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Public Procurement Law of Serbia – Amendments and Supplements

Public Procurement Law of Serbia – Amendments and Supplements

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The amendments and supplements provide for further compliance of the Act with the EU Directive 2014/24 and simplify planning and execution of the public procurement procedures.

On the other hand, annulment of the negative references list and granting of the discretion powers to the Contracting Authority to execute the contracts with the bidders who have violated the fair competition rules or the rules on prevention of the conflict of interest may be interpreted as a reward for the bidders violating the laws. Furthermore, by granting the powers to the contracting authorities to execute the contracts, regardless of a filed request for protection of right leads, at least, to legal insecurity, especially in the situation when rendering of decision upon the filed request for protection of right takes several month.

On August 12th, 2015 the Law on Amendments of and Supplements to the Public Procurement Law became applicable.  

The Law sets out the basic concepts in line with the EU Directive 2014/24 (concept of the principal, public procurement contract, frame agreement, goods, services and works of the same kind). What could be the subject of different interpretations is whether the legal entities incorporated for the purpose of satisfying the general interest requirements, have the industrial or trading character, and to which the Public Procurement Act does not apply. According to the established practice of the European Court of Human Rights, the two determining criteria for establishing whether a legal entity has an industrial or a trading character are: whether it operates in a market on the basis of competition and whether the principal reason for its activities is generating profit. 

The institute of a joint bid has been introduced and the rules have been set for further actions in case of a joint bid.

Changes of the provisions of the Law which refers to cases in which the Law is not applicable were made in order to comply with the EU Directive 2014/24.

The obligation of the Public Procurement office for certain procurements to inform the contracting authorities that, on the ground of the received public procurement plan, there are no exceptions to the application of this Law is no longer part of the Law. Therefore, the question may be raised who will control whether the contracting authorities apply exceptions to application of the Law or not.  

The obligation for the contracting authorities to publicise their internal plans and anti-corruption plans on their websites has been introduced. On the other hand, the obligation of the so called “major contracting authorities” to form a special department which will exercise control over planning, execution and implementation of public procurements has been deleted from the Law.  This deletion has been justified on the grounds that these tasks should be implemented by Contracting Authority’s internal audit department which has the same competencies as the special department body which has been abolished. The question arises to which extent the internal audit institute is applied in practice especially bearing in mind the applicable prohibition of employment in governmental bodies. Therefore, the abolition of the special anti-corruption department by the Law appears to be rather questionable. 

The principle of transparency has been improved by introducing the obligation of the competent authority to publish decisions it renders on the Public Procurement Portal.

The estimated value for classification of the low-value procurements i.e. the bottom end threshold for cases in which the Law is not applied has been increased. Also, the novelty is that the procurement of certain types of services (legal services, health care services, etc.) may be subject to application of  the low-value procurement provisions, regardless of the estimated value of such services. 

The Law has amended the provisions governing the framework agreement such that the Contracting Authority is authorized to execute the framework agreement with fewer bidders, or with only one bidder. This posibility has been made for situations where the Contracting Authority do not receive a certain number of previously expected acceptable bids. . 

The contents of the public procurement plan have been simplified, providing that Contracting Authority may initiate the public procurement procedure although at the time of the publishing of the invitation for submission of bids, it does not have the required funding in place, under condition it obtains funds prior to commencing the execution of the public procurement.

The public procurement of the same type is determined under its purpose or intention, whereby the same bidders in regard to the nature of their activities are able to execute it (no longer according to the classification in the Common Procurement Vocabulary). As for the participation requirements in the public procurement procedures, on the date of bid submission the bidders no longer have to provide the certificate stating that they are not under any prohibition to undertake/commence proposed actions or activities. The Contracting Authority may specify in the tender documentation that fulfilment of all or certain requirements, except for the mandatory requirements, shall be proven by submission of statements, in which the bidder shall, under full material and criminal liability, confirm that it meets the said requirements. The Contracting Authority shall be obliged prior to the rendering of the decision on the award of the contract, request from the most favorable bidder, to provide a copy of the requested evidence demonstrating fulfillment of the mandatory requirements. In addition, the Contracting Authority is not obliged to request from a bidder to provide all or certain evidence documents, if it possesses for the same bidder relevant evidence provided by the bidder in another public procurement procedure involving same Contracting Authority. 

The Law provides for the restriction that the minimum annual revenue that the bidder must generate shall not exceed double of an estimated value of the public procurement, apart from exceptional cases when this is necessary due to special risks related to the subject of the public procurement. The aim of this provision is to prevent discriminatory conditions being imposed for participation in the tender.   

The obligation of the Contracting Authority to reject “unconscious bidders” due to violation of the competition, conflict of interest, etc. and negative references list has been annulled. The Law specifies that the Contracting Authority may reject the bid only for certain reasons. The rationale provided in the Bill is that the contracting authorities have had cases where they could not award the contract since the only bidder who submitted the bid was on the negative reference list and hence contracting authorities could not enter into a public procurement contract. In addition, it was claimed that the reason for such amendment was the harmonization with the EU Directive 2014/24 which is not acceptable.  

Article 57, paragraph 4 of the EU Directive 2014/24 provides that the contracting authorities may exclude the bidders from the public procurement procedure on the account of corruption, conflict of interests, non-fulfillment of the contractual obligations, etc., but it also provides that the member states may request from the contracting authorities to exclude “the unconscious bidders” from the public procurement procedures.  

This means that the EU Directive 2014/24 does not provide as mandatory that the member states shall grant discretionary power to the Contracting Authority to decide whether to reject the bids of the “unconscious bidders”.  The question arises whether the bidders, for which the competent authority established to have committed the violation of the competition or have been involved with the corruption, should be permitted to participate in the public procurement procedures, since there is a significant risk that they will act in the same manner again.  We are of the opinion that the Law should provide for obligation of the Contracting Authority to reject the bids of the bidders who have acted contrary to the rules on prevention of conflict of interest, or the violation of the competition, and that it should be left to the contracting authorities to assess whether to reject a bid if a bidder has rejected to execute or has failed to implement the contract.

Amendments have been made in regard to the provisions on the public procurement contract, in terms that the Contracting Authority may, following the execution of the public procurement contract, without implementing the public procurement procedure, increase the quantity of the subject procurement by maximum 5% of the total value of the originally executed contract, provided that total value of the increase shall not exceed the amount of RSD 5.000.000, 00.

Amendments have also been made in regard to the provision related to the capacity for filing of the request for the protection of rights, in terms that it can be filed by the bidder, the applicant, candidate or a person interested in being awarded the contract or the frame agreement in the specific public procurement procedure and the bidder suffered or could have suffered the damage due to acts of contracting authorities contrary to the provisions of the Law.  Ratio legis of these amendments is to prevent the abuse of this legal institute. Before the amendments and supplements to the Law, the request for protection of right could have been filed by any person interested in or having the interest to execute the specific public procurement contract, which has led to situations when the requests for protection of right have been filed just for the purpose of stopping the public procurement procedure, whereby the applicants had no interest whatsoever in executing the mentioned contract. In the future, the request for protection of right cannot be filed by the bidders whose bid had been rejected as unacceptable, since they do not have any interest in the awarding of the contract, i.e. could not suffer the damage on the accounts of the Contracting Authority’s conduct. In addition, a cause – effect relationship between the Contracting Authority’s conduct and the possibility to cause the damage to the applicant shall be proven in the request for protection of right.      

The application of request for protection of right has been complicated by new provision, under which the Contracting Authority is authorized to undertake the activities and render decisions prior to rendering of the resolution on the filed request for protection of right.  Such powers of Contracting Authority may lead to a paradox, in which the bidder who has filed the request for protection of right due to conditions specified in the tender documentation, bear the risk that its bid will not to be considered at all. Also, the formulation that the Contracting Authority may proceed with his activities, despite the filed request for protection of right,  “when suspension of the Contracting Authority’s activities in the public procurement procedure, or implementation of the public procurement contract would cause major difficulties in the principal’s work or business operations, which are disproportionate with the value of the public procurement” provides for extensive powers to contracting authorities, enabling them to conduct their activities in any public procurement, regardless the filed request for protection of right.  In this context, one should bear in mind that the rendering of the decision upon the request for protection of right takes several months. Therefore, the question may be raised what would happen if the Contracting Authority starts to implement the contract despite the filed request, and subsequently the Commission for the Protection of Right in the public Procurement Procedures decides to adopt the mentioned request.

By Ivan T. Miloševic, Attorney at law, JPM Jankovic Popovic Mitic

JPM Jankovic Popovic Mitic at a Glance

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