Assessment of the Planned Amendments to the Law on Public Procurement
On March 2, the Parliament registered an initiative by the Government of Georgia (N07-2/452) on the Amendments to the Draft Law on Public Procurement. Transparency International Georgia analyzed the proposed amendments. We consider that they are mostly positive as their adoption would significantly improve the mechanisms for disputes and resolution in the public procurement process. However, there are also a number of concerns in regards to the draft law:
1. Rules for Conducting Procurement due to Urgent Necessity
According to existing law, contracting authorities must receive approval from the State Procurement Agency prior to conducting a simplified procurement. Approval must also be sought on procurements that are required due to urgent necessity.
The draft amendments (Article 7, 2b1) establish an exception that allows the contracting authority to conduct simplified procurement without the prior approval from the State Procurement Agency. Namely, this exception applies to cases when the values of the goods, services and work to be procured is equal or exceeds the monetary thresholds established by EU Directives on public procurement (goods and services – EUR 139,000; Work – EUR 5,350,000)
The reasoning behind the requirement of seeking prior approval for simplified procurement from the State Procurement Agency is that the contracting authority is obliged to substantiate the urgent necessity. If the amendments are adopted, it will be impossible to conduct a pre-assessment and oversight over the reasons for the urgent necessity for the largest simplified procurements. This, in turn, will increase the risks of misuse of these instruments.
All simplified procurements conducted due to urgent necessity must require approval from the State Procurement Agency
- Carrying out suspended procurements due to urgent necessity
The draft law notes that the contracting authority is obliged not to announce a new tender on a procurement that has been halted due to a complaint review, or suspend procedures if a tender has already been announced (Article 237.9). However, the same provision reads that “the contracting authority is authorized, by the rules determined by this law, to conduct procurement due to urgent necessity.”
This provision contains a risk that dishonest contracting authorities can misuse the aforementioned power and conduct a temporarily suspended procurement under the guise of urgent necessity.
The contracting authority must not be able to go ahead and carry out a suspended procurement on the basis of urgent necessity.
3. Appealing simplified procurements
According to the draft law, the decision of conducting a simplified procurement can be disputed, which is a welcome amendment. However, this concerns simplified procurements that are equal to or exceed the monetary thresholds established by the EU Directives (goods and services – EUR 139 000; Work – EUR 5 350 000).
These thresholds are overly high for Georgia, where it is required to announce a tender for procurements valued over GEL 5,000 (app. EUR 1,400).
Data modeling on the basis of information from 2019 shows that the Dispute Resolution Board will receive only 10 additional appeals related to simplified procurement a year. In 2019, only 250 simplified procurements were conducted with a total value exceeding GEL 480,000. Considering the fact that an average of 3-4% of tenders are appealed, the thresholds proposed by the draft law would result in only 10 appeals a year from simplified procurements. This means that the appeal mechanism will only concern an incredibly low number of simplified procurements.
In comparison, if the threshold is lowered to GEL 25,000, there will be around 200 new appeals a year. The new Dispute Resolution Board should be able to cope with this increase, considering the planned increase of its resources. Notably, the Broad, with its existing resources, successfully deliberated on 1,245 appeals in 2019.
It should be possible to appeal the decisions related to simplified procurement in the Dispute Resolution Board for procurements that are valued substantially less than it is defined through the monetary thresholds of EU Directives.
The present remarks were also sent in the form of a letter to the Committee on Sectoral Economics and Economic Policy of the Parliament of Georgia, which is the leading committee in the review of this draft law.