administrative procedure (PP
  Administration decides whether contracting
  authority meets requirements for negotiating on
  the basis of previous information), changed in
  order to strengthen control by market
  participants via mechanism of protection of
  bidders rights (contracting authoritys
  obligation to publish announcement on selection
  of the best bid in the Official Gazette prior to
  contract signing, creates room for interested
  bidders to protect bidders rights)
• REPORTS ON CONTRACTS AWARDED instead of once a
  year, they are submitted to PP Administration
  quarterly, which will considerably improve
  timeliness of information and help State Audit
  Institution control bidders
• PREFERENTIAL TREATMENT of 20 was not changed
  because draft SAA envisages that the existing
  level of preference should remain in force in the
  first two years of Agreement implementation.
• A SERIES OF IMPROVEMENTS IN PROTECTION OF
  BIDDERS RIGHTS INTRODUCED such as Commission,
  as authority independent from the executive
  (recommendations) tougher conditions for
  selection of Commission president and member in
  order to promote the institution's professional
  level and integrity introduced possibility to
  launch administrative dispute challenging the
  Commissions decisions, which will help establish
  control of regularity of the Commissions
  decisions improves quality of protection of
  bidders rights and removes existing deficiency
  caused by impossibility to lodge a complaint or
  initiate administrative procedure.

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RELATED LEGISLATIVE ACTS

• Decision on forming public procurement commission
  (amendment of the existing one)
• Rules of Procedure on public procurement data
  registration form (amendment of the existing one)
• Rules of Procedure for opening the bids and form
  for keeping a record of opening the bids
  (amendment of the existing one)
• Rules of Procedure on required elements of
  documents in public procurement procedure
  (amendment of the existing one)
• Rules of Procedure on defining evidence that
  goods are produced in the country, i.e. that they
  are of domestic origin (amendment of the existing
  one)
• Rules of Procedure on electronic procurement
  (new)
• Rules of Procedure on small-value procurement
  (new)
• Act on public procurement consultants activities
  and certification procedure (new)

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PLAN OF LEGISLATIVE ACTIVITIES

• Public Procurement Law
• Design and send proposed draft Law to relevant
  stakeholders for public discussion
  mid-September
• Public discussion concerning Draft Law last ten
  days of September
• After public discussion, definite version of
  Draft Law designed and the Draft Law forwarded to
  the Government the first half of October
• Government adopts Proposed Law the second half
  of October
• Proposed Law submitted into parliamentary
  procedure the second half of October
• The Law adopted in the Parliament by end
  November
• Set of Rules of Procedures that enable
  application of the PP Law
• Designing draft amendments / new Rules of
  Procedure the first half of October
• Consultation of relevant subjects concerning
  amendments / new Rules of Procedure middle of
  November
• Corrections and design of final Proposed
  amendments / new Rules of Procedure on the basis
  of consultations and alignments that took place
  last ten days of November
• Submission of Proposed amendments / new Rules of
  Procedure to competent authority for adoption
  end November
• The competent authority adopts Proposed
  amendments / new Rules of Procedure December

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AUDIT OF PUBLIC PROCUREMENTS

• SUPREME AUDIT INSTITUTION
• INTERNAL AUDIT BY THE CONTRACTING AUTHORITY

• To have State Audit Institution functioning as
  soon as possible, in line with the SAI Law. SAI
  is responsible for audit of all PP phases
  (planning, realization of public contracts and
  assessment of results and savings achieved in use
  of public funds)

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THANK YOU FOR YOUR ATTENTION!
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ITS YOUR TURNYOUR SUGGESTIONS ARE WELCOME!