New Public Procurements Act Entered into Force

On 1 September, the long-negotiated new Public Procurements Act, which was passed at the beginning of summer entered into force and therefore tenderers now have to take several amendments into account when participating in tenders. When it comes to updating the public procurements law, it was important for the Chamber of Commerce to stand for improving the competitive conditions at the procurements market.

Contents of the bid become public

Based on the proposals made by the Chamber of Commerce, the new law establishes that a business secret must be indicated and reasoned already when submitting the bid. Additionally, it is not allowed to declare the contents of a bid, including the cost fully confidential. Additionally, in case of procurements for services other figure indicators characterising the bid that meet the valuation criteria should not be indicated as business secret, and in case of procurements for items and construction work, all indicators characterising the bid that meet the valuation criteria, numeric or other, should always be disclosed in addition to the cost.

Measures for identifying under-bidding

Based on the initiative from the Chamber, the new Public Procurements Act now has the so called average salary condition, which is one of the two measures for identifying under-bidding and is applied only to the procurement contracts in the field of construction. If the tenderer pays to the employees participating in the performance of the procurement contract a salary that is less than 70% of the average salary of the respective area of activity, and it is discovered that the reason for it is artificial decreasing of labour costs and tax avoidance, the contracting authority will reject such bid.

The amendments related to under-bidding will enter into force on 1 January 2018.

Changing the procurement contract is easier

While until now, it was impossible to change the procurements contracts that had already been concluded (except for small technical amendments), the new Public Procurements Act allows changing the procurement contract to the extent of up to 50% of the cost of the procurement, but only if the conditions listed in the Act are met. For example, the contracting authority is still required to observe that the changes would not bring along replacing of the object of the procurement (e.g. instead of wooden furniture, kitchen appliances are bought) or adding a condition, the inclusion of which to the initial procurement documents would have expanded the range of companies who could have participated in the procurement. Changes are allowed if during the performance of the procurement contract it appears that it is necessary to purchase additional objects or services related to the object of the procurement contract, the purchasing of which from the same tenderer would be more cost-effective and reasonable.

Obligation to check sub-contractors

Despite of the unanimous opposition of entrepreneurs, the Public Procurements Act was updated with the obligatory checking of sub-contractors and suspending of payments to the tenderer on the basis of reasoned application from a sub-contractor. The contracting entity is obliged to check the sub-contractors used by the main contractor for the performance of the procurement contract – in case of all sub-contractors it is necessary to check the existence of the grounds for removing from the procurement proceedings and if such grounds exist, the contracting entity is required to request from the main contractor that such sub-contractor be replaced. In practice, the main contractor is required to submit to the contracting authority the data of all sub-contractors participating in the performance of the contract no later than by the time of starting the performance of the contract, and if necessary, find new sub-contractors if the grounds for eliminating are discovered for the existing sub-contractors. The aim of the measures is to eliminate from the performance of the procurement dishonest sub-contractors over whom there is practically no control.

Furthermore, the contracting authority is now allowed not to pay the fee for work to the tenderer based on the reasoned application of a sub-contractor, if a dispute has arisen between the sub-contractor and the tenderer and the sub-contractor has not received its contractual payment from the tenderer. Delaying with the payment is not considered breach of the procurement contract by the contracting authority due to which the tenderer has no legal possibility to protect itself against the activities of the contracting authority.

Application of the contradictory provisions has a significant impact on the activities of the contracting authorities as well as tenderers, due to which these provisions are set to enter into force later, i.e. from January 2019. The aim is to give the stakeholders more time for developing the processes necessary for implementing the new procedure.

In conclusion, the new Public Procurements Act has its good and its questionable amendments. Their implementation will probably give new reason for the generation of contestation and judicial practice, which will hopefully facilitate regulating of the issues that are missing from the provisions that have been written down.