Despite the fact that Federal Law No. 223-FZ of July 18, 2011 On the Procurement of Goods, Works And Services by Certain Types of Legal Entities (hereinafter, “Law No. 223-FZ”), which entered into force in 2012, is amended annually, and its norms are still far from perfect. Mikhail Evraev, Deputy Head of the Federal Antimonopoly Service of Russia, expressed the same opinion when he spoke at a press conference devoted to the problems of the enforcement of Federal Law No. 44-FZ of April 5, 2013 On the Contractual System for Procurement of Goods, Works and Services to Meet State and Municipal Needs (“Law No. 44-FZ”), Law No. 223-FZ and improving legislation. Therefore, the priorities of the FAS include the promotion of initiatives to change and supplement the rules on procurement for state-owned companies and natural monopolies.
According to the regulatory authorities, the average number of applications under Law No. 223-FZ lags significantly behind those under Law No. 44-FZ. Thus, in 2019 the average percentage of applications under Law No. 44-FZ was 3.12%, while the applications under Law No. 223-FZ only accounted for 1.17%. The total amount of notices published last year in the EIS was of RUB 14.1 trillion. Moreover, auctions accounted for 8.7% of the total procurement amount, tenders, for 17.3%, requests for proposal, for 4.6%, and of requests for quotation, for 3.8%. The remaining 65.6% were made up by other methods, including purchases from a sole vendor and non-competitive purchases.
In addition, statistics announced by Artem Lobov, Head of the Government Order Placement Control at the Department of the FAS of Russia, showed a sharp increase in the number of complaints considered under Law No. 223-FZ, which is the double compared to the previous year (7,149 in 2018 vs. 13,674 in 2019). The Agency attributes this trend to the fact that over the past few years, significant changes have been made to the rules for conducting purchases under Law No. 223-FZ, and companies have started to use them. In case of non-compliance with the new rules, filing complaints is one of the most rapid methods of restoring the procurement participants’ violated rights, amending the procurement documents, etc. It is important to mention that the number of justified complaints increased by more than 30% (2,617 in 2018 compared to 4,371 in 2019). In turn, the number of complaints about inclusion in the supplier blacklist (“the SBL”) increased by almost 70% (972 in 2018 compared to 1,647 in 2019).
During the event, the current problems and gaps in the legislative regulation of procurement under Law No. 223-FZ were discussed. The agenda included:
- lack of uniform requirements for the composition of applications and for participants, or for the application evaluation procedure;
- lack of justification for the initial contract price;
- unlimited purchases from a single vendor and non-competitive purchases.
If the solutions to the first two problems are obvious, namely, establishing uniform requirements for the composition of bids and for the procurement participants, as well as obliging them to justify the initial contract price, several interrelated ideas are being discussed for the latter. First of all, it was proposed to combine the non-competitive purchases with the sole-vendor ones, since there is a very thin line between them, which sometimes makes it difficult to distinguish them. Secondly, it is planned to establish an exhaustive list of cases when the customer can purchase from a single vendor, as well as to introduce an annual percentage limit (10%) for non-competitive and sole-vendor purchases (excluding the cases provided for in the exhaustive list in Law No. 44-FZ).
The Deputy Head of the Federal Antimonopoly Service of Russia also pointed out the lack of unified approaches to setting qualification requirements for procurement participants. He believes this problem might be solved by introducing of universal and special pre-qualification for the tenders (i.e. automatic screening for experience of performing a contract for a certain amount). Since only the person entitled to bid will be able to lodge a complaint about the tender, this measure will prevent cases of “professional complainants” (organizations and persons who lodge complaints for the sake of receiving money for withdrawing them), according to the FAS.
Another initiative that was proposed was also the introduction of the entrepreneurs’ business reputiation rating. Similar to the proposals on Law No. 44-FZ, the assumption is that the rating will be assigned automatically in the Online Public Procurement System, depending on the quality, quantity and cost of the contracts that have been executed. It is planned to be used for admission to the bidding and objective assessment of the bidding participants. Depending on the rating level (high, basic, or low), it will be possible to reduce the amount of the collateral for the application and the contract.
“It should work as follows: for Law No. 44-FZ, contracts must be accepted for both Law No. 44-FZ and Law No. 223-FZ, and vice versa, for Law No. 223-FZ, contracts must be accepted for both Law No. 223-FZ and Law No. 44-FZ.http://base.garant.ru/70353464/ Perhaps we could also think about how to accept commercial contracts, but it is still unclear how to administer them,” Mr Evraev said.
As for bank guarantees that are provided to secure the application and the contract, it is planned not only to establish unified requirements and approve a single format for them, but also to publish them in the bank guarantee register in the framework of government procurement under Law No. 44-FZ.
Finally, in the list of issues of procurement legislation under Law No. 223-FZ, Mr Evraev highlighted the absence of the following:
- exhaustive list of electronic trading platforms (it is planned to transfer all purchases to electronic platforms operating under Law No. 44-FZ);
- procedure for entering into and executing contracts (it is proposed to establish a procedure for entering into and executing contracts, as well as to exclude the customer’s ability to change the essential terms of the contract at its conclusion from Law No. 223-FZ);
- the procedure for inclusion in the RNP (it is planned to regulate the actions of the customer and the antimonopoly authority when considering inclusion in the register).
The FAS of Russia also plans to provide e-notifications for procurement process participants through the Online Procurement Portal. This implies not only implementing the possibility of submitting complaints and official notifications for participants through the Online Procurement Portal, but also keeping all kinds of official correspondence (including procurement-related) between the customer and the contractor only via the Online Procurement Portal. There is also an intention to expand the territory of implementation of the remote complaint review mechanism. For customers and entrepreneurs from the Far East and Siberia, this option has already been introduced for the complaints that are considered only in the Central Office of the FAS of Russia (for example, for purchases that are worth more than 1 billion rubles). From March 16, a similar complaint mechanism will be launched for the North-Western and Ural districts. In the future, it is planned to be extended to other districts (including Crimea), and, perhaps, by the middle of 2020, it might be applied to all the federal districts.
In addition, the Deputy Head of the Antimonopoly Service announced the imminent creation of an Expert Council under Law No. 223-FZ, consisting of representatives of the FAS of Russia, government-owned companies, the Association of Compliance Managers and other professional organizations. It is assumed that said Council will not only discuss legislation and the ways to improve it, but also establish relationships with the companies that are interested in fair competition, in order to adopt joint antitrust compliance standards. In this case we are talking about the risk prevention system for the violations of the antimonopoly legislation to be approved in each industry sector (construction, healthcare, etc.).
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Some of the ideas have already been presented as bills, some are still being discussed, and then will be agreed taking into account the positions of other regulatory bodies (Ministry of Finance of Russia and the Federal Treasury). But we can say with certainty that the Federal Antimonopoly Service of Russia has an understanding of the development vector for improving the legislation on procurement of state-owned companies and natural monopolies.
Mikhail Evraev expressed concern that the adjustment of the legislation may take a while (up to a year or two), but said that the FAS is ready to facilitate more rapid adoption of the necessary amendments. However, he called on the state-owned companies and natural monopolies that want to carry out competitive purchases under Law No. 223-FZ not to wait for the amendments to be made, but to join voluntarily the use of standard compliance norms, which will clarify all ambiguities and resolve gaps, upon the parties’ agreement.