Marta Hohol: Amendments in the Procurement Law. What’s in the Bill 8265?

The e-procurement system has been active for two years already. The reform didn’t finish with the launch of ProZorro; technical and legislative amendments still go on. On April 13, the President of Ukraine filed the Bill 8265 marked as urgent to the Verkhovna Rada. The bill amends the law “On Public Procurement” (hereafter the Law). Petro Poroshenko suggests to regulate pre-threshold procurement; elaborate the system of protesting sale results; provide participants with an opportunity to correct errors in their documents within 24 hours since their detection; introduce electronic catalogs and widen the list of actions of procurers that impose punishment. Adoption of these amendments is aimed at solving a number of problems in the sphere of public procurement.

  1. Simplifiedprocurement

The bill is supposed to regulate the so-called pre-threshold procurement legislatively. Current Law “On Public Procurement” does not provide for this type of procurement and does not regulate the pre-threshold procurement mechanism. It only has one provision that allows procurers using the e-system with the aim of selection of suppliers according to the sums that do not exceed pre-threshold as provided by law. Taking into account the lack of clear regulations for pre-threshold procurement, it makes things more complicated both for procurers and participants of bids. To regulate this situation, the bill introduces a “simplified” procurement procedure that is analogous to current pre-threshold procurement. Procurers tan be obliged to conduct their procurements over UAH 50 000 via ProZorro. The “simplified” procedure itself is similar to the procedure of open sales with a shorter timeframe and without obligatory participation of at least two participants.

Basic stages of the “simplified” procurement

  1. Tender announcement
  2. Timeframe for correction of the procurer’s information in the announcement of the simplified procedure.
  3. Participant’s proposals.
  4. Online bids.
  5. Consideration of correspondence with the conditions set in the announcement of a simplified procurement.
  6. Selection of a winner and procurement contract signing.
  7. Reporting on the results of the simplified procurement.

The issue of protesting pre-threshold procurement is one of the thorniest ones due to the fact that business lacks leverages to influence procurers and assert their rights. The bill stipulates that simplified procurement is to be disputed in court. However, taking into account the shortened procurement period and, on the contrary, long court proceedings, it is hard to evaluate the efficiency and effectiveness of this dispute.

A lot of errors in bid proposals are technical. As a result, these proposals are declined and it has a negative influence both on the procurers that buy more expensive and on the business that fails to sign a contract due to their inattentiveness. In case of the bill adoption participants will receive an opportunity to correct their errors. How will it happen? Procurers check the proposals, detect the errors and mark them in the electronic system for the participants to correct them. Participants will have 24 hours for this. To minimize potential manipulations, the list of documents allowed for correction will be limited.

  1. Changes in procurement disputing

The system of disputes has to be fair and provide equal rights for all participants of the procurement process. As of now, around 30% of appeals considered by the Anti-Monopoly Committee of Ukraine (AMCU) are unpaid. AMCU has to consider them and make decision to decline them. It requires the time for preparation and wording of the decision. The bill offers to introduce an electronic complaint payment system that will allow AMCU using the time more effectively and consider only paid complaints.

The main innovation is the disputed amount: 1.5% of the expected price of procurement or a lot.

This high price puts the possibility for participants to protect their interests in huge bids at risk, which can have a negative influence on the whole area. At the same time, in case AMCU redresses the grievance, the money for the dispute is planned to be returned to the complainant, and business will most likely find this decision be positive.

  1. Electronic catalogs

The information on prices, technical and quality characteristics of goods proposed by participants is planned to be grouped in electronic catalogs where procurers will be able to choose goods themselves.

The bill provides procurers with two variants depending on the price:

Over UAH 50 000

Variant 1. Hold a simplified procurement

Variant 2. Select a supplier from the electronic catalog

Up to UAH 50 000

Variant 1. Select a supplier directly, sign a contract and publicize the report electronically.

 

  1. Liability for violations

The President’s bill introduces amendments to Article 164 Paragraph 14 of the Code of Ukraine on Administrative Offences (hereafter the Code). The article provides for liability for violations in public procurement.

This norm is not effective in fact, as it has not been coordinated with current legislative provisions when adopting the law “On Public Procurement”.

Groundless negotiations on procurement, groundless disqualification of a participant and groundless selection of a winner are suggested to be listed as violations. Another innovation in the bill is liability for failure to fulfill the decision of AMCU. According to the bill, this violation shall be punished with a fine in the amount of 2 to 3 thousand tax-free allowances (UAH 34 000 to UAH 51 000) paid by the head of the procuring entity. We need to support this initiative as it is going to be a constraining factor for those who violate procurement.

Speaking about introduction of pre-threshold procurement to the law “On Public Procurement”, we also need to take into account the introduction of liability for violations. Most of the pre-threshold procurements are severely violated without any liability of wrongdoers. Pre-threshold procurement is conducted due to the decision of the procurer only, and in some cases due to the procurer’s management body’s decision (city council, regional state administration). Therefore, violations in procurements of this kind bear only disciplinary liability, or criminal one in case of a severe harm to the state. Legal regulation of pre-threshold procurements by means of their introduction in the Law provides for introduction of the liability according to Article 164 Paragraph 14 of the Code.

The proposed changes are necessary and important both for business representatives and procurers, and for the society. Pre-threshold procurement gives an opportunity for development of the small and medium-sized business, and allows the state to propose its goods on a competitive market. Obligatory procurement via an electronic system is a mechanism that allows transparent spending of public funds by means of a free access to full information on procurement. This provides for an effective state and public control over procurement and for prevention of corruption.

 

Via Liga.Zakon, “Yuryst I Zakon” Journal No. 23