ME
NU
january 15, 2020

PUBLIC TENDERS IN UKRAINE: APPEALS WILL BE MORE FRUITFUL

On 19 September 2019, the Ukrainian Parliament adopted amendments to the Law “On Public Procurement” (“the New Law”). The New Law suggests inter alia changes to ensure greater effectiveness of appeal proceedings held by the Antimonopoly Committee of Ukraine (“the AMCU”). The New Law has entered into force on 19 October 2019 and will be put into effect on 19 April 2020, while its specific provisions on restricted tenders will be put into effect on 19 October 2020.   

So what will be changed in the appeal proceedings with the New Law?

 Dismissal of a bidder’s documentation

One of the most frequent grounds for appeals against public procedures is the allegedly discriminatory dismissal of a complainant’s documentation by a procuring entity. Significant changes regarding the grounds to dismiss a bid have been introduced by the Law. Generally, there are 3 types of the grounds for dismissal that deal with non-compliance of (i) a bidder, (ii) a bidder's documents, and (iii) a winner.  
 

(i) Non-compliance of a bidder: non-compliance with conditions reflected in the tender documentation (TD); provision of false information; disregard of a customer’s demand to adjust a bid proposal or to justify the abnormally low price of the most beneficial proposal; designating information as confidential, which is not the case;

(ii) Non-compliance of a bidder’s documentation: the documents are presented not in the language designated by TD or their term has expired;  

(iii) Non-compliance of a winner's bid: a copy of a license/ other authorization documents are not provided or a contract is not secured (by a bank guarantee or other designated way).   

The procedure of public procurement appeal
 

Other amendments are related predominantly to procedural aspects, aimed at guarantying better transparency in the tender process while approaching the standards of court proceedings.

The terms for filing a complaint are quite shortened, specifically:

  • 4 days before the TD submission deadline – for appeals on discriminatory conditions of TD or actions of a procuring entity during the preparation of bids;
  • 10 days after an applicant (could have) found out that its rights had been violated – in cases of a bidder’s disqualification or where a procuring entity admitted a bid that was not compliant with TD conditions;
  • 5 days after the publication of the minutes with results of consideration of bidders’ documents – if a winner’s documents are not in line with TD conditions. 

 

Until April 2020, the fees have to be paid to an account of the State Treasury Service of Ukraine with the further submission of the scan copy of a payment document via the electronic system Prozorro[1] along with the appeal. The New Law provides that fees have to be paid via Prozorro simultaneously with uploading of a complaint. The amendment will obviously speed up the filing of appeals for complainants. At the date of entry into force, the charge[2] equals approx. EUR 182 for complaints related to the procurement of goods or services, and approx. EUR 546 for complaints related to the procurement of works.

The effective Law “On Public Procurement” provides that the AMCU decides whether to launch the appeal proceeding within 3 business days and adopts its decision within 15 business days. There is no requirement to declare the conclusive part of the decision at the AMCU’s hearing, however, it should be published in Prozorro within 1 business day upon its adoption, while the full text should be published within the following 3 business days.

The New Law establishes that the general term for consideration of appeals is 10 business days, which may be extended to 20 business days with legitimate justification. Decisions shall be adopted at the meeting of the AMCU’s Administrative Board and at least the conclusive part of a decision shall be orally proclaimed at the meeting with further publication of its full text within the following 3 business days. The New Law provides that all the decisions adopted by the AMCU (no matter procedural or on merits) will be published on Prozorro. The parties will be able to file all their additional evidence 3 days prior to consideration.

The AMCU’s decision may be challenged to the Kyiv Circuit Administrative Court within 30 days after its publication on Prozorro.

New types of public procurement procedures
 

One of the significant novelties relates to a new procedure. In addition to the open tender, competitive dialogue, and negotiated tender that are currently in place, the New Law introduces another procedure – a restricted tender. This is a two-round-tender envisaging a qualitative selection, where a procuring entity chooses the further bidders on the basis of documents submitted to demonstrate compliance with the qualification criteria (as a 1st stage) and bids themselves (the 2nd stage).

Contrary to EU law, even amended, the Law “On Public Procurement” is still silent about some public procurement procedures, i.e. innovation partnership (a procedure designed for the procurement of complex contracts related to innovative products) and design contest (a competition with/ without the award mostly used to select a plan or design for town and country planning, architecture and engineering or data processing). These procedures were introduced in the EU in 2014 by the Directive on public procurement 2014/24/EU.

The AMCU as the public procurement watchdog

 

Why the AMCU?
 

In 2006, Ukrainian competition authority was empowered to consider appeals on public procurement procedures. These specific functions were put on the AMCU, in particular, on its Administrative Board composed of 3 State Commissioners, since the authority dealt with detection of discriminatory behavior and protection of competition from restrictions on various product markets, ensuring the main principles of state/ public procurement: competition itself, its fairness, and transparency.  

It is still quite unusual to have a national competition authority in charge of compliance with Public Procurement Law. Unlike in European countries, the AMCU is neither an administrative body that fulfills judicial review nor an administrative court, which reviews cases on the merits.

The difference with the common law system goes even further. For instance, in the U.S., there are 2 responsible bodies to review such cases: Government Accountability Office and the U.S. Court of Federal Claims and none of them are focused only on competition issues triggered by public procurement. In other jurisdictions, both the special trade (procurement) authorities (e.g. the Canadian International Trade Tribunal or the Government Procurement Adjudication Tribunal in Singapore) and general courts are vested with the tender appeal functions.  

Drawbacks
 

The AMCU’s Administrative Board that consists of its 3 State Commissioners has functioned under the conditions of high workloads since 2016 till September 2019 when the other Administrative Board was established.

The statistics speak for themselves. While the AMCU considered 1,846 complaints in 2016, having conducted only 168 meetings[3], the same Board received 7,786 complaints in 2018 (which is almost 154% more), and the number continues to increase[4]. According to Clarity App[5] statistics[6], the AMCU received 5,109 complaints on decisions of procuring entities and 2,195 on TD conditions during 9 months of 2019.

Such enormous workloads (approx. 23 considered complaints per day in 2017), however, resulted in the inconsistency of the AMCU's approaches in similar cases. Given the short terms and the lack of time for proper consideration, it is obvious that some points will remain unclear and thus unjustified deviations will raise additional questions.

Nevertheless, only 196 of the AMCU’s decisions were further appealed to the court in 2018 (3.5%) appeals being pointless, as the bidding would be over or cancelled far in advance of the court decision. The only reason for the parties is to obtain justice (and, presumably, satisfaction) and to form an approach for future cases.

Active defense
 

The results of the appeal procedure become dependent on the parties' ability to prove the alleged violations of their rights. Taking into account the above mentioned acceleration of the terms of case consideration, this issue becomes a cornerstone in the whole procedure. A complainant and a procuring entity should provide as much evidence proving their position as possible before the appeal is considered, and should take part in the AMCU’s Board meeting either personally or online.

Upon the results of consideration, the AMCU may decide on a procuring entity’s elimination of discriminatory conditions from TD (if any), cancellation of a decision on non-admission or admission of a bidder, withdrawal of the decision on a winner’s selection or, in certain circumstances, on cancellation of the tender. The AMCU’s decision, which has not been appealed in court, shall be entirely fulfilled within 30 days upon its adoption.

 


[1] Prozorro is an electronic system designed as a marketplace for public procurement tenders. It is also an open resource that offers access to all information from the central electronic bidding database, similar to TED (Tenders Electronic Daily) in the EU.

[2] The fee rates have been converted using the National Bank of Ukraine exchange rate effective as of 19 October 2019, according to which EUR 1 = UAH 27.48673.

[3] According to the AMCU Annual Report 2016.

[4] According to the AMCU Annual Report 2018.

[5] Clarity App is an initiative project for research and analysis of the AMCU’s practice of consideration of complaints on violations of public procurement procedures. The project was presented by Better Regulation Delivery Office (BRDO) – a non-government organization and analytical center supported by the Ministry of Economic Development, Trade and Agriculture of Ukraine as well as the European Union, the World Bank and Canadian Government. On 20 September 2019, the AMCU signed a Memorandum on Cooperation with BRDO regarding, inter alia, the use of Clarity App.

[6] For detailed statistics on public procurement, please refer to the Clarity App website, available via the link: http://bi.prozorro.org/http/sense/app/2595af2b-985f-4771-aa36-2133e1f89df0/sheet/42dca13e-7e5c-4fcc-b35c-452300f9fc15/state/analysis.

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