Baker & McKenzie s Global Public Procurement Handbook 2012 Edition. With UNCITRAL s Model Law on Public Procurement with Commentary

Transcription

1 Baker & McKenzie s Global Public Procurement Handbook 2012 Edition With UNCITRAL s Model Law on Public Procurement with Commentary

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3 Baker & McKenzie s Global Public Procurement Handbook

4 2012 Baker & McKenzie All rights reserved. This publication is copyrighted. Apart from any fair dealing for the purposes of private study or research permitted under applicable copyright legislation, no part may be reproduced or transmitted by any process or means without the prior permission of the editors. The material in this guide is of the nature of general comment only. It is not offered as legal advice on any specific issue or matter and should not be taken as such. Readers should refrain from acting on the basis of any discussion contained in this publication without obtaining specific legal advice on the particular facts and circumstances at issue. While the authors have made every effort to provide accurate and up to date information on laws and regulations, these matters are continuously subject to change. Furthermore, the application of these laws depends on the particular facts and circumstances of each situation, and therefore readers should consult their attorney before taking any action. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm. This may qualify as Attorney Advertising requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

5 Baker & McKenzie's Global Public Procurement Handbook Editors Note Baker & McKenzie is pleased to provide you with this complimentary inaugural 2012 Edition of our Global Public Procurement Handbook. While we have been working with our clients in public procurement for many years both private companies and public agencies the release of the Handbook is timely as it reflects the growing complexity of the laws and practices in most jurisdictions around the world. The basis of public procurement includes law, business, public policy and trade regulation. Because the area is grounded in so many disciplines, those who are involved in public procurement often start from different perspectives, and just as often tend to have widely differing views about ways to resolve issues. It is an area where those with a broad range of competencies stand a better chance of unraveling the complexities and achieving concrete results. Whether it is a U.S. products company looking to sell its technology to a public agency in China, a German engineering company proposing to build a bridge in neighboring France, a Singaporean telecommunications provider bidding on the provision of services to the U.S. Navy in Asia, or a public hospital in Canada planning to outsource most of its medical equipment to a private company through all of these cases and many others, we know by the evolving mix of inquiries received from our clients in recent years that the challenges in public procurement have grown exponentially. There are now more laws and regulations, which have increasingly become the subject of more stringent enforcement and oversight, whether directly by the courts or indirectly through state auditors. Bid protest mechanisms that provide expedited redress to disappointed bidders have also proliferated, as has the number of protests. The stakes are often high in public procurement. For the public sector, the procurement legal framework typically represents the means by which public agencies carry out their institutional mandate (their raison d être). For the private sector, public procurement is a path to the sale of goods, construction and services to what are often the biggest and most important clients in most jurisdictions around the world (i.e., in fiscal 2010, federal procurement spending in the United States topped US$535 billion). Because public procurement involves the acquisition by a public agency of goods and/or services or construction, it is by its nature transactional. Yet, to Baker & McKenzie i

6 prevent fraud, waste, corruption or local protectionism, the field has become heavily regulated. For instance, many of the concerns of global corporate executives in respect of enforcement under the U.S. Foreign Corrupt Practices Act ( FCPA ) relate directly to public agencies procurement activities. In fact, the United Nations Convention Against Corruption, which came into force in 2005, treats corruption as an integral part of procurement regulation and not as a separate regulatory area. We know from our clients that a conscientious approach to procurement whether on the public or private side often calls for a review of proposed practices to ensure full compliance with a fast-evolving regulatory framework. We are pleased to include in this edition of the Handbook the Model Law on Public Procurement revised by the United Nations Commission on International Trade Law ( UNCITRAL ) in 2011, preceded by a Commentary from a lawyer who was deeply engaged in the efforts to modernize the Model Law. The Model Law is a template available to national governments around the world seeking to introduce or to reform their existing internal public procurement legislation. It reflects new procurement practices, particularly as it relates to electronic procurement ( eprocurement ) and related aspects of electronic commerce. Because our objective in issuing the Handbook is to promote the development of best legal and business practices in public procurement, we welcome this collaboration with UNCITRAL, and commend the organization on its significant efforts to modernize the Model Law. This will help to realize the many benefits flowing from transparent and robust international public procurement practices. Baker & McKenzie s Global Public Procurement Team works with private and public organizations, and provides counseling, transactional, compliance and litigation support. Whether you are a public agency proposing to issue an RFP for a large project, or a private company selling internationally, we can help. To learn more about how we may be able to assist you and your organization, please reach out to any member of our Global Public Procurement Editorial Team (listed below) or Global Public Procurement Team in your jurisdiction. Denis Chamberland and Theo Ling Lead Editors ii Baker & McKenzie

7 Baker & McKenzie's Global Public Procurement Handbook Editorial Team Anne-Marie Allgrove (Sydney) Tel: [email protected] Arnaud Cabanes (Paris) Tel: [email protected] Denis Chamberland (Toronto) Tel: [email protected] Marc Gabriel (Berlin) Tel: +49 (0) [email protected] Barbara Li (Beijing) Tel: [email protected] Theo Ling (Toronto) Tel: [email protected] John P. Rowley III (Washington, DC) Tel: [email protected] Heloisa Uelze (Sao Paulo) Tel: [email protected] Baker & McKenzie iii

8 Contributing Lawyers Argentina Guillermo Cervio Buenos Aires Tel: Luis Dates Buenos Aires Tel: Belgium Daniel Fesler Brussels Tel: [email protected] Gregory Lebrun Brussels Tel: [email protected] Esteban Ropolo Buenos Aires Tel: [email protected] Australia Anne-Marie Allgrove Sydney Tel: [email protected] Brazil Maria Cristina Machado Cortez Sao Paulo Tel.: [email protected] Heloisa Uelze Sao Paulo Tel: [email protected] Patrick Fair Sydney Tel: [email protected] Anne Petterd Sydney Tel: [email protected] Robert Walker Melbourne Tel: [email protected] Canada Denis Chamberland Toronto Tel: [email protected] Lisa Douglas Toronto Tel: [email protected] Theo Ling Toronto Tel: [email protected] iv Baker & McKenzie

9 Baker & McKenzie's Global Public Procurement Handbook Craig Logie Toronto Tel: China (PRC) Nancy Leigh Hong Kong Tel: Barbara Li Beijing Tel: Howard Wu Shanghai Tel: Colombia Daniel Bayona Bogotá Tel: Carolina Pardo Cuellar Bogotá Tel: Ricardo Trejos Bogotá Tel: Czech Republic Petra Ledvinkova Prague Tel: Katerina Schenkova Prague Tel: European Union Nina Niejahr Brussels Tel: [email protected] Quentin Azau Brussels Tel: [email protected] France Arnaud Cabanes Paris Tel : [email protected] Alexia Robbes Paris Tel: [email protected] Germany Marc Gabriel Berlin Tel: +49 (0) [email protected] Matthias Scholz Frankfurt Tel: +49 (0) [email protected] Katharina Weiner Berlin Tel: +49 (0) [email protected] Baker & McKenzie v

10 Hungary József Antal Budapest Tel: [email protected] Anna Ménes Budapest Tel: [email protected] India Amit Kapur New Delhi Tel: [email protected] S. P. Purwar Gurgaon Tel: [email protected] Fabio Svizzero Milan Tel: [email protected] Malaysia Kong Si Ying Kuala Lumpur Tel: [email protected] Sonia Ong Kuala Lumpur Tel: [email protected] Adeline Wong Kuala Lumpur Tel: [email protected] Vishnu Sudarsan Gurgaon Tel: [email protected] Italy Pierfrancesco Federici Milan Tel: [email protected] Mexico Jorge Guadarrama-Yañez Mexico City Tel: [email protected] Carlos Maass-Porras Juarez Tel: [email protected] Lorenzo de Martinis Milan Tel: [email protected] Gherri Magaraggia Milan Tel: [email protected] Gabriela Marroquin-Garcia Juarez Tel: [email protected] Sergio Legorreta-Gonzalez Mexico City Tel: [email protected] vi Baker & McKenzie

11 Baker & McKenzie's Global Public Procurement Handbook Jorge L. Ruiz Juarez Tel: Benjamin Torres-Barron Juarez Tel: Netherlands Robert Boekhorst Amsterdam Tel: +31 (0) Maarten Goudsmit Amsterdam Tel: +31 (0) Kevin van t Klooster Amsterdam Tel: +31 (0) [email protected] Poland Wojciech Pfadt Warsaw Tel: [email protected] Singapore Ken Chia Singapore Tel: [email protected] See Khiang Koh Singapore Tel: [email protected] Spain Pep Brugera Barcelona Tel: [email protected] Laia Colome Barcelona Tel: [email protected] Elisabet Cots Barcelona Tel: [email protected] Xavier Junquera Barcelona Tel: [email protected] Sweden Morvarid Dorkhan Nilsson Stockholm Tel: +46 (0) [email protected] Tobias Nilsson Stockholm Tel: +46 (0) [email protected] Magnus Stålmarker Stockholm Tel: +46 (0) [email protected] Filip Skoglund Stockholm Tel: +46 (0) [email protected] Baker & McKenzie vii

12 Taiwan H. Henry Chang Taipei Tel: [email protected] Melanie Ho Taipei Tel: [email protected] Eason Su Taipei Tel: [email protected] Thailand Yuthana Sivaraks Bangkok Tel: +66 (0) [email protected] United Kingdom Ross Denton London Tel: [email protected] Yindi Gesinde London Tel: [email protected] Richard Pike London Tel: [email protected] United States John P. Rowley III Washington, DC Tel: [email protected] Denis Chamberland Toronto/Washington, DC Tel: [email protected] Jennifer Ancona Semko Washington, DC Tel: [email protected] Theo Ling Toronto Tel: [email protected] Jacqueline Wilkosz Chicago Tel: [email protected] Vietnam Fred Burke Ho Chi Minh Tel: [email protected] Chi Lieu Dang Hanoi Tel: [email protected] Dinh Quan Nguyen Ho Chi Minh Tel: [email protected] Yee Chung Seck Ho Chi Minh Tel: [email protected] viii Baker & McKenzie

13 Baker & McKenzie's Global Public Procurement Handbook Table of Contents Editors Note... i Contributing Lawyers... iv Asia Pacific...1 Australia...3 China...15 India...23 Malaysia...44 Singapore...50 Taiwan...61 Thailand...70 Vietnam...75 Europe...85 Belgium...91 Czech Republic European Union France Germany Hungary Italy Netherlands Poland Spain Sweden United Kingdom Latin America Argentina Brazil Colombia Mexico North America Baker & McKenzie ix

14 Canada United States United Nations Commission on International Trade Law (UNCITRAL) Commentary UNCITRAL Model Law on Public Procurement Baker & McKenzie Offices Worldwide x Baker & McKenzie

15 Asia Pacific

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17 Baker & McKenzie's Global Public Procurement Handbook Asia Pacific Asia Pacific As a general rule, in the Asia-Pacific region (particularly in the countries surveyed, namely Australia, China, India, Malaysia, Singapore, Taiwan, Thailand and Vietnam), there exist local frameworks which regulate government procurements. Such frameworks have been established under procurement specific legislation or government-issued regulations, circulars or policies and vary in terms of the level of detail and transparency. In considering the regulatory frameworks in place across the Asia-Pacific region, a number of similarities, differences and trends may be observed. Similarities The frameworks regulating government procurement are generally built upon similar principles of fairness, transparency, accountability, equitable treatment, efficiency, value and open competition. A range of procurement models are available in each country, varying from competitive to sole/direct source models. An open competitive bidding process is not required for government procurements in certain circumstances, such as where the value of a given tender does not meet a specified threshold. Prospective bidders may be excluded from competition in a tender for various reasons, including where such a bidder fails to meet tender criteria or has been previously blacklisted. Rules apply to the nature and/or presentation of criteria/specifications for tenders. Rules against anti-avoidance, bid rigging or other anti-competitive conduct impact upon the procurement processes. Successful bids are generally based on evaluations of both price and compliance with bid criteria. Differences Notwithstanding that there is a basic underlying principle of equitable treatment in Malaysia, this principle is affected in part by the Bumiputera affirmative action policy whereby certain government procurement contracts are only available to Bumiputeras. Baker & McKenzie 1

18 In India and Australia, defence procurement is not treated differently from other types of procurement but additional policies or rules may apply. In Taiwan and China, military or defence procurement is treated differently from other types of procurement and in Singapore, procurements by the Ministry of Defence of certain goods will be treated differently. In Vietnam, government procurement laws do not distinguish in their application between public agencies and private organisations. In Taiwan, certain private entities may be covered (where they are the beneficiaries of government grants, subject to specified thresholds being met). In Thailand, procurement specific laws prohibit bidders from joining to submit a bid. In other countries, aside from general competition laws, there are no procurement-specific laws that expressly impose an outright prohibition on joint bids. Although in a number of jurisdictions, agencies may issue specific requirements or there may be standard contracts for technology procurements, only China has specific laws that apply to government procurement of technology goods or services. Trends Online bidding or procurement processes are increasingly being used or trialled in countries such as Malaysia, Singapore, Thailand and Vietnam. A number of countries in the region are shifting toward frameworks that encourage flexibility in procurement processes and competition. There is also a movement towards more effective regulation of procurements, procurements of green or eco-friendly products, and greater vigilance and enforcement in respect of compliance with procurement laws. There is a growing recognition of the role of international trade agreements and/or their impact on local procurement laws in countries such as China, India, Singapore and Vietnam. 2 Baker & McKenzie

19 Baker & McKenzie's Global Public Procurement Handbook Australia Australia 1. The Laws a. What is the applicable legislation? Government procurement activity in Australia is regulated at federal, state/territory and local government levels. At the federal level, the Financial Management and Accountability Act 1997 (Cth) establishes a framework and general principles for the proper expenditure of public monies by government departments and agencies. Requirements for procurement are primarily contained in the Commonwealth Procurement Guidelines ( CPGs ) issued under regulations to the Act. Government procurement is also subject to other policies and directions. Many of these are captured in Finance Circulars issued by the Department of Finance and Deregulation. Finance Circulars address some contract positions (e.g., on indemnities). Unlike some jurisdictions, contract terms for Australian government procurement are not contained in regulations. At the state/territory and local levels, there is also legislation regulating the proper expenditure of public monies. As an overall comment, regulation of government procurement activities at these levels tends to be more prescriptive than at the federal level. At a state/territory level, legislative instruments typically require, subject to limited exceptions, that a competitive procurement process be conducted for government supplies. Legislation in most states/territories create a central procurement body to set procurement policy and conduct most procurement. The procurement policies address similar matters to the federal CPGs. Most states/territories also issue Treasurer s Instructions (or equivalent) which address similar issues to the federal Finance Circulars. Discrete pieces of legislation or government policy in each jurisdiction also address other procurement issues such as public disclosure of contract details. Legislation regulating local government procurement tends to require, with limited exceptions, a tender to be conducted for supplies to local government. Note, this chapter does not cover generally applicable legislation such as legislation dealing with freedom of information or foreign corrupt practices which apply to contracts entered into by government entities. Baker & McKenzie 3

20 b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Bilateral trade agreements have impacted Australia s procurement rules and requirements. The most recent bilateral trade agreement to impact Australian government procurement was the Australia-United States Free Trade Agreement ( AUSFTA ). It came into force on 1 January The core goals of Chapter 15 of the AUSFTA (which deals with government procurement) are to eliminate preferential treatment and provide transparency in the tendering process. These goals have been incorporated into procurement frameworks across all Australian governments. For example, the CPGs ensure that competition is encouraged in procurement processes by prohibiting discrimination which would otherwise favour local suppliers and codify the requirement for transparency of process in procurement activities. Note that Australia is an observer, but not a member, of the World Trade Organisation Agreement on Government Procurement. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The central principle of government procurement in Australia at all levels is value for money. Other procurement principles deal with encouraging competitive markets, adhering to non-discriminatory purchasing practices, accountability for purchasing decisions, and using efficient, effective, ethical and transparent procurement processes. These principles are reflected in broadly the same manner in the CPGs and state and territory procurement guidelines. Outside of the legislative framework, the courts have found governments to be subject to an implied term to conduct tenders fairly and in good faith. However, such an obligation is not automatically implied into each government tender, but depends upon the facts of each case. 4 Baker & McKenzie

21 Baker & McKenzie's Global Public Procurement Handbook Australia d. Is aerospace and defence procurement treated differently from other types of procurement? Defence procurement is undertaken by the federal government and is subject to the same legislative regime as other federal government procurement. However, due to the size of defence procurement spending and the specialised nature of defence procurement, the Department of Defence, through the Defence Materiel Organisation, has a number of complex additional defence-specific procurement rules. These are primarily contained in the Defence Procurement Policy Manual which is updated regularly. Defence also issues its own specialised contract terms. The contract terms include terms dealing with controlled technology provided by other countries (e.g., the United States). Australia is in the process of enacting legislation to implement the Australia- United States Treaty on Defence Trade Cooperation. This will result in some changes to aerospace and defence procurement requirements. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? At the federal and state/territory level, there are typically two types of government agencies for procurement purposes: departments and agencies which do not have a separate legal identity to the Crown (complying with the procurement laws and policies in most cases is mandatory for these bodies); and other government created bodies that have a separate legal identity to the Crown (e.g., bodies created by statute or government-owned companies). Treatment of these bodies differs. In some cases they may choose to subject themselves to the procurement laws and policies and in other cases they can be directed to comply. At the federal level, under the Commonwealth Authorities and Companies Act 1997 ( CAC Act ), government authorities and government whollyowned companies may be directed to comply with the CPGs. As a practical matter, most government created authorities and companies will have in place very similar procurement requirements to government departments and agencies. Baker & McKenzie 5

22 At the local government level, each local government will be required to comply with the local government procurement laws. b. Which private entities are covered by the laws? Private entities are not covered by the procurement frameworks discussed in this chapter. However, in a number of cases, private sector entities may be permitted to benefit from government purchasing. For example, private schools and hospitals may be allowed to buy from government established supply arrangements. c. Which types of contracts are covered? Any contracts that are awarded by government departments or agencies using public money or relating to public property will generally be subject to the procurement laws. It is important to check in each case whether the proposed procurement activity is covered by the relevant procurement laws especially where the relevant activity is not for procuring goods or services or the means of acquisition or contracting are non-standard. For the purposes of the federal CPGs, grants, investment (or divestment), sales by tender, loans, purchases of property or services for resale or of property or services used in the production of goods for resale and any property right not acquired through the expenditure of public money are not considered to be covered procurement activities. d. Are there anti-avoidance rules (including laws on bid rigging)? The Competition and Consumer Act 2010 (Cth) ( CCA ) (previously the Trade Practices Act 1974 (Cth)) was enacted to encourage competition in Australia. The CCA prohibits practices such as cartel conduct, anticompetitive agreements, boycotts, misuse of market power, exclusive dealing, resale price maintenance and acquisitions that substantially lessen competition. The CCA prohibits collusive tendering and price fixing and would apply to bid rigging between competitors. At the federal level, Part 7.6 of the Criminal Code Act 1995 (Cth) prohibits bribery of a Commonwealth government official. The states and territories also have laws prohibiting bribery and the giving of secret commissions. Secret commission offences also exist under common law. 6 Baker & McKenzie

23 Baker & McKenzie's Global Public Procurement Handbook Australia There is also legislation and supporting codes of conduct and policies at federal and state/territory level regulating the conduct of public servants and elected officials. These include requirements to obtain approval to receive gifts and register the receipt of any gifts and for dealing with actual or perceived conflicts of interest. 3. Procurement Procedures a. What procurement procedures can be followed? Public agencies in Australia can use a broad range of approaches. Consistent with the underlying principles referred to above, Australian governments will generally be required to procure goods and services by way of competitive tendering processes for procurements over a certain price threshold. Even below the threshold, there may be requirements to go to market in an attempt to ascertain the best value for money for the proposed procurement. Generally, one of the following different forms of procurement will be adopted: Competitive procurement this can be open so that any supplier can bid or a closed or select procurement where a prequalification process results in a limited set of suppliers being invited to bid. The prequalification process might be conducted through an earlier open tender, expression of interest or request for proposal process. Sole/direct source sole sourcing arrangements may be permitted in limited cases but are generally subject to additional rules. Period arrangements period contracts are established to enable agencies to purchase pre-qualified products. Period contracts operate as a standing offer by a supplier to supply specified product to a defined customer group at a pre-agreed cost for a given period. Agencies can source the products offered without the requirement for a tender each time. These types arrangements are generally established by an initial competitive tender to appoint one or more suppliers to a panel to supply the identified products. b. Are there any rules on the specifications/criteria? Most tender documents will set out evaluation criteria (which will reflect the requirements of the applicable procurement framework) and include mandatory specifications. Baker & McKenzie 7

24 c. Can certain prospective bidders be excluded from the competition? Bidders can be excluded from the competition where a government agency is permitted to undertake a select approach to market or sole/direct sourcing. For example, as noted above, the government may conduct a tender to establish a period contract panel of suppliers for certain supplies and permit government agencies to procure from those suppliers without needing to go to market. Prospective bidders not on the panel have to wait to seek inclusion on the panel until the panel expires and is re-tendered or opened up for new panel members. Select tendering can also be permitted in certain circumstances (e.g., when the agency has made enquiries about suitable prospective suppliers) (see Section 4(a) on sole/direct sourcing). Prospective bidders can be excluded from the competition through the use of conditions for participation. For example, procurement terms will usually require bidders to demonstrate their ability to participate in a procurement. Conditions can require a potential supplier to demonstrate it has the legal, commercial, technical and financial abilities to fulfil the requirements of the procurement. Additionally, procurement frameworks will often enable government agencies to exclude potential suppliers on grounds such as bankruptcy, insolvency, false declarations or significant deficiencies in performance of any substantive requirement or obligation under a prior contract. A bidder might also be excluded if the bidder has failed to comply with a mandatory procurement policy requirement. At the federal level, government agencies cannot procure supplies from a supplier who does not comply with certain mandatory requirements. For example, it is government policy that an organisation who fails to comply with the Equal Opportunity for Women in the Workplace Act 1999 (Cth) is ineligible for government contracts. There are also requirements for specific types of procurement. For construction projects, the government is prohibited by the Building and Construction Industry Improvement Act 2005 (Cth) from funding building work unless the builder is accredited under the scheme created by the Act. If a party has been involved in an earlier stage of the project being tendered (e.g., in preparing the specifications), the party may find itself excluded from competing in the later tender. 8 Baker & McKenzie

25 Baker & McKenzie's Global Public Procurement Handbook Australia d. Are there any rules on the awarding of contracts? As a general rule, government procurement guidelines require that contracts be awarded to the bid which demonstrates the best value for money and otherwise satisfies the conditions of participation. The terms of any tender will set out specific evaluation criteria that will be considered in awarding a contract under that tender. It is common for tender terms to give the government agency flexibility in awarding contracts. Tender terms will typically state that the lowest price bid will not necessarily be accepted and that the agency may exercise discretion to accept a non-compliant or alternate bid. e. Can bidders combine to submit a bid? As noted above (see Section 2(d)), the CCA was established to promote competition in Australia. Division 1 of Part IV of the CCA contains parallel civil and criminal prohibitions on companies making or giving effect to a cartel provision in a contract, arrangement or understanding. A cartel provision is a provision of a contract, arrangement or understanding between competitors that has the purpose or effect of fixing, controlling or maintaining prices for the purpose of rigging bids, restricting outputs or allocating customers, markets or territories. Under these prohibitions, bid rigging includes a provision of a contract, arrangement or understanding which has the purpose of ensuring that if there is a request for bid: one or more of the parties bid but others do not; parties bid on the basis that one bid is more likely to be successful; some parties will withdraw from the bidding process; parties will proceed with the bidding process on the basis that one bid is more likely to be successful; or parties agree on a material component of their bids. Collusive tendering by competitors can also constitute price fixing and customer allocation for the purpose of the prohibitions on cartel conduct. The maximum penalties for engaging in cartel conduct are (per contravention) for companies the greater of AUD10 million and three times the value of the benefit of the anti-competitive conduct (or, if that cannot be Baker & McKenzie 9

26 ascertained, 10% of annual group turnover in Australia) and for individuals, imprisonment for up to 10 years and fines of up to AUD500,000. f. Are there any rules on alternative bids? Alternative bids are allowed in Australia and will be governed by the tender itself. For example, tender terms might permit an alternate bid to be submitted but will often require that a compliant bid also be submitted. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Sole sourcing (or direct sourcing) is permitted in limited circumstances. Typically a legislative instrument will set out the circumstances where sole sourcing is permitted. Examples where sole sourcing might be permitted are: where, in response to an approach to the market, no suitable submissions were received; where, for reasons of extreme urgency brought about by events unforeseen by the agency, the property or services could not be obtained in time under open tendering procedures; for purchases made under exceptionally advantageous conditions that only arise in the very short term, such as from unusual disposals, unsolicited innovative proposals, liquidation, bankruptcy, or receivership and which are not routine purchases from regular suppliers; or where the property or services can only be supplied by a particular business and there is no reasonable alternative or substitute. Sole sourcing cannot be used for the purposes of avoiding competition or to discriminate against any domestic or foreign supplier. In any sole or direct sourcing arrangement, the general procurement policy framework still applies, including the requirement to achieve value for money. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? There is no specific legislation granting rights to challenge procurement decisions. There is also no specific standalone court system in Australia for 10 Baker & McKenzie

27 Baker & McKenzie's Global Public Procurement Handbook Australia addressing procurement grievances (as noted above, Australia is not a member of the World Trade Organisation Agreement on Government Procurement). At a federal level, the CPGs require government agencies to have a fair, equitable and non-discriminatory procurement complaint handling procedure. Legislation also allows a complaint about procurement to be made to the Commonwealth Ombudsman. The Ombudsman has powers to investigate and make a recommendation, but no power to change a decision. The position is substantially the same at the state/territory and local government levels. b. Are remedies available outside the scope of the legislation? In theory, a number of government processes and legal actions may be available to challenge a procurement decision. In practice, challenging procurement decisions can be difficult. There are government processes for handling procurement complaints. There is no charge to use them. They are purely administrative and the complainant has no legal rights. However, they can provide a quick solution. Each jurisdiction will typically require the agency conducting the procurement to have in place a complaints handling process. There is usually also a central body to whom complaints can be escalated. Administrative and private law actions may also be available to provide a remedy for a procurement complaint. Administrative law may allow a claim based on: denial of natural justice, a lack of procedural fairness or on the legitimate expectation doctrine; or legislation allowing review of administrative decisions made under an enactment. However, these cases are rare as procurement decisions are not usually found to have been made under an enactment. As noted in Section 5(a), procurement complaints may also be referred to the Ombudsman in that jurisdiction or an anticorruption body (established in some jurisdictions). Different private law remedies may be available depending on the jurisdiction, which government agency conducted the procurement and Baker & McKenzie 11

28 whether there was a process contract for conduct of the procurement. For example: some procurements (particularly for large-scale projects) will be conducted under a process contract. Where a process contract has been created, an action in breach of contract may be available if the agency fails to follow the procurement process; if the agency has acted in a misleading manner in conducting the procurement, it may be liable for misleading conduct in breach of the CCA or under corresponding state and territory fair trading legislation. However, there are differences between jurisdictions in whether the government can be liable under the legislation; or the doctrine of estoppel may also be available to provide redress for a tendering complaint where representation, reliance and detriment can be shown to have occurred. c. Is there a specific forum before which disputes are heard? As noted in Section 5(a), there is no specific standalone court system in Australia for addressing procurement grievances. There are government processes for handling procurement complaints. The jurisdiction for an administrative law case against a federal government body will be the federal court. The jurisdiction for an administrative law case against a local government or state/territory body will be the relevant state court (for a claim against a local government body or state body) or territory court. The jurisdiction for a breach of contract case against a government body will ordinarily be that of the state or territory law governing the contract. The jurisdiction for a case for breach of legislation against a government body will be the courts with jurisdiction over the legislation. d. Are there any timing requirements where a party wants to enforce? A party s right to bring any legal action will be subject to the relevant limitation period in legislation prescribing the period in which a party must bring any action. 12 Baker & McKenzie

29 Baker & McKenzie's Global Public Procurement Handbook Australia As a practical matter, procurement decisions are highly unlikely to be undone unless the complainant acts quickly (and usually before a contract is entered into). e. What are the leading court decisions involving procurement disputes? Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 is the leading Australian authority involving a procurement dispute. The case established that under Australian law a public tender could be governed by a process contract. The case further established that the process contract which was found to exist not only contained the express terms of how the tender process would be conducted but also the implied term that a government body is to evaluate all tenders fairly and in good faith. JS McMillan Pty Ltd v Commonwealth (1997) 147 ALR 419 is the leading Australian authority for procurement disputes based on breach of trade practices or fair trading legislation, such as misleading or deceptive conduct. The decision examined when the federal government could be treated as carrying on a business. This was important as the legislative prohibition on engaging in misleading or deceptive conduct or conduct that is likely to mislead or deceive under what is now the CCA, only applies to the federal government to the extent it is carrying on a business. In McMillian, the federal government outsourcing its printing operations was not held to be carrying on a business. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Some of the related bodies of law have been referred to in the other sections of this chapter. In a public law context, laws on bribing public officials, corruption and freedom of information are relevant to procurement. Public agencies are subject to private laws in much the same way as privatesector bodies. Relevantly, this includes contract law and laws dealing with breach of confidence. In some cases, the government can be held to a higher standard of compliance with private laws (or an obligation to act in good faith more readily implied) than non-government bodies. Legislation (other than legislation specifically intended to regulate government) can have more limited application. As noted in Section 5(b), a Baker & McKenzie 13

30 private sector organisation who engages in misleading conduct in conducting procurement can be liable under the CCA, but a government body engaging in the same conduct might not be. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws applying to procuring technology. There are a number of technology-specific contract terms, technology panel agreements and procurement policies in place at the federal and state/territory levels. For example, a number of jurisdictions have specific liability policies for technology supplies. A frequent difficulty faced by suppliers new to the Australian government market is becoming familiar with the different technology standard contract terms in each jurisdiction. Each jurisdiction s standard contracts tend to raise similar issues for suppliers 8. Looking Ahead a. Are there any proposals to change the law in the future? No significant changes to laws are contemplated in the near future. In terms of procurement trends, there has been a trend in the last few years towards whole of government agreements for supplies (instead of allowing government agencies to purchase individual supplies). At the federal level, the CPGs are reportedly to be renamed the Commonwealth Procurement Rules. It is expected that this proposed change will be of minor significance as it only relates to the name of the law and will not change any of the substance of the procurement requirements. 14 Baker & McKenzie

31 Baker & McKenzie's Global Public Procurement Handbook China China 1. The Laws a. What is the applicable legislation? The Government Procurement Law of the People s Republic of China ( PRC ) was promulgated in 2002 and implemented as of 1 January 2003 (the GPL ). The Chinese government is in the process of drafting the Implementing Rules for the GPL. The Tendering and Bidding Law of the PRC (the Bidding Law ), which was promulgated and became effective in 2000, also applies to government procurement activities, where applicable. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? During the WTO negotiation, China promised and documented in its WTO accession agreement that China s GPL will comply with the basic spirit of the WTO Agreement on Government Procurement and will refer to the UNCITRAL Model Law on Procurement of Goods, Construction and Services. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? Any government procurement must adopt the principles of openness, transparency, fair competition, impartiality and honesty. d. Is aerospace and defence procurement treated differently from other types of procurement? The GPL does not apply to military procurement, which will be governed by separate regulations to be issued by the Central Military Commission of the PRC. Baker & McKenzie 15

32 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? Government departments, institutions and public organisations at all levels are subject to the GPL when they conduct procurement activities with fiscal funds. b. Which private entities are covered by the laws? Private entities are not covered by the laws. c. Which types of contracts are covered? The GPL applies to contracts for procuring goods, services or construction projects, if such procurement contracts fall within the scope of the centralised procurement catalogue issued by the central or local governmental authorities or if the value of such procurement contracts exceeds the thresholds prescribed by the authorities. d. Are there anti-avoidance rules (including laws on bid rigging)? The GPL expressly provides that no entity or individual may, by any means, deny or restrict free access to the government procurement markets. Information on government procurement opportunities should be released to the public in a timely manner through the news media designated by the authorities supervising the particular government procurement. Parties involved in government procurement are prohibited from colluding with each other to the detriment of the interests of the state, the public or third parties. Where the parties adopt a public tender or bid by invitation to conduct the government procurement, the relevant procedures as set out in both the GPL and the Bidding Law must be strictly followed. The parties are expressly prohibited from breaking up the whole procurement into small procurement packages or taking other measures, for the purpose of circumventing the public tender requirement. 3. Procurement Procedures a. What procurement procedures can be followed? The GPL confirms the following methods are acceptable for government procurement: public tender; 16 Baker & McKenzie

33 Baker & McKenzie's Global Public Procurement Handbook China bid by invitation; competitive negotiation; sole source procurement; price inquiry; and other procuring methods as confirmed by the State Council. Public tender is singled out by the GPL as the main method for government procurement. Different procedures apply depending on the specific procurement method adopted. Public Tender In the case of a public tender, the procuring entity should give the bidders at least 20 days to prepare and submit the bid. The procedures as set out in the Bidding Law with respect to the issuance of the Request for Proposals ( RFP ), bid preparation and submission, bid evaluation and the bid award to the successful bidder should also be strictly complied with. Bid by Invitation The GPL provides that the procuring entity can conduct the government procurement via bid by invitation, in the following circumstances: the goods or services to be procured are of a special nature and can only be procured from limited suppliers; or the procurement cost would be too large if the procurement was conducted via a public tender. Under a bid by invitation, the procuring entity should send the RFP to at least three bidders who are selected at random from qualified bidders and the procuring entity must give at least 20 days for the bidders to prepare and submit their bids. Competitive Negotiation The competitive negotiation method can be adopted if: no qualified bidders can be found after a bidding process; Baker & McKenzie 17

34 due to the technical complexities, it is impossible to determine the specifications or detailed requirements for the goods, services or projects to be procured; the time requirement of the procuring entity cannot be met if a bidding process is adopted; or it is impossible to determine the total value of the procurement. In circumstances where a competitive negotiation process is adopted, the procuring entity should form a negotiation team, which shall consist of representatives of the procuring entity and external experts in the relevant industry sectors. The negotiation team should prepare the relevant contractual documentation and issue invitations to at least three qualified suppliers for negotiation. The negotiation team must determine the winning supplier based on the negotiation results. Sole Source Procurement According to the GPL, the procuring entity can adopt a sole source procurement process if the goods, services or construction projects can only be procured from one single supplier or if the procurement in question is related to an existing project and the purchase from the original supplier will help maintain consistency. Any government procurement undertaken through a sole source structure must be carried out in accordance with the principles of ensuring the government obtains a reasonable price and the goods and/or services are of a good quality. Price Inquiry It is possible for the procuring entity to choose the price inquiry option for government procurement if the goods being procured are sufficient in supply and subject to little price fluctuation. If the price inquiry method is adopted, the procuring entity must form an inquiry team, which shall consist of the representatives from the procuring entity and external experts. The inquiry team is responsible for determining the potential suppliers and should request quotes from at least three qualified suppliers. The inquiry team must decide the winning supplier by taking into account various standards such as quality, price, service and other requirements. 18 Baker & McKenzie

35 Baker & McKenzie's Global Public Procurement Handbook China b. Are there any rules on the specifications/criteria? The GPL provides for certain requirements the suppliers participating in government procurement should meet. Those requirements include, without limitation, the supplier s technical skills, past performance, financial viability, and track record for compliance with applicable laws. The procuring entity is permitted to include additional standards or criteria which are necessary for the procurement task, for example, by requesting the bidders or suppliers submit their qualification certificates or other track record documentation. The procuring entity is, however, not allowed to impose unreasonable conditions to discriminate against potential bidders or suppliers. c. Can certain prospective bidders be excluded from the competition? As discussed in Section 3(b) above, certain prospective bidders or suppliers may be excluded from the competition if they are unable to satisfy the requirements or meet the standards as reasonably required by the procuring entity. For example, if the procuring entity requires the bidders or suppliers to possess certain experience, skills or track record, a bidder or supplier which fails to comply with those requirements would not be able to participate in the competition. d. Are there any rules on the awarding of contracts? The procuring entity must enter into the procurement contract with the successful bidder or supplier within 30 days after the issuance of the award notice. The procurement contract, which must be in writing, shall be governed by the laws of the PRC. Within seven working days of signing, the parties should file a copy of the procurement contract with the relevant governmental authority. Subject to the procuring entity s consent, the winning bidder or supplier is allowed to subcontract certain work components to its subcontractors, provided that the subcontractors and the winning bidder or supplier assume joint and several liability to the procuring entity for such work components. e. Can bidders combine to submit a bid? It is possible for two or more bidders to form a consortium to submit the bid. Baker & McKenzie 19

36 f. Are there any rules on alternative bids? The GPL is silent on alternative bids. Under the Bidding Law, an alternative bid is generally deemed as a bid which does not respond to the bid call document and is therefore subject to the risk of being disqualified. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? See Section 3(a) above. Where the requirements for a sole source procurement or a price inquiry option exist, the procuring entity can avoid the competitive bidding process. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The GPL contains a complaint mechanism for government procurement. According to the GPL, if a supplier considers its interests and benefits have been infringed by the RFP terms, the procuring process, or the result of the bid award, the supplier has a right to present its written queries to the procuring entity within seven working days after it knew or should have known of the alleged infringement. Upon the receipt of the written queries from the supplier, the procuring entity must provide a response in writing to the enquiring supplier as well as all other suppliers involved. If the procuring entity fails to provide a response within the prescribed time period or if the enquiring supplier is otherwise unsatisfied with the response it received, the enquiring supplier may lodge a complaint with the relevant governmental authority. Within 30 working days from the receipt of the complaint, the governmental authority should render a decision. If the enquiring supplier is not satisfied with the governmental decision, it can initiate an administrative lawsuit in the people s court. b. Are remedies available outside the scope of the legislation? The remedies available under the PRC Contract Law and Bidding Law generally apply to government procurement. c. Is there a specific forum before which disputes are heard? Depending on the actual terms adopted in the trade agreements for government procurement, disputes are usually resolved by arbitration or court proceeding. 20 Baker & McKenzie

37 Baker & McKenzie's Global Public Procurement Handbook China d. Are there any timing requirements where a party wants to enforce? Please see Section 5(a) above for the time limits for the complaint mechanism. The parties may also be time-barred from bringing legal actions concerning government procurement transactions if they fail to comply with the time requirements under the PRC Civil Procedural Law. e. What are the leading court decisions involving procurement disputes? There have been a considerable number of government procurement related court rulings since the implementation of the GPL. One of the most high-profile government procurement cases is Beijing Modern Wo Er Economic and Trade Co., Ltd. v. the PRC Ministry of Finance. This case involved a substantial procurement of medical devices and the court gave a ruling in favour of the supplier. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Several ministerial authorities, including, without limitation, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Science and Technology, and the Ministry of Railway, have issued various administrative rules regulating government procurement in the relevant industry areas under their respective supervision. In addition, the majority of local governments at the provincial level have promulgated various local rules to regulate government procurement activities in their respective jurisdictions. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? The PRC Science and Technology Advancement Law and the Tentative Measures for the Administration of Tendering and Bidding of Science and Technology Projects, which were enacted in 2000, apply to government procurement of technology goods or services. Baker & McKenzie 21

38 One hot topic in this area in recent years is indigenous innovation. Since 2006, a series of Chinese policies and rules were drawn up to encourage indigenous innovation in the technology sector, and give certified Chinese companies better access to government purchasing orders. This policy is a response to China s perceived over-reliance on foreign technology and intellectual property, but the foreign companies viewed this as discriminatory. In order to qualify as indigenous innovation, a product had to be produced by an enterprise which owned the intellectual property in China, had a trademark owned by a Chinese company, was registered in China, and embodied a high degree of innovation. This policy was vigorously challenged by international companies and, as a result, from 1 July 2011, three key rules on indigenous innovation for government procurement were suspended for an indefinite term. This move is widely praised by foreign businesses, and is viewed as a positive step toward levelling the playing field in the government procurement market in China. 8. Looking Ahead a. Are there any proposals to change the law in the future? There have been substantial debates among the Chinese legislatures, law scholars and practitioners on the urgency of passing a revised draft of the GPL and Bidding Law, to resolve the conflicts between these two important laws and to better regulate the government procurement and bidding markets. In 2010 and 2011, the Chinese law makers issued the long-awaited draft implementing rules of the GPL and Bidding Law for public consultation, but without resolving the issues at the upper law level, it is unlikely that the implementing rules of the GPL and Bidding Law can be promulgated soon. China has submitted several revised offers to accession to the Government Procurement Agreement under the framework of the World Trade Organisation ( GPA ). One would expect that China s accession commitments to the GPA will have a significant impact on the opening up of China s government procurement market. 22 Baker & McKenzie

39 Baker & McKenzie's Global Public Procurement Handbook India India 1. The Laws a. What is the applicable legislation? At the apex of the Indian legal framework governing public procurement is Article 299 of the Constitution of India, which stipulates that all contracts made in the exercise of the executive power of the Union of India or a State Government must be in the name of the President of India or the Governor of the State, as the case may be, and be executed on behalf of the President or the Governor or by such person as he or she may direct. At the federal level, there is no legislation exclusively governing public procurement in India, though at the state level, certain state legislatures (like Tamil Nadu and Karnataka) have enacted such laws. However, comprehensive rules and directives for public procurement have been put in place at the federal level in terms of: the General Financial Rules, 2005 ( GFR ); the Delegation of Financial Powers Rules, 1978; the Manual on Policies and Procedures for Purchase of Goods issued by the Ministry of Finance; the Manual of Policies and Procedure for Employment of Consultants issued by the Ministry of Finance; the Director General of Supplies and Disposals Manual; Manuals governing Procedures for Purchase of goods/services issued by individual ministries/departments like Defence and public sector undertakings like BSNL; Government orders regarding price or purchase preference or other facilities to sellers in the Handloom Sector, Cottage and Small Scale Industries and to Central Public Sector Undertakings, etc., and the guidelines issued by the Central Vigilance Commission to increase transparency and objectivity in public procurement. These provide the regulatory framework for public procurement by governmental instrumentalities. In addition, for works contracts, model Baker & McKenzie 23

40 bidding documents have been issued by various public authorities (such as NHAI, Planning Commission, etc.) which establish the standard contractual framework between the public authorities and private parties. There also exist certain sectoral laws and underlying sectoral policies which also guide public procurement processes. Within this framework, various governmental instrumentalities and agencies including ministries and departments (such as the Public Works Department, the National Highways Authority of India) have evolved their own public procurement system. This chapter does not address these systems. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The General Financial Rules, 1963 were amended with effect from 1 July 2005 to reflect the provisions of supra-national regimes like the GPA and the EC Rules. The preface to the GFR provides that the review of the General Financial Rules, 1963 was done to incorporate developments that had taken place including a rapid growth of alternative service delivery systems, developments in information technology, outsourcing of services and liberalisation of the system of procurement, accounting and disposal of goods in line with the international practices. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? Rule 137 of the GFR lays down the basic principles underlying the public procurement regime. It provides that every authority delegated with the financial powers to procure goods in the public interest shall be responsible and accountable for bringing efficiency, economy and transparency in matters relating to public procurement and for fair and equitable treatment of suppliers and promotion of fair competition in public procurement. Rule 137 of the GFR provides that the procedure for public procurement must conform to the following yardsticks: the specifications in terms of quality, type, etc., as well as quantity of goods to be procured, should be clearly spelt out keeping in mind the specific needs of the procuring organisations. The specifications should meet the basic needs of the organisation without including superfluous and non-essential features, which may result in unwarranted expenditure. 24 Baker & McKenzie

41 Baker & McKenzie's Global Public Procurement Handbook India Care should also be taken to avoid purchasing quantities in excess of requirements to avoid inventory carrying costs; offers should be invited following a fair, transparent and reasonable procedure; the procuring authority should be satisfied that the selected offer adequately meets the requirements in all respects; the procuring authority should satisfy itself that the price of the selected offer is reasonable and consistent with the quality required; and at each stage of procurement the procuring authority must place on record, in precise terms, the factors it considered in making the procurement decision. Rule 160 of the GFR requires that all government purchases should be made in a transparent, competitive and fair manner to secure best value for money and in doing so, enable prospective bidders to prepare and submit their competitive bids with confidence. Some of the measures for ensuring the above are as follows: the text of the bidding document should be self-contained and comprehensive without any ambiguities. All essential information, which a bidder needs for submitting a compliant bid, should be clearly spelt out in the bidding document in simple language. The bidding document should contain, amongst other things: (i) the criteria for eligibility and qualifications to be met by the bidders such as minimum level of experience, past performance, technical capability, manufacturing facilities and financial position, etc.; (ii) eligibility criteria for goods indicating any legal restrictions or conditions about the origin of goods etc which may be required to be met by the successful bidder; (iii) the procedure as well as date, time and place for submitting the bids; (iv) date, time and place of opening of the bid; (v) terms of delivery; and (vi) any special terms affecting performance, if any; provision should be made in the bidding document to enable a bidder to raise questions about the bidding conditions, bidding process and/or rejection of its bid; provision should be made for the settlement of disputes, if any, emanating from the resultant contract; Baker & McKenzie 25

42 the bidding document should indicate clearly that the resultant contract will be interpreted under Indian Laws; the bidders should be given reasonable time to submit their bids; the bids should be opened in public and authorised representatives of the bidders should be permitted to attend the bid opening; the specifications for the required goods should be clearly stated without any ambiguity so that the prospective bidders can submit meaningful bids. In order to attract a sufficient number of bidders, the specifications should be as broadly drafted as possible. Efforts should also be made to use standard specifications which are widely known in the industry; pre-bid conference: in the case of turn-key contract(s) or contract(s) for the procurement of sophisticated and costly equipment, provision is to be made in the bidding documents for a pre-bid conference to provide an opportunity to clarify issues and clarify any doubts about the specifications and other technical details of the plant, equipment and machinery contemplated in the bidding document. The date, time and place of the pre-bid conference should be indicated in the bidding document. This date should be sufficiently in advance of the bid opening date; evaluation criteria used to assess the bids and to award the contract should be clearly indicated in the bidding documents; bids received should be evaluated in terms of the conditions already incorporated in the bidding documents; no new condition which was not incorporated in the bidding documents should be brought in for evaluation of the bids. Determination of a bid s compliance should be based on the contents of the bid itself without recourse to extrinsic evidence; bidders should not be permitted to alter or modify their bids after expiry of the deadline for receipt of bids; negotiation with bidders after bid opening must be severely discouraged. However, in exceptional circumstances where price negotiation against an ad-hoc procurement is necessary due to some unavoidable circumstances, negotiations may be entered into but only with the lowest evaluated compliant bidder; 26 Baker & McKenzie

43 Baker & McKenzie's Global Public Procurement Handbook India where a number of firms are placed on a rate contract for the same item, negotiation as well as counter offering of rates is permitted with the bidders and for this purpose special permission has been given to the Directorate General of Supplies and Disposals ( DGS&D ); the contract should ordinarily be awarded to the lowest evaluated bidder whose bid has been found to be compliant and who is eligible and qualified to perform the contract satisfactorily as per the terms and conditions incorporated in the corresponding bidding document. However, where the lowest acceptable bidder is not in a position to supply the full quantity required, the remaining quantity, as far as possible, should be ordered from the next highest compliant bidder at the rates offered by the lowest compliant bidder; and the name of the successful bidder should be published in the relevant Ministries or Departments notice board or bulletin or website. d. Is aerospace and defence procurement treated differently from other types of procurement? While aerospace procurement is not treated differently from other types of procurement, all procurements by the Ministry of Defence are currently governed by the Defence Procurement Procedures, 2008 and the Defence Procurement Manual, 2009 which envisage the following forms of procurement: placing demands on diverse public sources including (i) the Director General of Ordnance Factories for the manufacture of stores in Ordnance Factories; (ii) other Ministries of the Government of India; or (iii) State Governments, for supply from factories/workshops/other procurement agencies under them; (iv) placing demands on the Industries/Factories/Statutory Corporations whether wholly or partly financed by the State set-up for the manufacture of a specific range of items in the country; (v) placing demands on the indigenous trade either directly or through the Director General of Supplies and Disposals including the Textile Commissioner, Mumbai; (vi) placing demands on Defence Public Sector Undertakings and other Government Public Sector Undertakings for the purchase/repair/manufacture/fabrication of items/equipment/systems/aircrafts etc. to meet Defence Services requirements; Baker & McKenzie 27

44 local purchase of items which are not supplied by the central procurement authority/organisations from Services/Departments and stores required in an emergency; capital procurement of all goods and services that fit the description of capital expenditure; revenue procurement, i.e., procurement of items and equipment, including replacement equipment assemblies/sub assemblies and components to maintain and operate already sanctioned assets in the service, the necessity of which has been established and accepted by the Government; indigenous procurement, i.e., procurement from indigenous sources; foreign procurement, i.e., procurement of such defence equipment and assets, which are of foreign origin (and includes), items required to maintain and operate such equipment. Such equipment is procured from suppliers abroad; central procurement, i.e., procurement undertaken against indents resulting from a planned provisioning process like the Annual Provision Review, refit planning, obsolescence planning and planned routines; and local Procurement, i.e., local purchase undertaken by various authorities to meet short term ad-hoc or urgent requirements, or to meet normal requirements of units for stores which are not within the purview of central purchase organisation. Cash and carry purchase is resorted to in case of extreme urgency or when the supplier is not willing to supply the required item on credit. The Defence Production Policy, 2011 stresses the preference for procurement from indigenous sources wherever possible, subject to ensuring that the defence forces have an edge over potential adversaries at all times in immediate terms as well as in sustainability. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? As per Rule 135 of the GFR, all Ministries and Departments of the Central Government that are involved in the procurement of goods for use in the public service are covered under the category of purchasers. Further, as set out in the notification dated 2 November 2010 issued by the Department of 28 Baker & McKenzie

45 Baker & McKenzie's Global Public Procurement Handbook India Expenditure, Ministry of Finance, the Central Government has also made the GFR applicable to autonomous bodies that are created or owned by or regularly receive grants from the Government of India, except in those cases where the by-laws of an autonomous body provide for separate financial rules which have been approved by the Government. b. Which private entities are covered by the laws? Any private entity participating in the competitive bidding or public procurement process to supply goods or services, or for that matter being awarded a project or contract by a government agency, will be covered by the law insofar as the bidding, qualification and award/rejection is subject to judicial review under well established common law principles of fair play and reasonableness (such as the principle of legitimate expectation, pacta sunt servanda, Wednesbury s reasonableness and proportionality, as have been incorporated into Indian law by the courts). Private entities claiming a wrongful denial have a right to seek redress through the courts of law. c. Which types of contracts are covered? The regulatory framework of the public procurement system is applicable to all types of contracts entered into by Ministries and Departments of the Government for the procurement of goods and services. d. Are there anti-avoidance rules (including laws on bid rigging)? The Income Tax Act, 1961, contains rules for avoidance of tax on the transfer of goods and services between associated and connected enterprises. These rules are all encompassing and also apply to contracts for public procurement. Further, certain Government instrumentalities and agencies, including ministries and departments (like the Ministry of Defence, the Public Works Department, the National Highways Authority of India, et al), have evolved their own public procurement system in which such rules are found. The Competition Act, 2002 prohibits any agreement which causes, or is likely to cause, appreciable adverse effect on competition in markets in India. Such agreements are void. Any agreement which evidences bid rigging or collusive bidding that shall be presumed to have an appreciable adverse effect on competition under Section 3 of the Competition Act. The Competition Commission of India ( CCI ) may inquire into any alleged contravention of Section 3. The CCI, on being satisfied that there exists a Baker & McKenzie 29

46 prima facie case of bid rigging, shall direct the Director General to cause an investigation and furnish a report. Post inquiry, the CCI can pass such orders and impose such penalty as it deems fit. 3. Procurement Procedures a. What procurement procedures can be followed? The following are the types of award procedures available under the GFR. Purchase of goods without quotation Under Rule 145 of the GFR, goods up to the value of Rs.15,000 (Rupees fifteen thousand) may be purchased without inviting quotations or bids. A certificate is to be recorded by the competent authority as to its satisfaction that the goods purchased are of the requisite quality and specification and have been purchased from a reliable supplier at a reasonable price. Purchase of goods by purchase committee Under Rule 146 of the GFR, goods costing above Rs.15,000 (Rupees fifteen thousand) and up to Rs.1,00,000 (Rupees one lakh) may be purchased on the recommendations of a duly constituted local purchase committee consisting of three members of an appropriate level as decided by the Head of the Department. The committee surveys the market to ascertain the reasonableness of rate, quality and specifications and identify the appropriate supplier. Before recommending placement of the purchase order, the members of the committee jointly record a certificate of satisfaction that the goods recommended for purchase are of the requisite specification and quality, priced at the prevailing market rate and the supplier recommended is reliable and competent to supply the goods in question. Purchase of goods directly under rate contract Ministries and Departments may directly procure rate contracted goods (as concluded by the Central Purchase Organization in accordance with Rule 141 of the GFR) from suppliers. In such cases, Rule 147 of the GFR mandates that the prices to be paid for the goods shall not exceed those stipulated in the rate contract and the other salient terms and conditions of the purchase should be in line with those specified in the rate contract. Advertised tender enquiry Rule 150 of the GFR mandates that except in the two situations outlined below, invitations to tender by advertisement should be used for procurement 30 Baker & McKenzie

47 Baker & McKenzie's Global Public Procurement Handbook India of goods of an estimated value of Rs.25,00,000 (Rupees twenty five lakh) and above. The organization should also post the complete bidding document on its website and permit prospective bidders to make use of the document downloaded from the web site. Where the Ministry or Department feels that the goods of the required quality, specifications, etc., may not be available in the country, copies of the tender notice may be sent to Indian embassies abroad and foreign embassies in India. Limited tender enquiry Under Rule 151 of the GFR, allows for a limited tender process to be adopted when the estimated value of the goods to be procured is up to Rupees Twenty Five Lakhs. Copies of the bidding document should be sent directly by speed post/registered post/courier/ to firms which are included on the list of registered suppliers for the goods in question. The number of supplier firms in a limited tender enquiry should be more than three. Purchase via this method may be adopted even where the estimated value of the procurement is more than Rupees Twenty Five Lakhs, in the following circumstances: urgency of the demand where any additional expenditure involved by not procuring through advertised tender enquiry is justified in view of the urgency. The Ministry or Department is to record the nature of the urgency and reasons why the procurement could not be anticipated; there are sufficient reasons, to be recorded in writing by the competent authority, indicating that it will not be in the public interest to procure the goods through advertised tender enquiry; and the sources of supply are definitely known and the possibility of fresh sources beyond those being tapped, is remote. Single tender enquiry Under Rule 154 of the GFR, procurement from a single source may be resorted to in the following circumstances: only one particular firm is the manufacturer of the required goods; in a case of emergency, when the required goods must be purchased from a particular source. The reason for such a decision is to be recorded and the approval of the competent authority is to be obtained; and for proprietary machinery or spare parts to be compatible with the existing sets of equipment. Baker & McKenzie 31

48 b. Are there any rules on the specifications/criteria? Rule 137 of the GFR states that the specifications in terms of quality, type etc., as well as quantity of goods to be procured, should be clearly spelled out, keeping in mind the specific needs of the procuring organisations. The specifications so worked out should meet the basic needs of the organisation without including superfluous and non-essential features, which may result in unwarranted expenditure. Care should also be taken to avoid purchasing quantities in excess of what is required to avoid inventory carrying costs. Rule 160 of the GFR provides that the bidding document should contain: the criteria for eligibility and qualifications to be met by the bidders such as minimum level of experience, past performance, technical capability, manufacturing facilities and financial position, etc.; and eligibility criteria for goods, indicating any legal restrictions or conditions about the origin of goods etc which may be required to be met by the successful bidder. Further, the specifications of the required goods should be clearly stated without any ambiguity so that the prospective bidders can submit meaningful bids. In order to attract sufficient numbers of bidders, the specification should be broad. Efforts should also be made to use standard specifications which are widely known in the industry. Criteria for determining the compliance of bids, for evaluating the bids and for awarding the contract to the lowest compliant bidder should be set out in the bidding documents. c. Can certain prospective bidders be excluded from the competition? There are general provisions in the GFR regarding when tenderers may be excluded from a procurement process. However from time to time, due to sectoral policy considerations (like cross-holding restrictions between print media and broadcasting), as well as issues of national/public interest (for defence and strategic procurements), specific qualifications rules for specific transactions may have exclusionary impacts. It is instructive to note that governmental instrumentalities may exclude/blacklist a tenderer if a tenderer engages in illegal or corrupt practices or if a particular tenderer has failed to perform its obligations under a certain governmental contract. The Supreme Court in Raghunath Thankur 32 Baker & McKenzie

49 Baker & McKenzie's Global Public Procurement Handbook India v. State of Bihar & Ors, (1989) 1 SCC 229, observed that blacklisting any person in respect of business ventures has civil consequences for the future business of the person concerned. Therefore, it is an elementary principle of natural justice that parties affected by an order for blacklisting should have right to be heard and make representations against such order. Each Ministry/Department of the Government that engages in public procurement formulates its own guidelines for determining the eligibility of suppliers who are qualified in all respects to deliver the goods and services. The guidelines are formulated by taking into account the credentials, manufacturing capabilities, quality control systems, past performance, facility for after-sales services, financial background and other parameters contained in GFR. d. Are there any rules on the awarding of contracts? The tender is usually awarded to the lowest evaluated tender. After completing the entire evaluation process for the compliant tenders on an equitable basis, the bids are ranked in ascending order based on the evaluated prices (i.e. L1, L2, L3, etc.) along with other relevant details so that a clear picture of their standing as well as comparative financial impact is available at a glance. Before ranking a contract as the lowest evaluated compliant tender (L1), the purchase organisation must ensure that the price to be paid is reasonable. The following are broadly taken into account in assessing the reasonableness of prices: last purchase price of same (or, in its absence, similar) goods; current market price of same (or, in its absence, similar) goods; price of raw materials that go into the production of the goods; receipt of competitive offers from different sources; quantity involved; terms of delivery; period of delivery; and cost analysis (material cost, production cost, over-heads, profit margin). e. Can bidders combine to submit a bid? The GFR is silent on this issue. However, it is common practice for bidders to form consortia for the purposes of a particular procurement. Baker & McKenzie 33

50 f. Are there any rules on alternative bids? The GFR does not have any provisions concerning alternative bids. The permissibility of alternative bids will depend on the tender document. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? In addition to the specific instances covered under our response to Section 3(a) above, the separate guidelines for defence procurement prescribe certain exemptions. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The GFR does not provide for remedies and enforcement under the procurement process. b. Are remedies available outside the scope of the legislation? A challenge to a tendering process or any disputes in relation to a tendering process can be brought before the courts of law in the same was as any ordinary civil dispute; in compliance with the Code of Civil Procedure, Further, disputes regarding the tendering process can also be subject to judicial review by a High Court or the Supreme Court under their writ jurisdiction, among other things, on the ground of arbitrariness, unfairness in action, mala fides or violation of the fundamental or legal rights as enshrined in the Constitution of India, which include the doctrine of reasonableness. c. Is there a specific forum before which disputes are heard? There is no specific forum before which disputes regarding a public procurement are heard. Disputes may be brought before the appropriate forum for civil disputes in accordance with the Code of Civil Procedure, 1908 or may be brought before the High Courts or Supreme Court under their writ jurisdiction. d. Are there any timing requirements where a party wants to enforce? In terms of the courts civil jurisdiction, the Limitation Act, 1963 prescribes the limitation period for filing an application in the appropriate judicial forum to redress a grievance. In most civil cases, including for specific 34 Baker & McKenzie

51 Baker & McKenzie's Global Public Procurement Handbook India performance of a contract and compensation for breach of a contract, the prescribed limitation period is three years from the date of the occurrence of the relevant cause of action. In circumstances where the parties invoke the writ jurisdiction of the High Court or Supreme Court, no specific time limits are prescribed. The courts have developed the doctrine of laches, where expediency in seeking relief is warranted and those guilty of inexplicable or unreasonable delays may be deemed unable to bring a suit. e. What are the leading court decisions involving procurement disputes? The Supreme Court s decision in Ramana Dayaram Shetty v International Authority of India, (1979) 3 SCC 489 is a landmark judgment on the issue of administrative action and is also applicable to public procurement. The Supreme Court observed that where the Government is entering into contracts or granting other forms of largesse, the Government cannot act arbitrarily at will and, like a private individual, deal with any person it pleases. Instead, its actions must be in conformity with standards or norms which are not arbitrary, irrational or irrelevant, and if the Government departs from such standards or norms in any particular case or cases, the actions of the Government are liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory. In Nagar Nigam, Meerut v Al Faheem Meat Exports Pvt. Ltd and Ors., (2006) 13 SCC 382, the Supreme Court laid down that the law is well-settled that contracts by the State, its corporations, instrumentalities and agencies must normally be granted through public auction/public tender by inviting tenders from eligible persons. The notification of the public auction or for inviting tenders should be advertised in well known dailies having wide circulation in the locality with all relevant details such as date, time and place of auction, the subject-matter of auction, technical specifications, estimated cost, etc. The award of government contracts through public auction/public tender is to ensure transparency in the public procurement process, to maximise the economy and efficiency of government procurements, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and to eliminate irregularities, interference and corrupt practices by the authorities concerned. Baker & McKenzie 35

52 In Raunaq International Ltd. v IVR Construction Ltd. and Ors., (1999) 1 SCC 492, the Supreme Court observed that the award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. It listed out the following as being the commercial considerations which are of paramount importance in arriving at a commercial decision: the price at which the other side is willing to do the work; whether the goods or services offered are of the requisite specifications; whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involve the engagement of substantial manpower or require specific skills to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important; the ability of the tenderer to deliver goods or services or to do the work of to a requisite standard and quality; past experience of the tenderer, and whether they have successfully completed similar work previously; time which will be taken to deliver the goods or services; and often; and the ability of the tenderer to take follow up action, rectify defects or to give post contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State, public body or agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. The overarching view, as stated by the Supreme Court in Master Marine Services Pvt. Ltd. v Metcalfe and Hodgkinson Pvt. Ltd. and Anr., (2005) 6 SCC 138, is that the Government must have freedom of contract but considerations of fair play are necessary for an administrative body functioning in an administrative sphere. In Global Energy Ltd. v. Adani Exports Ltd., (2005) 4 SCC 435, the Supreme Court observed that it is well settled that the terms of an invitation to tender are not open to judicial scrutiny and the courts cannot whittle down the terms of a tender, as they are in the realm of contract, unless the terms are wholly arbitrary, discriminatory 36 Baker & McKenzie

53 Baker & McKenzie's Global Public Procurement Handbook India or actuated by malice. In a similar vein, the Supreme Court in Tata Cellular v Union of India, (1994) 6 SCC 651, noted that judicial review does not mean the court should take over parties contracting powers. The parameters for interference in such matters would be (i) mala fides, (ii) bias, and (iii) arbitrariness to the extent of perversity. If none of these are present, the court should not interfere. It must be left to the authorities. With respect to negotiations, the Supreme Court in Nagar Nigam, Meerut v Al Faheem Meat Exports Pvt. Ltd and Ors., (2006) 13 SCC 382, has clearly opined that in rare and exceptional cases, having regard to the nature of the trade or largesse or for some other good reason, a contract may have to be granted by private negotiation, but normally that should not be done as it damages public confidence. In rare and exceptional cases, for instance during natural disasters and emergencies declared by the Government; where the procurement is possible from a single source only; where the supplier or contractor has exclusive rights in respect of the goods or services and no reasonable alternative or substitute exists; where the auction was held on several dates but there were no bidders or the bids offered were too low, etc., the normal rule may be departed from and such contracts may be awarded through private negotiations. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? The Indian Contract Act, 1872 and the Sale of Goods Act, 1930 are the major pieces of legislation governing contracts of sale/purchase of goods and services in general. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no laws specific to the procurement of technology in India. However, the Manual on Policies and Procedures for Purchase of Goods states that specifications should aim at procuring the latest technology and avoid procurement of obsolete goods. It is also provided that the period of a rate contract should normally be one year for stable technology products. In special cases, shorter or longer period may be considered. Further, the draft Telecom Policy, 2012 provides measures for incentivising telecom producers to use domestic products, i.e., telecom/information and Baker & McKenzie 37

54 communications technology equipment. It also aims to provide preferential market access for domestically manufactured products with a special emphasis on Indian products for which intellectual property rights reside in India to adequately address the strategic and security needs of the country consistent with international commitments. 8. Looking Ahead a. Are there any proposals to change the law in the future? Public Procurement Law Pursuant to the recommendations of the Committee on Public Procurement and the decisions of the Group of Ministers constituted to consider measures to tackle corruption and ensure transparency, as well as the announcement in the Prime Minister s Independence Day address regarding the introduction of a bill in Parliament to enact a piece of public procurement legislation, the Department of Expenditure, Ministry of Finance and Government of India ( DEA ) have prepared a draft Public Procurement Bill, 2011 ( Bill ). Some important features of the Bill are: Objective: Ensuring transparency, fair and equitable treatment of bidders, promoting competition and enhancing efficiency and cost effectiveness in the procurement process. Applicability: The following procuring entities are covered: (i) Ministries and Departments of the Central Government and their attached and subordinate offices; (ii) all Central Public Sector Enterprises ( CPSEs ) controlled by the Central Government; (iii) Central Purchase Organisations of the Central Government; (iv) Constitutional bodies whose expenditure is met from the Consolidated Fund of India; (v) any person, board, corporation, authority society or autonomous body established or constituted under an Act of Parliament or controlled by the Central Government; (vi) any other entity deemed by the Central Government to be a procuring entity for the purpose of the Bill. Exclusions: Procurement necessitated by disasters, public employment contracts; procurements under particular conditions or procedures of treaties, inter-governmental agreements or agreements with intergovernmental international financing institutions are, among other things, exempted from the provisions of the Bill. 38 Baker & McKenzie

55 Baker & McKenzie's Global Public Procurement Handbook India Needs determination: The procuring entity must first determine the need for the subject matter of procurement, including the scope and quantity. Supplemental Rules: The Central Government is to frame supplemental rules for the procurement of goods, works and services and any other rules as may be necessary to fulfil the obligations under the legislation, including public procurement for the purpose of national security, public private partnerships and procurement by CPSEs. Time-frame: The procurement process is to be completed within a reasonable time and not later than 120 days from the date of needs determination (longer periods may be prescribed for certain categories of procurement). In the case of delay, the procuring entity must record reasons for delay in writing. Record of proceedings: The procuring entity must maintain a record of proceedings covering, inter alia, needs determination, a statement of reasons for the choice of procurement method (if not open competitive bidding) and a summary of the bid evaluation. Integrity pact: An integrity pact is required to be entered into for such categories or procurements and above such threshold values as the Central Government may prescribe. The integrity pact covers all stages of procurement. The integrity pact deals with assuring a level playing field, initiation of disciplinary actions, review and oversight by independent monitors, commitments against paying illegal gratification and sanctions for such conduct. Contract terms and conditions: The Central Government may prescribe standard terms and conditions for procurement contracts. Procurement portal: The Central Government must set up and maintain a central public procurement portal for posting all matters which the legislation requires to be brought to the attention of the public. Registration of suppliers: Prospective bidders are invited to register as qualified bidders to participate in the bid process. Bid evaluation committee: A bid evaluation committee (or technical evaluation committee in the case of technical bids) is to be constituted and tasked with the responsibility of evaluating bids in accordance with the criteria specified in the bidding documents. Baker & McKenzie 39

56 Means of procurement: Open competitive bidding is the preferred means for procurement. The other permitted means of procurement are restricted bidding, two-stage bidding (technical and financial bids), competitive negotiations, single source procurement, electronic reverse auctions, request for quotations, purchase through purchase committee, purchase without quotations, framework agreements and rate contracts. Grievance redressal: A multi-stage grievance redressal mechanism has been put in place. At the first instance, an application is made to the procuring entity for reconsideration of its decision. Thereafter, a party aggrieved by the outcome of such requests for consideration can approach the grievance redressal committee constituted by the procuring entity. There is a separate grievance redressal committee for the preaward and post-award stages of the bid process. Only a participating bidder may take recourse to the dispute settlement mechanism following the notification of the selected bidder (i.e., the post-award stage). Appeals from orders of a grievance redressal committee can be made to the High Court. Subject to fulfilment of monetary thresholds that may be prescribed, the High Court may be directly approached by a party aggrieved by the outcome of a request for consideration. Offences: Punishment is prescribed for offences such as vexatious litigation, interference with the bid process and receipt or grant of undue gain. Public Procurement Policy for Goods Produced and Services Rendered by Micro and Small Enterprises On 1 November 2011, the Cabinet approved the draft Public Procurement Policy for goods produced and services rendered by Micro and Small Enterprises ( MSEs ) to be notified under Section 11 of the Micro, Small and Medium Enterprises Development (MSMED) Act, The salient features of this policy are: Central Ministries/Public Sector Undertakings ( PSUs ) shall set annual goals for the procurement from MSEs at the beginning of the year with the objective of procuring from MSEs a minimum of 20% of the total annual purchases in a period of three years. At the end of this period, the minimum of 20% will be made mandatory. Reasons for non-compliance are to be given to a review committee set up under this policy; out of the 20% target of annual procurement from MSEs, a sub-target of 4% (i.e. 20% out of 20%) will be earmarked for procurement from MSEs 40 Baker & McKenzie

57 Baker & McKenzie's Global Public Procurement Handbook India owned by entrepreneurs of the Schedules Castes or Scheduled Tribes ( SC/STs ). However, if such MSEs fail to participate in the tender process or meet tender requirements and the L1 price, the 4% sub-target for procurement earmarked for MSEs owned by SC/ST entrepreneurs will be met from other MSEs; MSEs quoting price within the band of L1+15% may also be allowed to supply a portion of the requirement by bringing down their prices to L1 price, in a situation where L1 price is from someone other than an MSE. Such MSEs may be allowed to supply up to 20% of the total tendered value. In cases where there is more than one such MSE, supply is shared equally; Central Ministries/PSUs will report goals set for procurement from MSEs and the achievement made against those goals in their respective Annual Reports; Central Ministries/PSUs will continue to procure from MSEs the 358 items reserved for exclusive purchase from them. This list will be reviewed; and defence armament imports and defence equipment (weapon systems, missiles, etc.) will not be included in computing the 20% goal for the Ministry of Defence. National Public Private Partnership Policy A draft National Public Private Partnership Policy ( PPP Policy ) has been issued by DEA. This policy defines public private partnerships ( PPP ) and lays down the essential conditions for meeting the PPP definition. Desirable conditions or good practices for PPP are also laid down. The policy facilitates expansion of the use of PPP in a consistent and effective manner. The following broad principles for pursuing PPP projects are set out: providing a fair and transparent framework to facilitate and encourage the PPP method of implementation and provision of public assets and/or related services; ensuring projects are planned, prioritized and managed to benefit users and maximize stakeholders economic returns; adopting an efficient, equitable, consistent, transparent and competitive process for selecting private partners and ensuring efficient governance over the project life cycle; Baker & McKenzie 41

58 protecting the interests of end users, persons affected by projects, private and public sector entities and other stakeholders; encouraging efficient delivery of public services by engaging proficient and innovative practices with the utilization of the best available skills, knowledge and resources in the private sector; achieving increased efficiency in the deployment of investments by setting out enabling frameworks for greater private sector participation in building future public assets and ensuring their long-term maintenance; and providing for requisite provision in budgets for contingent liabilities for the sponsoring government in various forms, such as liabilities towards lenders in case of contract termination or minimum revenue guarantees. The PPP Policy seeks to ensure that a value for money ( VfM ) rationale is adopted with optimal risk allocation in project structuring with a life cycle approach. VfM analysis shall be undertaken to support key decisions and to establish whether to develop a project as a PPP project and subsequently to affirm whether to award a PPP contract on the basis of the bids received. The PPP Policy envisages the publication of a defined set of PPP rules by the Government in order to guide and empower Government officers in structuring PPPs and decision making. The rules shall cover identification and procurement processes, critical clauses of contracts (such as dispute resolution and arbitration, events of force-majeure and termination), monitoring of projects and management of contracts. National Competition Policy DEA has issued a draft National Competition Policy ( NCP ). The Union Corporate Affairs Minister has announced that the NCP will receive Cabinet approval shortly, paving the way for the policy next year. The NCP aims at promoting a competition culture in the country. The NCP will also help promote good governance through transparency and accountability. The NCP guides ministries and state governments with respect to competition. It endeavours, among other things, to: preserve the competition process, protect competition, and encourage competition for optimized efficiency and maximised consumer welfare; promote, build and sustain a strong competition culture in the country; 42 Baker & McKenzie

59 Baker & McKenzie's Global Public Procurement Handbook India harmonize policies, laws and procedures of the Central and State Governments and sub-state Authorities vis-à-vis competition, with a focus on greater reliance on well-functioning markets; ensure competition in regulated sectors and an institutional mechanism to coordinate the relationship between and among sectoral regulators and the Competition Commission of India and prevent jurisdictional grid locks; strive for single national market; and ensure that consumers enjoy greater benefits in terms of wider choices and better quality of goods and services at competitive prices. The NCP in particular recognizes that substantial savings can be achieved in public procurement by encouraging greater competition, thereby releasing resources for much needed investment for social sector development in the country. Baker & McKenzie 43

60 Malaysia 1. The Laws a. What is the applicable legislation? There is no specific legislation for public procurement in Malaysia. However, the Malaysian Ministry of Finance ( MOF ) is the central agency which determines the government financial management policies, including government procurements. Section 6(1) of the Financial Procedure Act 1957 empowers the Minister of Finance to supervise and coordinate government procurements. Pursuant to this, the MOF has issued Treasury Instructions, Treasury Circulars and regulations in relation to government procurements. For ICT procurement, there are also applicable circulars from the Prime Minister s Department. These do not constitute legislation per se. For purposes of increasing efficiency in the management of the finances in the various government departments, the MOF practices the concept of decentralisation through the delegation of powers, in which the various Ministries are authorised to manage their own procurements within their own Ministries. Thus, depending on the type and nature of dealing a party has with the government and which government body that party intends to deal with, there may be different or additional procedures, practices and policies applicable. The various Ministries may also have specific administrative guidelines as to how and with whom they may contract with. These guidelines are generally administrative in nature only and not legally binding. Although non-compliance with these guidelines will not give rise to any legal penalties or implications, the relevant Ministries will generally refuse to deal with the party in question unless the guidelines are met. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Does not apply. 44 Baker & McKenzie

61 Baker & McKenzie's Global Public Procurement Handbook Malaysia c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The principles for government procurement in Malaysia are public accountability, transparency, best value for money, open competition and fair dealing. It should, however, be mentioned that due to Malaysia s Bumiputera affirmative policy, certain government procurement contracts are only available to Bumiputera suppliers, i.e., companies whose shareholders, directors and/or management hold Bumiputera status, namely persons who are deemed to be native to the land. Hence, there may not be entirely equal treatment in this respect. d. Is aerospace and defence procurement treated differently from other types of procurement? No, the application procedure is technically the same as other types of procurement. It should, however, be noted that there are different requirements by the respective Ministries which are not publicly available, depending on the type and nature of dealing the party has with them. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? All public agencies of the Malaysian government ministries and department, statutory bodies and some government-linked companies are subject to the MOF s Treasury Instructions and Treasury Circulars. b. Which private entities are covered by the laws? A company who wishes to supply products or services to any government agency must first register with the MOF as a supplier or consultant via the eperolehan system. Generally, any company incorporated in Malaysia is qualified to register. However, companies are categorized as follows: standard registration a company owned by Malaysians or foreigners; Bumiputera-status registration a company owned by Malaysians or foreigners but where the composition of its shareholders, Board of Directors, management and staff are at least 51% Bumiputera; and wholly Bumiputera registration a company owned by Malaysians and where the composition of its shareholders, Board of Directors and management are 100% Bumiputera. Baker & McKenzie 45

62 c. Which types of contracts are covered? All contracts for supplies and services. d. Are there anti-avoidance rules (including laws on bid rigging)? The Competition Act 2010 will come into force on 1 January 2012 and specifically provides that bid rigging between enterprises which operate at the same level in the production or distribution chain is deemed to have the object of significantly preventing, restricting or distorting competition in the relevant market for goods/services and amounts to an infringement. The Malaysian Competition Commission can impose a financial penalty of up to ten per cent (10%) of the worldwide turnover of an enterprise over the period during which an infringement occurred. The Treasury Circulars also set out the penalties and consequences for violations. 3. Procurement Procedures a. What procurement procedures can be followed? As mentioned above, a company which wishes to supply products to any government agency must first register with the MOF as a Supplier via the eperolehan online system. Where the goods and services to be supplied cost in excess of RM500,000 per annum, an open tender must be issued by the relevant Ministry. There are two types of tenders: (i) local tenders (the product will be supplied from within Malaysia); and (ii) international tenders (the product will be supplied from outside of Malaysia). For goods and services that cost above RM50,000 but below RM500,000, procurement is via quotation. Contracts for goods and services below RM50,000 per annum can be procured via direct purchase. For works, an open tender is to be issued where the cost is in excess of RM500,000; quotations are made for works costing between RM20,000 and below RM500,000; while contracts for works below RM20,000 are to be procured through direct purchase. b. Are there any rules on the specifications/criteria? The actual specifications/criteria for procurement are largely dependant on the type and nature of the dealing the party has with the relevant Ministry. 46 Baker & McKenzie

63 Baker & McKenzie's Global Public Procurement Handbook Malaysia c. Can certain prospective bidders be excluded from the competition? If the Treasury Instruction or Treasury Circulars specify that only certain types of suppliers, e.g., Bumiputera companies, are eligible for a bid, then those suppliers who do not comply with these requirements will be excluded. d. Are there any rules on the awarding of contracts? Yes, the Treasury Instructions and Treasury Circulars set out the rules, procedure and contract value thresholds. They differ depending on the type of procurement. For example, in the appointment of consultants, at least five consulting firms registered in the relevant area must be shortlisted and invited to make an offer. e. Can bidders combine to submit a bid? This is not prohibited per se, and consortiums are known to bid for projects. However, for technical reasons, bidders who combine to submit a bid would generally do so under only one registered entity. f. Are there any rules on alternative bids? Does not apply. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? See Section 3a above. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? No. b. Are remedies available outside the scope of the legislation? Yes, under common law and judicial review. c. Is there a specific forum before which disputes are heard? No. Baker & McKenzie 47

64 d. Are there any timing requirements where a party wants to enforce? The Malaysian Limitation Act 1953 applies to proceedings against the Government of Malaysia. Accordingly, actions cannot be brought against the government after the expiration of six years from the date on which the cause of action accrued for actions founded on a contract with the government. The Malaysian Limitation Act 1953 applies not just to actions under contract, but also to actions under tort and certain ancillary types of actions. As mentioned above, there is no specific, regulatory enforcement mechanism or forum in relation to public procurement. However, assuming that there is no contract entered into and a bidder is seeking recourse for not being awarded a contract, unless the bidder could somehow rely on tort, it would be a matter for judicial review, which is a general recourse available against public bodies, although this has never been invoked in a procurement case. Under judicial review, the deadline to appeal to the High Court is 40 days from the decision that the bidder is aggrieved by. e. What are the leading court decisions involving procurement disputes? There are no high profile or landmark cases involving procurement disputes with the Malaysian government. Recent cases include High Court cases KFH Ijarah House (M) Sdn Bhd v. Government of Malaysia [2011] 4 CLJ 328, and Macrotac Enterprise & Ors v. Pengarah Pendidikan Negeri Selangor & Ors [2010] 8 CLJ 592 that relate to capacity to contract. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? There is no further legislation relating specifically to procurement by public agencies. However, Malaysia s anti-corruption laws would naturally apply, in particular the Penal Code and the Malaysian Anti-Corruption Commission Act Technology Law a. Are there any specific laws or practices that apply when procuring technology? No. 48 Baker & McKenzie

65 Baker & McKenzie's Global Public Procurement Handbook Malaysia 8. Looking Ahead a. Are there any proposals to change the law in the future? Not at this time. Baker & McKenzie 49

66 Singapore 1. The Laws a. What is the applicable legislation? The laws governing public sector procurement are primarily set out in the Government Procurement Act (Cap. 120) ( GPA ) and subsidiary legislation promulgated thereunder, namely the Government Procurement Regulations ( GP Regulations ), the Government Procurement (Challenge Proceedings) Regulations ( Challenge Proceedings Regulations ), the Government Procurement (Application) Order ( Application Order ) and the Government Procurement Act (Commencement) Notification. Detailed and comprehensive guidelines on the conduct of government procurement are set out in a section of the Instruction Manual issued by the Ministry of Finance to all public sector officers ( IM on Procurement ). However, the IM on Procurement is only accessible on the government intranet and is not made available to the general public. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The GPA is intended to give effect to Singapore s obligations under international treaties, in particular the plurilateral 1994 Agreement on Government Procurement established under the auspices of the World Trade Organisation ( 1994 Agreement ). Obligations on government procurement can also be found in various bilateral and multilateral treaties that Singapore has entered into, including the Agreement between New Zealand and Singapore on a Closer Economic Partnership ( ANZSCEP ), the Agreement between Japan and Singapore for a New Age Economic Partnership ( JSEPA ), the EFTA-Singapore Free Trade Agreement ( ESFTA ), the Singapore-Australia Free Trade Agreement ( SAFTA ) and the United States-Singapore Free Trade Agreement ( USSFTA ). 50 Baker & McKenzie

67 Baker & McKenzie's Global Public Procurement Handbook Singapore c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The framework for public sector procurement enshrines the Singapore government s commitment to the following principles: openness and fairness suppliers should be given equal access to opportunities and compete on a level playing field in order to ensure that the best offers possible are received. transparency all stages of the procurement lifecycle should be open and transparent and the objectives, criteria and procedures associated with the procurement should, as far as possible, be made known to suppliers. value for money the selected supplier should offer the best value for money (i.e., the optimal balance of benefits measured against the total cost of ownership); the tender does not need to be awarded to the lowest bidder. d. Is aerospace and defence procurement treated differently from other types of procurement? The GPA applies in respect of procurement by the Ministry of Defence, but only in relation to certain categories of goods listed in the Fifth Schedule of the Application Order. The list is mainly comprised of generic goods or goods of a non-sensitive nature (e.g., motor vehicles, engine accessories, furniture, office supplies, clothing, personal equipment, and toiletries). This implies that the procurement of other goods by the Ministry of Defence, such as the purchase of major military equipment, weapons, arms and munitions, is excluded from the ambit of the GPA. This is in line with the exception set out in paragraph 1 of Article XXIII of the 1994 Agreement in relation to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defence purposes. In a similar vein, the GPA does not apply to procurement undertaken by certain agencies under the Ministry of Home Affairs (e.g., the Criminal Investigation Department of the Singapore Police Force) or to procurement undertaken by the Ministry of Home Affairs that has security implications. Baker & McKenzie 51

68 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The GPA applies to public sector agencies that are listed in the Second Schedule of the Application Order ( contracting authorities ). Most Ministries, organs of state, statutory boards and other quasi-governmental organisations are included in the list. As a city-state, Singapore does not have local government or sub-central governmental authorities. The bulk of government procurement activities is decentralised to individual contracting authorities, to be carried out under the framework discussed in this chapter. However, in order to reap economies of scale, certain agencies may call tenders for bulk purchases or practice demand aggregation on behalf of the entire Singapore government in the procurement of common goods and services. For example, the Infocomm Development Authority of Singapore is often appointed to source for suppliers to provide IT security services, network infrastructure or other IT or communications services on behalf of other government agencies. b. Which private entities are covered by the laws? The GPA does not apply to private sector entities. c. Which types of contracts are covered? The GPA applies to the procurement of goods and certain types of services listed in the Third and Fourth Schedules of the Application Order (or a combination thereof) by all contracting authorities, other than the Ministry of Defence. Although the Ministry of Defence is a contracting authority, as noted in Section 1(d) above, the GPA only applies in respect of the procurement of certain goods by the Ministry. There is also a requirement that the value of the contract in question exceeds a certain threshold. d. Are there anti-avoidance rules (including laws on bid rigging)? The GP Regulations set out certain rules that contracting authorities are required to comply with in undertaking procurement exercises, and contracting authorities are not allowed to prepare technical specifications or use the qualification procedure in such a manner as to avoid the application 52 Baker & McKenzie

69 Baker & McKenzie's Global Public Procurement Handbook Singapore of such rules. Further, where a contracting authority undertakes a procurement through an agent (who is not a contracting authority), the contracting authority is required to ensure that the agent abides by the principles of national treatment and non-discrimination. Where suppliers are concerned, section 34 of the Competition Act seeks to prohibit agreements, decisions or concerted practices between suppliers which are intended to or have the effect of preventing, restricting or distorting competition within Singapore. Such agreements should have an appreciable effect in respect of the prevention, restriction or distortion of competition, but bid rigging and other types of collusive conduct during the tender process will always have an appreciable adverse effect. 3. Procurement Procedures a. What procurement procedures can be followed? The Defence Science & Technology Agency operates a common e- procurement system for the entire public sector known as GeBiz. Other than small value purchases (where the estimated procurement value is less than S$3,000) and certain other limited exceptions (e.g., where purchase is from a sole source), all government procurement is centralised into this onestop portal. Based upon our understanding of the section titled Contracts and Purchasing Procedures in the Instruction Manual ( IM3B ), which as noted above is not publicly available, public sector agencies will issue quotations where the estimated procurement value exceeds S$3,000 but is below S$70,000, and use a tender process where the estimated procurement value exceeds S$70,000. IM3B has been replaced by the IM on Procurement, but we expect that the position under the latter would be the same. The tendering procedure can be either open, selective or limited. Under the GP Regulations, contracting authorities are generally required to use the open procedure (all interested suppliers may submit a tender) or the selective procedure (only suppliers invited to submit a tender may do so) in undertaking a procurement exercise. The open procedure typically comprises four stages: (i) inviting offers from the public; (ii) submission and receipt of offers; (iii) verification, evaluation and recommendation of offer; and (iv) approval and award. Under the selective procedure, only suppliers invited to do so by the contracting authority may submit an offer. This method is usually adopted in Baker & McKenzie 53

70 relation to complex public sector projects which require suppliers with sophisticated and high-level know-how, capabilities and experiences. Thus, where a selective tender is carried out, a qualification of interested suppliers has to be carried out. Once suppliers are qualified based on their capabilities, the tender will generally follow the process set out in relation to the open procedure. Contracting authorities are only allowed to use a limited tendering procedure (whereby no tender is called or suppliers are invited individually to submit a tender) in certain circumstances. This is covered in greater detail in Section 4(a) below. b. Are there any rules on the specifications/criteria? There are mandatory requirements governing the technical specifications issued by contracting authorities under the GP Regulations. These are mainly designed to ensure that the technical specifications are in terms of performance rather than specific design or descriptive characteristics, and do not refer to specific goods or services (e.g., goods or services from a particular producer), unless accompanied by the words or equivalent. Technical specifications should be based on applicable international standards or, where no such international standards exist, applicable local standards. From our experience, there are also certain requirements relating to the requirement specifications portion of a tender in IM3B (and presumably in the IM on Procurement). For example, requirement specifications shall include at least the following information: a complete description of the goods or services required and any additional requirements to be fulfilled (including technical specifications); the quantity of the items required; and the time-limits for delivery of the items. It is recognised that in certain cases, the contracting authority may wish to provide for some flexibility in the requirements to allow for diversity in the proposals submitted by bidders. In such instances, the contracting authority may issue a request for proposal based on requirements that are crafted more loosely, and enter into discussions with prospective suppliers on the precise scope of works pursuant to this process. 54 Baker & McKenzie

71 Baker & McKenzie's Global Public Procurement Handbook Singapore c. Can certain prospective bidders be excluded from the competition? Yes, certain prospective bidders may be excluded if a selective tender procedure is utilised. As mentioned in Section 3(a) above, this process envisages that suppliers will need to be qualified before they are invited to respond to the tender. Please note however that even if an open tender procedure is used, it is possible for contracting authorities to invoke a two-stage tendering process whereby only tenderers shortlisted in accordance with the evaluation criteria set out in the tender may proceed to the second stage of tendering. It is also possible to exclude all prospective bidders but one if the relevant contracting authority is entitled to employ the limited tendering procedure (see Section 4(a) below). Finally, certain prospective bidders may be excluded on the basis that they have been disbarred from participating in government procurement exercises by the Standing Committee on Debarment. There are various grounds for debarment, but these typically revolve around some form of default or contravention of government contracts or tendering procedures by the supplier (e.g., contract terminated for breach, withdrawal of tenders prior to award). In general, the period of debarment is commensurate with the financial or material losses suffered by the government agency and the need to protect other government agencies from the defaulting supplier. d. Are there any rules on the awarding of contracts? Under the GP Regulations, a contracting authority shall award the contract to the tenderer which the contracting authority has determined to be fully capable of complying with the terms and conditions of the contract, and whose tender: offers the lowest price, or has been determined by the contracting authority to be the most advantageous; and fully complies with the criteria for the award of the contract and the essential requirements, as set out in the contract documents. A contracting authority may decide not to award the contract if it is of the opinion that it is in the public interest not to do so. In practice, evaluations leading to the award of tender is carried out by a tender evaluation committee ( TEC ) comprising of procurement officers, Baker & McKenzie 55

72 representatives from user departments and technical specialists. The TEC may recommend the award of the tender to one or more tenderers, or recommend that no award be made (whether all tender proposals have been evaluated or not). However, the final decision to award the tender is vested with the Tender Approving Authority ( TAA ). The members in the TAA must be different from those in the TEC. e. Can bidders combine to submit a bid? There are no mandatory rules in respect of combined bids from two or more bidders. We note that the terms and conditions governing most public sector tenders allow for submissions by a consortium. f. Are there any rules on alternative bids? There are no mandatory rules in respect of the submission of alternative bids. In practice, the contracting authority will typically state in the tender documentation if it is willing to consider an alternative offer from tenderers. If the contracting authority is willing to do so, tenderers have the option of submitting an alternative bid which functionally meets the technical specifications, but uses different materials, designs or processes from those specified in the tender. However, the relevant tenderer would still have to submit a base offer which meets all the requirement specifications. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? A contracting authority is only permitted to use a limited tendering procedure (whereby no tender is called or suppliers are invited individually to submit a tender) for procurement in certain circumstances, such as: where an open or selective tender procedure was used but no tender was received; when the goods or service to be procured can only be supplied by a particular supplier for technical reasons, or for reasons connected with the protection of exclusive rights (such as intellectual property rights), or by reason of being a work of art; when (but only if it is strictly necessary), for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the 56 Baker & McKenzie

73 Baker & McKenzie's Global Public Procurement Handbook Singapore goods or service cannot be obtained in time by means of the open procedure or the selective procedure; or when the service to be procured is an extension of an existing service, and where to obtain the service from a person other than the person who performed the existing service will result in the contracting authority obtaining a service not meeting its requirements of interchangeability with existing goods, installation or service. Further, a contracting authority must not carry out limited tendering with a view to avoiding competition or protecting suppliers established in Singapore or otherwise in a manner which is discriminatory against any applicable supplier. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Under the GPA, a contracting authority undertaking a relevant procurement has a duty to comply with the procurement framework set out in the GP Regulations. The breach of such duty by a contracting authority cannot be made the subject of any court proceedings. However, a challenge may be submitted by a relevant supplier who has suffered loss or damage as a result of the breach, or reasonably risks suffering such loss or damage. Such a challenge would be brought before the Government Procurement Adjudication Tribunal ( Tribunal ) pursuant to the process set out in the GPA and the Challenge Proceedings Regulations. b. Are remedies available outside the scope of the legislation? In theory it may be possible to allege a breach of statutory duties if a contracting authority fails to comply with the guidelines set out in the IM on Procurement. However, such a course of action has not been tested in the courts. Errant officers may potentially be subject to disciplinary proceedings if they are found to be personally culpable for any non-compliance with the IM on Procurement. Baker & McKenzie 57

74 c. Is there a specific forum before which disputes are heard? As mentioned in Section 5(a) above, complaints alleging contravention of the procurement rules set out in the GP Regulations will be brought before the Tribunal. d. Are there any timing requirements where a party wants to enforce? A relevant supplier will need to lodge a notice of challenge with the Tribunal no more than 15 days after the date on which the facts constituting the basis of the challenge first took place. e. What are the leading court decisions involving procurement disputes? We are not aware of any decisions issued by the Tribunal to date. As mentioned in Section 5(a) above, disputes relating to the adherence of contracting agencies to government procurement rules cannot be heard in court. There have been some court decisions on disputes arising from government contracts (i.e., post-award) but these do not relate to the procurement process. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Other pieces of legislation may contain provisions which are relevant to the procurement process. For example, the payment of bribes and other conduct which impinge upon the integrity or impartiality of personnel involved in the procurement process may constitute offences under the Prevention of Corruption Act (Cap. 241) and/or the Penal Code (Cap. 224). Anticompetitive conduct such as bid rigging would be regulated under the Competition Act (Cap. 50B) (see Section 2(d) above). 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? No, the government procurement rules described above apply to technology as well as other goods and services. 58 Baker & McKenzie

75 Baker & McKenzie's Global Public Procurement Handbook Singapore 8. Looking Ahead a. Are there any proposals to change the law in the future? We do not foresee significant changes to the law. However, we do expect that the detailed implementation of the government procurement rules as set out in the IM on Procurement may be tightened to provide for more checks and balances and mitigating controls against fraud and other instances of non-compliance. For example, in what is perhaps the most massive case of public sector fraud uncovered in Singapore, several officers of the Singapore Land Authority and their accomplices were recently charged with cheating the Authority of approximately S$12 million over the course of 2 years. The two senior employees were accused of rendering false invoices for fictitious IT maintenance and other services through various business entities set up by external parties. They apparently escaped detection by conspiring with each other and the external parties to circumvent the checks and balances that were in place. As a result, new roles and other requirements were implemented by the Singapore government in order to strengthen the system against similar crimes in the future. Further, the Auditor-General s Office ( AGO ), which audits government ministries, organs of state, statutory boards and government funds on the proper accounting of public funds and use of public resources, has reported various instances of non-compliance with government procurement rules over the years. In its most recent report for 2010/ 2011, the Auditor-General notes that many of the lapses found in the audits are in respect of procurement, and arose when the fundamental principles of government procurement are not adhered to. Examples offered by the AGO include agencies waiving competition based on weak grounds, setting an unrealistically short period for submission of bids thereby limiting competition, not giving equal opportunity to tenderers to revise their bid price when requirements were changed, and accepting a tender which did not meet tender specifications. In this report, the AGO found pervasive lapses in two projects undertaken by the Police Coast Guard, which resulted in the department being grossly overcharged and making large payments for materials before delivery. Several agencies were also censured for providing inaccurate or incomplete information to TAAs for their decision on the acceptance of a tender. Baker & McKenzie 59

76 We expect that the Singapore government may seek to tighten processes to prevent a recurrence of such lapses. 60 Baker & McKenzie

77 Baker & McKenzie's Global Public Procurement Handbook Taiwan Taiwan 1. The Laws a. What is the applicable legislation? In Taiwan, the applicable law regarding public procurement is the Government Procurement Law (the GPL ). In addition, the World Trade Organization Government Procurement Committee adopted Taiwan s accession to the Agreement on Government Procurement (the GPA ) on 9 December After the internal process of administration and legislation, the GPA started to apply to Taiwan s public procurement on 5 July As such, both the GPL and GPA apply to public procurement in Taiwan but the GPL is the main applicable law. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? No, the GPL does not relate to or interact with any applicable trade agreements. The GPA is a plurilateral agreement regarding the public procurement market and can be regarded as a trade agreement among members. There are 42 members in the GPA to date. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? According to Article 6 of the GPL, an entity should observe the principles of protecting public interests, fairness and reasonableness, and must not accord differential treatment to suppliers without due cause in conducting any procurement. In addition, the preamble of the GPA provides that it is desirable to provide transparency of laws, regulations, procedures and practices regarding government procurement. Baker & McKenzie 61

78 d. Is aerospace and defence procurement treated differently from other types of procurement? No, aerospace procurement is not treated differently from other types of procurement. With respect to defence procurement, the GPL provides the exception due to the nature of the procurement. Article 104 of the GPL provides that if the procurement is for weapons, ammunition, war supplies, or related to national security or national defence and one of the following circumstances exists, the GPL does not apply: where the nation is confronted with a war, in mobilization for a war, or in a war; where the procurement is a confidential or strictly confidential one (Articles 27, 45 and 61 of the GPL may not apply); where there is an emergency which may jeopardize an important military mission (Articles 26, 28, and 36 of the GPL may not apply); or where there is only one supplier invited for tendering (the first sentence of paragraph 3 of Articles 26 of the GPL may not apply). 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? According to Article 3 of the GPL, public procurement conducted by any government agency, public school or government-owned enterprise (the entity ) will be governed by the GPL. b. Which private entities are covered by the laws? According to Article 4 of the GPL, a juridical person or organization which takes a grant from an entity should conduct a procurement in accordance with the GPL provided that the amount of the grant is not less than half of the procurement value and also reaches the threshold for publication. c. Which types of contracts are covered? According to Article 7 of the GPL, the public procurement includes construction work, property and service. As such, the contracts of construction work, property and service are covered in the GPL. 62 Baker & McKenzie

79 Baker & McKenzie's Global Public Procurement Handbook Taiwan d. Are there anti-avoidance rules (including laws on bid rigging)? Yes, Articles 87 and 88 of the GPL set forth the anti-avoidance rules. Under Article 87 of the GPL, the following are crimes: a person commits violence or threat, administers drugs, or applies hypnosis with the intent to cause a supplier not to tender or to tender contrary to its real intention, or cause the winning tenderer to forego the award or to assign or subcontract after award; a person commits fraud or uses any other illegal means to make the supplier unable to tender or cause the opening of tenders to have an incorrect result; a person causes the supplier not to tender or not to proceed with price competition by means of contract, agreement or other forms of meeting of minds, with the intent to adversely affect the price of award or to gain illegal benefits; or a person borrows or assumes another s name or certificate to tender, with the intent to adversely affect the result of procurement or to gain illegal benefits. Article 88 of the GPL further provides that it is crime if a personnel of a supplier who is entrusted by an entity to conduct planning, design, review, monitoring, project management, or procurement imposes unlawful restrictions or review on the technologies, technical methodology, materials, equipment, or specifications with the intent to gain personal illegal benefits and thereby obtains benefits. Further, the Fair Trade Law in Taiwan provides regulations, such as Article 24, regarding punishment for anti-competitive conduct. 3. Procurement Procedures a. What procurement procedures can be followed? The tendering procedures include open tendering, selective tendering, and limited tendering. The term open tendering procedures means the procedures under which a public notice is given to invite all interested suppliers to submit their tenders. Baker & McKenzie 63

80 The term selective tendering procedures means the procedures under which a public notice is given to invite all interested suppliers to submit their qualification documents for pre-qualification evaluation based upon specific qualification requirements and, after such evaluation, the qualified suppliers are invited to tender. The term limited tendering procedures means the procedures under which, where no public notice is given, two or more suppliers are invited to compete or only one supplier is invited for tendering. The procuring entity should prepare the tender documentation based on the type of tendering procedures mentioned above. The entity can stipulate the criterion of the bidder and other requirements the entity thinks fit in the tender documentation. For open tendering or selective tendering procedures, an entity must publish a notice of invitation to tender or of qualification evaluation in the Government Procurement Gazette, and also make it available on the information network. The bidder should follow the requirements in the tender documentation and prepare the bidder documentation. The tender should be submitted in writing and sealed, by mail or personal delivery, and at the procurement entity or any designated place before the deadline for tendering. b. Are there any rules on the specifications/criteria? Yes, Article 36 paragraph 1 of the GPL provides that an entity may prescribe basic qualifications of tenderers based upon actual needs. However, the entity should not restrain competition unduly and must only prescribe the qualifications essential to contract performance in prescribing the qualifications. A tender submitted by a supplier who does not meet the qualification requirements must not be accepted. c. Can certain prospective bidders be excluded from the competition? Yes, certain prospective bidders may be excluded from the competition for a number of reasons listed in Article 101 of the GPL, such as poor performance under an earlier contract with the public agency, forgery of certificate or bidder documentation, bankruptcy, or discrimination against women or aboriginals. 64 Baker & McKenzie

81 Baker & McKenzie's Global Public Procurement Handbook Taiwan In addition, as stated above, it is also possible to exclude prospective bidders from the competition through a pre-qualification process which is specifically stated in the tendering documentation. Where a pre-qualification process has been established, only those that met the requirements may submit a bid. d. Are there any rules on the awarding of contracts? Article 52 of the GPL provides that the awarding of a contract should follow one of the following principles, and the principle adopted should be specified in the tender documentation: where a government estimate is set for the procurement, a tenderer whose tender meets the requirements set forth in the tender documentation and is the lowest tender within the government estimate shall be awarded; where no government estimate is set for the procurement, a tenderer whose tender not only meets the requirements set forth in the tender documentation with a reasonable price, but also is the lowest tender within the budget amount shall be the winning tenderer; the tenderer whose tender meets the requirements set forth in the tender documentation and is the most advantageous one shall be the winning tenderer; or to adopt multiple award. An entity may prescribe in the tender documentation that contracts may be awarded to different tenderers by different items or different quantities, but the spirit of competition as to the lowest price or the most advantageous tender shall be respected. Article 56 of the GPL further provides that where an award is conducted in accordance with the third principle above, the evaluation criteria set forth in the tender documentation should be used to determine the most advantageous tender by comprehensively evaluating the technology, quality, function, commercial terms, or price of the tenders with ranking or score. The most advantageous tender should be determined by the head of the procuring entity or the concurrence of the majority of the evaluation committee. If the most advantageous tender is unable to be determined, negotiations may be conducted, and then another comprehensive evaluation must be made to determine the most advantageous tender. Baker & McKenzie 65

82 e. Can bidders combine to submit a bid? According to Article 25 of the GPL, the procurement entity may, by the provisions set forth in the tender documentation, allow the bidders to combine to submit a bid depending on the characteristics of an individual procurement. However, the joint tendering should only be permitted where it can increase the competition among suppliers or not restrain competition without due cause. f. Are there any rules on alternative bids? Pursuant to Article 35 of the GPL, the procurement entity may provide in the tender documentation that a supplier is allowed to submit an alternative bid before the deadline of the tender in technology, technical methodology, materials, or equipment to shorten the construction period, save expenditure, or increase the efficiency, provided that the original function requirement is not impaired. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Except as otherwise stated in Section 3(a) or where otherwise prohibited by the treaties or agreements to which Taiwan is a party, Articles 43 and 44 of the GPL stipulate the exemptions to competitive bidding by specifying the provisions which are preferable to the domestic bidders or suppliers. According to Article 43 of the GPL, the procurement entity conducting a procurement may specify one of the following measures in the tender documentation: to request from a tenderer commitments to purchase goods locally produced to a certain extent, transfer technology, have inward investment, facilitate local export, or take any other similar measures, and include such commitments in evaluation, provided that they should not weigh over one-third in the evaluation; where a foreign supplier s tender is the lowest tender according to the principle of contract award prescribed in Article 52, a domestic supplier may be awarded at such a price by preference. Where a foreign supplier s tender is the lowest bid according to the principle of contract award prescribed in Article 52, an entity conducting a particular procurement may, except where otherwise prohibited by the treaties or agreements to which the nation is a party, award by preference to a local 66 Baker & McKenzie

83 Baker & McKenzie's Global Public Procurement Handbook Taiwan supplier which supplies property with at least 50% value added locally, or supplies construction work or service locally, provided that the awarded price should not exceed the aforementioned lowest bid by a certain percentage. No preference should be given except when such preference meets the policies of employment or industrial development, and there should be no percentage exceeding 3% or period of preference exceeding five years. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? According to Article 75 of the GPL, with regard to disputes arising from the tendering or awarding proceedings, the participating or unsuccessful bidder may file an objection against the decisions made or the award result rendered with the procurement entity. If the bidder is not satisfied with the result of the objection it raised, it may seek further remedies with the Public Construction Commission ( PCC ), Executive Yuan, or the comment authority of the GPL. b. Are remedies available outside the scope of the legislation? After the procurement contract is awarded to and concluded with the successful bidder, any disputes in connection with the performance of the procurement contract should be conducted in accordance with the dispute resolution mechanisms which include the mediation proceedings hosted by the PCC, lawsuits in the civil courts, or the arbitration proceedings held by the arbitral tribunal, which requires that the parties have an arbitration agreement in writing for the dispute. c. Is there a specific forum before which disputes are heard? For disputes arising from the tender or award proceedings, the forum before which the disputes are heard is the procurement entity which made the decisions of the procurement or rendered the award result. The Instructions to Bidder ( ITB ) of a government procurement will usually prescribe how disputes will be treated. d. Are there any timing requirements where a party wants to enforce? With regard to disputes arising from the tender or award proceedings, Article 75 of the GPL requires the participating or unsuccessful bidder who would like to file an objection against the decisions or the award result to file the Baker & McKenzie 67

84 objection within 10 days after the notice issued by the procurement entity is received or the publication is announced. The ITB of a government procurement will usually provide for the time frame within which the contract needs to be executed by the awarded party and the procurement entity. As to disputes concerning the performance of the procurement contract, the time frame in which a claim can be made in respect of a right will vary in accordance with the statutory time limitation pertaining to such right. e. What are the leading court decisions involving procurement disputes? In Taiwan, there are several court decisions involving procurement disputes. A resolution rendered by the Supreme Administrative Court in 2004 held that a dispute arising from the tender or award proceedings should be regarded as a dispute pertaining to public laws, and the remedies resorted to for such disputes must involve administrative proceedings and the administrative courts. A dispute between the awarded party and the entity after the contract is awarded and concluded should be regarded as a dispute pertaining to civil laws and the remedies for such disputes should involve the civil courts or arbitration proceedings in case the parties have an arbitration agreement. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? In addition to the GPL, the Law of Administrative Procedures, the Act of Anticorruption, and the Ethics Regulations for the Procurement Personnel promulgated by the PCC are relevant to procurement by public agencies. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws or practices that apply when procuring technology. However, the procurement entities can prescribe specific terms and conditions in the procurement contract by and between the agencies and the awarded party for the procurement of technology. 68 Baker & McKenzie

85 Baker & McKenzie's Global Public Procurement Handbook Taiwan 8. Looking Ahead a. Are there any proposals to change the law in the future? As far as we know, the PCC has promoted a proposal for green procurement which encourages public entities to procure more green or eco-friendly products. In addition, the PCC has also proposed amendments to the current regulations governing public construction quality management. These proposals have not yet been approved by the Legislative Yuan. Baker & McKenzie 69

86 Thailand 1. The Laws a. What is the applicable legislation? The Regulations of the Office of the Prime Minister on Procurement, B.E (A.D. 1992), as amended (the Procurement Regulations ), are the applicable laws which establish uniform policies and procedures for the purchase of goods and hire of work by government agencies. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The Procurement Regulations do not relate to or interact with any applicable trade agreement. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The basic underlying principles of the Procurement Regulations framework are not only value and method of procurement but also transparency and equal treatment. d. Is aerospace and defence procurement treated differently from other types of procurement? The Procurement Regulations generally apply to public procurements. Aerospace and defence procurements are not treated differently from other types of procurement. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? Government agencies are governed by the Procurement Regulations. However, government agencies do not include state-owned enterprises or agencies under the law on local administration or other agencies for which the law provides that they have the status of a local administration. As a result, state-owned enterprises and agencies under the law on local 70 Baker & McKenzie

87 Baker & McKenzie's Global Public Procurement Handbook Thailand administration are not bound to follow the Procurement Regulations. Nonetheless, in practice, state-owned enterprises and agencies under the law on local administration mostly or fully adopt the regulations set forth in the Procurement Regulations. b. Which private entities are covered by the laws? Does not apply. c. Which types of contracts are covered? All types of contracts are governed by the Procurement Regulations. It should be noted that, if necessary, the contract to be signed by the government agencies may contain terms or details that are different from the sample contract (provided by the Office of the Attorney-General) as long as they are as essential as those in the sample contract and do not cause disadvantage to the government agencies. If the chief of a government agency finds that any additional or amended terms would cause disadvantage to the government agency or has loopholes, the draft of the contract has to be sent to the Office of the Attorney-General for prior consideration. d. Are there anti-avoidance rules (including laws on bid rigging)? The officials are strictly required to comply with the regulations set forth in the Procurement Regulations. Any official who intentionally or through negligence fails to comply with the Procurement Regulations, or acts in bad faith or beyond his power or duty, including circumstances that facilitate a person offering a price for work or obstructing fair competition, shall be deemed to have committed a disciplinary infraction and will be subject to civil and/or criminal liability, which may also relate to the Act on Offenses Relating to the Submission of Bids to State Agencies, B.E (A.D. 1999), generally referred to as the Bid Rigging Act. The Bid Rigging Act is intended to maintain and encourage competitive bidding processes, and focuses on conspiracies to lessen competition, including sub-contract bid rigging and bid suppression. Violation of the Act may lead to a severe criminal penalty. 3. Procurement Procedures a. What procurement procedures can be followed? Under the Procurement Regulations, there are five methods for the purchase of goods and hire of work procedures to be followed: price agreement Baker & McKenzie 71

88 method, price inquiry method, bidding method, special method, and special case method (plus e-bidding method). b. Are there any rules on the specifications/criteria? The five methods of procurements are subject to varying prices of purchasing or hiring and/or criteria. c. Can certain prospective bidders be excluded from the competition? Prospective bidders can be excluded from the competition for a number of reasons, such as being blacklisted by government agencies. It is also possible to exclude prospective bidders from competition through a prequalification process where, for instance, prospective bidders must meet qualifications set out in the Term of Reference (TOR) or a Request for Proposal (RFP), such as experience and registered capital of the entity. d. Are there any rules on the awarding of contracts? The main rule is that contracts must be awarded in accordance with the rules set out in the TOR or RFP and the Procurement Regulations (including a government agency s policies and procedures). e. Can bidders combine to submit a bid? There is a rule under the Procurement Regulations called Bidder with Joint Benefits which prohibits bidders from joining together to submit a bid. Also, bidders need to be mindful of the requirements under the Bid Rigging Act. f. Are there any rules on alternative bids? There are no rules on alternative bids. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? In addition to the methods set out in Section 3(a), an exemption may be given if approval is granted by Cabinet resolution on a case-by-case basis. 72 Baker & McKenzie

89 Baker & McKenzie's Global Public Procurement Handbook Thailand 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Does not apply. b. Are remedies available outside the scope of the legislation? The remedies are available under contract law and administrative law. c. Is there a specific forum before which disputes are heard? Disputes concerning the tender process are generally within the jurisdiction of the Administrative Court. d. Are there any timing requirements where a party wants to enforce? The law of prescription under administrative law clearly sets out the time when an action can be brought before the competent court. e. What are the leading court decisions involving procurement disputes? There have been many court decisions involving procurement disputes, which made decisions about the tender process; for instance, Noppawong Construction Co., Ltd. v. Chiangmai Municipality; Metropolitan Transit Information Service v. Director of Traffic and Transport Department, Bangkok Metropolitan Administration and Bangkok Governor; and Thong Inthanon Co., Ltd. v. Permanent Secretary of Ministry of Finance and the Procurement Committee. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? See Section 2(d). 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? The Procurement Regulations generally apply to public procurements, regardless of the specific industry sector. Baker & McKenzie 73

90 8. Looking Ahead a. Are there any proposals to change the law in the future? There are no proposals to change the law in the near future. 74 Baker & McKenzie

91 Baker & McKenzie's Global Public Procurement Handbook Vietnam Vietnam 1. The Laws a. What is the applicable legislation? Key legal documents forming the legal framework for public procurement bidding activities in Vietnam include: Law No. 61/2005/QH11 on Bidding, adopted by the National Assembly on 29 November 2005, which took effect 1 April 2006, as amended by Law No. 38/2009/QH12 on amendment to a number of articles of laws concerning investment in capital construction (the Bidding Law ); Decree No. 85/2009/ND-CP providing guidelines for the implementation of the Bidding Law and for the selection of construction contractors pursuant to the Law on Construction issued by the Government on 15 October 2009 ( Decree No. 85 ); and Circular No. 17/2010/TT-BKH providing details for pilot online bidding issued by the Ministry of Planning and Investment on 22 July 2010 ( Circular No. 17 ). b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Although Vietnam has become a member of several international organizations, including the World Trade Organization ( WTO ) and the Association of Southeast Asian Nations ( ASEAN ), Vietnam has not made any commitments to any agreement on government procurement under such organization (for example, the WTO Government Procurement Agreement ( WTO GPA )). However, the WTO GPA is being studied by the Ministry of Planning and Investment and the National Committee for International Economic Cooperation in Hanoi in order to introduce WTO GPA to Vietnamese enterprises over time and to make initial preparations for eventual WTO GPA accession. Baker & McKenzie 75

92 c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? Basic principles underlying Vietnam s bidding legal framework are fairness and transparency. These principles, which can be found in provisions on bidding information (which requires certain kinds of information to be published in a bidding newsletter and on the bidding website of the State bidding administrative body), include: assurance of competitiveness in bidding process; prohibited acts in bidding; provision on currency to be used in bidding (in Vietnam, the currency to be used in bidding should be stipulated in the bidding invitation documents on the principle of one currency for one specific volume); and all domestic costs must be quoted in Vietnamese dong. d. Is aerospace and defence procurement treated differently from other types of procurement? Pursuant to Art. 1.2 of the Bidding Law, its scope covers projects financed by the State for procurement of assets for the purpose of maintaining regular activities of State bodies, political organizations, socio-political organizations, socio-political-occupational organizations, social organizations, socio-occupational organizations and units of the armed forces. Moreover, up to now, there have been no specific regulations issued by the relevant ministries or agencies regarding aerospace and defence procurement. Thus, in principle, we understand that there should be no difference in treatment between aerospace and defence procurement and other types of procurement. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The Bidding Law does not categorize its subjects into public or private agencies. According to Art. 2 of the Bidding Law, its subjects are: domestic and foreign organizations and individuals participating in tendering activities for tender packages belonging to the projects stipulated in Article 1 of the Law; organizations and individuals involved in tendering activities for tender packages belonging to the projects stipulated in Article 1 of the Law; and 76 Baker & McKenzie

93 Baker & McKenzie's Global Public Procurement Handbook Vietnam organizations and individuals with projects not within the governing scope of this Law may choose to apply this Law. Projects stipulated in Article 1 of the Bidding Law are: investment and development projects using State funding of 30% or more; projects using State funding for procurement of goods for the purpose of maintaining regular activities of State bodies, political organizations, socio-political organizations, socio-political occupational organizations, social organizations, socio-occupational organizations, and units of the armed forces; and projects using State funding for procurement of goods for the purpose of renovation or major repairs to equipment, production lines, building works and factories of State owned enterprises in which investment has already been made. b. Which private entities are covered by the laws? See Section 2(a) above. c. Which types of contracts are covered? There are four types of contracts covered by the Bidding Law, including lump-sum contracts, unit price contracts, time-based contracts and percentage-based contracts. d. Are there anti-avoidance rules (including laws on bid rigging)? Yes, it is prohibited to give, offer, receive or request anything of value resulting in impartial behaviour, or to exert personal influence to distort the bidder selection process. Collusion to alter bids or to arrange winning a bid award is also prohibited. Other acts are also prohibited which distort competition. More information on specific prohibited cases in bidding activities are provided in Art. 12 of the Bidding Law. 3. Procurement Procedures a. What procurement procedures can be followed? Depending on the specific forms and methods of bidding and specific contents of a bidding package, the process may vary. Under the bidding regulations, the bidding process may be generalized as follows: Baker & McKenzie 77

94 Bidding plan. The bidding plan will itemize the names of the bidding packages in a certain project, and information about price, financing source, bidding method, schedule, form of contract and schedule for contract performance of each bidding package. Such a bidding plan must be approved by the Authorized Person, which is defined, under the Bidding Law, as the person with the right to decide on the bidding project. Bid invitation documents. The bid documents must be prepared in accordance with prescribed rules and approved by an Authorized Person. The notices inviting bidders must be advertised at least 10 days prior to the issuance of the bid documents. Preparation of bids. Bidders have at least 15 days (for domestic bidding) or 30 days (for international bidding) to prepare and submit their bids. This deadline is call bid closing time. Before the bid closing time, bidders may also need to provide the bid guarantee as indicated in the bid documents, which must not exceed 3% of the approved bidding package price. Bid opening. The submitted bids must be opened immediately after the bid closing time, on the date and at the location stated in the bid invitation documents. In this step, the main information about each of the bids will be disclosed. Bid evaluation. The party calling for bids will review and evaluate the opened bids on the basis of the requirements of the bid invitation documents and evaluation criteria. During this process, the bid evaluators will, based on the bidding price offered by the bidders, make necessary corrections and adjustments to determine the evaluation price of the bids. The evaluation price is defined, under the Bidding Law, as the bid price proposed by a contractor after correcting errors and necessary expenses for operation and maintenance. The bid having the lowest evaluation price will rank first. Bid results. The bid result must be approved and then announced (e.g., winning bidder, winning price, form of contract, etc.) by the Authorized Person. The contract will be finalized and entered into between the investor and the winning bidder. If the parties fail to negotiate and finalize the contract, the investor will invite the next ranking bidder to negotiate and sign the contract. 78 Baker & McKenzie

95 Baker & McKenzie's Global Public Procurement Handbook Vietnam Circular No. 17 provides details on a pilot program of bidding on the internet. According to this regulation, once the method of bidding on the internet is applied to a bidding package, a number of steps during the bidding process will be conducted over the internet, including the announcement of the bidding plan, announcement of invitation for bids, issuance of bid invitation dossiers, submission of bids, bid opening, announcement of the bidding result, and announcement of contractors committing a violation of the Bidding Law. b. Are there any rules on the specifications/criteria? Yes, most bid invitation documents include prerequisite requirements, which bids submitted must satisfy. Any bid that fails to meet a single mandatory requirement is regarded as non-compliant (Art. 15.2(b), Decree No. 85). Only the criteria that were published in the bid invitation document can be used to evaluate the bids submitted. If there needs to be an amendment to the bid invitation documents after they have been issued, a notice must be sent to all bidders who received the bid invitation documents at least 10 days prior to the deadline for bid closing. c. Can certain prospective bidders be excluded from the competition? Yes, certain prospective bidders can be excluded from the competition if they do not meet certain provisions on their eligibility as organizations or individuals as well as bidding conditions. Specifically, bidding organizations can be excluded from the competition if they do not meet the following eligibility requirements: It has a business registration certificate or investment certificate issued pursuant to law, or a decision on establishment in the case of a domestic bidder which is an organization without business registration. A foreign bidder must have registration for its operation issued by the competent authority of the country of nationality of the bidder. It is an independent cost accounting entity. There is no decision by a competent body concluding that the bidder has an unhealthy financial status; it is not bankrupt or insolvent, and it is not in the process of dissolution. Baker & McKenzie 79

96 Individual bidders can be excluded from the competition if they do not meet the eligibility requirements below: having full capacity for civil acts pursuant to the law of the country of which such individual is a citizen; having lawful registration for operation or an appropriate professional certificate issued by the competent authority; and the individual is not subject to investigation for a criminal offence. Moreover, bidders (whether organizations or individuals) may even be excluded from competition if they do not satisfy bidding conditions for one bidding package, which are: Be eligible pursuant to Articles 7 and 8 of the Bidding Law. Submit only one tender, either as an independent bidder or in partnership, for each tender package. In the case of a partnership, there must be a written agreement between the partners specifying the person heading the partnership and the general and specific responsibilities of each partner with respect to the tender package works. Satisfy the requirements set out in the notice inviting tenders or in the letter inviting tenders from the party calling for tenders. Ensure competitiveness in tendering pursuant to the provisions in Article 11 of the Bidding Law. d. Are there any rules on the awarding of contracts? Yes, the negotiation and signing of a contract must be based on (i) the results of the bidding, (ii) a model contract provided in the bid invitation document, (iii) the requirements of the bid invitation document, (iv) the bid and any documents clarifying the bid provided by the selected contractor, and (iv) the contents that need to be negotiated and finalized by the parties. A contract includes the contract body that the parties have negotiated and supplemented by relevant bidding documents used in the bidding process. The contract can be in the form of a lump-sum contract, unit price contract, time-based contract, or percentage-based contract. The winning bidder may need to provide a performance bond of a maximum of 10% of the contract price prior to the date on which the contract takes effect. In special cases, the value of the performance bond can be higher but 80 Baker & McKenzie

97 Baker & McKenzie's Global Public Procurement Handbook Vietnam cannot exceed 30% of the contract price and, in such a case, the permission of the Authorized Person is required. In certain circumstances, the price or the scope of works under a contract can be adjusted, subject to certain requirements under the law. e. Can bidders combine to submit a bid? Yes, under Article 10.2 of the Bidding Law, in the case of a partnership, there must be a written agreement between the partners specifying the person heading the partnership and the general and specific responsibilities of each partner with respect to the tender package works. f. Are there any rules on alternative bids? Bidders prepare and submit bids as required by the bidding dossier. If they wish to modify or withdraw their submitted bids, bidders must make written requests and the party calling for the bid will approve the modifications only if it receives such requests prior to bid closure. Moreover, after the opening of bids, bidders must clarify their bids on request from the party calling for bids. The clarification of a bid must ensure that there is no change to the main substance of the submitted bid and bid price. Any item of clarification of a bid must be made in writing, and the party calling for bids must retain it as an integral part of the bid. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Yes. Under the Bidding Law, all project processes discussed in Section 2(a) above are subject to open bidding by default. The open bidding process does not limit the number of bidders nor does it contain conditions restricting the participation of bidders or favouring one or more bidders. It is prohibited to use a bidder selection process other than open bidding when the conditions are not suitable. When certain conditions are met, the selection of a contractor can also be done in the following forms: Limited bidding. This process applies to (i) a bid package financed by a foreign donor upon its request, or (ii) a bid package which has highly technical requirements or technical peculiarities or bid packages of a research or experimental nature for which only a limited number of bidders are capable of satisfying their requirements. The limited bidding Baker & McKenzie 81

98 procedure is required to have at least five bidders, or an approval by the Authorized Person is required for the participation of less than five bidders. Direct appointment. The direct appointment of a contractor applies to: (i) an event of force majeure due to a natural disaster, war or the like; (ii) bid packages in which the foreign donor requests the direct appointment; (iii) bid packages belonging to national top secret or urgent projects in the national interest; (iv) bid packages for the procurement of any type of materials and equipment in order to restore, maintain or expand the capacity of equipment and technological production lines which were previously purchased from the one supplier, and in order to ensure compatibility of facilities and technology it is not possible to purchase such materials and equipment from other supply bidders; (v) bid packages for consultancy services with a bid package price of VND3 billion (approximately US$157,890) or less, bid packages for the procurement of goods with a bid package price of VND2 billion (approximately US$105,260) or less, bid packages for construction and installation with a bid package price of VND5 billion (approximately US$263,160) or less belonging to projects for investment and development or projects for major repair or improvement of State-owned enterprises; bid packages for the procurement of goods with a bid package price of VND100 million (approximately US$5,260) or less belonging to a project or estimated budget for recurrent procurement; and (vi) bid packages with special requirements as provided by the Government. Direct procurement. The direct procurement process applies when a contract was signed for a bid package with similar contents within the previous six (6) months. Competitive quotation in the procurement of goods. The form of competitive quotation applies if (i) the bid package price is less than VND2 billion (approximately US$105,260), and (ii) the items to be purchased are commonly used goods which are readily available in the market, which have standardized technical features and which are similar to each other in quality. Self-implementation. The form will apply where the investor is also a contractor with sufficient capability and experience to implement the bid package belonging to the project which such an investor manages and uses. 82 Baker & McKenzie

99 Baker & McKenzie's Global Public Procurement Handbook Vietnam Special case. In the case of a bid package with particular requirements for which the abovementioned forms of contractor selection cannot be applied, the investor will prepare a plan for selection of contractors which ensures competitiveness and economic effectiveness and will submit it to the Prime Minister for consideration and decision. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Yes, anyone who breaches the Bidding Law may be warned, fined, prohibited from participating in bidding activities or dealt with in accordance with provisions of criminal law besides being listed in the Bidding Newsletter and on the bidding website depending on the type of violation. b. Are remedies available outside the scope of the legislation? Yes, bidding violations are handled by relevant ministries or agencies. For example, bidding violations in construction are dealt specifically under Decree No. 85/2009/ND-CP by the Government. c. Is there a specific forum before which disputes are heard? No, depending on the substance of the disputes (i.e., whether they are civil or criminal disputes), a specific forum will apply in accordance with provisions of law. d. Are there any timing requirements where a party wants to enforce? Yes, the resolution of protests about relevant matters during the bidding process should be implemented as follows. The party calling for tenders is responsible for resolving a protest regarding tendering made by a bidder within a time-limit of a maximum five working days from the date of receipt of the written protest of the bidder. If the party calling for bidders is unable to resolve the protest or if the bidder disagrees with the resolution as made by the party calling for tenders, the bidder has the right to lodge the protest with the investor for the latter s consideration and resolution. In such case, the investor is responsible for resolving a protest regarding tendering made by a bidder within a time-limit of a maximum seven working days from the date of receipt of the written protest of the bidder. If the Baker & McKenzie 83

100 investor is unable to resolve the protest or if the bidder disagrees with the resolution as made by the investor, the bidder has the right to lodge the protest with the Authorized Person for the latter s consideration and resolution. In this case, the Authorized Person must resolve the protest within a timelimit of a maximum 15 working days from the date of receipt of the written protest of the bidder. If the Authorized Person is unable to resolve the protest or if the bidder disagrees with the resolution as made by the authorized person, the bidder has the right to institute court proceedings. e. What are the leading court decisions involving procurement disputes? In Vietnam, court decisions are not published; thus, it is impossible to access procurement related court decisions. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? See Section 2(a) above. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? No. Up to now, there have been no specific laws issued by any ministries or agencies in technology procurement nor are there any practices relating to this issue in Vietnam. 8. Looking Ahead a. Are there any proposals to change the law in the future? Enterprises and agencies have proposed to change the Bidding Law in order to keep it up-to-date with changes in bidding activities in Vietnam (for example, to cover bidding activities in various areas such as purchase, services and assembling). Moreover, they have also proposed to complete the legal framework for bidding on the internet. However, to our understanding, there are still no amendments to the Bidding Law. 84 Baker & McKenzie

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103 Baker & McKenzie's Global Public Procurement Handbook Europe Europe Due to the enhancement of European integration, and the implementation of the European Internal Market, European public procurement law finds itself in a process of amendment. The applicable legal situation and actual development of procurement law in the Member States of the European Union ( EU ) is strongly effected by the effort to realize European Fundamental Freedoms, the opening of the Member States procurement markets and the coordination of contract award procedures above certain thresholds. The target is to strengthen the internal market together with the competitiveness of EU commercial companies in comparison with companies located in other regions of the world. The latest far-reaching changes in European public procurement law has its origins in the so-called legislative package, consisting of the public procurement coordination directive ( Directive 2004/18/EC ) and the utilities directive ( Directive 2004/17/EC ). Current legislative reforms of public procurement law continue the objectives of these directives in general. Directive 2004/18/EC summarized the existing directives in the fields of works, supply and services contracts to build an integrative legal framework. Moreover, it constituted the competitive dialogue procedure as an additional type of contract award procedure, to make it more flexible and established electronic auctions as well as electronic procurement. It modified the award criteria to enable the use of environmental characteristics and social clauses in public procurement law. The tendency to open national procurement markets led to several initiatives, even in those industry areas that have conventionally been closed to competitive procurement with regard to higher-ranked public issues. As far as public passenger transport services are concerned, the Regulation (EC) No. 1370/2007 changed the rules on public procurement in this area. Its aim was to raise the bar on efficiency and transparency for public procurement and compensation acts in this field, through regulated competition. Therefore, the regulation prescribes the general mandatory application of procurement procedures for public service obligations in the field of public passenger transport services. At the same time, it defines certain exceptions with reference to higher-ranked public issues. Awarding public services contracts directly is possible, where the contract relates to modest amounts or distances. The competent local authority is authorized to provide public passenger transport services itself and to take emergency measures in the Baker & McKenzie 87

104 event of undersupply. REG (EC) No. 1370/2007 is considered a lex specialis and lex posterior in relation to the directives forming part of the legislative package. However, its special procurement rules only apply when a public service concession is awarded for public passenger transport services by bus or train. There are no specific rules for the procurement procedure, except for the general prescription that the process must be open to all operators, be fair and observe all the principles of transparency and non-discrimination. The implementation of the European Internal Market also extends to the socalled Defence Directive ( Directive 2009/81/EC ) on the market of works, supplies and services contracts in the fields of defence and security. Because of Article 346 of the Treaty on the Functioning of the European Union ( TFEU ), this area was so far effectively removed from the application of public procurement law. The Defence Directive constitutes a procurement procedure that primarily takes national security interests into consideration. As a consequence, contracting authorities are not bound to the hierarchy of procurement procedures in this area. Rather, they can apply the negotiated procedure with the publication of a contract notice from the beginning. Furthermore, contracting authorities are entitled to demand special security requirements concerning information and supply security. Finally, the European Commission released a Green Paper on the modernization of European public procurement policy and a Green Paper concerning e-procurement in 2011, to serve as a basis for fundamental change. Drawing on the findings of these Green Paper consultations (20 December 2011), the European Commission released two proposals for directives, which will replace Directive 2004/17/EC and Directive 2004/18/EC. Major changes in the proposed directives include: The simplification and the making more flexible of procurement procedures, through a revision and modernization of basic concepts and definitions of procurement to better determine the scope and purpose of procurement law. In this context, the traditional distinction between so-called priority and non-priority services will be abolished. Following the evaluation, the scope of sectors covered remains largely unchanged; only procurements made for the purpose of exploring oil and gas have been withdrawn from the scope, with reference to sufficient competition. The proposal either provides a more flexible and user-friendly approach for certain important features of procurement procedures. A toolbox of procurement procedures, which will provide the three basic forms of procedure, which are open and restricted procedures as well as 88 Baker & McKenzie

105 Baker & McKenzie's Global Public Procurement Handbook Europe negotiated procedures with prior call for competition, and the innovation partnership as a new form of procedure for innovative procurement. Intended for aggregated and electronic procurement, contracting entities will have at their disposal a set of six specific procurement techniques and tools: framework agreement, dynamic purchasing systems, electronic auctions, electronic catalogues, central purchasing bodies, and joint procurement. For the promotion of e-procurement, the directives prescribe the mandatory transmission of notices in electronic form, the mandatory electronic availability of the procurement documents, and imposes the switch to fully electronic communication, in particular e-submission, in all procurement procedures within a transition period of two years. The strategic use of public procurement responds to new challenges, such as, among others, the promotion of social and environmental goals ( Europe 2020 ). The contracting authority will be allowed to base its award decisions on life-cycle costs of the products, services or works to be purchased and may require that works, supplies or services bear specific labels, certifying environmental, social or other characteristics. Economic operators could even be excluded from the procedure if they committed infringements of obligations established by the EU. With regard to the production process, purchasers can refer to all factors directly linked to this process. Better access and simplification of the procedure for small and mediumsized enterprises ( SMEs ) will be granted by a simplification of information obligations, better access to framework agreements through a limitation of the duration to four years, and the provision of direct payment of subcontractors. Specific regulations to fight conflicts of interests, favoritism and corruption. For the implementation of public procurement law in the Member States, there will be a single national authority in charge of monitoring, implementing and controlling the procurement law. Additionally, the proposal obliges Member States to provide support structures that offer legal and economic advice, guidance, training and assistance in preparing and conducting procurement procedures by knowledge centers. Baker & McKenzie 89

106 Besides the modernization of existing procurement regulations, and the Green Papers issued in December 2011, the European Commission has also published a first proposal for a directive on the award of concession contracts to create a modern public procurement framework. It covers partnership agreements between a body that is generally public and a private business, where the latter assumes the operative risks linked to maintenance and development of infrastructures or to the supply of services of general economic interest. The proposal pursues in particular two elementary goals, which are, on the one hand, legal certainty and, on the other, better access to the concession markets. With this proposed directive, the applicable legal framework for the award of concessions will be constituted and simultaneously be clearly delimited. The proposal extends the majority of the obligations which currently apply to the award of public works concessions to all service concessions. The proposal also lays down a number of concrete and more precise requirements that are applicable at different stages of the award process. Furthermore, it clarifies the cases in which the concession award rules are applicable for contracts concluded between contracting authorities and it provides specific conditions concerning the modification of concessions during their term, based on the relevant case law of the Court of Justice. To ensure better access to the concession markets, it restricts the arbitrariness of contracting authorities, and contracting entities decisions on such issues as prior and postpublication, procedural safeguard, selection and award criteria, and the deadlines imposed on tenderers. It has to be recognized that this amendment to public procurement laws in the EU and its effects on Member States laws will continue in the future, with appropriate focuses. The strategic use of public procurement law for social and environmental issues will especially entail some very considerable consultancy requirements to ensure that European fundamental freedoms and competition are persevered whether on the side of the public contract authority and the supplier. The situation is similar with regard to the extension of the application of public procurement laws on economic sectors such as the defence and security industry, public passenger transport services, and concession contracts, which may lead to more liberal contract award procedures. 90 Baker & McKenzie

107 Baker & McKenzie's Global Public Procurement Handbook Belgium Belgium 1. The Law a. What is the applicable legislation? The Belgian public procurement legislation (the Legislation ) mainly consists of the Public Procurement Act of 24 December 1993 and its implementing decrees. The legislator enacted a new legislation under the Act of 15 June 2006 to implement the 2004 EC Public Procurement Directives; the said act should, however, not enter into force before June 2012, except for some provisions already included in the Legislation. Public procurement contracts in Belgium are mainly subject to: international treaties (such as WTO); European Treaties; EC Directives as implemented under Belgian law (this is without prejudice to the direct effects of those directives as the case may arise); Competition law (EC and national); the Belgian Constitution; and the general legislation that can apply as the case may arise. Under the legislation, a public procurement contract is an agreement whereby a contracting authority listed among those subject to the Legislation awards works, services or supplies, to a private or a public contractor, subject to a consideration to be borne by such authority. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Yes, as mentioned in Section 1(a) above, the Legislation relates to the former or current EU Directives, which it has in fact implemented. Besides, for the purposes of the award of contracts by contracting authorities, Member States should apply in their relations conditions as favourable as those which they grant to economic operators of third countries in accordance Baker & McKenzie 91

108 with the Agreement on Government Procurement, concluded in the framework of the Uruguay Round. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The principles applicable to award procedures are: appropriate advertising of procurement procedures; equal and unbiased treatment of bidders and offers; and transparency of procedures. These principles are explained in detail below. In the context of the performance of public procurement contracts, payments are restricted to duly delivered and accepted works, supplies or services. Prices are generally fixed for the whole duration of the contracts, and they may only be revised through the applicable procedures. d. Is aerospace and defence procurement treated differently from other types of procurement? Important defence procurements by the Belgian State are indeed subject to specific procedures. Where the Belgian State decides to launch a public procurement for the acquisition of military material, the Council of Minister must approve such procurement if the estimated amount thereof reaches or exceeds the following thresholds: for calls for tenders or adjudications 11 millions; and for negotiated procedures 1.1 million. The Council of Minister may impose economic compensations on the bidder and determine the respective impact of the economical criterions for the assessment of the bids. The Council of Minister must also determine the amount of the lump sum indemnity to charge the selected bidder in case of breach of the economic compensations. This lump sum may, however, not be less than 10% of the total amount of the unperformed compensations. 92 Baker & McKenzie

109 Baker & McKenzie's Global Public Procurement Handbook Belgium The Act of 13 August 2011 also implemented into Belgian law Directive 2009/81/CE for certain contracts in the fields of defence and security. It is expected that the said act will enter into force and that its implementing decrees will be adopted in the course of Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? Under the Legislation, contracting authorities are public legal entities, such as the federal, community, regional, or local authorities, public institutions, as well as associations formed by such entities (e.g., intercommunales). Public enterprises are also considered to be contracting authorities for the benefit of given tasks in the field of water, energy, transport, and postal services. b. Which private entities are covered by the laws? Private entities incorporated for a general albeit non-industrial and noncommercial interest purpose, mainly financed or controlled by public entities, are subject to the Legislation. c. Which types of contracts are covered? Services, works and supply contracts launched by public and legal entities or private entities subject to the Legislation are covered by the Legislation. Contracts relating to telecommunication services and networks are not subject to the Legislation. d. Are there anti-avoidance rules (including laws on bid rigging)? Bid rigging is a criminal offense under Belgian law, as well as any fraudulent interference with a public procurement award procedure. The Legislation also makes it illegal to divide artificially a given contract to fall under certain thresholds, so as to favour, for example, negotiated procedures. More generally, any deed affecting the normal conditions of due completion is prohibited and the resulting requests for participation and bids must be disregarded. Baker & McKenzie 93

110 3. Procurement Procedures a. What procurement procedures can be followed? The Public Procurement Legislation provides for four main procedures to award public contracts: negotiated procedure; open/restricted call for tender; open/restricted adjudication; and competitive dialogue. The call for tender is defined as the award procedure whereby the public authority chooses the most advantageous tender on the basis of objective criteria set out prior to the issuance of the call for tender. The adjudication is the award procedure whereby the lowest priced offer is selected. The call for tender and adjudication are the most common procedures. They can be used whenever desired by the contracting authorities. Negotiated procedures may be used for specific contracts, as listed in the Legislation (Article 17 of the 1993 Public Procurement Act), and in general for procurements whose value does not exceed 67,000. Competitive dialogue can be used where the contracting authority is not in a position either to define the technical requirements satisfying its needs or the technical, legal, or financial outcome of the procurement. b. Are there any rules on the specifications/criteria? The selection of companies allowed to tender is based on the disclosure of formal documents evidencing their technical, professional and financial suitability. In a call for tender, the award of a contract must be based on objective criteria, such as the technical value of the performance, price, deadlines, quality, environmental impact, etc. All these criteria must be set out beforehand and must be in relation to the contract. It is preferable but not strictly required to set out the value of the criteria beforehand. In an adjudication procedure, the award of the contract should only be based on the lowest price. 94 Baker & McKenzie

111 Baker & McKenzie's Global Public Procurement Handbook Belgium c. Can certain prospective bidders be excluded from the competition? Any prospective bidder may be excluded from the competition who: is bankrupt or is being wound up, where his affairs are being administered by the court, where he has entered into an arrangement with creditors, where he has suspended business activities or is in any analogous situation arising from a similar procedure under national laws and regulations; is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or of an arrangement with creditors or of any other similar proceedings under national laws and regulations; has been convicted by a judgment which has the force of res judicata in accordance with the legal provisions of the country of any offence concerning his professional conduct; has been guilty of grave professional misconduct; has not fulfilled obligations relating to the payment of social security contributions in accordance with the legal provisions of the country in which he is established or with those of Belgium; has not fulfilled obligations relating to the payment of taxes in accordance with the legal provisions of the country in which he is established or with those of Belgium; or is guilty of serious misrepresentation in supplying the information required under this Section or has not supplied such information. Belgian adjudicating authorities should accept, with respect to the first, second and third points above, certificates from the clerk of the court of commerce or an excerpt from the criminal docket or, in the absence thereof, equivalent documents issued by a competent judicial or administrative authority in the country from which the bidder originates or where it is established, showing that those requirements are met. As regards the fifth and sixth points, they should accept certificates issued by the tax and social competent authorities. Baker & McKenzie 95

112 d. Are there any rules on the awarding of contracts? In a call for tender, the award of a contract must be based on objective criteria and the contract must be awarded to the bidder having filed a bid meeting the best such award criteria. In an adjudication procedure, the award of the contract should only be based on the lowest price. For other types of procurement procedures, there are no strict rules but the award of the contract must comply with the principles mentioned under Section 1(c) above. In practice and in case there are several valid bids, the contract should be awarded to the most advantageous bidder. e. Can bidders combine to submit a bid? Yes, under the form of the temporary association, unless the specifications of the tender exclude such a combined bid. f. Are there any rules on alternative bids? Where the contract is to be awarded to the most economically advantageous offer (e.g., in the frame of a call for tender), contracting authorities may authorise bidders to submit variants. Contracting authorities must indicate in the contract notice whether or not they authorise variants, state in the contract documents the minimum requirements to be met by the variants as well as any specific requirements for their presentation. Only variants meeting the requirements set forth by the contracting authorities will be taken into consideration. In procedures for awarding public supply or service contracts, contracting authorities having authorised variants may not reject a variant on the sole ground that, if successful, it would lead to either a service contract rather than a supply contract, or vice versa. It is worth noting that a bid will not be held valid and will be dismissed if it is conditional or mentions any reservation with respect to the terms or specifications of the request for proposals. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? One may award a public procurement contract without prior publicity, although possibly after consultation of several potential bidders, where: the 96 Baker & McKenzie

113 Baker & McKenzie's Global Public Procurement Handbook Belgium level of expenses does not exceed 67,000; the procurement at stake is subject to specific security measures or where the protection of this sanction interest in the countries at stake; only invalid bids were submitted in the frame of an adjudication or call for tender; only unacceptable prices were proposed in the same conditions; no offer was filed in the frame of such an indication or call for tender; or the specificity of the works, supplies or services, requires that the contract be awarded to a given provider. A negotiated procedure without prior publicity but with prior consultation of the market, will also be allowed for supplementary works or services not exceeding 50% of the works or services ordered under the initial contract, for the repetition of works or services, provided that, the total duration of the relation does not exceed three years as of the conclusion of the initial contract, for the supply of testing or research equipment, for the supply of compatible equipment, provided that, the total duration of the contract does not exceed three years, or for the services contracts with winners of project competition. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Public procurement contracts subject to the Legislation may be of either a public or private nature, depending on whether the entity launching the procedure is a public or a private entity. A contract should normally be considered as of a public nature if it is entered into by a public entity or on behalf of a public entity and it concerns public works, services or supplies. Where procurement contracts are of a private nature, they are subject to the jurisdiction of and may be suspended or annulled by the civil courts such as depending on the case and/or the quality of the parties first instance courts, courts of commerce, or courts of appeal. The Council of State (Conseil d Etat) has exclusive jurisdiction on the suspension or annulment of the decision taken by a public entity to enter into a public contract. A plea for suspension must be filed before the expiration of the 15-day standstill following the notification of the award decision to the participants to the tender procedure, and the performance of the said contract. The claimant has to file a plea for suspension of the award decision in accordance Baker & McKenzie 97

114 with the rules of summary suspension proceedings and then a plea for annulment. Civil courts have jurisdiction on claims relating to public contracts where the suspension of the award decision may no longer be applied for or after that the performance of the contract has started. Where a contract has been awarded without complying with the 15-day standstill, the affected bidder may apply for its annulment before the president of the competent civil court, within 30 days after he has learned of the untimely awarded contract. b. Are remedies available outside the scope of the legislation? A plaintiff may also claim damages before civil courts. Such damages may be claimed regardless of whether a contract was entered into. The plaintiff must prove that the contracting authority has committed a violation that caused a prejudice to the plaintiff. The plaintiff has to prove that it should have been awarded the procurement or has a reasonable chance to be awarded. Damages may cover the loss of profit or a loss of chance and a compensation for the expenses incurred by the plaintiff for the preparation of its bid. In certain case, civil courts may also be asked to cancel a public contract for violation of public order. Those cases are, however, extremely rare in Belgium. Contracting authorities or bidders face criminal sanctions (up to 6 months imprisonment and fines of 15,000) in case they interfere with the procurement process by way of promises, gifts, threats, violence or any other fraudulent means (Art. 314 of the Belgian Criminal Code). Bribery and forgery are also punished. Legal entities may also face criminal sanctions, including their forced winding up. c. Is there a specific forum before which disputes are heard? See Section 5(a) above. d. Are there any timing requirements where a party wants to enforce? See Section 5(a) above. 98 Baker & McKenzie

115 Baker & McKenzie's Global Public Procurement Handbook Belgium e. What are the leading court decisions involving procurement disputes? None. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Yes, in relation to the privatisation and sales of public assets. The sale of public assets must be allowed by an act. Such requirement is not, however, systematically complied with in practice. The privatisation and sales of public assets is in any case arguably subject to the same principles as those governing the Legislation, i.e., they must be subject to appropriate prior publicity and bidders must be treated on an equal basis. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws that apply when procuring technology. The general specifications of public contracts will equally apply, without any particular restriction. This is often a source of concern for IT firms that have difficulties in coping with liability and warranty clauses that are not standard in their field of activity. There is little possibility to address those concerns. In general, large IT companies do not directly bid for such contracts but intervene as subcontractors to smaller firms that will accept to subscribe the terms and conditions set forth by the adjudicating authorities. It is also conceivable to hide certain protective terms in, for example, software licence or warranty terms. One must, however, always keep in mind that conditional bids or bids not fully compliant with the terms of the request for proposals may be held invalid or disregarded by the adjudicating authority. Baker & McKenzie 99

116 8. Looking Ahead a. Are there any proposals to change the law in the future? As mentioned above, the legislator enacted a new legislation under the Act of 15 June 2006, which has, however, not yet entered into force, except for some provisions. This new legislation aims at implementing the 2004 EC Public Procurement Directives. 100 Baker & McKenzie

117 Baker & McKenzie's Global Public Procurement Handbook Czech Republic Czech Republic 1. The Laws a. What is the applicable legislation? Act No. 137/2006 Coll., on public contracts ( Act ) regulates the tender procedures for conclusion of public contracts. The Act is based on the principles of transparency, non-discrimination and equal treatment. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The Czech Republic, as an EU-member, implements public procurement directives of the European Union. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The contracting authority is bound by the principles of transparency, nondiscrimination and equal treatment. The transparency principle is implemented specifically by the obligation to publish the tender procedure, the requirement to appoint a commission for opening of envelopes with tenders and for the evaluation of tenders, the right of contractors to take part in the opening of envelopes and demand access to minutes of the meeting of the commission, the obligation to substantiate the decision on the most suitable tender, and the determination of evaluation criteria in advance. The principle of equal treatment demands that the contracting authority treats all contractors in the same way during the whole tender procedure. The principle of equal treatment demands that similar tender conditions apply to all contractors and that any contractor is entitled to submit a tender in the public procurement procedure. The principle of non-discrimination is violated if the contractor is, in advance, deprived of the possibility to participate in a tender procedure (e.g., if unreasonable qualification criteria for contractors are stipulated), or participation in the tender is restricted only to domestic contractors. Baker & McKenzie 101

118 d. Is aerospace and defence procurement treated differently from other types of procurement? The manufacture of military material or trade with military material are not subject to public procurement rules of the Act if they are necessary for the protection of important security interests of the Czech Republic. Public contracts in the area of defence and security are subject to special rules of the Act which simplify the conditions for use of certain types of award procedures. Defence and public security contracts may not be awarded in an open procedure, i.e., the number of contractors submitting a tender is always restricted and the contracting authority never invites an unlimited number of contractors to submit a tender. The use of the negotiation procedure with and without publication is allowed. Further, specific additional qualification criteria must be fulfilled by the contractors. There are no specific rules for public procurement in aerospace. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The Act distinguishes three types of entities covered by the Act: contracting authorities, subsidized contracting authorities, and sector contracting authorities. Contracting authorities are: the Czech Republic; state allowance organizations; municipal and regional units; allowance organizations founded by municipal or regional units; and also other legal entities (i) which were established or founded for the purpose of meeting the needs of general economic interest not having an industrial or commercial character, and (ii) are predominantly financed or controlled by the state or other contracting authority or in which the state or other contracting authority appoints or elects more than half of the members in its management, administrative, supervisory or controlling body. b. Which private entities are covered by the laws? Subsidized contracting authorities are legal entities or natural persons which award public works contracts reimbursed by more than 50% from moneys provided by the contracting authority. Subsidized contracting authorities follow the same rules as contracting authorities which are public agencies. 102 Baker & McKenzie

119 Baker & McKenzie's Global Public Procurement Handbook Czech Republic Sector contracting authorities are authorities performing relevant activity as defined by the Act, provided that this relevant activity is based on a special or exclusive right, or the contracting authority directly or indirectly controls the sector contracting authority. c. Which types of contracts are covered? Public contracts are either supply contracts, works contracts or service contracts. Public supply contracts are procurement contracts for goods, especially in the form of purchase, purchase in instalments, rental or lease, or lease purchase, of goods. Public works contracts are contracts for the execution of construction works and associated design and development activity, or development of a building resulting from a combination of construction or assembly works and/or related design and engineering activities capable of fulfilling an independent economic or technical function. A public service contract means a public contract other than public supply contract or public works contract. d. Are there anti-avoidance rules (including laws on bid rigging)? Severe violation of bidding rules of public procurement procedures contrary to public procurement laws is a criminal offense under Czech law. Criminal law also sanctions an agreement on preferential terms with a contractor to the detriment of other contractors and conspiracies in connection with the award of a public contract (which is defined very broadly). Czech law imposes sanctions of up to 3 years imprisonment for natural persons found guilty of committing one of these crimes. Violations of public procurement procedures also constitute administrative offences sanctioned by the Act. Contracting authorities violating these procedures in such a way that it could influence the decision on the most suitable offer, or failing to comply with other obligations stipulated by the Act, face a fine of up to CZK10,000,000 (US$553,250). Contractors who submit false information or documents in order to meet qualification criteria will be fined up to CZK10,000,000 (US$553,250) and will be prohibited from taking part in public procurement procedures for a period of three years. Baker & McKenzie 103

120 Bid rigging is sanctioned under Act No. 143/2001 Coll., on Protection of Competition, as an unlawful cartel by the imposition of a fine of up to 10% of the turnover of the undertaking. 3. Procurement Procedures a. What procurement procedures can be followed? The Act stipulates the following forms of award procedures: open procedure; restricted procedure; negotiated procedure with publication; negotiated procedure without publication; competitive dialogue; and simplified below-the-threshold procedure. The Act further regulates sui generis forms of award procedures: framework contract; and dynamic purchasing system. Open procedure and restricted procedure may generally be used by the contracting authorities without any restrictions. Competitive dialogue and simplified below-the-threshold procedure may not be used by sector contracting authorities. In an open procedure, an unlimited number of contractors are invited to submit a tender and prove the fulfilment of the qualification criteria. A restricted procedure is a two-phase procedure. First, the contractors are invited to prove the qualification criteria. Contractors who fulfilled the qualification criteria are then invited to submit a tender. Negotiated procedure with publication or without publication may generally be used only after a previous unsuccessful award procedure or in other exceptional circumstances. In the negotiated procedure, the tender is subject to further amendments in order to achieve more advantageous conditions for the contracting authority based on negotiations with the respective contractors. 104 Baker & McKenzie

121 Baker & McKenzie's Global Public Procurement Handbook Czech Republic Competitive dialogue may only be used in case of a particularly complex subject matter of the public contract, i.e. in case the contracting authority is objectively incapable of determining exactly the technical specifications, legal or financial requirements applicable to the performance of public contracts. In the course of the competitive dialogue, the contracting authority enters into negotiations with selected contractors for the purpose of identifying and specifying one or more suitable solutions capable of meeting its needs and requirements. Simplified below-the-threshold procedure enables the contracting authority to invite only specific candidates (at least five) to submit a tender. Framework agreements are concluded based on a standard award procedure with one or more contractors. Under the framework agreement, the contracting authority awards public contracts to parties to the framework agreement. Contractors are usually selected to submit a tender by invitation of the contractor who placed first in the award procedure for the framework agreement. If this contractor omits to submit a tender, the contracting authority invites the contractor who placed second, and so on. The contracting authority may also, under special circumstances, choose to conclude individual public contracts under the framework agreement successively with contractors based on the sequence in which they placed in the award procedure for the framework contract. Dynamic purchasing systems may be set up by the contracting authority for public contracts which cover regular and commonly available goods, services or works in open procedure. Contractors submit indicative offers during the duration of the dynamic purchasing system. Contractors who have submitted indicative offers in accordance with the requirements of the contracting authority would be admitted to the dynamic purchasing system. Public contracts are awarded on the basis of an invitation to tender to contractors admitted to the dynamic purchasing system. b. Are there any rules on the specifications/criteria? The Act prescribes (i) general qualification criteria which require proof that the contractor: was not sanctioned for certain criminal offences or found guilty of unfair competition in the form of bribery; is not insolvent or bankrupt; and does not have any arrears of taxes or other fees. The Act further prescribes the fulfilment of (ii) professional qualification criteria by submission of an official document proving the authorization to conduct business activity in the Czech Republic and the fulfilment of (iii) economic and financial qualification criteria by submission of an insurance contract, Baker & McKenzie 105

122 balance sheet or information on the total turnover and the fulfilment of (iv) technical qualification criteria by submission of a list of important supplies made within the last three years, list of technicians which will be involved in the performance of the public contract, description of technical equipment, control of the production facilities, specimen, photos or description of goods or documents proving conformity of the goods. The Act further stipulates that evaluation criteria may be determined by the contracting authority either as (i) the lowest tender price, or (ii) economical advantageousness of tender. If the contracting entity decides to assign a public contract based on economical advantageousness of tender, partial evaluation criteria must be determined reflecting the relationship between utility and price. Such partial evaluation criteria must relate to implementation of the public contract. c. Can certain prospective bidders be excluded from the competition? Contractors who submit false information or documents in order to meet qualification criteria will be sanctioned by prohibition to take part in public procurement procedures for a period of three years. These contractors are included in a public list of persons prohibited from performing public contracts. Further, the contracting authority prescribes in tender requirements the qualification criteria which must be met by contractors. Tenders of contractors who fail to meet qualification criteria will not be evaluated by the contracting authority. d. Are there any rules on the awarding of contracts? The Act prescribes detailed rules on the awarding of contracts. Public contracts are awarded to contractors based on the submission of tenders. Envelopes with tenders are opened by a commission for the opening of envelopes appointed by the contracting authority. The commission inspects the formal completeness of the tender. The submitted tenders fulfilling formal requirements are further evaluated by an evaluation committee consisting of at least five members appointed by the contracting authority. The contracting authority decides on the selection of the most suitable offer based on the evaluation performed by the evaluation committee. 106 Baker & McKenzie

123 Baker & McKenzie's Global Public Procurement Handbook Czech Republic The contracting authority may not conclude the public contract for a certain period during which contractors who were not selected may object to the decision on the most suitable tender. The Act also prescribes an exhaustive list of reasons for the cancellation of the award procedure. e. Can bidders combine to submit a bid? Contractors may submit a joint tender, but each contractor must comply with the general qualification criteria to the full extent. Professional, economic and financial and technical qualification criteria may be fulfilled by the contractors together. Contractors must submit a contract which stipulates the joint and several liability of contractors. A contractor may also perform part of the public contract with the help of one or more subcontractors. A subcontractor may also provide the contractor with certain rights or goods. The contractor is liable for the subcontractor s performance as if the performance was rendered by the contractor. The contracting authority may exclude in the tender requirements that a specific part of the public contract is performed by the subcontractor and it may also require that the contractor indicates which part of the public contract it intends to perform with the help of a subcontractor. However, the contracting authority may not exclude the performance of the public contract by the subcontractor as such. If the contracting authority is not capable of proving full compliance with professional, economic and financial or technical qualification criteria, it may prove compliance with qualification requirements to the missing extent through its subcontractor. In such cases, the contracting authority is obligated to submit a contract to the contracting authority concluded with a subcontractor f. Are there any rules on alternative bids? Alternative tenders are admissible only if the public contract is awarded based on the evaluation criterion of economical advantageousness and if the contracting authority allowed alternative tenders in the tender requirements. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? The Act includes a number of various exceptions. The contracting authority is not obliged to conclude public contracts according to the Act, e.g., in case the value of the public contract does not reach a certain threshold (small-scale Baker & McKenzie 107

124 public contracts), if the award procedure would jeopardize protection of classified information, if the subject matter of the public contract concerns research and development, or manufacture or trade with military material, or arbitration and mediation services, or services provided by the Czech National Bank. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The Office for Protection of Economic Competition supervises the compliance with the Act, including reviews of lawfulness of conduct performed by the contracting entity. The Office decides on whether the contracting entity proceeded according to the Act in awarding public contracts, imposes remedies and sanctions and reviews administrative offences. If the contracting authority fails to comply with the procedure stipulated in the Act for the award of public contacts and if such conduct has or could have substantially affected the selection of the most suitable tender, and the relevant contract has not yet been concluded, the Office imposes remedies by cancelling the award of the public contract or any single act performed by the contracting authority, or otherwise suspends the proceedings. The Office may ban the contracting authority from conclusion or performance of the public contract. b. Are remedies available outside the scope of the legislation? Does not apply. c. Is there a specific forum before which disputes are heard? Disputes are heard by the Office for Protection of Economic Competition which may commence proceedings ex officio or based on written request of the contractor. The decision of the Office may be reviewed by administrative courts. d. Are there any timing requirements where a party wants to enforce? Objections against any act of the contracting authority must be submitted within 15 days after the contractor acquires knowledge of such unlawful act. Objections against the decision on the most suitable offer must be submitted 108 Baker & McKenzie

125 Baker & McKenzie's Global Public Procurement Handbook Czech Republic within 15 days after delivery of the information on the selection of the most suitable offer to the contractor. The contracting authority is obliged to review the objections within 10 days after submission and decide whether it allows or denies the objection. If the contracting authority does not allow the objection, the contractor may submit an application for review with the Office for Protection of Economic Competition within 10 days after delivery of the decision denying the objections, together with an application for preliminary injunction banning the contracting authority from concluding the public contract. The contracting authority may not conclude the public contract during the period for submission of objections. If the contracting authority denied the objections of a contractor, the contracting authority may not conclude the contract during the period for submission of an application for review with the Office and if such application was submitted, within 45 days after delivery of the objections of the contractor to the contracting authority. This period may be extended by a preliminary injunction imposed by the Office. e. What are the leading court decisions involving procurement disputes? There are a number of important decisions. However, please note that the Czech Republic is a civil law country and, thus, no leading decision is relevant to the extent that it would substantially rewrite the Act. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Act No. 139/2006 Coll., on Concession Contracts, was adopted in order to enable implementation of Public Private Partnership (PPP) Projects. Concession contracts are by definition also public contracts but differ in the following aspects: the contracting authority grants the contractor the right to take profits from the provided services or use of the supplied work, a substantial part of the risk shifts to the supplier. The Act on Concession Contracts is closely related to the Act. Baker & McKenzie 109

126 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? Does not apply. 8. Looking Ahead a. Are there any proposals to change the law in the future? The Act is one of the most regularly amended statutes in the Czech Republic. Currently, the parliament is deciding on an amendment of the Act decreasing the limits for the use of particular procedures (small-scale, below-thethreshold and above-the-threshold public contracts), thus, increasing the requirements for compliance with the Act. 110 Baker & McKenzie

127 Baker & McKenzie's Global Public Procurement Handbook European Union European Union EU Institutions & Bodies 1. The Laws a. What is the applicable legislation? Contracts awarded by the institutions and bodies of the European Union ( EU ) are subject to specific EU procurement rules. EU institutions and bodies subject to these rules are, among others, the Council, the European Parliament, and the Commission and its more than 30 agencies, including, for example, the European Food Safety Authority and the European Aviation Safety Agency. Each year the contracts awarded by these EU institutions and bodies amount to public spending of several billion Euro. Council Regulation No 1605/2002 on the Financial Regulation applicable to the budget of the European Communities, as amended (the Financial Regulation ) and Commission Regulation No 2342/2002 laying down detailed rules for the implementation of Council Regulation No 1605/2002, as amended (the Implementing Regulation ) set out the scope of and the basic principles governing public procurement by EU institutions and bodies. It lays down advertising obligations and the procedures for such procurement. It applies to procurement by EU institutions and bodies ( EU Contracting Authorities ) defined as EU institutions or bodies acting for their own account and, in the field of external action, as (i) the Commission procuring on behalf of and for the account of a third-party beneficiary, or (ii) as the beneficiary or a third party acting on the beneficiary s behalf. Procurement in the field of external action is procurement relating to EU programs implementing cooperation and development initiatives benefitting non-eu countries and regions. Baker & McKenzie 111

128 b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Yes, the legislation applicable to procurement by EU Contracting Authorities relates to and interacts with the WTO Government Procurement Agreement ( GPA ) as well as some of the EU s bilateral and regional free trade agreements, which provide access to procurement by EU Contracting Authorities for tenderers from non-eu countries. Currently, 13 non-eu countries are covered by the GPA, and a number of EU bilateral and regional trade agreements already agreed or under negotiation, include similar mutual procurement commitments. Countries covered by these agreements include South Korea, Chile, Mexico, the 16 Caribbean Forum states ( CARIFORUM, comprising the 15 Caribbean Council states and the Dominican Republic), Colombia, Peru and Switzerland. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The Financial Regulation sets out the scope of and the basic principles governing public procurement financed in whole or in part from the EU budget. Such procurement must comply with the principles of transparency, proportionality, equal treatment and non-discrimination (e.g., EU Contracting Authorities may not use framework contracts improperly or in such a way that the purpose or effect is to prevent, restrict or distort competition). The Financial Regulation lays down advertising obligations and the procedures for procurement. All contracts must be made in writing. d. Is aerospace and defence procurement treated differently from other types of procurement? No. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The EU institutions and their departments: the European Parliament, the European Council, the Council, the European Commission (and its more 112 Baker & McKenzie

129 Baker & McKenzie's Global Public Procurement Handbook European Union than 30 agencies), the Court of Justice of the European Union, the European Central Bank, and the Court of Auditors. The Economic and Social Committee, the Committee of the Regions, the Ombudsman and the European Data Protection Supervisor. b. Which private entities are covered by the laws? The legislation does not cover any procurement by private entities, except procurement by: private entities that exceptionally act by delegation or on behalf of an EU Contracting Authority; or natural persons or legal entities who are beneficiaries of financing for the implementation of external action (see Section 1(a) above for a definition of external action). c. Which types of contracts are covered? All types of contracts are covered. This means any contract for pecuniary interest concluded in writing between an economic operator and an EU Contracting Authority for the supply of movable or immovable assets, the execution of works, or the provision of services against payment of a price paid in whole or in part from the EU budget. These contracts include: (i) contracts for the purchase or rental of a building; (ii) supply contracts; (iii) works contracts; and (iv) service contracts. Contracts can also take the form of framework contracts the purpose of which is to establish the terms governing contracts to be awarded during a given period, such as price and, where appropriate, quantity envisaged. d. Are there anti-avoidance rules (including laws on bid rigging)? Article 101 of the Treaty on the Functioning of the European Union ( TFEU ) prohibits any cartel activities. Cartel activities include price-fixing (including resale price maintenance), bid rigging (collusive tendering), the establishment of output restrictions or quotas and/or market-sharing or market partitioning. Baker & McKenzie 113

130 3. Procurement Procedures a. What procurement procedures can be followed? The following procurement procedures are available: Open procedure the EU Contracting Authority publishes a contract notice and all interested economic operators may submit a tender. Restricted procedure the EU Contracting Authority publishes a contract notice with selection criteria. All interested economic operators may express an interest in tendering for the contract but only those meeting the EU Contracting Authority s selection criteria will actually be invited to do so. Negotiated procedure the negotiated procedure can be without prior publication (the EU Contracting Authority is not required to publish a tender notice and can negotiate directly with the supplier of its choice) or with prior publication (the EU Contracting Authority must publish a tender notice). Tenderers are invited to negotiate the terms of the contract with the EU Contracting Authority. This procedure can be used only in certain limited circumstances. Competitive dialogue in the case of particularly complex contracts (i.e., where the EU Contracting Authority is not objectively able to define the technical means capable of satisfying the needs), the EU Contracting Authority may make use of the competitive dialogue procedure. All interested economic operators may express an interest in tendering for the contract in response to the tender notice. Only those meeting the EU Contracting Authority s selection criteria will be invited to do so. During the dialogue phase, tenderers are able to discuss all aspects of the contract individually with the EU Contracting Authority prior to the invitation to tender. Once the dialogue has generated solutions as to the agreed requirements, final tenders are invited based on each tenderer s individual solution. Specific procedures for low value contracts EU Contracting Authorities may use the negotiated procedure with consultation of at least five candidates (without prior publication) for contracts of 60,000 or less (if it receives only one valid tender, the contract can be awarded provided the tender meets the award criteria). For contracts of 25,000 or less, the same procedure can be used, but consultation only of at least three candidates is required. Contracts of 5,000 or less may be awarded 114 Baker & McKenzie

131 Baker & McKenzie's Global Public Procurement Handbook European Union on the basis of a single tender. Finally, no tender is required for procurements of 500 or less; payment against invoice will be sufficient. b. Are there any rules on the specifications/criteria? The documents relating to the call for tenders should give a full, clear and precise description of the subject of the contract and specify the exclusion, selection and award criteria and their relative weighting (as applicable), set out the technical specifications, state the minimum requirements that variants (where permitted) must meet, and require tenderers to indicate where they have their headquarters or domicile and provide supporting evidence to confirm that they have access to procurement by EU Contracting Authorities (see Section 1(b) above). c. Can certain prospective bidders be excluded from the competition? Tenderers, who generally have access to procurement by EU Contracting Authorities (see Section 1(b) above), shall be excluded from participating in procurement procedures if: they are bankrupt or being wound up; they have been convicted of an offence concerning their professional conduct; they have been guilty of grave professional misconduct; they have not fulfilled their tax obligations; they have been sentenced for fraud, corruption, involvement in a criminal organisation or any other illegal activity detrimental to the Communities financial interests; or they have been declared to be in serious breach of their obligations under contracts covered by the Union budget. Persons supplying false or fraudulent information or caught by a conflict of interests during the course of the procurement procedure can also be excluded from procurement. Details of such persons are entered in a database which is accessible to all other European institutions. Baker & McKenzie 115

132 d. Are there any rules on the awarding of contracts? EU Contracting Authorities must award a contract on the basis of either: lowest price the lowest priced tender wins (no other element of the tender may be taken into account); or best value for money factors other than or in addition to price, such as quality and technical merit can be taken into account. If the award is to be made on the criterion of best value for money the EU Contracting Authority must publish: the evaluation criteria - criteria have to be set out sufficiently precisely and must be justified by the subject of the contract. They can include the price quoted, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, profitability completion or delivery times, after-sales service and technical assistance; and the weighting that will be applied to each evaluation criterion, either as an exact number/percentage or as a meaningful range (e.g., price: 40%- 50%). The contract is to be awarded in compliance with the published selection and award criteria and the procurement rules. e. Can bidders combine to submit a bid? Yes, if permitted by the tender requirements, bidders can create consortia in order to take part in the bidding process. Subcontracting is also an option under certain conditions. f. Are there any rules on alternative bids? The EU Contracting Authority can state in the invitation to tender or to negotiate or to take part in the dialogue whether or not it authorises variants. When variants are authorised for contracts to be awarded on the basis of the tender offering best value for money, the invitation should provide a separate weighting formula for each variant. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Competitive bidding, in the form of a publicised call for tenders is not required in certain negotiated procedures (see Section 3(a)). Also, specific 116 Baker & McKenzie

133 Baker & McKenzie's Global Public Procurement Handbook European Union procedures not requiring competitive bidding apply to low value contracts (see Section 3(a) above). 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Procurement procedures should be suspended by the EU Contracting Authority and it must take any necessary action, including the cancellation of a procedure, where the procedure proves to have been subject of substantial errors, irregularities or fraud. In the event that, following the award of a contract, the procedure proves to have been subject to substantial errors, irregularities or fraud, the EU Contracting Authority may decide not to conclude the contract, suspend performance of the contract or terminate the contract as appropriate. It may also, where errors, irregularities or fraud are attributable to the successful tenderer, refuse to make payments, recover amounts paid or terminate all contracts concluded with this tenderer as may be appropriate and proportionate. Tenderers whose tenders are rejected are informed of the grounds on which the award decision was taken. All tenderers whose tenders are admissible and who make a request in writing will be informed of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded. Subject to exceptions, the EU Contracting Authority should not sign the contract or framework contract with the successful tenderer until a period of standstill specified in the tender notice has elapsed. b. Are remedies available outside the scope of the legislation? Yes, acts of the EU Contracting Authorities are subject to judicial review, generally by the General Court of the European Union (first instance) and the European Court of Justice (on appeal) (but see Section 5(c) below). The EU Courts can annul award decisions and may award compensation for damages caused by the EU Contracting Authorities that engages the EU s noncontractual liability. Fines can be imposed by the European Commission on bidders for violations of Article 101 TFEU if anticompetitive behaviour such as collusive tendering took place in the course of the tender procedure. Baker & McKenzie 117

134 c. Is there a specific forum before which disputes are heard? This will be specified in the tender notice. It can be the General Court of the European Union in first instances (and the European Court of Justice on appeal) or national courts. d. Are there any timing requirements where a party wants to enforce? Yes, timing requirements will apply depending on the competent forum, unless the bidding documents provide otherwise, e.g., for a specific enforcement process such as an administrative complaint process before the EU Contracting Authority, in which case the bidding documents will have to establish the applicable procedure including any timing requirements. If the EU courts have jurisdiction, the time limit for brining a full appeal is generally two months and ten days. e. What are the leading court decisions involving procurement disputes? Some of the leading EU court decisions include: 56/77, Agence européenne d intérims v Commission, on the existence of a margin of discretion for the EU Contracting Authority in assessing the factors to be taken into account in the interests of the department for the purpose of deciding to enter into a contract and the scope of the judicial review of such discretional decisions by the EU courts. T-13/96, TEAM v Commission, on the fact that an EU Contracting Authority is not bound by decisions of advisory committees consulted during the tender procedure. T-203/96, Embassy Limousines & Services v Parliament, on the obligation for the EU Contracting Authority to comply with the principles of equal treatment between tenderers and of transparency and on the obligation to show a coherent and consistent attitude towards tenderers. 118 Baker & McKenzie

135 Baker & McKenzie's Global Public Procurement Handbook European Union 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? A Practical Guide to Contract procedures for EU external actions is published on the EuropeAid web site (the most recent version of the guide at the time of writing is of March 2011, see 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? No. 8. Looking Ahead a. Are there any proposals to change the law in the future? No proposals are currently pending. A new development we are observing is the move to joint procurement by EU institutions with contracting authorities of EU Member States based on a joint procurement agreements pursuant to the legislation applicable to procurement by EU Contracting Authorities, rather than pursuant to the procurement laws of one or more EU Member States, which would normally apply to procurement by contracting authorities of EU Member States. Such joint EU procurement is actively being pursued by the European Commission and EU Member States in certain areas in order to run more efficient procurement procedures and obtain better pricing conditions. The Commission is currently preparing the joint procurement with EU Member States of a common auction platform for emission trading in the framework of the EU ETS and of an of auction monitor that will survey the auctions conducted on this and Member States separate auction platforms. Both procurements are based on joint procurement agreements of November 2011 between the Commission on behalf of the EU and EU Member States. In addition, the Commission has proposed the adoption of a legal basis in December 2011 that would enable joint procurement with EU Member States to address any cross-border health threats and in anticipation of its adoption in 2012 the Commission is already preparing the joint procurement of pandemic influenza vaccines. Baker & McKenzie 119

136 France 1. The Laws a. What is the applicable legislation? Several legislations apply depending on the type of contract entered into and the contracting entities concerned. The most important applicable legislations are: the Public Procurement Code that applies to contracts concluded by the State, its public bodies other than those of an industrial and commercial nature, the local authorities and their public bodies; and the Ordinance n dated 6 June 2005 relating to contracts awarded by certain public or private bodies not subject to the Public Procurement Code. Such texts partly implement EU Directives; they also edict rules that are specific to the French jurisdiction. Several other texts, Decrees and laws implement the Public Procurement Code and the Ordinance n b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The legislations listed above are strongly influenced by the European Union procurement rules since they implement the Directives 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors and 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts. 120 Baker & McKenzie

137 Baker & McKenzie's Global Public Procurement Handbook France c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The main principles applicable to public procurement procedures are: free access to public procurement contracts; equal treatment of bids and offers submitted by companies; transparency of procedures; effectiveness of public procurement; and best value for public money. d. Is aerospace and defence procurement treated differently from other types of procurement? As regards aerospace procurement, there are no specific rules applicable to such contracts. With respect to defence procurement (and defence aerospace), Article 3-7 of the Public Procurement Code excludes from its scope all public procurement contracts which require confidentiality and specific measures of performance imposing the absence of prior competition procedure. For other defence procurement contracts, specific rules listed in Part III of the Public Procurement Code apply. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The State, its public bodies other than those of an industrial and commercial nature (such as museums), the local authorities and their public bodies are covered by the Public Procurement Code. The UGAP (Central Public Purchasing Office Union des groupements d achats publics) is also subject to the rules contained in the Public Procurement Code. Other public entities are subject to the Ordinance n such as the Banque de France, the Caisse des dépôts et consignations and all the administrative public bodies performing, under its statutes, a research task (e.g., CNRS and INRA). Baker & McKenzie 121

138 b. Which private entities are covered by the laws? The following private entities are covered by Ordinance n : private entities created for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character and either (i) mainly financed by public entities, (ii) subject to management supervision by those bodies, or (iii) having an administrative, managerial or supervisory board, more than half of whose members are appointed by those bodies; private entities created for the specific purpose of executing joint activities either by (i) contracting authorities covered by the Public Procurement Code, (ii) contracting authorities covered by Ordinance n , or (iii) contracting authorities covered by the Public Procurement Code and contracting authorities covered by Ordinance n ; public undertakings executing activities listed in the Ordinance n , related to gas, heat, electricity, water, transport services, postal services, exploration for, or extraction of, oil, gas, coal or other solid fuels, as well as ports and airports; and private entities operating on the basis of special or exclusive rights for the activities listed above. For example, Electricité de France (EDF), Société Nationale des Chemins de Fer (SNCF), Aéroports de Paris (ADP) and La Poste are subject to Ordinance n c. Which types of contracts are covered? All contracts and framework agreements for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities listed above and having as their object the execution of works, the supply of products or the provision of services. d. Are there anti-avoidance rules (including laws on bid rigging)? Contracting authorities or their representatives may be convicted for criminal offences in the event of a breach of procurement rules. The French Criminal Code provides for several offences against the government committed by civil servants such as passive corruption and 122 Baker & McKenzie

139 Baker & McKenzie's Global Public Procurement Handbook France trafficking of influence by a person holding public office, unlawful taking of interest or offences against equal access in respect of public tenders. The management of the companies, as well as the companies themselves, benefiting from such favourable treatment, could also be exposed to sanctions on the ground of complicity or of the concealment of such offences. Besides, the contract must not place the contractor in a situation of breach of competition law. Otherwise, the decision awarding the contract should be annulled. 3. Procurement Procedures a. What procurement procedures can be followed? The Public Procurement Code and Ordinance n provide for four main procedures to award public contracts: open/restricted call for tender which can be used to choose the economically most advantageous tender, without negotiation, on the basis of objective criteria brought to the prospective bidders attention beforehand; negotiated procedures which can be conducted, with or without prior publicity and opening to competition, for specific contracts listed in the Public Procurement Code (Article 35) and in the Decree n dated 30 December 2005 setting the rules applying to contracts awarded by the contracting authorities mentioned in Article 3 of the abovementioned Ordinance n (Article 33); competitive dialogue procedure which can be used when the contracting entity is unable to determine the technical means to meet its requirements, or, when it is unable to establish a project s legal or financial particulars; and adapted procedure which can be mainly used when the estimated amount of the contract is below 125,000 (VAT excluded) for services and supplies contracts for the State and its public bodies; 193,000 (VAT excluded) for services and supplies contracts for local authorities, health public bodies; 4,845,000 (VAT excluded) for works. b. Are there any rules on the specifications/criteria? The documents must mention, in the public tender notice or the tender regulations, the documents that must be disclosed in support of applications Baker & McKenzie 123

140 to facilitate evaluation of the prospective bidder s experience, and its professional, technical and financial capabilities. The criteria that can be used to award the contract (see Section 3 (d) below) must be set out in the public tender notice or the tender regulations. The said criteria are either weighted or prioritised. c. Can certain prospective bidders be excluded from the competition? The following prospective bidders are barred from bidding for public contracts : bidders which have been convicted for specific criminal offences; bidders convicted for specific offences listed in the French Labour Code; bidders which have not submitted the tax and social-security returns for which they were responsible, bidders which have not paid the taxes and contributions due by that date; and bidders in distress. d. Are there any rules on the awarding of contracts? The contract must be awarded to the most economically advantageous bid. The award of the contract can be based, given the object of the contract, on a single criterion, which must be the price. The award of the contract can also be based on various non-discriminatory criteria which vary in accordance with the object of the contract, such as the operating costs, the bid s technical merit, its innovative nature, its environmental friendliness, its performance in terms of occupational integration of populations in difficulty, the time for completion, its aesthetic and functional features, after-sales service and technical support, the delivery time and date, and the price. e. Can bidders combine to submit a bid? Companies may submit their application or bid as a several group or a joint group, without prejudice to compliance with the rules relating to free pricing and competition. 124 Baker & McKenzie

141 Baker & McKenzie's Global Public Procurement Handbook France f. Are there any rules on alternative bids? Unless the tender regulations forbid it, bidders are allowed to submit several bids for a contract or for one of its lots by acting as both individual bidders and as members of one or more groups, or as bidders of several groups. However, even if the tender regulations do not forbid such alternative bids, the bid of a company or of a joint group might be rejected if the companies take part in anti-competitive practices. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Below 4,000 (VAT excluded), the State, its public bodies other than those of an industrial and commercial nature, the local authorities and their public bodies may enter into procurement contracts without prior publicity and opening to competition. Both the Public Procurement Code (Article 3) and Ordinance n (Article 7) exclude from their scope some types of contracts which can be entered into without prior publicity and opening to competition. These contracts are, for example, contracts having as their object the acquisition or renting of land, existing buildings or other real property, or which relate to other rights over such property, regardless of the financial terms and conditions thereof; purchases of services made within the context of research and development programmes which a public body contributes to without fully financing them or acquiring all the results; or contracts awarded by virtue of the specific procedures of an international organisation or contracts concluded with international organisations in order to obtain supplies, services or public works. Both the Public Procurement Code (Article 35) and Decree n (Article 33) also provide that negotiated procedures can be conducted, with or without prior publicity and opening to competition, for specific contracts. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public Baker & McKenzie 125

142 works contracts and the Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors has been implemented in France respectively by law n of 4 January 1992, as subsequently amended, and by law n of 29 December The Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts with EEA relevance has been implemented by Ordinance n of 7 May Most of these provisions are codified under the relevant sections of French Administrative Justice Code. b. Are remedies available outside the scope of the legislation? Contractors may resort to settlement, conciliation, and arbitration. As regard conciliation, for contracts subject to the Public Procurement Code, contractors may submit any dispute to an advisory board (Comité consultatif de règlement amiable des différends ou des litiges). Such advisory board investigates elements of law or fact with a view to finding an amicable and equitable solution. Besides, these contracts may refer to one of the Administrative General Terms and Conditions pursuant to which an amicable conciliation procedure before bringing an action before Administrative Courts is compulsory. As regards arbitration, and as an exception to the principle set forth in Article 2060 of French Civil Code, local public authorities, local public bodies, some public bodies of industrial and commercial nature and the State (subject to prior authorisation by a specific decree in this case) may resort to arbitration for works and supply contracts. c. Is there a specific forum before which disputes are heard? Disputes relating to public procurement contracts are judged by the local competent Administrative Courts. Disputes relating to private contracts are judged by the local competent District Courts (Tribunal de Grande Instance). 126 Baker & McKenzie

143 Baker & McKenzie's Global Public Procurement Handbook France d. Are there any timing requirements where a party wants to enforce? When the procurement contracts refer to one of the Administrative General Terms and Conditions, specific timing requirements will have to be complied with. e. What are the leading court decisions involving procurement disputes? There have been many court decisions involving procurement disputes in France, including those by the Supreme Administrative Court (Conseil d Etat), which are followed by the lower Administrative Courts. The following decisions can be pointed out: Conseil d Etat, 3 October 2008, SMIRGEOMES (relating to summary proceedings before the signing of the procurement contract and considering that the only persons who show that they have sustained or are likely to sustain harm owing to breaches to publicity and opening to competition can lodge an application) and Conseil d Etat, 16 July 2007, Société Tropic Travaux Signalisation (allowing the ousted competitors to dispute the validity of the contract or some of its clauses once it is signed). 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Competition law and criminal law are relevant to procurement by public agencies (see above). 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? The public procurement law applies to all procurement contracts, regardless of the industry sector. However, the contract may refer to one of the Administrative General Terms and Conditions applicable to specific contracts (such as intellectual performances contracts, industrial contracts or information and communication techniques contracts). Baker & McKenzie 127

144 8. Looking Ahead a. Are there any proposals to change the law in the future? A bill aimed at simplifying the law and reducing the administrative procedures has been introduced before the National Assembly on 28 July It notably aims at increasing the current amount of 4,000 (VAT excluded) of the Public Procurement Code below which contracts may be entered into without prior publicity and opening to competition, to 15,000 (VAT excluded). The bill has been adopted by the National Assembly on 18 October 2011 and is currently submitted to the Senate. 128 Baker & McKenzie

145 Baker & McKenzie's Global Public Procurement Handbook Germany Germany 1. The Laws a. What is the applicable legislation? German procurement law is guided by rules contained in three different levels of regulation: first, in budgetary (Federal and State Budgetary Regulations BHO and LHO ) and competition law (German Act Against Restraints on Competition GWB ); second, in delegated legislation (Procurement Ordinance, Vergabeverordnung VgV ); and third, in procurement regulations (German Procurement Regulations for Works VOB/A, German Procurement Regulations for Supplies and Services VOL/A, German Procurement Regulations for Performances VOF ). The provisions contained in the GWB are elaborated in the VgV and in VOB/A, VOL/A and VOF. Public procurement law under the GWB and the VgV only applies if the threshold values contained in European Directives are equalled or exceeded. Current values are 193,000 for supplies and services and 4,845,000 for building contracts. The threshold values for awards in the sectors of water, energy and transport (utility sectors) are 387,000. Specific other threshold values apply for specific Federal authorities and specific contracts regarding the military area. The procurement regulations (VOB/A, VOL/A and VOF) contain additional administrative provisions. They consist of four different parts which apply to different kinds of procurements such as awards below (part 1 of each regulation) and above the EU thresholds values (part 2 of each regulation) and awards in the utilities sectors (parts 3 and 4 of each regulation). b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? German procurement law is based largely on EC Directives on public procurement. These in turn are influenced by the WTO Government Procurement Agreement (GPA) as the European Union and each of its 27 Member States are signatories to the GPA. The scope of the GPA covers any law, regulation, procedure or practice regarding any procurement by any Baker & McKenzie 129

146 contractual means as soon as the procuring entity and the type of contract are listed in Appendix I to the GPA and the thresholds stated there are exceeded. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? As German procurement law aims largely at implementing EC Directives on public procurement, it concentrates on principles resulting from European primary law. Thus, public contracts may only be awarded on the basis of a competitive award procedure, which must be transparent and nondiscriminatory. Additionally, the promotion of small business interests, contained in paragraph 3 of section 97 GWB, must be respected. These main principles have to be observed during every step of the procurement process. d. Is aerospace and defence procurement treated differently from other types of procurement? While, in principle, government procurement in the field of defence and security falls under the general EC procurement rules (Directive 2004/18/EC), these general rules do not accommodate the specificities of defence-related procurement contracts. Consequently, until now, most EU Member States have opted to derogate from the general EC procurement rules for practically all defence and security related contracts by invoking Art. 346 TFEU (former Art. 296 EC Treaty), which allows a derogation for national security reasons, and have instead subjected these to defencespecific national rules. According to section 100 paragraph 2 (d) and (e) GWB, German procurement law does not apply to the procurement of hard military equipment, civil goods and dual-use goods that are related to interests of national security. Hence, rejected bidders who believe themselves unfairly disqualified were left without any adequate remedy. Apart from recourse to the European Court of Justice, the rejected bidders could only claim damages. This regulatory deficiency produced unease. Therefore the defense and security sector was subject to a reform at the European level. The central element of this reform was the so-called Defence Package: Directive 2009/81/EC on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defense and security ( Directive on Defence Procurement ) and Directive 2009/43/EC on simplifying terms and conditions of transfers of defence-related products within the Community. Since Germany has not implemented the Directive 130 Baker & McKenzie

147 Baker & McKenzie's Global Public Procurement Handbook Germany on Defence Procurement in the scheduled timeframe, its regulations now have direct effect. However, a special German Defence Procurement Ordinance (Verteidigungsvergabeverordnung VSVgV ) that is meant to transpose the Directive is expected for the beginning of The Directive sets forth procurement rules specifically tailored to those areas of the European defence market that fall outside the scope of both Art. 346 TFEU and the general EU Procurement Directive 2004/18/EC. Thus, the new Directive applies to sensitive public supply contracts, public service contracts, and public work contracts in the fields of defence and security. The procurement thresholds are the same as those set forth in the general EU Procurement Directive, which has been the principal pattern for the new Directive. However, the Directive on Defence Procurement stipulates a number of specific procedural features tailored to the characteristics of sensitive public defence and security contracts. Under the new Directive, EU Member States may still invoke Art. 346 TFEU in order to exempt from the new procurement rules those defence and security procurement contracts which are so sensitive that even the new rules do not satisfy their security needs. However, this option is now severely curtailed since Member States should be able to generally satisfy their special security needs by means of the new Directive. Accordingly, the use of Art. 346 TFEU is limited to truly exceptional cases where the rules of the new Directive are insufficient to safeguard a Member State s essential security interests. In contrast, there are no special regulations applicable to aerospace procurement. The award of contracts in this field is governed by the general procurement laws. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? Contracting authorities that have to observe the procurement provisions include all classic public authorities (bound to budgetary law), especially the Federal Government, the State Governments and municipalities, as well as co-operations thereof. b. Which private entities are covered by the laws? Private corporations which perform public purposes and predominantly belong to or are controlled by the classic public authorities are deemed contracting authorities. Other private entities involved in the implementation of special governmental-supported activities, for example, the construction and operation of hospitals, sports, school or leisure facilities or universities Baker & McKenzie 131

148 have to observe public procurement law, as well. Also, the concessionaire of a works concession has to comply with some of the public procurement provisions. c. Which types of contracts are covered? Section 99 GWB determines the types of contracts covered by procurement provisions. In paragraph 1, public contracts are defined as contracts for pecuniary interest concluded between contracting entities and undertakings whose subject matter is supplies, works or services, and reward procedures intended to lead to service contracts. Thus, the German law distinguishes between supply, works and service contracts, specified in paragraphs 2 to 4 of section 99 GWB: Supply contracts are contracts for the procurement of goods involving in particular a purchase or hire purchase or leasing, or a lease with or without a purchase option. The contracts may also include ancillary services. Works contracts are contracts either for the execution or the simultaneous design and execution of works or a work which is the result of civil engineering or building construction work and is to fulfill a commercial or technical function, or for the execution of a work by a third party corresponding to the requirements specified by the contracting entity. Service contracts are contracts for performances which are not covered by paragraphs 2 or 3 and are not reward procedures. d. Are there anti-avoidance rules (including laws on bid rigging)? The awarding of contracts is also subject to the provisions of antitrust law and should be in compliance with section 1 GWB, which prohibits agreements between competing enterprises that would effect the prevention, restriction or distortion of competition. In Germany, in accordance with section 2 paragraph 1 VOB/A and VOL/A, one of the consequences of the applicability of the antitrust law provisions is the requirement to fight anticompetitive practices all bidders are excluded from tender who are party to anti-competitive agreements regarding the tender. According to these provisions, anti-competitive agreements are practices capable of restricting or distorting competition. The term anti-competitive agreement is therefore not 132 Baker & McKenzie

149 Baker & McKenzie's Global Public Procurement Handbook Germany restricted to illegal practices, but also includes any other agreements and practices which do not comply with the principles of competition. Furthermore, the procurement process can also be subject to chapter 26 of the German Criminal Code concerning restrictive practices offences and chapter 30 concerning offences committed in public office. These impose penalties on restricting competition through agreements in the context of public bids and on taking and giving bribes. 3. Procurement Procedures a. What procurement procedures can be followed? German public procurement law offers several different ways to award a contract. Contracting authorities may employ the following procedures: open procedure, in which all interested contractors may submit a bid; restricted procedure (two-step-procedure), in which, first, an invitation to participate is published and the contracting authority selects a limited number of the interested economic operators to submit a tender subsequently; negotiated procedure, in which the contracting entity consults companies of its choice, with or without a contract notice and negotiates the terms of the contract with one or more of them; and competitive dialogue, in which a contract notice is published and the contracting authority conducts a dialogue with the candidates admitted to that procedure with the aim of developing one or more suitable alternatives capable of meeting its requirements and on the basis of which the chosen candidates are invited to tender. As a general rule, the open procedure has priority. A deviation from this principle is only permissible if a statutory exception exists. Circumstances in which the restricted, the negotiated procedure or the competitive dialogue is permissible are stated in the German contracting regulations. b. Are there any rules on the specifications/criteria? Contracts are awarded to economic operators that are suitable with regard to the subject of the contract. A bidder or an applicant respectively is suitable if he possesses technical knowledge, efficiency and reliability. Economic operators possess the required technical knowledge if they have the knowledge and experience to accomplish the task subject of the contract. Baker & McKenzie 133

150 Specific experience in similar tasks will be considered. Efficiency requires the economic operator to possess the technical, personal and financial resources to guarantee appropriate performance of the contract. An economic operator qualifies as reliable if he guarantees contract performance in due form and, in particular, in line with applicable provisions of law (tax, social, criminal, etc.). Additionally, he has to provide the ability to carry out the contract within the time limits set by the contracting authorities and follow the instructions given by them. Additional selection criteria are only admissible if federal or state law provides for them. Among these so-called non-award-related criteria Federal and state legislators have implemented are the promotion of women, the fight against clandestine employment, and the protection of the environment. Non-award-related criteria which have not been provided for by statute, like tariff clauses or sect clauses, are therefore not admissible. c. Can certain prospective bidders be excluded from the competition? The exclusion of certain prospective bidders is regulated in the third level of the procurement regulation in section 6 EG VOL/A and section 6 a VOB/A. According to these provisions, bidders who have been convicted of any of the offences listed have to be excluded from the competition. These offences include, e.g., forming criminal organizations, money laundering, fraud and giving bribes as an incentive to the recipient s violating his official duties. Additionally, a bidder can be excluded if the outcome of the qualifying examination did not prove their suitability, i.e. expertise, capacity and reliability. This exclusion is, in contrast, at the contracting authority s discretion. d. Are there any rules on the awarding of contracts? The contract has to be awarded to the most economic tender or offer. This also includes the consideration of the price because the award criterion of the most economic tender/offer is aiming at an optimum price-performance ratio. According to the Awards Senates of the Higher Regional Courts, the price might be the only criteria for awarding a contract if the public contracting entity failed to define other criteria in the tender documents. 134 Baker & McKenzie

151 Baker & McKenzie's Global Public Procurement Handbook Germany e. Can bidders combine to submit a bid? The European Community law prescribes only very few regulations for the participation of bidding consortia in award procedures. The EC procurement regulations previously in force merely provided that bidding consortia may submit tenders and that the question of eligibility must not be decided a priori i.e., before a contract is awarded upon the condition that a specific legal form be assumed. The so-called Legislative Package (Directives 2004/18/EC and 2004/17/EC) provides only a slightly more extensive regulation. For the first time, the new case-law-based directives provide guidelines regarding the proof of capability of bidding consortia. Bidders or applicants which do not satisfy the criteria for participation in procedures themselves are now free to rely on the economic and technical capabilities of third parties they intend to subcontract if the contract is awarded to them, provided that it can be proved to the awarding authority that the bidding party has the required means at its disposal, for instance, by producing an undertaking by those other enterprises. German public procurement law has implemented these regulations. Only recently, as part of the so-called PPP Acceleration Act, an amendment to VgV now provides that in regard to the VOB/A, the awarding authority may require that a bidding consortium assume a specific legal form only when a contract is awarded, to ensure the proper execution of the contract and that contractors may avail themselves of the capabilities of other enterprises to perform services described in the VOB/A and the VOL/A. Another crucial question in the context of public procurement procedures which often last several months is what consequences may arise from changes in the composition of bidding consortia during the procedure. For contract awards in open procedures in Germany, it is commonly accepted judicial practice that the establishment of bidding consortia or a change in their composition is generally prohibited between bid submission and bid award. It is therefore inadmissible under procurement law to change a bid in open procedures between submission and bid award by changing the bidders legal relationships, including the removal of individual bidders from the consortium. In restricted procedures with non-competitive tender, bidding consortia whose composition has changed or which were established after invitation to bid may also not submit a valid bid, while in restricted procedures and negotiated procedures with call for competition, the composition or establishment of a bidding consortium rightly become binding immediately after the end of the bid period. Baker & McKenzie 135

152 Finally, in Germany, individual members of bidding consortia do not have standing to file an appeal for review on behalf of the consortium. As detailed in section 107 paragraph 2 GWB, only the consortium itself can have a legitimate interest in the contract, but not individual members who did not submit an offer and therefore could not be awarded the contract. f. Are there any rules on alternative bids? If public authorities do not declare the submission of alternative bids as required or permitted, their submission is not admissible. If they do so, submitted alternative bids have to be assessed in the same way as main offers. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? As mentioned above, German public procurement regulations permit negotiated procedure without prior publication of the tender notice. This procedure is insofar not a formal awards procedure as the contracting authority may approach selected enterprises in order to negotiate the terms and conditions of a prospective contract. Hence, the principle of competition remains to the side since the use of this procedure is limited to certain determined cases as also enlisted in the Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts. An award may be granted without prior notice, when no tenders or no suitable tenders or no applications have been submitted in response to an open procedure or a restricted procedure, provided that the initial conditions of contract are not substantially altered and on condition that a report is sent to the Commission if it so requests. when the products involved are manufactured purely for the purpose of research, experimentation, study or development; this provision does not extend to quantity production to establish commercial viability or to recover research and development costs. when, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, the contract may be awarded only to a particular economic operator. 136 Baker & McKenzie

153 Baker & McKenzie's Global Public Procurement Handbook Germany insofar as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseeable by the contracting authorities in question, the time limit for the open, restricted or negotiated procedures with publication of a contract notice cannot be complied with. The circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authority. for additional deliveries by the original supplier which are intended either as a partial replacement of normal supplies or installations or as the extension of existing supplies or installations where a change of supplier would oblige the contracting authority to acquire material having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance; the length of such contracts as well as that of recurrent contracts may not, as a general rule, exceed three years. for additional works or services not included in the project initially considered or in the original contract but which have, through unforeseen circumstances, become necessary for the performance of the works or services described therein, on condition that the award is made to the economic operator performing such works or services, when such additional works or services cannot be technically or economically separated from the original contract without major inconvenience to the contracting authorities or when such works or services, although separable from the performance of the original contract, are strictly necessary for its completion. However, the aggregate value of contracts awarded for additional works or services may not exceed 50 % of the amount of the original contract. for new works or services consisting in the repetition of similar works or services entrusted to the economic operator to whom the same contracting authorities awarded an original contract, provided that such works or services are in conformity with a basic project for which the original contract was awarded according to the open or restricted procedure. As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into consideration by the contracting authorities when they apply the provisions of Article 7. This procedure may be used only during the three years following the conclusion of the original contract. Baker & McKenzie 137

154 for public service contracts, when the contract concerned follows a design contest and must, under the applicable rules, be awarded to the successful candidate or to one of the successful candidates, in the latter case, all successful candidates must be invited to participate in the negotiations. for supplies quoted and purchased on a commodity market. for the purchase of supplies on particularly advantageous terms, from either a supplier which is definitively winding up its business activities, or the receivers or liquidators of a bankruptcy, an arrangement with creditors, or a similar procedure under national laws or regulations. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Although German public procurement law was traditionally part of administrative law, as of 1998, public procurement regulation is also implemented in the GWB. Prior to 1998, the legal regime guiding public procurement was exclusively contained in budgetary law and administrative regulation which gave no standing to the private entities participating in the procurement process. Consequently, legal remedies for applicants and bidders were not provided. In order to comply with European Directives on public procurement calling not only for individual rights of bidders and applicants respectively but also for an effective remedies system to protect these rights, the German legislator introduced new rules meeting these requirements in sections 97 to 129 GWB. Additionally, in February 2001, the Procurement Ordinance (VgV) amending the remedies system entered into force. However, the legal protection system only applies to procurement procedures for contracts exceeding the European threshold values. For contracts below the applicable threshold, bidders and applicants still have no standing for such specific judicial review. In case of an infringement of procurement rules, bidders can also claim damages. This may include not only reimbursement of the costs for preparation of the tender and participation in the procurement procedure but also consequential damages caused by the unlawful award. Procurement provisions also provide the right to bring forward an action for damages against a competing bidder who abused its right of judicial review by a claim 138 Baker & McKenzie

155 Baker & McKenzie's Global Public Procurement Handbook Germany obviously unjustified or based on false statements or on a misrepresentation of facts. b. Are remedies available outside the scope of the legislation? The remedies available are those applicable under the trade agreements, and those generally available under contract law and the procurement regulations. As the legal protection system only applies to procurement procedures for contracts exceeding the European threshold values, contracts below the applicable threshold cannot be reviewed before the Judicial Review Chambers and the Review Senate. The Federal Constitutional Court ruled in 2006 that this division of the legal protection system in two levels was constitutional. Subsequently, a German Higher Administrative Court ruled that the unsuccessful tenderers still had access to civil or administrative courts to verify the legality of the public authority s decision under contract law. This also includes the assertion of a claim for damages. c. Is there a specific forum before which disputes are heard? Judicial review of public procurement activities in Germany is guaranteed on a two-level basis: First instance review is granted by Judicial Review Chambers (Vergabekammern) which are part of the administrative authority. Judicial Review Chambers exist on a federal and on a state level. Appeals against decisions of the Judicial Review Chambers are apart from few exemptions with regard to the health care sector dealt with by specialized Review Senates (Vergabesenate) at the Higher Regional Courts (Oberlandesgerichte). Review by Judicial Review Chamber Petitions for judicial review (Nachprüfungsantrag) of federal procurement procedures have to be filed with the Federal Judicial Review Chambers which are constituted within the Federal Cartel Office (Bundeskartellamt). Procurement procedures initiated by state authorities are reviewed by the Judicial Review Chambers of the respective state. The Judicial Review Chambers work and decide independently. A petition for judicial review filed with a Judicial Review Chamber suspends the award procedure, i.e. award of the contract is banned as soon as the petition for judicial review has been served on the contracting authority. A contract awarded despite of the suspension is void. Baker & McKenzie 139

156 Judicial Review Chambers may review the award procedure with regard to all aspects of public procurement law. Accordingly, Judicial Review Chambers may grant a wide range of remedies such as execution of lawful measures, declaration of the unlawfulness of the award (on application) or termination of the suspension and admission to award the contract in advance (on application). Judicial Review Chambers are obligated to rule within a period of five weeks and give reasons for its findings in writing, although in exceptional cases this period might be extended. However, as soon as the contract in question is awarded to another bidder, Judicial Review Chambers cannot set aside the award or employ any other remedy. In order to guarantee an effective remedies system with respect to this policy, German public procurement law commits contracting authorities to notify all participants of the procurement procedure of their intention to award the contract to a competitor at least 10 days prior to the award. Contracts awarded without this so-called preliminary information (Vorabinformation) are void. Frustrated participants may call on Judicial Review Chambers to declare such voidance. Contracts which are awarded without any kind of tender procedure, i.e. direct award to one entity, are also deemed void due to violation of the preliminary information obligation. The impending public procurement law reform contains clarifications with regard to the voidance ramification of direct awards in order to heighten legal certainty. For instance, it introduces a deadline for enforcement of the voidance by frustrated competitors. Review by Review Senates The final decision of a Judicial Review Chamber which constitutes an administrative act can be challenged with an immediate appeal (sofortige Beschwerde) to the Review Senate of the Higher Regional Courts. An immediate appeal must include a statement of the grounds for appeal and must be filed within two weeks after the Judicial Review Chamber has served its decision to the respective party. The Review Senate acting as court of appeal can either replace the Judicial Review Chamber s decision by its own or annul the decision of the Judicial Review Chamber and recommit it under the condition to consider the reasons given by the Review Senate. d. Are there any timing requirements where a party wants to enforce? For obtaining legal protection, the German legislator has stipulated a strong condition precedent for the appeal to the Awards Chambers. According to 140 Baker & McKenzie

157 Baker & McKenzie's Global Public Procurement Handbook Germany section 107 paragraph 3 GWB, if a bidder recognizes an infringement of its subject rights according to section 97 GWB during the procurement process, it must file an objection vis-à-vis the contracting authority without undue delay. The interpretation of the term without undue delay of section 107 paragraph 3 GWB in the legal practice of the Awards Senates and Awards Chambers is inconsistent due to the fact that the deadline must be assessed in every single case. In cases which show no difficulties concerning the factual or legal situation, the courts and awards chambers recognized three days of respite until the objection vis-à-vis the contracting authority. In more difficult factual and/or legal situations, they have decided that it might be possible to file the objection within a maximum deadline of fourteen days. As the legal situation has not been clarified until now, it must be recommended that bidders should file their objections as soon as possible. Request for judicial review can be filed before the review chamber at any time before the conclusion of the contract. As mentioned above it is also possible to challenge an award as void from the outset even after the conclusion of the contract. An immediate appeal must be filed within two weeks after the Judicial Review Chamber has served its decision to the respective party. e. What are the leading court decisions involving procurement disputes? Since European procurement law has been transposed into German national law in 1999, economic operators have made vast use of the possibility to seek judicial review. Therefore, German case law is numerous and profound. More than 15,000 well-founded decisions dealing with all aspects of German procurement law and thereby also answering most questions arising from European procurement law exist. Each year German review bodies provide for more than approximately 1,200 new decisions. Many landmark decisions of the European Court of Justice result from German cases, e.g., the decision regarding the qualification of public-private companies as public contracting authorities (C-26/03 Stadt Halle), the decision regarding the difference between framework agreements and concessions as well as the qualification of public sickness funds as public contracting authorities (C-300/07 Oymanns); the decision regarding the obligation to tender property sales which are connected with certain works obligations (C-451/08), or such decisions initiated by Germany such as the decision regarding the Commission s interpretative communication on the Baker & McKenzie 141

158 Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (OJ C 179, p. 2) (T-258/06). 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Regulation PR No. 30/53 on Pricing in Public Contracts, which is often referred to in tender documents, is aimed at ensuring stricter observance of market principles in public contracts. The regulation dates from 1953 when market pricing was not common but the determination of prices was made by official authorities. Despite of its age, it is still common in Germany to refer to this regulation in public contracts. The regulation PR No. 30/53 is a tool to guarantee a fair market value for contracting authorities. As a basic rule, contracting authorities are supposed to pay market prices unless a market price does not exist for the requested services or goods. In the latter case, the regulation sets forth rules on how to determine what price the contracting authority has to pay. The most important factor to determine prices are the costs of the supplier of goods or the provider of services, respectively. Costs in this context also include a certain share of profit. If possible, cost prices are to be determined on a standardized basis, i.e. consistent for similar types of goods or services. Only if standardization is not possible, individual costs of suppliers and providers are the relevant basis for cost determination. Accordingly, the aforementioned regulation PR No. 30/53 is only relevant if market pricing does not exist for the respective services/goods. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? When the description of performance shall contain technical specifications, the contracting authority needs to comply with additional requirements established in section 8 EG paragraphs 2 to 7 VOL/A, section 7 paragraphs 3 to 8 VOB/A or section 6 paragraphs 2 to 7 VOF each in connection with an annex on technical specification. The contracting authority can formulate technical specification with reference to those listed in the annex, following the hierarchy from national standards implementing European standards to European and international standards, certifications and specifications through to national standards, certifications and specifications. In either case, an additional remark has to ensure that equivalent standards are admitted. 142 Baker & McKenzie

159 Baker & McKenzie's Global Public Procurement Handbook Germany Alternatively, the authority can formulate technical specifications in the form of performance or functional requirements providing a clear picture of what will be the object of the contract. Additionally, it is admissible to combine both the technical specifications listed in the annex and performance and functional requirements. 8. Looking Ahead a. Are there any proposals to change the law in the future? As stated above, Germany has not yet implemented the Directive on Defence Procurement, which is currently expected for Supply and service contracts in the fields of defence and security will be regulated in a completely new Defence Procurement Ordinance (Verteidigungsvergabeverordnung VSVgV ) following the example of the VOL/A, while works contracts in these fields will be included in a completely new (third) chapter of the existing VOB/A. Furthermore, the amendments will entail modifications of the GWB regarding judicial review in the areas covered by the Directive. Baker & McKenzie 143

160 Hungary 1. The Laws a. What is the applicable legislation? From 1 January 2012, a new public procurement act came into force ( Act ) and replaced the previous legislation. The Act is significantly shorter than the previous act and only serves as a framework of the public procurement legislation. Therefore, government decrees and ministerial decrees will contain the detailed rules of procurements. As of the time of writing, the decrees are not available yet. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The Act is compatible with the EC Directives as Hungary had to complete the harmonization of the Hungarian public procurement legislation with EC law by Hungary s accession to the EU (1 May 2004). At the same time of its EU-accession, Hungary also joined the WTO Government Procurement Agreement ( GPA ). c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The Act is based on five principles: fair competition during the entire public procurement procedure; adequate publicity and transparency; acting in good faith and exercising rights properly; equal treatment of all participants; and national treatment of foreign suppliers in accordance with international agreements. In case of any violation of the above principles, the Public Procurement Committee ( Committee ) may be requested to review a claim. 144 Baker & McKenzie

161 Baker & McKenzie's Global Public Procurement Handbook Hungary d. Is aerospace and defence procurement treated differently from other types of procurement? Procurements in the field of defence and security are not governed by the Act; instead the following separate laws are applicable: Government Decree (No. 218/2011) on the special rules of procurements which relate to state secrets, service secrets, basic security and national security interests or which require special security measures. This Decree will come into force on 1 January 2012, replacing the currently effective decree on this subject. The Decree shall be applied if the competent committee of the Parliament renders a preliminary decision on the exclusion of the application of the Act regarding a procurement influencing national security. Government Decree (No. 228/2004) on the special rules of procurements of military and law enforcement devices and services which relate to basic security interests. At this stage, it seems that this Decree will remain in force after the Act comes into force. Government Decree (No. 40/2005) on the detailed rules of procurements executed in the framework of NATO s Security Investments Program. In such procurements, generally only Hungarian business organizations having special certificates ruled by separate laws may participate as bidders. At this stage, it seems that this Decree will remain in force after the Act comes into force. Although there are specific laws regarding the abovementioned areas, in principle, the basic rules of these procurements are very similar to (or sometimes the same as) the general public procurement rules set out in the Act. There is no specific law for aerospace procurement. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The following public agencies are covered: ministries, the Hungarian Prime Minister s Office, and organizations authorized to call for tender in centralized procurements; Baker & McKenzie 145

162 the Hungarian State, public entities financed from the central budget, local municipalities, associations of regional municipalities and other municipality organizations, and public foundations; legal entities conducting, or established for conducting, activities of public interest (except for industrial and commercial activities), provided that either they are under the control of one or more organizations defined in this section, the Parliament or the Government, or they are financed in majority by one or more organizations concerned; economic organizations in case of an in-house relationship; in certain cases, economic organizations providing specific public services (e.g., water supply, gas supply, postal services), provided that they are under the control of one or more organizations defined in this section; and in certain cases, economic organizations providing specific public services (e.g., water supply, gas supply, or postal services), provided that they are providing these services on the basis of an exclusive right. b. Which private entities are covered by the laws? For the purposes of a subsidized procurement, private entities may also be covered by the Act. Private entities are covered by the Act if their procurements are subsidized by the public agencies listed in Section 2(a) above. Further, private entities may chose to voluntarily apply the Act, in which case the Act is fully binding on them. c. Which types of contracts are covered? The Act covers the contracts the subject of which is: (i) the purchase of goods; (ii) purchase of services; (iii) construction projects; (iv) construction concessions; and (v) service concessions; provided that the goods or services are provided for consideration, the value of which reaches the respective minimum amounts defined by the Act. d. Are there anti-avoidance rules (including laws on bid rigging)? In order to avoid anti-competitive conduct, the Act provides that in the same public procurement procedure (i) a bidder must not submit a bid together 146 Baker & McKenzie

163 Baker & McKenzie's Global Public Procurement Handbook Hungary with another bidder, (ii) a bidder should not be the subcontractor of another bidder, and (iii) a bidder should certify the eligibility of another bidder. Section 11 of the Hungarian Competition Act prohibits agreements restricting economic competition. This provision implicitly covers the prohibition of bid rigging. If the contracting authority notices the obvious violation of Section 11 of the Hungarian Competition Act or Article 101 of Treaty on the Functioning of the European Union, or assumes such violation with good cause, it must notify the Hungarian Competition Authority. The Hungarian Criminal Code defines a crime regarding agreements in restraint of competition in public procurement and concession procedures, as follows: Any person who enters into an agreement aiming to manipulate the outcome of an open or restricted tender published in connection with a public procurement procedure or an activity that is subject to a concession contract by fixing the prices (charges) or any other term of the contract, or for the division of the market, or takes part in any other concerted practices resulting in the restraint of trade is guilty of felony punishable by imprisonment for up to five years. Any person who partakes in the decision-making process of an association of companies, a public body, a society or similar organization, and adopting any decision that has the capacity for restraining competition aiming to manipulate the outcome of an open or restricted tender published in connection with a public procurement procedure or an activity that is subject to a concession contract shall also be punishable as set forth in Subsection. The punishment shall be imprisonment for a misdemeanor for up to two years, if the act specified in the above subsections if the value of the public contract involved is below substantial value. The perpetrator of a criminal act defined in the above subsections shall be exonerated from punishment if he confesses the act to the authorities first hand and reveals the circumstances of the criminal act. Authorities shall also mean the bodies supervising competition and financial operations and the body which reviews procedures in connection with public procurement contracts. Baker & McKenzie 147

164 3. Procurement Procedures a. What procurement procedures can be followed? There are three main types of public procurement procedures in Hungary the open, the restricted and the negotiated procedure (nevertheless, the Act governs other types of procedures). Contracting authorities may apply open and restricted procedures in general, while negotiated procedures may be applied only in exceptional cases specified in the Act. The open procedure is a one-phase procedure in which any supplier may participate. Restricted and negotiated procedures consist of two phases. In the participation phase, the contracting authority only decides on the bidders eligibility for the performance of the contract. In the tendering (bidding) phase, the bidders submit their bids, which are finally evaluated by the contracting authority. In an open or a restricted procedure, a contracting authority is bound to the terms of its call for tender and other documents issued in the course of the public procurement procedure, and the bidders are also bound to their bids. However, in a negotiated procedure, a contracting authority may, to a great extent, freely negotiate the terms and conditions of a contract with the bidders. Due to the implementation of Directive 2004/18/EC of the European Parliament and the Council, as from 2006, the competitive dialogue is also available for contracting authorities. The competitive dialogue ensures greater flexibility for contracting authorities in case of complex procurements. Effective 1 January 2012, a new rule states that if the value of the procurement does not reach the relevant European Community threshold, the contracting authority, in certain cases, may choose to establish and apply its own rules of procedure. b. Are there any rules on the specifications/criteria? Contracting authorities must use certain criteria to select eligible bidders. These criteria must be precisely defined in the notice initiating the public procurement procedure and in the tender documentation. These criteria serve to ascertain the bidder s financial, economic and technical eligibility. 148 Baker & McKenzie

165 Baker & McKenzie's Global Public Procurement Handbook Hungary c. Can certain prospective bidders be excluded from the competition? Certain prospective bidders may be excluded from the competition on the basis of the excluding causes listed in the Act. For example, a company should be excluded from a public procurement procedure if, among others, it is under voluntary or involuntary winding-up or bankruptcy, has overdue taxes, its activities have been suspended, or has provided false data which jeopardizes competition. The contracting authority may exclude the companies for which no national treatment should be granted. National treatment should be granted for bidders seated in the European Union and for community goods. National treatment to non-community tenderers and non-community goods should be granted in compliance with the international commitments of the Republic of Hungary and the European Communities in the field of public procurements. d. Are there any rules on the awarding of contracts? Contracts must be awarded to the participant that: offers the lowest price; or submits a bid that contains the most advantageous offer. If the contracting authority chooses the most advantageous offer, it must specify the types of the awarding criteria/sub-criteria, together with the weighing method. This specification must reflect the importance of each criterion/sub-criterion and indicate the available scores for each of the criteria/sub-criteria. e. Can bidders combine to submit a bid? Two or more bidders may submit joint bids, with certain restrictions. In the same public procurement procedure: (i) a bidder must not submit a bid together with another bidder; (ii) a bidder should not be the subcontractor of another bidder; and (iii) a bidder must certify the eligibility of another bidder. f. Are there any rules on alternative bids? The contracting authority should indicate in the document initiating the public procurement procedure whether alternative bids are accepted. The contracting authority is entitled to allow the possibility of alternative bids only if the award criterion is that the contract is awarded to the bidder which submits a bid that contains the most advantageous offer (see Section 3(d) Baker & McKenzie 149

166 above). If the contracting authority allowed alternative bids, it should specify in the documents initiating the public procurement procedure what minimum requirements and technical specifications the alternative bids must comply with. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? In certain very strict conditions, the contracting authority may be entitled to call only one bidder for participating in a tender, which basically excludes actual competition. This is the case, for example, when, for technical or artistic reasons, or for reasons connected with protection of exclusive rights, the contract may be performed only by a particular organization or person. Further, public contracts may be reserved for sheltered employers. Pursuant to the Act, the contracting entity may, and in certain cases must, reserve the right of participating in public procurement for bodies qualified as sheltered employers, bodies committed to a sheltered employment program, and for bodies authorized to operate social employment programs, if more then 50% of their workforce is comprised of people with some degree of incapacity, or for bodies providing employment under a social employment program for workers cared for in social institutions, if more than 50% of their workforce is comprised of people with disabilities. The contracting entity should clearly indicate this disposition in the tender notice. In connection with the public contracts reserved according to the above subsection, the contracting entity should ensure equal opportunity to tenderers established in the European Union, if more than 50% of their workforce is comprised of workers with some degree of incapacity. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The Act contains the detailed rules of remedy. In Hungary, the Committee is responsible for reviewing infringements of the Act. A remedy procedure before the Committee may be initiated either ex officio or upon the request of a contracting authority, a bidder or any other interested party, for a procedural fee. The Committee may decide to hold a public trial. The Committee may take interim measures if it is likely that the Act is violated or there is a jeopardy thereof. In its final decision, the Committee may reach the 150 Baker & McKenzie

167 Baker & McKenzie's Global Public Procurement Handbook Hungary following decisions, for example: declaring that there is a violation of the Act; ordering the wrongdoer to comply with the Act; annulling the decision of the contracting authority; ban a bidder from participation in public procurement procedures for a maximum of 5 years; or impose a fine. b. Are remedies available outside the scope of the legislation? Does not apply. c. Is there a specific forum before which disputes are heard? The Committee is responsible for reviewing infringements of the Act. The Committee is entitled to conduct investigations and make administrative decisions on legal disputes falling within its competence. The Committee, acting in panels of three, decides on disputes arising in connection with the following alleged infringements of the Act: the violation of public procurement rules; the illegal amendment or performance of contracts awarded in a public procurement procedure; and the violation of the procedural rules which were set out by the contracting authority independently in the case where the contracting authority chose to establish its own procedural rules. The Committee has jurisdiction over the entire territory of Hungary. d. Are there any timing requirements where a party wants to enforce? Remedy proceedings may usually be requested or initiated within 15 days from the date on which the violation of the Act came to the knowledge of the complainant if the complainant became aware of the violation of the Act only after it was committed. If the request for remedy is challenging the contracting authority s final decision establishing the results of the tender, a remedy proceeding may be requested or initiated within 10 days from the date on which the violation of the Act came to the knowledge of the complainant. If the request for remedy is challenging the call for tender/call for participation or the tender documentation, as a general rule, a remedy may be requested five days before the expiration of the deadline for the submission of the bids at the latest. The Act contains certain presumptions regarding which date must be considered as the date of the violation and that of becoming aware of the violation. Baker & McKenzie 151

168 No remedy proceedings may be requested 90 days after the date on which the violation of the Act was committed. e. What are the leading court decisions involving procurement disputes? In Hungary, there have been many court decisions involving public procurement disputes, including those by the Supreme Court of Hungary. These court decisions cover various fields of public procurement, such as references (Supreme Court s decisions No. BH ), abnormally low price (Supreme Court s decision No. EBH ), and invalid bid and excluding causes (Supreme Court s decision No.BH ). 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? The Public Procurement Council issues guidelines and other documents which are important sources of guidance for both the contracting authorities and bidders. The Committee s decisions also serve as guidance for the interpretation and exercise of the public procurement provisions. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws. 8. Looking Ahead a. Are there any proposals to change the law in the future? The Act is effective from 1 January However, this is only a framework legislation. Therefore, several governmental and ministerial decrees have to adopted, which will contain the detailed rules of procurements. 152 Baker & McKenzie

169 Baker & McKenzie's Global Public Procurement Handbook Italy Italy 1. The Laws a. What is the applicable legislation? The legislation applicable to public procurement activities is the Legislative Decree no. 163, dated 12 April 2006 (the so-called Codice dei contratti pubblici or Code of Public Contracts ). Furthermore, with specific regard to information technology (IT) supply contracts to be executed with Italian public entities, additional provisions are set forth by the Legislative Decree no. 82/2005 ( Codice dell Amministrazione Digitale or e-government Code, hereinafter EGC ). b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The enactment of the Code of Public Contracts accomplished the implementation of European Directives 2004/17 (relevant to the procurement procedures of entities operating in the water, energy, transport and postal services sectors) and 2004/18 (relevant to procedures for the award of public works contracts, public supply contracts and public service contracts). c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The main principles of the Code of Public Contracts are established in Article 2 of the Code, pursuant to which public procurement procedures must ensure the quality of the supplies, services and works and be conducted in compliance with the principles of monetary value, effectiveness, timeliness and correctness. Moreover, the awarding of supply contracts must respect the principles of free competition, equal treatment and non-discrimination of the economic operators; awarding procedures must be transparent, suitable to purpose and public. Baker & McKenzie 153

170 d. Is aerospace and defence procurement treated differently from other types of procurement? Article 195 of the Code of Public Contracts expressly extends to defencerelated contracts the applicability of the general principles of the Code. In addition, the Ministry of Defence may issue specific regulations applicable to various aspects of the contracting activity (such as planning of necessary services to be procured, technical standards to be complied with in order to be eligible as suppliers, and other additional rules applicable to defence contracts). Finally, it is worth specifying that, pursuant to Article 16 of the Code of Public Contracts, contracts relating to the manufacture and trade of weaponry, ammunition and other war material (included in the list drawn up by the EU Council) are expressly excluded from the scope of the Code. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The Code of Public Contracts regulates all procurement contracting activities conducted by all the Italian public bodies, which are to be identified according to a substantive criterion. That is to say that not only the notion of public entities includes the entities expressly defined as public entities, but it also comprises those entities that, in light of all the applicable circumstances, may be considered as public entities (e.g., the State, a region or a municipality is a significant shareholder). Moreover, in some cases even procurement contracts from private entities may be covered by the Code of Public Contracts. b. Which private entities are covered by the laws? Pursuant to Article 32, private entities are covered by the Code of Public Contracts in the event that their activity involves: works, supplies and services, regarding works, goods or services that, for any reason, are not placed on the market in free competition and are contracted by a corporation whose capital (or even a minority part of the same) is owned by public bodies; contracts involving civil engineering activities or construction work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes, 154 Baker & McKenzie

171 Baker & McKenzie's Global Public Procurement Handbook Italy which are subsidised directly by the contracting authorities (i.e., the public entities governing the relevant contract awarding procedure) by more than 50% and the estimated value of which is greater than 1,000,000; service contracts which are subsidised directly by the contracting authorities by more than 50% and the estimated value of which, net of VAT, is equal to or greater than 193,000 and which are connected to a works contract within the context of the immediately preceding item; or contracts involving civil engineering activities or construction works (i.e., urbanization work) undertaken by private entities in deduction to the contribution they are required to pay in order to obtain the building permits. This means that the developer of the site, instead of paying the fixed amount of contribution to the town council, participates in the public procedure alongside the town council. c. Which types of contracts are covered? See Section 2(b) above. d. Are there anti-avoidance rules (including laws on bid rigging)? Article 353/bis of the Italian Criminal Code punishes, with a fine ranging from 103 to 1,032 and with imprisonment from six months to five years, whoever, by means of violence, threats, gifts, promises, collusion or other fraudulent means disturbs the administrative procedure intended to determine the content of the call for tenders. 3. Procurement Procedures a. What procurement procedures can be followed? The different types of procurement procedures provided for by the Code of Public Contracts are the following. open procedures any interested economic operator may submit a tender; restricted procedures any economic operator may request to participate and, among them, only those economic operators invited by the contracting authority may submit a tender; Baker & McKenzie 155

172 competitive dialogue any economic operator may request to participate and the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of identifying one or more suitable alternatives capable of meeting its requirements. On the basis of the outcome of such dialogue, the candidates who are finally chosen are invited to place a tender; negotiated procedures the contracting authorities consult certain economic operators of their choice and negotiate the terms of the contract with one or more of these; and design contests which enable the contracting authority to acquire, mainly in the fields of urban and rural planning, architecture and engineering or data processing, a plan or design selected by a jury after being put out to competition, with or without the award of prizes. b. Are there any rules on the specifications/criteria? The technical specifications drawn up by public purchasers need to allow public procurement to be opened up to competition and should ensure equal access to bidders, and not creating unjustified obstacles to the opening up of public procurement procedures to free competition. In this sense, it is possible to submit tenders which propose alternative options, reflecting a variety of technical solutions that may be suitable to the purpose. c. Can certain prospective bidders be excluded from the competition? The Code of Public Contracts sets forth certain express exclusion provisions. For example, subjects who have been convicted for certain crimes listed in the Code of Public Contracts, or who have been made bankrupt are excluded from the tender as well as from the consequent subcontracting. Moreover, certain exclusions could be determined for those subjects in gross infringement of employee health and safety regulations, as well as for those for which non-compliance of social security obligations is ascertained. d. Are there any rules on the awarding of contracts? Pursuant to the Code of Public Contracts, the two main principles which govern the choice of the candidate to be awarded with public procurement contracts are: 156 Baker & McKenzie

173 Baker & McKenzie's Global Public Procurement Handbook Italy most economically advantageous tender in this case, various aspects of the tender must be considered (e.g., quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, etc.); and lowest price all other conditions being equal, the tender to be chosen is the one with the lowest price. e. Can bidders combine to submit a bid? The Code of Public Contracts expressly provides for the possibility for bidders to submit a joint bid by means of a so-called temporary associations of enterprises ( ATIs ). ATIs may be both vertical (i.e., one of the bidders will perform the prevailing activities) and horizontal (i.e., all the bidders will jointly perform the same activities). All the participants to an ATI will be jointly responsible towards the relevant contracting authority as regards the subject matter of the contract. f. Are there any rules on alternative bids? According to the general principles on public contracts, it is prohibited to submit more than one bid within the same awarding procedure (the so-called prohibition of double participation principle). In particular, as regards the abovementioned ATIs, pursuant to paragraph 7 of Article 37 of the Code of Public Contracts, bidders are prohibited from participating in more than one ATI for the same public procurement as well from bidding individually once the joint bid has been submitted. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? The Code of Public Contracts expressly indicates certain types of contracts which fall outside the scope of its provisions, i.e. public service contracts regarding: the acquisition or lease, by any financial means whatsoever, of land, existing buildings or other immovable property or relative rights thereof; the acquisition, development, production or co-production of program material intended for broadcasting by broadcasters and contracts for broadcasting time; arbitration and conciliation services; Baker & McKenzie 157

174 financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments; in particular, transactions by the contracting authorities to raise money or capital, and central bank services; employment relationships; and research and development services other than those where the benefits accrue exclusively for the contracting authority for its use in the conduct of its own affairs, on condition that the service provided is wholly remunerated by the contracting authority. Moreover the Code of Public Contracts does not apply to public service contracts awarded by a contracting authority to another contracting authority or to an association of contracting authorities on the basis of an exclusive right which they enjoy pursuant to a published law, regulation or administrative provision which is compatible with the Code of Public Contracts. As a consequence, all of the above types of contracts are not subject to the mandatory bidding procedure or call for tenders provided for by the Code of Public Contracts. Finally, contracting authorities may also award public contracts through a negotiated procedure without prior publication of a specific call for tenders in the following cases below: for public work contracts, public supply contracts and public service contracts: (i) when no tenders or no suitable tenders or other request to participate have been submitted in the scope of an open or restricted procedure already carried out, provided that the initial conditions of the contract are not substantially altered; (ii) when, for technical or artistic reasons, or for the protection of exclusive rights (such as patents), the contract may be awarded only to a particular economic operator; or (iii) insofar as is strictly necessary when, for unforeseeable reasons of extreme urgency, the time limit for the normal tender procedures cannot be complied with (the circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authority). for public supply contracts: (i) when the products are manufactured purely for the purpose of research, experimentation, study or development; (ii) for additional deliveries by the original supplier where a change of supplier would oblige the contracting authority to acquire 158 Baker & McKenzie

175 Baker & McKenzie's Global Public Procurement Handbook Italy material having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance (the term of such contracts as well as that of recurrent contracts may not, as a general rule, exceed three years); (iii) for supplies quoted and purchased on a commodity market; or (iv) for the purchase of supplies at particularly advantageous terms, from either a supplier which is definitively winding up its business activities, or the receivers or liquidators of a bankruptcy, an arrangement with creditors, or similar procedures. for public service contracts, when the concerned contract follows a design competition and must, under the applicable rules, be awarded to the winner (or one of the winners) of said competition. for public work and service contracts: (i) for additional works or services not included in the project initially considered or in the original contract but which have, through unforeseen circumstances, become necessary for the performance of the works or services described therein, on condition that the award is made to the economic operator performing such works or services when such additional works or services cannot be technically or economically separated from the original contract without major inconvenience to the contracting authorities, or when such works or services, although separable from the performance of the original contract, are strictly necessary for its completion (in any event, the aggregate value of contracts awarded for additional works or services may not exceed 50% of the amount of the original contract); (ii) for new works or services consisting of the repetition of similar works or services entrusted to the economic operator to whom the same contracting authorities awarded an original contract, provided that such works or services are in conformity with the project related to the original contract (awarded following an open or restricted procedure). As soon as the first project is put up for tender, the possible use of this procedure must be disclosed and this procedure may be used only during the three years following the conclusion of the original contract. In any case, it is worth recalling that the tacit renewal of public contracts is forbidden and public contracts tacitly renewed would be void. Baker & McKenzie 159

176 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Pursuant to Article 243 of the Code of Public Contracts, subjects who plan to take legal action must inform the contracting authority of their intention to do so. The latter must communicate its resolution to the subjects within 15 days. The lack of the said information and communication could be taken into account by the court in deciding which party has to bear the connected legal expenses. b. Are remedies available outside the scope of the legislation? Specific judicial remedies applicable to public procurement activities are set forth in the Legislative Decree no. 104/2010 ( Code of Administrative Trial ). c. Is there a specific forum before which disputes are heard? In compliance with the provision of Article 244 of the Code of Public Contracts, Article 133 of the Code of Administrative Trial states that all the disputes relating to public procurement procedures carried out by the contracting authorities, including those relating to compensation and the annulment of contracts, fall within the competence of Administrative Courts. On the contrary, disputes regarding the performance of the subject matter of the contract are heard before Civil Courts of Law. d. Are there any timing requirements where a party wants to enforce? Pursuant to paragraph 5 of Article 120 of the Code of Administrative Trial, the deeds of the contracting authorities must be challenged before the Administrative Courts within 30 days from the receipt, the publication or the cognizance of the same. e. What are the leading court decisions involving procurement disputes? Due to the relatively recent implementation of the current set of rules on public procurement in Italy, there is no court ruling which, for the present purposes, can be regarded as a leading case. 160 Baker & McKenzie

177 Baker & McKenzie's Global Public Procurement Handbook Italy Nevertheless, given that the Italian legislative framework is an implementation of the abovementioned European Directives, the decisions of the European Court of Union affect the decision of similar cases in Italy. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Alongside the Code of Public Contracts and the general principles of Italian administrative law, the Civil Code applies, in particular, as mentioned above, with respect to the performance of the subject matter of the contracts. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? The provisions of the Code of Public Contracts generally apply regardless the specific field of industry involved. In addition, the provisions of the EGC, and the guidelines issued by the public agency responsible for the digitalization of government processes, i.e. DigitPA (which stands for digital public administration ), constitute an additional set of rules and requirements specifically applicable to the procurement of IT. Legal provisions Article 69 of the EGC (entitled Re-Use of Software ), among other things, states that public entities have the right to include in software supply contracts certain clauses which bind the supplier to make the same software available to other public entities for a certain time frame. Article 83 EGC (entitled General Agreements ) states that DigitPA (at a national level) and the Italian regions (as regards their territory) should resort to public bidding procedures for the selection of the most appropriate suppliers, and execute general agreements regulating the provision of the specific services indicated under Article 77 of the EGC. In particular, these are services which are deemed essential to one of the main purposes of the EGC, i.e., the creation of the so-called public connectivity system, which is a coordinated, interconnected IT infrastructure aimed at ensuring maximum interoperability, efficient cooperation, and data sharing among all the government bodies, agencies and other public entities. Pursuant to Article 83, the suppliers who sign the general agreements ( Qualified Suppliers ) are Baker & McKenzie 161

178 bound to conform to the terms and conditions set forth in the general agreements and all the single supply agreements they subsequently enter into with any relevant public entity. DigitPA plays an active role in the creation of the public connectivity system and in the procedures for selecting the Qualified Suppliers (who are subsequently inserted in specific lists maintained by DigitPA and by the competent regions). According to Article 82 of the EGC, in order to be eligible as Qualified Suppliers, IT suppliers must demonstrate that they meet certain adequacy requirements regarding: (i) electronic communication infrastructure and services in place; (ii) demonstrated experience in the field; (iii) commercial network and technical support capabilities; (iv) financial situation and company assets and, specifically for connectivity suppliers; (v) applicable authorizations, and (vi) demonstrated expertise in network management and data security. Guidelines DigitPA issued a set of guidelines containing practical indications (intended for both contracting authorities and perspective suppliers) on a wide spectrum of IT procurement-related activities, including best practices in the drafting and execution of the relevant contracts (model clauses, models for describing the services to be offered, preferred service quality measurement parameters, etc.). Even if these guidelines are not mandatory, taking these guidelines into consideration is highly advisable for those organizations who are willing to enter into an IT procurement contract with public entities in Italy and wish to maximize the effectiveness and appeal of their proposal, and consequently the chances to be awarded the contract. 8. Looking Ahead a. Are there any proposals to change the law in the future? Currently, no relevant proposals to change the applicable law are pending. 162 Baker & McKenzie

179 Baker & McKenzie's Global Public Procurement Handbook Netherlands Netherlands 1. The Laws a. What is the applicable legislation? The Decree regarding procurement rules for public contracts ( Besluit aanbestedingsregels overheidsopdrachten or Bao ) contains the material provisions on public procurement in general. The Decree regarding procurement rules for special sectors ( Besluit aanbestedingsregels speciale sectoren or Bass ) contains specific rules for utility procurement. These decrees contain the rules set out in the Procurement Directives and therefore form the heart of Dutch procurement law. The Remedies Directive implementation act ( Wet implementatie rechtsbeschermingsrichtlijn aanbesteden or Wira ) covers the procedures that allow a party to file suit in opposition of a procurement procedure or grant. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The Wira contains the rules set out in the Remedies Directive 2007/66/EC with regard to improving the effectiveness of review procedures concerning the award of public contracts. The Bao and the Bass are the Dutch implementation of the rules dictated by the European Directives 2004/18/EC (on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts) and 2004/17/EC (coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors), respectively. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The primary principle governing public procurement is equality of bidders. This is based the European principle of non-discrimination. In addition, the legislation is based on the principle that a competitive bid will result in the most efficient expenditure of public funds. Baker & McKenzie 163

180 Based on those two principles (equality and competition), the European and Dutch courts have derived the principles of transparency and objectivity. These ensure that each bidder has equal access to information. It must be clear from the documentation, to all bidders, how the winning bid will be determined. In order to guarantee equal treatment, such a determination must be made objectively. d. Is aerospace and defence procurement treated differently from other types of procurement? The Bao applies mutatis mutandis to aerospace and defence procurement. The Decree does, however, exclude a number of orders that are related to defence procurement, such as employment contracts, top secret orders, and orders related to specific military material and/or services which are regulated by Article 346 of the Treaty of Lisbon. Furthermore, the Directive 2009/81/EC on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security will be implemented in the new Act which is planned for early 2012 (see Section 8 below). The deadline for implementation of the Directive 2009/81/EC was 21 August Since the Dutch Legislature has exceeded the term for implementation, courts are obligated to interpret existing law in accordance with the Directive. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? According to the Bao, public procurement law covers so-called contracting authorities. This group includes government bodies which govern a region or territory (municipality, province, or the State). It also covers bodies governed by public law. A body governed by public law is any body: established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; having legal personality; and financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by 164 Baker & McKenzie

181 Baker & McKenzie's Global Public Procurement Handbook Netherlands the State, regional or local authorities, or by other bodies governed by public law. Procurement law also covers any combination of, or cooperation between, the above entities. The Bass (and not the Bao) governs contracting authorities that provide utilities, i.e. entities that engage in the provision of gas, electricity, water, public transportation, postal services and harbour, port and airport facilities. In addition, the Bass governs public undertakings which are involved in the provision of utilities. A public undertaking is any undertaking over which the contracting authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it. b. Which private entities are covered by the laws? Procurement rules may apply to private entities. The Dutch Supreme Court has held that a private entity, which is not obligated to adhere to the rules of public procurement, yet chooses to follow the route of a procurement, can be obligated to adhere to the principles of procurement law, such as equality, objectivity and transparency (Hoge Raad, 4 April 2003, LJN: AF2830, NJ 2004/35). Within the limited scope of the Bass, procurement law also covers private entities that operate on the basis of a special or exclusive right, granted by a competent authority. An exclusive or special right means a right the effect of which is to limit the provision of utilities to one or more entities, and which substantially affects the ability of other entities to carry out such activity. c. Which types of contracts are covered? Procurement law covers procurement of works, services and goods by contracting authorities. d. Are there anti-avoidance rules (including laws on bid rigging)? The corruption of the results of a procurement procedure through the use of anti-competitive behaviour, such as a bid rigging agreement between parties, is a violation of competition law and subject to fines and administrative injunctions. Moreover, violations of competition law are punishable under criminal law. Baker & McKenzie 165

182 3. Procurement Procedures a. What procurement procedures can be followed? The following procurement procedures can be followed in the Netherlands: open procedure; restricted procedure; negotiated procedure with publication; negotiated procedure without publication; and competitive dialogue. In an open procedure, all interested bidders are invited to submit a tender (Article 1, 11. sub a Decree 2004/18). In accordance with Article 1, 11 sub b Decree 2004/18, bidders are first invited to prove that they meet the qualification criteria. The bidders who have fulfilled the qualification criteria are invited by the contracting authorities to submit a tender. In negotiated procedures with and without publication, the bidder and contracting authorities generally discuss and negotiate the terms of the contract. In the case of particularly complex contracts and in cases where the use of the open or restricted procedure will not allow the award of the contract, contracting authorities may apply the competitive dialogue. b. Are there any rules on the specifications/criteria? As a general matter, the specifications need to meet the general principles of equal treatment, transparency, objectivity and proportionality. Specifically, the contracting authority must list the technical specifications of the procurement. Such technical specifications must refer to European norms or, if these are not available, national norms. Alternatively, the technical specifications may list the contracting authority s demands in terms of performance or functions of the procurement. In addition, it is not allowed to specify a particular brand or make of product, unless this can be somehow objectively justified. c. Can certain prospective bidders be excluded from the competition? Bidders who have been the subject of a conviction by final judgment of which the contracting authority is aware may be excluded from the 166 Baker & McKenzie

183 Baker & McKenzie's Global Public Procurement Handbook Netherlands competition. Prospective bidders may also be excluded if the meet one or more of the following criteria: (i) participation in a criminal organisation, (ii) corruption, (iii) fraud or (iv) money laundering. Furthermore, a bidder may be excluded when: it has filed for, or has entered, a state of bankruptcy, or has ceased operations; it has been held by a court that the bidder has breached his professional rules of conduct; the contracting authority can show that the bidder has committed grave professional misconduct; or is guilty of serious misrepresentation in supplying background information or has not supplied such information d. Are there any rules on the awarding of contracts? Contracts are awarded based on the following rules: the most economically advantageous bid (this is based on quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service and technical assistance, delivery date and delivery period or period of completion); or the lowest price only. In the contract notice or in the contract document, the contracting authority should specify the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender. When the contracting authority is unable to determine the weighting based on demonstrable reasons, those weightings can be expressed by providing for a range with an appropriate maximum spread. When the contracting authority is unable to weigh the criteria, for demonstrable reasons, the contracting authority will specify the criteria in descending order of importance. e. Can bidders combine to submit a bid? Bidder may combine to submit a bid. Both bidders will have to adhere to the general qualification criteria. Furthermore, the bidders need to submit a contract stipulating their joint liabilities. Baker & McKenzie 167

184 Furthermore, the contracting authority may request the bidder to specify which subcontractor he is planning to work with and what part of the contract will be performed by the subcontractor. f. Are there any rules on alternative bids? Alternative bids are admissible. Specific rules for alternative bids can be found in the Decree regarding procurement rules for public contracts 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? There are a number of exemptions to competitive bidding in the Netherlands. Such as defence procurement in specific cases (see Section 1(d) above), contracts in the water, energy, transport and postal services sector and secret contracts and requiring special security measures. Moreover, the Bao states a number of reasons why a contract may be excluded from competitive bidding and the contracting authority may award a public contract by a negotiated procedure, This is the case when: no suitable bids have been submitted; when for technical or artistic reasons, or due to reasons connected to exclusive rights, the contract may only be awarded to one particular economic operator; or for reasons of extreme urgency. Such a procedure may also be followed with regards to the delivery of goods, when the delivery relates to: goods manufactured purely for the purpose of research, experimentation, study or development; additional deliveries by the original supplier which are intended either as a partial replacement of normal supplies or installations; supplies quoted and purchased on a commodity market; or the purchase of supplies on particularly advantageous terms, from either a supplier which is definitively winding up its business activities. 168 Baker & McKenzie

185 Baker & McKenzie's Global Public Procurement Handbook Netherlands A contracting authority may, in addition, award a public service contract by a negotiated procedure, without a public announcement, when the contract concerned follows a design contest and must, under the applicable rules, be awarded to the successful candidate or to one of the successful candidates, in the latter case, all successful candidates must be invited to participate in the negotiations. And finally, this procedure may be followed, in the case of public works and public service contracts when: for additional works or services not included in the project initially considered or in the original contract but which have, through unforeseen circumstances, become necessary for the performance of the works or services described therein, on condition that the award is made to the economic operator performing such works or services: (i) when such additional works or services cannot be technically or economically separated from the original contract without major inconvenience to the contracting authorities; or (ii) when such works or services, although separable from the performance of the original contract, are strictly necessary for its completion. However, the aggregate value of contracts awarded for additional works or services may not exceed50 % of the amount of the original contract; or for new works or services consisting in the repetition of similar works or services entrusted to the economic operator to whom the same contracting authorities awarded an original contract, provided that such works or services are in conformity with a basic project for which the original contract was awarded according to the open or restricted procedure. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The Wira provides for a right to appeal a contracting authority s decision to grant a contract. A party may demand that the court cancel the decision and to repeat the procurement procedure, or it may seek damages. Such an appeal is generally not open to parties who have not submitted a timely bid and who have not otherwise made their objections known. Moreover, when an objection could be made known during the procurement procedure, courts generally require a bidder to do so. Failure to make an Baker & McKenzie 169

186 objection known, when it was reasonably possible to do so, may lead to a dismissal of the complaint. b. Are remedies available outside the scope of the legislation? A bidder who has been wronged by incorrect application of procurement law may pursue all methods of remedy available to a party in a civil procedure, including an award of damages or injunctive relief. If a bidder suspects corruption (e.g., the bribing of officials) it may file charges with the police. Moreover, if it has evidence that suggests that it has suffered from unlawful behaviour by the contracting authority, or another bidder, it may file an action under tort law. c. Is there a specific forum before which disputes are heard? Complaints are heard before a civil law court, not an administrative court. d. Are there any timing requirements where a party wants to enforce? A bidder who wishes to challenge the grant of a contract must do so within 30 days after the decision by the contracting authority has been made public. If the decision or the procurement is not made public, a suit must be filed within six months after the contract has entered into force. e. What are the leading court decisions involving procurement disputes? The leading court decisions are generally decisions from the European Court of Justice, since the lion s share of Dutch law is a verbatim implementation of the Procurement Directives. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? The Dutch Competition Act ( Mededingingswet ) applies to all behaviour by market parties, including parties who vie for public contracts. Moreover, the behaviour of the Dutch government and Dutch public entities is subject to the Dutch Constitution ( Grondwet ) and the so-called general principles of good government. These unwritten principles include the right to an equal, reasonable, proportional and fair treatment by public authorities. 170 Baker & McKenzie

187 Baker & McKenzie's Global Public Procurement Handbook Netherlands These bodies of law apply even when the Dutch government assumes the role of a private party. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws for procuring technology. 8. Looking Ahead a. Are there any proposals to change the law in the future? A draft version of a new Dutch Public Procurement Act has been presented to the Dutch parliament in the summer of This act will incorporate the different pieces of procurement legislation into one. The new act has faced delays in Parliament, however, and has not yet reached a vote. The entry into force is expected to be delayed until at least the second quarter of Depending on the outcome of the European Commission s review of the procurement Directives, this process may be delayed even further. Baker & McKenzie 171

188 Poland 1. The Laws a. What is the applicable legislation? The Polish public procurement system is based on the Public Procurement Law dated 29 January 2004 (Journal of Laws j.t. PPL ). In addition, there are a number of regulations which cover various aspects of public tendering in detail. Their exhaustive list is beyond the scope of this chapter. However, due to its practical significance for the preparation of bids and applications, the following regulation is worth mentioning Regulation of the Prime Minister dated 30 December 2009, on the types of documents that may be requested by the awarding entity from the economic operator, and the forms in which such documents may be submitted (Journal of Laws No. 226, item 1817). b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? EU legislation is based on directives which have no direct effect in the Member States. Polish public procurement law is harmonized with EU legislation in that respect. The purpose of this work is not to list all EU directives pertaining to public procurement. However, it is worth mentioning that the directives which are fundamental for the system and the procedures are: Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors; Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts. It should be noted that in Poland public procurement procedures are required also for contracts the value of which is lower than that specified in Article 7 of Directive 2004/18/EC. Certain exemptions concerning the tenders for such contracts make these procedures less stringent. 172 Baker & McKenzie

189 Baker & McKenzie's Global Public Procurement Handbook Poland c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The basic principles of the Polish public procurement system are: The public procurement procedure should be carried out in a way which secures fair competition. All the tender participants need to be treated equally. The public tender procedure should be carried out in a transparent way. All the documents should be available on the terms applicable to public documentation. One of the exceptions to this rule is the data which constitute commercial secrets of the tender participants and which have been designated as such no later than at the moment of the expiry of the deadline to submit bids/applications for the participation in the tender procedure. The tender procedure should be carried out in writing. The exceptions to this rule concern the procedures which are handled electronically. The tender procedures are handled in Polish. However, in justified cases, the awarding entity may allow the documents to be submitted in other languages commonly used in commerce. The basic procedures are either open or limited. This means that no conditions need to be fulfilled to apply these procedures. Other procedures can be applied only if the relevant conditions are met. d. Is aerospace and defence procurement treated differently from other types of procurement? The PPL does not apply to contracts subject to state secrecy regulations, as well as in the event state security so requires. These exceptions may apply to a number of contracts concluded in the aerospace and the defence industries, namely those which concern the purchase of armament. In such a case, a different set of rules apply. For such tenders, the applicable law is Decision No. 291/MON of the Minister of Defence dated 26 July 2006 on the rules for and manner of concluding contracts in the defence department, the subject matter of which being armament or military equipment (Official Journal of the Ministry of Defence dated 23 August 2006, as amended). Baker & McKenzie 173

190 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The following categories of public entities are obliged to apply the PPL: public agencies, including government administration agencies, public audit bodies and legal protection bodies, as well as courts and tribunals; local government units and their associations; state-financed administrative entities; local-government-owned state-financed enterprises; executive agencies; public sector enterprises; state-owned special funds; the Social Insurance Office and the funds managed by it, and the Agricultural Social Insurance Fund and the funds managed by the President of the Agricultural Social Insurance Fund; National Health Fund; independent public health care centres; public colleges/universities; the Polish Academy of Sciences and the organizational units established by it; state and local-government-owned cultural institutions and state film institutions; and other state or local-government-owned legal persons established in accordance with separate laws for the purpose of performing public tasks, except for enterprises, research institutes, banks and commercial companies. In addition, other state-owned entities, which are not legal persons are obliged to apply the public procurement procedures. 174 Baker & McKenzie

191 Baker & McKenzie's Global Public Procurement Handbook Poland b. Which private entities are covered by the laws? The PPL needs to be applied by legal persons (other than those specified in Section 2(a) above) established for the specific purpose of meeting needs in the general interest, not of an industrial or commercial nature, if the public entities mentioned in Section 2(a) above, separately or jointly, directly or indirectly through another entity: finance them for more than 50%; hold more than half of their shares; supervise their management body; or are entitled to appoint more than half of the members of their supervisory or managerial bodies. Private entities are obliged to apply the PPL, if they conduct a utility activity and such activity is carried out on the basis of special or exclusive rights, or if the entities referred to in this point and in the point above, separately or jointly, directly or indirectly through another entity, have a dominant influence over them, in particular: finance them for more than 50%; hold more than half of their shares; hold more than half of the votes attached to their shares; supervise their management body, or are entitled to appoint more than half of the members of their managerial body. Additionally, the PPL is applied by other entities, if all the following circumstances arise: more than 50% of the value of the contract awarded by them is financed from public funds or by the entities referred to in Sections 2(a) and 2(b) (first type) above; the value of the contract is equal to or exceeds the thresholds for the application of the EU procurement regulations; and the subject matter of the contract are construction works comprising works in the field of civil engineering, construction of hospitals, sports, recreation or leisure facilities, school buildings, buildings of higher Baker & McKenzie 175

192 education institutions or buildings used by the public administration, or services connected with such construction works. c. Which types of contracts are covered? There are three basic types of contracts covered by the public procurement laws: contract for supply; contract for services; and contract for works. d. Are there anti-avoidance rules (including laws on bid rigging)? Tender avoidance and bid rigging are subject to a penalty under the criminal law in the event that certain conditions are fulfilled. This liability concerns natural persons acting both for the awarding entity and for the economic operators. In addition, a legal person may be criminally liable for the actions of a natural person acting for the benefit of such legal person. A violation of the public tender rules may constitute a violation of the competition rules and be subject to administrative fines. This concerns concerted practices relating to the contents of bids or similar matters. Individuals guilty of violating public tender rules are liable for the violation of budgetary discipline. This only concerns those individuals responsible for the public tender procedure who are acting for the awarding entities. The violation of the public tender procedures may also have an impact on such procedures themselves, including invalidation of the relevant contract. 3. Procurement Procedures a. What procurement procedures can be followed? The basic procedures are the open and the limited tenders. There are no conditions for the application of these procedures. Other procedures are the negotiated procedure with notice, the competitive dialogue and the negotiated procedure without notice. The least competitive procedure is the single source procurement where the awarding entity negotiates with one contractor of its choice. Additionally, a public tender procedure may be held by way of a request for quotation or electronic bidding. Apart from the first two, certain conditions need to be fulfilled for the awarding entity to organize the tender in a chosen procedure. 176 Baker & McKenzie

193 Baker & McKenzie's Global Public Procurement Handbook Poland b. Are there any rules on the specifications/criteria? The awarding entity may establish the criteria for the eligibility to participate in the tender. Such criteria should be fair and be related to the object of the tender. They need to be justified by the objective needs of the awarding entity and help to select adequate entities to perform the contract. The anticompetitive criteria may be questioned in litigation. The criteria concern: authorizations/licences to perform specific activities or actions, if such authorizations are required by the law; knowledge and experience; appropriate technical potential and personnel capable of performing the contract; and economic and financial standing. c. Can certain prospective bidders be excluded from the competition? The awarding entity is obliged to exclude the bidders or prospective bidders which do not fulfil the requirements set in accordance with the aforementioned criteria. In addition, the bidders which lost a court case concerning damages for the improper realization of a public tender contract (3 years before the commencement of the tender in question) or whose tender contract has been rescinded by the awarding entity, are obligatorily excluded. Additionally, in the event the board members of a bidder committed certain criminal deeds in the past, such prospective bidders need to be excluded. Similarly, contractors which are banned from running for public tenders in accordance with a final court verdict under the rules of the criminal liability of legal persons are excluded. The exclusion of an economic operator is also obligatory if such economic operator: directly performed actions in connection with the preparation of the procedure being conducted, or used, while preparing a bid, persons who perform such actions, unless the participation of such economic operators in the procedure will not distort fair competition; failed to submit a bid bond; or Baker & McKenzie 177

194 provided false information that affect or might affect the outcome of the procedure being conducted. d. Are there any rules on the awarding of contracts? The only obligatory criterion for the selection of the best bid is the price. Other criteria are not obligatory and include: quality, functionality, technical parameters, the use of the best available technologies in terms of environmental impact, operation costs, service and the time for completion of the contract. The above list is for illustrative purposes only. e. Can bidders combine to submit a bid? Bidders can combine to submit a bid. In addition, if a bidder does not fulfil the requirements for the participation in a tender, it may use the resources of another entity. Such entity, not being the co-bidder itself, will declare that the relevant resources will be made available for the performance of the contract. f. Are there any rules on alternative bids? An alternative bid means another, different bid submitted by the same economic operator in the same tender. Such alternative bids are not allowed under the PPL. One bidder is allowed to submit only one bid. If more than one bid is submitted by the same entity, all such bids will be rejected. It is possible to submit a variation bid. The variation bid is a bid providing for a method of the performance of the contract other than that specified by the awarding entity. Such bid may be submitted only if such an option is provided for in the tender specification. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? There are three negotiated procedures which could be treated as exemptions from competitive bidding. These procedures are: the negotiated procedure with notice; the negotiated procedure without notice; and the single source procurement. 178 Baker & McKenzie

195 Baker & McKenzie's Global Public Procurement Handbook Poland 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The PPL provides for remedies in the event of a violation of the public tender procedures. The verdict of the relevant authority will be enforced in accordance with the general rules of the Code of Civil Procedure. b. Are remedies available outside the scope of the legislation? Remedies could be available outside the scope of the PPL in the event of a violation of other legal provisions. A violation of the PPL will be subject to the remedies provided therein. c. Is there a specific forum before which disputes are heard? There is a specific arbitration court which only hears disputes relating to violations of the public procurement laws and regulations, namely the National Chamber of Appeal (Krajowa Izba Odwoławcza). This is a professional arbitration tribunal acting within the framework of the Public Procurement Office. d. Are there any timing requirements where a party wants to enforce? An appeal to the National Chamber of Appeal should be submitted within the deadline provided in the PPL. The length of the deadline depends on various conditions and varies from five days to six months. e. What are the leading court decisions involving procurement disputes? Jurisdiction is an important source of interpretation of the PPL. This concerns the jurisdiction of both the National Chamber of Appeal and the state courts, including the Supreme Court. The majority of cases of the Supreme Court focus on formal issues relating to the litigation procedures. In an interesting recent case concerning substantive matters heard by the Supreme Court, the Court defined the scope of the exemption of real estate purchase transactions from the PPL (II CSK 104/09). Baker & McKenzie 179

196 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? The President of the Public Tender Office is the central administrative body responsible for the public tender issues. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? In principle, the PPL is the same for any kind of industry. A typical issue pertaining to the technology sector is the protection of commercial secrets of the bidders. The bidders are authorized to restrict access to such information to the extent such information falls within the scope of the definition of business secret as per applicable laws. 8. Looking Ahead a. Are there any proposals to change the law in the future? The PPL has gone through considerable changes on numerous occasions. The tendency in the recent years has been to make the procedure less formalistic and to strengthen the position of the awarding entity. T he principal purpose of these changes has been to increase the level of absorption of EU funding. Currently, another amendment to the PPL is being prepared. The purpose of the amendment is to implement Directive 2009/81/EC. In addition to that, the amendment will include new provisions concerning, among other things, the exclusion from the tender of related entities which submit separate bids. 180 Baker & McKenzie

197 Baker & McKenzie's Global Public Procurement Handbook Spain Spain 1. The Laws a. What is the applicable legislation? The legislative framework for public contracts and public procurement consists of two main laws: Law 30/2007, of October 30, on public sector contracts; and Law 31/2007, of October 30, on contracting procedures in the special sectors. Law 30/2007 refers to the contracts and procurement processes to be used by public administration related bodies, and Law 31/2007 refers to those to be used by companies and entities owned by public administrations and private companies holding special or exclusive rights granted by a public administration body. These are the laws implementing Directives 2004/17/CE and 2004/18/CE, respectively. Also, Royal Legislative Decree 3/2011 of November 14 which provides the revised text of the Public Sector related norms has just been approved. Furthermore, it is worth mentioning that Royal Legislative Decree 2/2000, of June 16, which restated the laws on public contracts and public procurement, is still applicable to those contracts tendered and awarded in light of the provisions of this Decree. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The European Union principles and rules have been an obligatory reference for the Spanish legislator. The most important and influential European rules are: the Treaty of the European Union with its principles of transparency and free movement of persons, goods, services and capital; Directive 2004/18/EC, of March 31, on the coordination of procedures for the award of public contracts; and Services Directive 2006/123/EC, of December 12. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The main principles underlying the rules on public procurement are free access to tenders, publicity and transparency of the procedures, equal treatment and non-discrimination of candidates participating in the Baker & McKenzie 181

198 procurement procedure, and efficient use of public funds in case the procedure is launched by a public administration or related body or company. The latter is ensured through prior definition of the needs of the public service to be provided and through guaranteeing free competition, as well as the selection of the best economic offer. Procurement procedures cannot introduce unjustified restrictions to these principles either in the execution of the procedures or in the performance of the contract, once this has been awarded. Finally, these procedures must also prevent unlawful collusion between bidders. d. Is aerospace and defence procurement treated differently from other types of procurement? Until November 2011, Law 30/2007 on public sector contracts, had been the legislative framework applicable to procurement processes and contracts related to defence. However, Law 24/2011, of August 1, on public sector defence and security contracts, recently entered into force in November This piece of legislation implements Directive 2009/81/CE, of July 13, on coordination of the awarding procedures of certain works, supplies and services contracts related to defence and security, and provides a specific set of rules for their related procurement processes. In addition to Law 24/2011, it is important to note Instruction 5/2010 issued by the Ministry of Defence, which approves the Plan for the Organization of the Ministry of Defence s Contracting Related Procedures as well as Royal Decree 1053/2010, of August 5, which also relates to the internal organization and distribution of functions within the Ministry of Defence in connection with contracting, technical agreements and the like. Following Directive 2009/81/CE, of July 13, Law 24/2011, of August 1, establishes a different treatment for defence contracts. Law 24/2011 reinforces the security aspects of the information which is transferred to tenderers, the guarantee of continual supply, and the need to establish certain norms which allow for a more flexible contracting procedure. Law 30/2007 will be supplementary to Law 24/2011. Essentially, the different regime establishes a procedure for the selection of tenderers with the purpose of limiting their number, so that the negotiating procedure may be held with a limited number of qualified tenderers which meet all the technical and solvency requirements necessary for the proper execution of the contract. Law 24/2011 also seeks to strengthen small and medium-size companies participation in public contracts and requires transparency in the selection of 182 Baker & McKenzie

199 Baker & McKenzie's Global Public Procurement Handbook Spain subcontractors by establishing minimum publicity requirements for the subcontracting process, so that subcontracts follow objective criteria. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The following bodies, agencies and entities of the public sector are subject to public procurement rules or principles: the Public Administration at the national, autonomous community and local levels; the entities for the management and provision of common services of the Social Security; the autonomous bodies, public corporate entities, public universities, national agencies and any public sector entities with legal status or those organized under them, including those that function independently or with special autonomy recognized by law, have regulatory functions or exert external control over a particular sector or activity; companies where a stake higher than 50% is publicly owned; consortia with legal status in which a public administration holds a stake; foundations with a direct or indirect majority contribution from one or more public sector entities or permanent foundations with an endowment of more than 50% in goods or rights contributed or transferred by the public entities; the Social Security mutual insurance company covering accidents and occupational diseases; any entities or agencies with legal status which have been created specifically to meet needs of general interest, with no industrial or commercial interest, provided that one or more entities in the public sector are largely financing their activities, controlling their management or appointing more than half the members of the board of directors, management or supervision; associations formed by the agencies, organizations and entities mentioned above; entities from the public sector and public companies in the so-called special sectors: water, gas and heating, electricity, postal services, Baker & McKenzie 183

200 transport services, prospecting and drilling for oil, gas, coal and other solid fuels, and provision of transport terminals. Each of the above entities may be subject to a different level of restraint in its procurement rules and principles, according to a case-by-case analysis under the rules provided by law. b. Which private entities are covered by the laws? The following private entities are subject to public procurement rules or principles: entities that, according to Section 2(a) above, are deemed to belong to the public sector but may have a private nature; private entities entering into subsidized contracts above the price threshold applicable at any time; or private entities granted exclusive or special rights in the so-called special sectors: water, gas and heating, electricity, postal services, transport services, prospecting and drilling for oil, gas, coal and other solid fuels, and provision of transport terminals. Private entities would be subject to procurement principles rather than to the stricter rules of public procurement. c. Which types of contracts are covered? Those entered into by an entity belonging to the public sector: works and construction contracts; public works concession contracts; contracts for the management of public services; supply contracts; service contracts; and contracts for collaboration between the public and the private sectors, over the price thresholds applicable at any time. Other types of contractual relationships entered into by entities in the public sector may be governed by legislation other than procurement laws but would still be restrained by the principles of transparency, competition and publicity, as a general rule. Those entered into by an entity in the so-called special sectors: works and construction contracts, supply contracts and services contracts, over the price thresholds applicable at any time. 184 Baker & McKenzie

201 Baker & McKenzie's Global Public Procurement Handbook Spain d. Are there anti-avoidance rules (including laws on bid rigging)? As provided in the laws, the principles of transparency, competition and publicity apply. Where procurement rules do not strictly apply, procurement principles may still be enforceable. The laws contain criteria to define their specific scope of application for each scenario. Actions circumventing or breaching the application of procurement rules and principles may have their contracts nullified. In addition, there may be actions punishable as violations of competition law. If a case involves public officers, they could be punished for an offence under certain circumstances. 3. Procurement Procedures a. What procurement procedures can be followed? Ordinarily, open procedures (tenders or auctions fully open to competition) and restricted procedures (tenders or auctions open only to a certain number of pre-qualified operators) are followed. In certain cases, it is also possible to conduct a negotiated procedure (in which certain clauses of the contract may be discussed and negotiated, as an exception to the obligation of open and restricted procedures) or a competitive dialogue (for the joint definition by the operators and the contractor of the technical and/or legal or financial hedging of a contract of high complexity). Direct award is possible for socalled minor contracts (below the economic thresholds determined by law). b. Are there any rules on the specifications/criteria? Yes, the laws contain rules for the preparation of contract specifications by the contracting entity before the selection procedure formally starts, rules applicable to the determination of the technical specifications that will be established in the contract specifications and consequently required during the selection process and for contract performance, and a series of provisions relating to the execution, amendment and termination of contracts that are more or less mandatory depending on the type of contract and the nature of the contracting entity. As awarding criteria, both the lowest price and the most economically advantageous offer (to be determined by reference to all the economic and technical aspects of the bid) are accepted. The awarding criteria must be decided and indicated in advance in the contract specifications. Baker & McKenzie 185

202 c. Can certain prospective bidders be excluded from the competition? Yes, it is possible where no responsive or compliant offers have been submitted and due to abnormally low values (applicable to price and to other parameters), when so specifically provided in advance in the set of tender specifications. d. Are there any rules on the awarding of contracts? Yes, such rules refer to the assessment of bid offers, the decision-making process towards the award of contracts, the formalization of contracts, the challenging of contract awards, and the disclosure of information regarding contract-awarding and publication of the result. e. Can bidders combine to submit a bid? Yes, operators may submit joint bids, and when such joint bids are submitted, they are required to commit to the creation of a temporary joint venture specific for the contract to be awarded and become bound by joint and several liability. f. Are there any rules on alternative bids? Yes, as a general rule, only one bid offer will be accepted per operator. This restriction applies to legal entities individually considered and does not apply to different companies within a corporate group. Exceptionally, where the tender specifications allow bidding for separate lots, operators may submit offers for the lots they are interested in and may also combine with another operator to submit a joint bid separately from an individual bid for a different lot. The bid offer submitted by an operator may contain alternative ways of contract performance, provided that this has been allowed in advance by means of an express provision in this regard in the tender specifications. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? The so-called minor contracts, which are works contracts amounting to a maximum of 50,000 and other contracts for a maximum of 18,000, all of them with a maximum term of one year. 186 Baker & McKenzie

203 Baker & McKenzie's Global Public Procurement Handbook Spain Emergency contracts, where because of a catastrophe, situations of grave danger or national defence needs, the Administration may contract the necessary works, supplies and services without the formalities of other contracts. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Law 30/2007, on public sector contracts, envisages different remedy procedures for the claim of the Contracting Public Body in the phases of preparation and awarding of the public tender. Special Administrative Procedures to nullify the whole process may be followed in particular cases, and Special Administrative Appeal or Ordinary Appeals may also be pursued in certain other circumstances depending on the kind of contract. Unattended claims before public bodies and those concerning compliance with contract obligations may be brought before the courts. Administrative Litigation Courts are those competent to resolve disputes concerning: (i) the preparation, award, effects, compliance and termination of administrative contracts; (ii) the preparation and award of private contracts entered into by public administrations; and (iii) the preparation and award of certain contracts of entities which are not considered public administration bodies but are considered Awarding Authorities. Administrative Litigation Courts are also competent to resolve appeals filed against resolutions by public bodies. Civil Courts are competent to resolve: (i) disputes that arise between the parties over the effects, compliance and termination of private contracts; and (ii) the preparation and award of certain contracts of entities which are not considered public administration bodies but are considered Awarding Authorities, different from those to be resolved by the Administrative Litigation Courts. b. Are remedies available outside the scope of the legislation? Disputes that arise between the parties over the effects, compliance and termination of contracts with entities which are not considered public administration bodies but are considered Awarding Authorities may also be submitted to arbitration. In principle, the bid call should envisage this possibility. Baker & McKenzie 187

204 c. Is there a specific forum before which disputes are heard? Special Administrative Appeals must be treated by Independent Administrative Bodies, created specifically for this purpose. Ordinary Administrative Appeals shall be treated by the contracting entity. Appeals before the courts involving the resolutions of administrative bodies must be treated by General (not specific) Administrative Litigation Courts. d. Are there any timing requirements where a party wants to enforce? Each administrative procedure or court proceedings establishes timing requirements that must be met by the parties to a dispute. Deadlines may also be established by an arbitrator or an arbitration court when arbitration is envisaged. e. What are the leading court decisions involving procurement disputes? Although in practice there are many disputes in Spain that never reach the trial phase, there are indeed a number of very important rulings by the Spanish Supreme Court involving procurement disputes, which are followed by lower courts across the country. The following may be mentioned in this regard: the ruling of 5 January 2009, in Telefónica Móviles España, S.A. vs. Spanish State General Administration, on the termination of a public contract for the management of the public service for the establishment of a telecommunications network, based on the contractor s infringement; and the ruling of 9 April 2008, ESAVE, S.A. vs. Spanish State General Administration, on the termination of a public contract for the management of the public service of building security services, based on the contractor s infringement. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Apart from the abovementioned framework, there are some other relevant related bodies of law: Royal Decree 817/2009, of May 8, which partially implements Law 30/2007; and Law 30/1992, of November 26, on the Legal Regime of Public Administrations and the Common Administrative Procedure. 188 Baker & McKenzie

205 Baker & McKenzie's Global Public Procurement Handbook Spain For procurement by local governments, the following are also relevant acts: Law 7/1985, of April 2, on the basis of local government; and Law 39/1988, of March 5, on local finance. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws that apply when procuring technology. This kind of procurement is subject to the general framework. 8. Looking Ahead a. Are there any proposals to change the law in the future? The legislative framework on public contracts and public procurement has been amendment frequently over the last several years i.e., Law 30/2007 has been amended thirteen times since In order to harmonize the procurement framework and simplify the identification of applicable law, the Council of Ministers has approved Royal Legislative Decree 3/2011, November 14, which approves the Revised Text of the Public Sector Contracts Law. The Royal Legislative Decree comes into force on 16 December and revokes Law 30/2007 (with its amendments) and partially revokes Royal Legislative Decree 2/2000. This new Royal Legislative Decree does not include any new features; its aim is to clarify the applicable framework, containing the entire public contract legislation in a single text. Finally, it is worth mentioning that the European Commission has issued the so-called Green Paper on the modernization of the EU public procurement policy and procedures towards a more efficient and simple European Procurement Market. Baker & McKenzie 189

206 Sweden 1. The Laws a. What is the applicable legislation? There are three Swedish procurement acts (together the Acts ). These are the Public Procurement Act (Sw. lag 2007:1091 om offentlig upphandling), the Utilities Procurement Act (Sw. lag (2007:1092) om upphandling inom områdena vatten, energi, transporter och posttjänster) and the Defence Procurement Act (Sw. lag (2011:1029) om upphandling på försvars- och säkerhetsområdet). The Public Procurement Act and the Utilities Procurement Act were enacted on 1 January 2008 and the Defence Procurement Act was enacted on 1 November b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? The Acts, constituting a complete set of legislation, implement the six existing EU directives on public procurement; namely: Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts; Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors; Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors; Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts; 190 Baker & McKenzie

207 Baker & McKenzie's Global Public Procurement Handbook Sweden Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts; and Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC. However, the Acts have both an European and a national dimension. The provisions governing public procurement procedures above the thresholds set by the European Commission are corresponding to the EU directives. The provisions applicable to public procurement procedures below the thresholds are almost equivalent but are not imposed by the EU directives. These provisions have rather been implemented at the sole discretion of the state. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The Acts are based on the five fundamental principles of EU law with regard to public procurement, i.e. the principles of non-discrimination, equal treatment, transparency (openness and predictability), proportionality and mutual recognition. d. Is aerospace and defence procurement treated differently from other types of procurement? Defence procurement is treated differently as of 1 November 2011 when the Defence Procurement Act was enacted. The Defence Procurement Act grants the contracting authority/entity a larger scope of discretion by, e.g., allowing negotiated procedures at all times. Aerospace procurement is not treated differently in so far as it is not considered being within the fields of defence or security. Baker & McKenzie 191

208 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The Acts apply to governmental authorities and local government authorities within all areas, among others state, local or other authorities and decisionmaking bodies of local authorities and county councils. There is, however, no general list of contracting authorities. b. Which private entities are covered by the laws? The Acts apply to private companies, associations, societies and foundations which have been established to perform tasks in the public interest and which do not have industrial or commercial characteristics and: whose capital has (mainly) been supplied by the state, a local authority, a county council or a contracting authority; whose public activities are subject to the supervision of the state or a local authority, or a contracting authority; or which have a board of which more than half of the members have been appointed by the state, a local authority, a county council or a contracting authority. Further, when a contract concerns water, energy, transport or postal services the Utilities Procurement Act applies to private entities: over which a contracting authority may exercise a direct or indirect dominant influence; or which operate on the basis of certain special rights. Finally, when a contract concerns the fields of defence and security, the Defence Procurement Act applies in addition to the private entities set out above and also to private entities over which a contracting authority may exercise a direct or indirect dominant influence. c. Which types of contracts are covered? The Acts cover the award of supply, services and works contracts. The Utilities Procurement Act only applies to contracts within the fields of water supply, energy, transport and postal services, while the Defence Procurement Act only applies to contracts within the fields of defence and security. The thresholds, which are revised every other year in accordance with the 192 Baker & McKenzie

209 Baker & McKenzie's Global Public Procurement Handbook Sweden directives and the Agreement on Government Procurement (1994) ( GPA ), signed in Marrakesh on 15 April 1994, vary depending on the nature of the contract and the nature of the contracting authority/entity. The Acts do not cover the award of service concessions. However, the award of service concessions is subject to fundamental EU principles and may therefore be subject to action for damages even though the remedies under the Acts are not applicable. d. Are there anti-avoidance rules (including laws on bid rigging)? The Acts include provisions prohibiting the subdivision of a contract with the aim of preventing it from coming within the provisions on procurement exceeding the relevant thresholds contained in the Acts. 3. Procurement Procedures a. What procurement procedures can be followed? Different rules apply for public procurement procedures above the thresholds set by the European Commission and for public procurement procedures below those thresholds. When the value of a contract meets the thresholds set by the European Commission, four different procurement procedures may be used: open procedure (not available under the Defence Procurement Act), restricted procedure, competitive dialogue (not available under the Utilities Procurement Act), and negotiated procedure. When the open procedure is used, all interested suppliers may submit bids. The contract must be advertised in the European Union public procurement journal Tenders Electronic Daily. The contracting authority/entity is not allowed to negotiate with the bidders. This procedure is not available under the Defence Procurement Act. When the restricted procedure is used, qualified suppliers are invited to submit a bid, but all suppliers may apply to be invited to submit a bid. The contracting authority/entity must state the required qualifications to be invited to submit a bid in the advertisement of the contract. The contract must be advertised in Tenders Electronic Daily. The contracting authority/entity is not allowed to negotiate with the bidders. For particularly complex contracts, the competitive dialogue may be used. When the competitive dialogue is used, qualified suppliers are Baker & McKenzie 193

210 invited to enter into a dialogue in order to ascertain what solution best satisfies the contracting authority s /entity s needs. The contracting authority/entity must state the required qualifications to be invited to the dialogue in the advertisement of the contract. The contract must be advertised in Tenders Electronic Daily. This procedure is not available under the Utilities Procurement Act. Under certain circumstances, the negotiated procedure may be used. When the negotiated procedure is used, the contracting authority/entity invites certain suppliers to submit bids and can enter into negotiations with one or more of them. The contract must as a main rule be advertised in Tenders Electronic Daily. In certain cases this procedure can be used without any advertisement of the contract. When the value of a contract is below the thresholds set by the European Commission, there are four other award procedures that may be used: simplified procedure, selective procedure, competitive dialogue (not available under the Utilities Procurement Act), or direct award. When the simplified procedure is used, all interested suppliers may submit bids and the contracting authority/entity is allowed to negotiate with the bidders. The contract must be advertised in a publically available database. When the selective procedure is used, qualified suppliers are invited to submit a bid, but all suppliers may apply to be invited to submit a bid. The contracting authority/entity must state the required qualifications to be invited to submit a bid in the advertisement of the contract. The contract must be advertised in a publically available database. For particularly complex contracts, the competitive dialogue may be used. The procedure is the same as above the thresholds. However, the contract does not have to be advertised in Tenders Electronic Daily, only in a publically available database. This procedure is not available under the Utilities Procurement Act. Under certain circumstances, the contracting authority/entity may directly award a contract to a supplier without a call for tender. The direct procedure may only be used if the contract represents a maximum value of 15% of the Acts stated threshold, currently being a maximum value of approximately SEK287, 000 under the Public Procurement Act 194 Baker & McKenzie

211 Baker & McKenzie's Global Public Procurement Handbook Sweden and SEK577,000 under the Utilities Procurement Act and the Defence Procurement Act, or if there are exceptional reasons. There is also a possibility for contracting authorities/entities to enter into framework agreements with suppliers. When the framework agreement is concluded with several suppliers, calls are awarded either: by applying the terms and conditions set forth in the framework agreement, which must include an order of precedence or other distribution key; or by reopening competition (Sw. förnyad konkurrensutsättning) between the suppliers in the framework agreement. If reopening competition is used, it is not allowed to renegotiate the terms and conditions of the framework agreement. b. Are there any rules on the specifications/criteria? Technical specifications must be set out in the call for tender and may express the technical specifications as performance or functional requirements. The requirements may include environmental characteristics and should be formulated to clearly indicate the subject matter of the contract. Technical specifications may further be formulated with reference to certain technical standards. The standards, which may be referred to, vary between the Acts. Where a contracting authority/entity has referred to technical standards, it may not reject a bid on the sole ground that the products or the services do not comply with the specifications to which it has referred, if the bidder in its bid can prove that the proposed solutions satisfy in an equivalent manner the requirements according to the technical specifications. The technical specifications may not contain details of origin, production or a particular process or reference to trade marks, patents, types, origin or production, if this leads to certain suppliers being favoured or disfavoured. Such details and references may, however, appear in the specifications if it is otherwise not possible to describe the subject matter of the contract with sufficient precision or unambiguously. Each such reference must be accompanied by the words or equivalent. A contracting authority/entity may also lay down special social, environmental and other conditions relating to the performance of a contract. These conditions must be stated in the call for tender. Baker & McKenzie 195

212 c. Can certain prospective bidders be excluded from the competition? A contracting authority/entity may require that bidders demonstrate that they have sufficient ability and will be able to execute the contract. Therefore, a contracting authority/entity may request information about a company s technical ability and its financial position. The contracting authority/entity must indicate in the call for tender which information must be provided in this regard. These requirements must be proportionate in relation to the object for the contract. Moreover, there are certain mandatory and voluntary grounds for exclusion. A bidder can be excluded if the bidder, in accordance with a judgment that has entered into final legal force, has been sentenced for a crime that includes: participation in a criminal organisation; corruption; fraud against the financial interests of the European Union; or money laundering. A bidder may further be excluded if the bidder: is bankrupt or is being wound up, is under compulsory administration or is the subject of a composition or has indefinitely stopped their payments or is subject to a prohibition on conducting business; is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or composition or any other similar proceedings; has been convicted for an offence relating to professional malpractice; has been guilty of grave professional misconduct and the contracting authority/entity can prove this; has not fulfilled their obligations relating to social insurance charges or tax in their own country or in the country where the procurement is being conducted; or 196 Baker & McKenzie

213 Baker & McKenzie's Global Public Procurement Handbook Sweden in some essential respect has failed to provide information requested or has provided incorrect information required pursuant to certain provisions of the Acts. d. Are there any rules on the awarding of contracts? A contracting authority/entity may award the contract to the bidder which has submitted: the lowest price bid; or the economically most advantageous bid, in the light of an overall assessment taking into account considerations such as costs, functionality and environmental impact. If the contracting authority/entity will award the contract on the basis of the economically most advantageous bid, the call for tender must state which criteria will be used and specify the relative weighting of such criteria. Further, a contracting authority/entity may reject a bid if it considers the price to be abnormally low. However, the bid may only be rejected after the contracting authority/entity has requested in writing a reasoned submission for the low bid and has not received a satisfactory answer. e. Can bidders combine to submit a bid? A bid may not only be submitted by a sole bidder but also by a group of bidders, however, paying attention to relevant competition law. The contracting authority/entity may require that the consortia of bidders compose a specific form of legal entity if this is a prerequisite to be able to perform under the contract. Moreover, a bidder may refer to the economic, technical and professional abilities of other companies in its bid. In such case, the bidder must prove that it will have at its disposal the resources necessary for the execution of the contract by producing a commitment from the companies in question or in some other way. f. Are there any rules on alternative bids? The contracting authority/entity may allow bidders to submit alternative bids if it is to accept the most economically advantageous bid. The contracting authority/entity must state in the advertisement whether it will accept alternative bids. If this is not stated, alternative bids may not be allowed. Baker & McKenzie 197

214 If alternative bids are allowed, the call for tender must state the minimum requirements to be met by such bids and the specific requirements for how they are to be presented. Only bids that satisfy the minimum requirements may be considered in the procurement. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Contracting authorities/entities may in some exceptional cases conclude contracts with suppliers without competitive bidding. One such exception is when the contract represents a maximum value of 15% of the Acts stated thresholds, currently being a maximum value of approximately SEK287, 000 under the Public Procurement Act and SEK577,000 under the Utilities Procurement Act and the Defence Procurement. Another exemption is if there are exceptional reasons for the contracting authority/entity to conclude a contract with a supplier without any competitive bidding. This exception is, however, subject to a narrow interpretation and it must be applied in a restrictive manner. In addition, there are some other specific exceptional situations where a contracting authority/entity may conclude a contract without competitive bidding. One such example is when the object of the procurement can only be performed by a particular supplier for technical or artistic reasons, or owing to exclusive rights. Another example is when it is strictly necessary to award the contract, but extreme urgency caused by events unforeseeable by the contracting authority/entity make it impossible to keep to the time limits for the normal procurement procedures. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? There are various remedies and enforcement mechanisms in the Acts. First, suppliers may challenge the contracting authority s/entity s decision to award a contract by claiming that the procurement must be either recommenced or that the procurement may be concluded only after a certain rectification has been made. The basis for such a claim is that the contracting authority/entity has breached any of the five fundamental principles of EU 198 Baker & McKenzie

215 Baker & McKenzie's Global Public Procurement Handbook Sweden law with regard to public procurement (see Section 1(c) above) or has breached any other provision in the Acts and the supplier can substantiate that it has suffered or may suffer damage because of the specific breach of the contracting authority/entity. Second, suppliers may claim that a contract concluded between the contracting authority/entity and a supplier should be declared ineffective. The basis for such a claim may, for example, be that the contract has been concluded without prior publication of a notice by the contracting authority/entity. Third, suppliers may claim damages from a contracting authority/entity. The basis for such a claim is that the contracting authority/entity has not complied with the provisions in the Acts and this violation has caused the supplier damage. The contracting authority/entity must in that case compensate the supplier for the damage in question. The starting point is that the supplier is entitled to full compensation for its damage including compensation for lost profit. In any case, the supplier is entitled to compensation for its incurred costs for preparing a bid and otherwise participating in the procurement, provided that the infringement of the provisions of the Acts has had a detrimental effect on the supplier s chances of being awarded the contract. Fourth, the supervisory authority, i.e. the Swedish Competition Authority (Sw. Konkurrensverket) may claim that the contracting authority/entity must pay a special procurement fine to the state. The basis for such a claim is that: the general administrative court has determined by a ruling that has entered into final legal force that an agreement may remain in force, despite having been concluded in contravention of the provisions on standstill periods; the general administrative court has determined by a ruling that has entered into final legal force that an agreement may remain in force for overriding reasons relating to the public; or the contracting authority/entity has concluded an agreement with a supplier without prior publication of a contract notice. b. Are remedies available outside the scope of the legislation? There are no remedies available outside of the scope of the Acts. Baker & McKenzie 199

216 c. Is there a specific forum before which disputes are heard? The administrative court in whose judicial district the contracting authority/entity is based is competent to hear disputes either where suppliers challenge a decision to award a contract or where suppliers claim that a contract concluded between the contracting authority/entity and a supplier should be declared ineffective. Such disputes will be dealt with as so-called administrative cases at the administrative court. This means that the administrative court in most cases will review the documents submitted to the court by the parties and base its judgment solely on this review, i.e. written proceedings. Normally there will be no final hearing. It is possible to appeal against the judgment rendered by the administrative court, however, leave to appeal is required before the administrative court of appeal will hear the case. The administrative court in whose judicial district the contracting authority/entity is based is also competent to hear disputes where the Swedish Competition Authority claims that the contracting authority/entity must pay a special procurement fine to the state. The same rules as described above will apply also in this case. The district court in whose judicial district the contracting authority/entity is based is competent to hear disputes where suppliers claim damages from a contracting authority/entity. Such disputes are dealt with as civil cases at the district court. This means, for example, that the unsuccessful party will be ordered to reimburse the prevailing party for its reasonable legal costs. Before the district court renders its judgment, a final hearing including examination of witnesses normally takes place. It is possible to appeal against the judgment rendered by the district court, however, leave to appeal is required before the court of appeal will hear the case. d. Are there any timing requirements where a party wants to enforce? Suppliers who want to challenge a decision on the awarding of contracts, i.e. claiming that the procurement must be recommenced or that rectification has to be made, have to file an application with the competent administrative court at the latest within 10 days from the date when the contracting authority/entity has sent a notification of the award decision. However, should the contracting authority/entity send the notification of the award decision other than by electronic means, i.e. by regular mail or courier, the time limit is extended to 15 days. 200 Baker & McKenzie

217 Baker & McKenzie's Global Public Procurement Handbook Sweden Suppliers who want to claim that a contract concluded between the contracting authority/entity and a supplier should be declared ineffective have to file an application with the competent administrative court as a main rule at the latest within six months from the date the contract was concluded. However, if a contracting authority/entity has sent a notice of the results of the award procedure to the European Commission, the supplier must file the application with the competent administrative court before 30 days have elapsed from the European Commission publishing the notice sent by the contracting authority/entity. Further, if the contracting authority/entity has notified the candidates and the bidders in writing that the agreement has been concluded and issued a summary of the reasons thereof, the supplier must file the application with the competent administrative court before 30 days have elapsed from receiving such information. Suppliers who want to claim damages from a contracting authority/entity have to file its application for a summons with the competent district court at the latest within one year from the date when a contract was concluded between the contracting authority/entity and a supplier or the contract was declared ineffective. Should a supplier fail to file its application for a summons within the stipulated time, the right to damages is precluded. The Swedish Competition Authority has to file its application regarding payment of a special procurement fine with the competent administrative court at the latest within six months from the date when the contracting authority s/entity s ruling on which the application is based has gained legal force. However, when no suppliers have applied for a review of the validity of an agreement within the relevant time limits, the Swedish Competition Authority has to file its application regarding payment of a special procurement fine with the competent administrative court within one year from when the agreement was made. e. What are the leading court decisions involving procurement disputes? The Supreme Administrative Court has in an authoritative judgment rendered on 7 June 2011 stated that a supplier has standing to appeal when the supplier, due to an appeal by another supplier, has been excluded from a new evaluation by a judgment of an administrative court. Further, the Supreme Administrative Court also stated that a supplier must be given the opportunity to comment on an appeal by another supplier when the administrative court is considering to put those in the appeal alleged faults regarding the supplier s bid as ground for deciding that the supplier s bid must be excluded from a Baker & McKenzie 201

218 new evaluation. By this authoritative judgment, the Supreme Administrative Court has extended the suppliers right of action. The Supreme Court has in an authoritative judgment rendered on 22 December 2000 (in a case regarding a supplier s claim for damages against the contracting authority) commented on the matter of the required evidence and the quality thereof which a supplier has to present in order to be awarded damages. The Supreme Court has stated that in order to be awarded damages in excess of the costs incurred, it is sufficient that the supplier can establish that it is likely that it has lost the contract due to the contracting authority s violation of the procurement legislation. By this authoritative judgment, the Supreme Court has eased the supplier s burden of proof. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? When central government authorities, county councils and local government authorities and companies owned by municipalities and county councils act as contracting authorities/entities, they are subject to the principle of public access to information. This means that when the award decision has been made or all bids have been published, all documents relating to procurements by such bodies are subject to the ordinary rules on public access to documents and confidentiality. Consequently, the principle of public access to information applies to the information contained in such documents. This means that, as a general rule, anyone is then entitled to gain access to these documents provided they are not subject to any exemption rule on confidentiality. Should anyone ask for access to such documents in procurement by central government authorities, county councils and local government authorities and companies owned by municipalities and county councils as contracting authority/entity, the contracting authority/entity is obliged to expeditiously consider whether confidentiality applies to the information contained in the documents. Information that is subject to confidentiality must not be disclosed. Confidentiality may apply if it may be assumed that either the public or an individual supplier would suffer damage if the information were to be disclosed. However, requests to participate and bids are subject to absolute confidentiality until the contracting authority/entity has decided to award a contract to a particular bidder or the contracting authority/entity has before then concluded the procurement in some other way. 202 Baker & McKenzie

219 Baker & McKenzie's Global Public Procurement Handbook Sweden 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are no specific laws that apply when procuring technology. However, there are certain related pieces of legislation and practices that contracting authorities/entities as well as bidders should be aware of in connection with the procurement of technology. A recent study by the Swedish Competition Authority revealed that the IT and technology sectors are especially prone to what is called unsound strategic bidding, meaning that a bidder (alone or with others) violates the terms or the intentions of the contracting authority/entity as to how bidders should act. The three main categories of such unsound bidding identified by the Swedish Competition Authority are (i) bidders not fulfilling their obligations, (ii) corporate strategic bidding, and (iii) manipulation of relative evaluation models. In view of the potential negative economic effects of unsound strategic bidding, it is of paramount importance for contract awarding authorities/entities to apply well founded evaluation models that are not prone to manipulation, and to monitor compliance with the contracts once they have been awarded. Another issue for contracting authorities/entities and bidders to keep in mind is data protection, especially in connection with the procurement of IT outsourcing, such as hosting or other services of cloud computing character. The Swedish Data Protection Authority recently published a set of enforcement decisions and guidelines concerning data protection requirements in relation to cloud computing services. Some of the most important implications of the Swedish Data Protection Authority s decisions and guidelines from a practical perspective are that the contracting authority/entity must have knowledge of all subcontractors that may come to process its personal data, and conclude data processing agreements with all such subcontractors. Given that providers of cloud computing services generally instruct a large number of subcontractors located in various parts of the world, this is a somewhat burdensome requirement to comply with. However, it is permitted for the contract awarding authority/entity to have the supplier enter into data processing agreements with the subcontractors on its behalf. Baker & McKenzie 203

220 8. Looking Ahead a. Are there any proposals to change the law in the future? On 27 January 2011, the European Commission released a Green Paper on the modernisation of EU public procurement policy. The Green Paper deals primarily with simplification of procedures, better access to contract opportunities for all economic operators by reducing the administrative burden for participation, the potential of public procurement to support other policy objectives and ways of tackling favouritism and corruption. The publication of the Green Paper has been followed by an open consultation (now closed) and the publication of a proposal is foreseen before the end of 2011, paving the way for adoption of the revised legislation before the end of Parallel to the European Commission s work on modernisation of the public procurement rules, the Swedish government appointed a special investigator to evaluate the Swedish public procurement legislation. The investigation specifically aims at evaluating whether the existing legislation sufficiently enables contracting authorities/entities to make economically sound decisions. In addition, the investigation should evaluate the system for collection of procurement statistics in order to improve the possibilities for future evaluations of the public procurement legislation. The investigator must submit its proposal no later than 28 June The current exception from the Acts for so called in-house procurement (essentially based on the so called Teckal-judgment) is set to expire on 1 January On 3 September 2009, the Swedish government appointed a special investigator to evaluate the need of such exception. The investigator submitted his proposal to make the exception permanent on 28 April The proposal has so far not led to any decision, meaning that as of now, the exception is still set to expire on 1 January Baker & McKenzie

221 Baker & McKenzie's Global Public Procurement Handbook United Kingdom United Kingdom 1. The Laws a. What is the applicable legislation? As a member of the EU, the UK is subject to EU public procurement rules (the Public Sector Directive 2004/18/EC and Utilities Sector Directive 2004/17/EC, together, the EU Procurement Directives ). The EU Procurement Directives are implemented in the UK by the Public Contracts Regulations 2006 in England and Wales (the PCR 2006 ) and the Public Contracts (Scotland) Regulations 2006 in Scotland. The Utilities Contracts Regulation 2006 in England and Wales (the UCR 2006 together with the PCR 2006, the UK Regulations ) and the Utilities Contracts (Scotland) Regulations 2006 in Scotland. These Regulations came into force on 31 January The implementing regulations in Scotland are similar to the UK Regulations, however references made to the UK in this chapter will relate to the UK Regulations, which only cover England, Wales and Northern Ireland. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? As noted above, the UK Regulations implement the EU Procurement Directives and will be invalid to the extent of any inconsistency with the EU Procurement Directives. As an EU member state, the UK is also a party to the World Trade Organisation s Agreement on Government Procurement (the GPA ). c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The most fundamental principles underlying the legislation are those of transparency, non-discrimination and equal treatment derived from EU procurement law. EU principles of proportionality and mutual recognition are also relevant. Baker & McKenzie 205

222 d. Is aerospace and defence procurement treated differently from other types of procurement? In accordance with the EU regime, defence procurement is governed by a different set of rules to the UK Regulations. The Defence and Security Public Contracts Regulations 2011 came into force on 21 August 2011, implementing the European Union Defence and Security Procurement Directive 2009/81/EC. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? A broad range of UK public entities are covered by the definition of contracting authority under the EU Procurement Directives and in the UK implementation of the same. Regulation 3 of the PCR 2006 lists by name or description the bodies that fall within the definition. Essentially, all public bodies are caught except publicly-owned corporations engaged in commercial activities or which meet needs in the general interest (provided the latter are neither mainly financed or controlled by another contracting authority ). The UCR 2006 applies to the same public bodies, and also applies to certain private entities (see below for more detail). b. Which private entities are covered by the laws? In accordance with the EU Procurement Directives, private entities are covered by the UK Regulations in limited circumstances only. Under the EU Procurement Directives (implemented in the UK by the PCR 2006), this includes concessionaires private entities which enter into public works concession contracts with a contracting authority. The UCR 2006, in implementing the Utilities Sector Directive, also applies to private entities operating on the basis of a special or exclusive right granted by a competent public authority undertaking certain specified actions. Such a private entity must be operating in a utility sector subject to the UCR 2006 and be awarding a contract in relation to utility activity of a type falling within the UCR c. Which types of contracts are covered? There is no deviation by the UK from the EU Procurement Directives on this point. In brief, the UK Regulations apply to public works contracts, services 206 Baker & McKenzie

223 Baker & McKenzie's Global Public Procurement Handbook United Kingdom contracts and supply contracts. Under the UK Regulations, services contracts are divided into Part A and Part B contracts, which are defined in Schedule 3 of each Regulation. Part A contracts (e.g., IT services) are governed by the UK Regulations in their entirety, while Part B contracts (e.g., legal services) are only subject to certain elements of the UK Regulations, e.g., rules relating to contract award notices. As under the EU regime, the UK Regulations only apply to contracts above a certain threshold value specified in the Directives (in Euros) and expressed in pound sterling in the Official Journal at an amount which is fixed for a two-year period. New pound sterling threshold values will apply from 1 January d. Are there anti-avoidance rules (including laws on bid rigging)? The UK rules directly reflect the EU position, therefore the UK Regulations contain certain rules in relation to aggregation. The EU (and UK) rules require the value of purchases under individual contracts to be added together for the purpose of ascertaining the relevant threshold. This is an antiavoidance measure, the aim of which is to deter the contracting authorities/utilities from deliberately dividing up contracts (which fulfil the same or a similar purpose) to bring them below the relevant thresholds. Bid rigging is proscribed as a matter of competition law rather than procurement law. EU competition laws apply where trade between member states is affected. Otherwise, the Competition Act 1998 is the relevant law but it largely mirrors EU competition law. There may also be criminal liability pursuant to the Enterprise Act Procurement Procedures a. What procurement procedures can be followed? In accordance with the EU Procurement Directives, contracting authorities that intend to carry out procurements must use one of four procedures: the open procedure; the restricted procedure; the competitive dialogue procedure; and the negotiated procedure. The competitive dialogue procedure is only available under the Public Sector Directive (and therefore the PCR 2006 in the UK). In accordance with the EU Procurement Directives, as a general rule, purchasers subject to the PCR 2006 must choose between the open and restricted procedures and are only permitted to use the negotiated or Baker & McKenzie 207

224 competitive dialogue procedures in limited circumstances (typically where the contract is too complicated for the other procedures). In practice, UK authorities historically stretched the application of the negotiated procedure further than had been intended and the additional restrictions now imposed on its use appear to have resulted in relatively heavy use of the competitive dialogue procedure. Under the UCR 2006, all procedures (except the competitive dialogue procedure) are open to a contracting authority to use. b. Are there any rules on the specifications/criteria? Reflecting the EU Procurement Directives, the UK Regulations provide that where a contracting authority wishes to lay down technical specifications which must be met by the contract, then it must specify the technical specifications in the contract documents. Equal access must be afforded to economic operators and contracting authorities must ensure that no obstacles are created to opening up public procurement to competition. The EU Procurement Directives and the UK Regulations therefore generally prohibit specification of particular items that can be sourced from only one supplier. c. Can certain prospective bidders be excluded from the competition? The UK position does not differ from the EU position prospective bidders must be excluded from the competition in some situations and can be excluded in others. In practice, this results in a pre-qualification process for all tenders. Regulation 23 of the PCR 2006 sets out the mandatory rejection criteria for economic operators including convictions for certain offences (e.g., conspiracy, bribery, fraud or corruption) on the part of the economic operator or its directors. Regulations 24 and 25 clarify that contracting authorities can reject economic operators that do not demonstrate sufficient financial or economic standing and/or that do not demonstrate sufficient technical or professional ability. Similar provisions apply under the UCR 2006 but a utility may also reject bidders on the basis of its own established criteria. d. Are there any rules on the awarding of contracts? The two contract award criteria set out in the EU Procurement Directives: lowest price and most economically advantageous tender (MEAT) apply 208 Baker & McKenzie

225 Baker & McKenzie's Global Public Procurement Handbook United Kingdom in the UK. Contracting authorities must specify at the outset the grounds on which a contract will be awarded and it must award contracts on those grounds. When assessing which offer is the most economically advantageous, the contracting authority/utility must take into account factors such as quality, price, technical merit, aesthetic and functional characteristics, delivery date and delivery period. The contracting authority must specify the criteria it intends to use and the weight to be attached to each. e. Can bidders combine to submit a bid? Yes, Regulation 28 of each of the UK Regulations makes express provision for two or more persons, at least one of whom is an economic operator, to act jointly for the purpose of being awarded a public contract. f. Are there any rules on alternative bids? In accordance with the EU position, the UK Regulations permit alternative or variant bids, but only in relation to contracts which are to be awarded on the MEAT criteria. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? The EU Procurement Directives provide various exclusions and exemptions that are reflected in the UK Regulations. Regulation 6 of the PCR 2006 provides various exclusions from the regulations based on the subject matter of the contract. These include contracts for telecommunications, land, broadcasting material, employment, certain financial services, certain research and development services and where national security requires an exclusion. Regulation 14 of the PCR 2006 allows resort to the negotiated procedure without prior publication of a contract notice in certain circumstances. Where this applies, the contracting authority can essentially negotiate with a single supplier without any competition even though the contract would otherwise fall within the regulations. The procedure is most relevant where a contracting authority has already bought goods, works or services from a supplier and it is the fact of that prior purchase which makes it impracticable to go elsewhere (e.g., buying replacement parts for equipment where there is only one supplier and the other option would be to replace the equipment at much greater cost). Baker & McKenzie 209

226 The Utilities Sector Directive provides a procedure for the European Commission to withdraw the application of the Directive from sectors directly exposed to competition. The European Commission has made exemption rulings on the following utilities in England, Scotland and Wales: (i) electricity and gas supply; (ii) electricity generation; and (iii) exploitation of gas and oil. The European Procurement Directives and UK Regulations also do not apply to in-house arrangements, on the basis of the so-called Teckal exemption. In Teckal, the European Court of Justice held that a public body could bypass the EU procurement rules and directly enter into a contract with a service provider so long as: the public body controls the service provider in question as if it was that public body s own department; and the service provider in question carries out the essential part of its activities with the contracting authority. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The UK Regulations include all of the new remedies and mechanisms introduced by the EU Remedies Directive (2007/66/EC). The rules were implemented in England and Wales by the Public Contracts (Amendments) Regulations 2009 on 20 December Similarly, the Public Contracts and Utilities Contracts (Scotland) Amendment Regulations 2009 implemented the Remedies Directive in Scotland. The UK Regulations therefore now include mechanisms such as Alcatel periods - the UK implements the minimum standstill periods which were set out in the Remedies Directive. As under the EU Remedies Directive, Part B services are exempt under the UK Regulations from the standstill requirement, however UK case law suggests that on the basis of general EU principles a standstill period should be applied for Part B contracts in exceptional circumstances. b. Are remedies available outside the scope of the legislation? Under limited circumstances, a procurement decision may be challenged in the UK by judicial review. However, it is important to note that a review only relates to how a decision was made, not to its merits and it can only be 210 Baker & McKenzie

227 Baker & McKenzie's Global Public Procurement Handbook United Kingdom commenced where there is no suitable alternative remedy. The use of judicial review in the procurement context is exceptionally rare - the case of Cookson & Clegg v Ministry of Defence effectively rules out the use of judicial review unless it involves issues such as bribery, corruption, State aid or unlawful policy; or the contract falls outside the Regulations and there is a sufficient public law element to the contract. It could be possible to bring a claim in tort of misfeasance in public office which applies when there is targeted malice or reckless knowledge on the part of the decision-maker that they will probably cause injury. The Claimant must have suffered damage specific to him, which can include pure economic loss. An alternative to litigation could be to lodge a complaint with the UK Cabinet Office (which contains the UK government executive agency which deals with procurement management) or the European Commission. c. Is there a specific forum before which disputes are heard? The High Court of England and Wales hears disputes. For remedies in tort, actions may be brought either in the County Court or the High Court. Appeals from the County Court and High Court are heard in the Court of Appeal, appeals from that court are heard by the Supreme Court. d. Are there any timing requirements where a party wants to enforce? The Public Procurement (Miscellaneous Amendments) Regulations 2011 which came into force on 1 October 2011 amended the UK Regulations, reducing the three month period within which a party can commence legal proceedings to 30 days, for matters arising after 1 October In relation to matters arising before 1 October 2011, the limitation period is still three months. The 30 day time limit may be extended at the court s discretion up to a period of three months. The UK Regulations apply the Uniplex requirement that time begins to run from the moment the Claimant knows or ought to have known of the alleged breach. e. What are the leading court decisions involving procurement disputes? There are relatively few reported decisions. Indeed, few cases proceed to trial and even fewer result in an award of damages. Disputes are normally Baker & McKenzie 211

228 determined as a result of early rulings and/or settlement. Further, all relevant UK courts can refer questions to the European Court of Justice if there is uncertainty as to the correct position under the European Procurement Directives. In the circumstances, there have not been many relevant decisions by the UK appellate courts. Many of the leading cases are decisions of the European Court of Justice. Some of the more notable UK decisions include: Brent London Borough Council v Risk Management Partners Limited and London Authorities Mutual Limited and Harrow London Borough Council [2011] UKSC 7 applying the Teckal decision in the UK in circumstances where a number of local authorities set up their own mutual insurance company. The case confirmed that Teckal applies in the UK and that it can apply where a number of different contracting authorities jointly control the in-house entity. Sita UK Limited v Greater Manchester Waste Disposal Authority [2011] EWCA Civ 156 applied the Uniplex decision in the UK and confirmed that time runs from the date of actual or constructive knowledge of the breach. McLaughlin and Harvey Limited v Department of Finance & Personnel [2011] NICA 60 concerns the extent to which a contracting authority is obliged to disclose sub-criteria in the invitation to tender (and the weight to be applied to each of them). JB Leadbitter & Co. Ltd v Devon County Council [2009] EWHC 930 (Ch) confirmed that contracting authorities must act proportionately but concluded that a tenderer could be rejected for purely technical noncompliance (failure to submit electronically in accordance with the tender instructions). Harmon CFEM Facades (UK) Ltd v. The Corporate Officer of the House of Commons [2000] EWHC Technology 84 is a rare example of a damages award and in extraordinary circumstances where the contracting authority effectively implemented a Buy British policy. 212 Baker & McKenzie

229 Baker & McKenzie's Global Public Procurement Handbook United Kingdom 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? The UK Regulations are the most relevant as they consolidate UK public procurement legislation and implement the European Directives. In addition, the underlying principles of the Treaty on the Functioning of the European Union ( TFEU ) also have applicability. UK case law has also shown that judges will be mindful of giving effect to EU principles and obligations. As already noted above, competition law can be relevant in procurement disputes. The Freedom of Information Act 2000 is also of relevance in that it requires public bodies to grant access to information in relation to tenders unless exemptions apply. There is specific government guidance on freedom of information obligations in relation to particular categories of procurement information. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? The European Procurement Regulations and UK implementation of the same generally do not draw any distinction between the procurement of technology and other goods and services. The same rules and principles therefore apply to the public procurement of technology, which could involve both contracts for the supply of goods (hardware and commercial off-the-shelf-software) and/or contracts for services (bespoke software or managed services). One distinctive feature of the industry, however, is the common use of framework agreements. There are additional policies and procedure to be observed when procuring technology, given the large scale of public-sector technology projects and the complexity and risk that often accompanies them. ICT procurement projects in central civil government are subject to a review by an independent team in the Cabinet Office. The UK government plans to make public the various review reports, however their publication has already been postponed once. The UK government recently instituted a requirement to pro-actively publish all ICT contracts concluded by central government departments above a low Baker & McKenzie 213

230 financial threshold. The publication is subject to redactions justified by exemptions in the Freedom of Information Act. There is specific government guidance on ICT contracting and a specific model contract to use as a starting point. 8. Looking Ahead a. Are there any proposals to change the law in the future? Any UK-specific changes are likely to be focused on increasing procurement opportunities for small and medium sized enterprises ( SMEs ) and/or in relation to ICT procurement (see above). In February 2011, the UK government published a review specifying several measures aimed at increasing procurement opportunities for SMEs and reducing inefficiencies in the procurement processes. From March 2011, all government departments were required to publish specific, targeted actions to increase their business with SMEs, with the hopes of having 25% of government contracts awarded to them. The changes are intended to make the procurement process more straightforward, transparent and competitive. In July 2011, the UK government published its response to the European Commission Green paper on the modernisation of EU procurement policy. It particularly supported the streamlining of procurement procedures and improving accessibility for SMEs. 214 Baker & McKenzie

231 Latin America

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233 Baker & McKenzie's Global Public Procurement Handbook Latin America Latin America The public procurement legislation in Latin American countries has been largely developed under the same influence, so the main rules are shared by all countries. Such legislation regulates the public procurement of goods and services and is applicable to the public administration and to governmentowned entities, which, as a rule, must be conducted under a public bidding procedure. This guarantees best price conditions, while complying with basic and common principles, such as transparency, publicity, economy and equality, among others. In general terms, the procurement procedure follows a standard rule, which is a public tender (with broad competition), but the legislations also provide for certain types of restricted invitations or even, in exceptional circumstances, for direct purchase (without a tender procedure). Certain entities may be prevented from participating in public procurement in certain countries. Basically, the legal framework does not allow the participation of entities that have been penalized with the prohibition to enter into contracts with the administration or those entities which have a certain degree of relation with the public entity that is conducting the procurement (such as public officials or those with close family ties with a high ranking officer of the government-owned entity awarding the contract). The procurement procedure is usually a very formal process, where the rules for participation are defined in the Request for Tender. The rules are aimed at assuring that the competitors have the required legal and technical qualification for performing the object of the procurement. In general, the public procurement procedure may be subject to administrative disputes and even judicial challenges. Usually the administrative measures are adopted prior to any judicial lawsuit. The public procurement framework in Latin America shares similar rules in relation to preventing bid rigging. Severe penalties may be imposed, which may include a temporary prohibition against entering into contracts with the public administration. Another recent trend spreading across Latin America is to grant competitive advantage to those that include local content in their offers or commit to transferring technology to the Latin American countries. For instance, a Colombian bidder bidding for a public contract in Colombia will be Baker & McKenzie 217

234 evaluated more favorably than a non-colombian company. In the same way, outside companies operating or producing in a Latin America country will also score higher than an outside company without a presence in such country. Finally, when contracting with public agencies in Latin American countries, a competitive advantage in the procurement evaluation process can be achieved by offering to transfer technological capacity or by proposing to increase the numbers of jobs opportunities in a certain community. 218 Baker & McKenzie

235 Baker & McKenzie's Global Public Procurement Handbook Argentina Argentina 1. The Laws a. What is the applicable legislation? Argentina has a federalist government system. The country is divided into several provinces, each one having its own provincial government and regulatory framework. The provinces have granted certain powers to the National Government. Therefore, the provinces have the power to approve their own constitutions and legislate within their territories on matters not delegated to the National Government. The National Government, in contrast, has the power to enact legislation on matters encompassed under the delegated powers. Finally, the provinces have also granted certain specific powers to each municipality for purposes of governing each community. At the national level, the following legislations apply, as a general rule, to all contracting and procurement procedures: Contracting Regime for the National Public Administration (Reglamento de Contrataciones de la Administración Pública Nacionali), approved by Decree No. 1,023/2001; Rules for the Acquisition, Sale, and Contracting of Goods and Services for the State (Reglamento para la Adquisición, Enajenación y Contratación de Bienes y Servicios del Estado), approved by Decree No. 436/2000; and General Terms and Conditions for Contracting for Goods and Services with the National State (Pliego Único de Bases y Condiciones Generales para la Contratación de Bienes y Servicios del Estado Nacional), approved by Resolution No. 834/2000 of the Ministry of Economy. Note that many of these rules may apply even when the documents for a particular bid do not expressly mention them. Additionally, a particular public bid is regulated by specific and ad hoc rules ( bid documents ), namely: the Specific Terms and Conditions enacted for the public bid (Pliego de Bases y Condiciones Particulares), which may include technical specifications; Baker & McKenzie 219

236 the offer of the contractor; the governmental decision granting the public contract to a specific contractor (adjudicación); and the specific written contract and/or purchase (or service) request order. At the provincial level, each province has enacted its own public contracting and procurement regulations. However, such regulations usually implement a framework similar to that of the National Government. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Argentina is a member of the Mercosur Customs Union together with Brazil, Paraguay and Uruguay (Venezuela is in the process of joining). By means of Decision 23/06 of the Common Market Council (Consejo Mercado Común), a Protocol on Government Purchases was approved. As of November 2011, it has only been ratified by Argentina. Furthermore, Decisions 23/10 and 9/11 of the Common Market Council have ordered a review of the Protocol in order to update it. Thus, the Protocol is still not in place and it is not clear when it will enter into force. The purpose of the Protocol is to set the basic rules on public procurement in the member states. Those rules include: transparency, impartiality, equality, due process, publicity, and non-discrimination of companies of other member states in governmental purchases. The Protocol will apply, in principle, to purchases by all kinds of governmental entities, both at the national and provincial level. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The basic underlying principles of the legal framework are the following: reasonableness of the project and efficiency of the procurement for the satisfaction of the public interest; promotion of a broad attendance of and competition between the potential and current bidders; 220 Baker & McKenzie

237 Baker & McKenzie's Global Public Procurement Handbook Argentina transparency and publicity of the procedure; liability of the public officers authorizing, approving and/or managing public contracts; and equal treatment to all bidders. d. Is aerospace and defence procurement treated differently from other types of procurement? As a general rule, regulation and jurisdiction over aerospace and defence matters are powers granted to the National Government. At the national level, aerospace and defence procurement are not treated differently from other types of procurement. Hence, the same general regulatory framework explained in Section 1(a) above would apply. The National Government could acquire aerospace or defence products or services without a public bidding procedure, for example, in cases of duly proven and grounded urgency or emergency reasons or cases where the purchase should be kept secret because of national defence or security purposes (see Section 3(a) below for further details). 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? The general procurement legislation mentioned in Section 1(a) applies to the centralized and decentralized National Public Administration - i.e., the Executive and its subordinate offices, agencies and entities. Such legislation does not expressly apply to the other entities that, according to the Financial Administration and Control System of the National Public Sector Law No. 25,156, are integrated to the National Public Sector (e.g., companies organized under a private structure partially or totally owned by the National State). However, it has been contended that the basic underlying principles explained in Section 1(c) would apply to those entities. Moreover, companies organized under a private structure partially or totally owned by the National State usually enact its own specific procurement rules. b. Which private entities are covered by the laws? Private entities are mainly subject to private law and are not covered by the general procurement legislation mentioned in Section 1(a). However, if private entities participate in contracting or procurement procedures with the National Government, they should comply with the said regulations. Baker & McKenzie 221

238 c. Which types of contracts are covered? The general procurement legislation mentioned in Section 1(a) applies, as a general rule, to all types of public contracts. More specifically, the Contracting Regime for the National Public Administration establishes that it covers public contracts purchasing any kind of goods or services. There are also specific regulations that might apply to certain public contracts. For instance, Law No. 13,064 regulates the specific framework for contracts for public constructions, while Law No. 17,520 regulates the specific framework for the concession of public constructions. Morover, several public utilities have their own specific regulatory frameworks - e. g., transportation and distribution of natural gas or electricity. d. Are there anti-avoidance rules (including laws on bid rigging)? Law No. 25,156 of Competition Defence includes bid rigging as one of the anti-competitive practices punished by it. Bid rigging is subject to fines of up to AR$150 million (approximately US$ 32 million). The agency in charge of applying this law is the Competition Defence Commission, an administrative agency within the Ministry of Economy, whose findings are subject to judicial review. As with any other anti-competitive conduct, bid rigging is subject to the so-called rule of reason, where the economic effects of the conduct must be analyzed before deciding whether the specific conduct is competitive or anti-competitive. However, according to the Commission s recent case law, there is a presumption that bid rigging will affect competition and it will be up to the accused parties to prove otherwise. 3. Procurement Procedures a. What procurement procedures can be followed? According to the general procurement legislation mentioned in Section 1(a), there are two different main procedures in order to select the contractor for a public contract: (i) the public bidding procedure, which is the standard procedure; and (ii) the direct contracting procedure, which is only permitted in certain specific cases, such as: when the amounts involved are low; when the very special nature of the contractor would not allow a public bid; when the second public bid fails or is declared void; when there is a proven urgency or emergency; or when there are confidentiality reasons. 222 Baker & McKenzie

239 Baker & McKenzie's Global Public Procurement Handbook Argentina b. Are there any rules on the specifications/criteria? The rules on the criteria and specifications of the contracting procedure are set forth by the General Terms and Conditions, the Specific Terms and Conditions, the offer of the contractor, the governmental decision granting the public contract to a specific contractor (adjudicación), and the specific written contract and/or purchase (or service) request order. That framework specifies the mandatory criteria and specifications that the submitted bids must comply with. Any bid that fails to meet them could be rejected on inadmissibility grounds. Only the criteria and specifications that were published in the bid documents should be used to evaluate the bids submitted. This means that the evaluation criteria must be developed before the release of the bid call document (see Section 3(d) for further details). c. Can certain prospective bidders be excluded from the competition? According to the general procurement legislation mentioned in Section 1(a), certain prospective bidders could be excluded from the competition for, mainly, the following reasons: having been penalized due to previous breaches of public contracts; being an officer of the National Government or of the corporations under its control; being under a reorganization or bankruptcy procedure; or having been held guilty in court for criminal offences. d. Are there any rules on the awarding of contracts? The bid documents can state different rules on the awarding of contracts, such as those attending to the lower price, the experience or skills of the bidder, the quality of the materials, or other criteria. The default rule is that the public contract must be awarded to the most convenient offer, taking into account, as a whole, the price, quality, and other characteristics of the bid, as well as the bidder s suitability and aptitude for the contract. Please note that, in procurement procedures for the acquisition of standardized products or for the hiring of standardized services, the public contract would be awarded to the least expensive offer. Baker & McKenzie 223

240 e. Can bidders combine to submit a bid? There is no bar to submitting a joint bid, although the bidders will need to comply with the requirements against bid rigging set forth in the Law No. 25,156 of Competition Defense. f. Are there any rules on alternative bids? Alternative bids are allowed by the general procurement legislation mentioned in Section 1(a), unless expressly prohibited by the bid documents. Alternative bids would nevertheless be inadmissible if they do not comply with the requirements, criteria and specifications set forth in the bid documents. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Under certain circumstances, a public contract could be directly awarded, overlooking the competitive bidding procedure (see Section 3(a) for further details). Also, private biddings could be followed, for example, if only a few potential bidders were identifiable. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Any bidder has the right under the general procurement legislation mentioned in Section 1(a) to challenge any administrative decision issued during the public bidding procedure, including the award of the public contract. Such challenges must be previously filed at the administrative level, and only when all administrative remedies are exhausted, can the administrative decision be challenged in court. b. Are remedies available outside the scope of the legislation? Depending on the case, other remedies - established by certain trade and foreign investments protection agreements - would be available. c. Is there a specific forum before which disputes are heard? At the national level, as a general rule, the judicial disputes regarding public procurements must be heard by the Federal Courts having jurisdiction on Administrative Disputes Matters. 224 Baker & McKenzie

241 Baker & McKenzie's Global Public Procurement Handbook Argentina At the provincial level, the forum will depend on the regulations of each province, because such power has not been delegated to the National Government. d. Are there any timing requirements where a party wants to enforce? As a general rule, before enforcing the public contract, the party should exhaust all administrative remedies available (see Section 5(a) for further details). e. What are the leading court decisions involving procurement disputes? Some of the leading Supreme Court decisions regarding these matters are Ingeniería Omega S.A. v. Municipalidad de la ciudad de Buenos Aires, Cardiocorp S.R.L. v. Municipalidad de la Ciudad de Buenos Aires and Técnicas de Investigación y Servicios de Luis A. v. Municipalidad de la Ciudad de Buenos Aires. These decisions led to a current legal trend which states that if a public contract does not follow the public bidding procedure when it is expressly requested by the applicable laws, then it must be deemed as non-existent. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Other related bodies of law relevant to procurement by public agencies are: the Public Ethics Law No. 25,188; the National Regime of Private Initiative enacted by decree 966/2005; and the National Regime of Public-Private Partnerships enacted by decree 967/ Technology Law a. Are there any specific laws or practices that apply when procuring technology? The general procurement legislation mentioned in Section 1(a) applies universally, regardless of the specific industry sector. Nevertheless, the public administration or the public agency may set forth specific rules regulating a particular procurement, attending to the peculiarities of technology contracts. Baker & McKenzie 225

242 8. Looking Ahead a. Are there any proposals to change the law in the future? Several Bills of Amendments have been introduced at the National Congress in order to expressly extend the application of the Contracting Regime for the National Public Administration to the companies organized under a private structure partially or totally owned by the National State and to all other entities (including public trusts) whose decisions or assets are controlled by the National Government. 226 Baker & McKenzie

243 Baker & McKenzie's Global Public Procurement Handbook Brazil Brazil 1. The Laws a. What is the applicable legislation? The basis for public procurement in Brazil is set forth in Law 8.666/93. This Law covers both public procurement and contracts entered into with the government (administrative contracts), and is the main legal reference when it comes to public procurement in Brazil. Also, Law /02 provides for a specific public procurement procedure and it is regulated by Decree 5.450/05. Recently, Brazilian public procurement has undergone some changes due to the future hosting of the FIFA World Cup and the Olympic Games. Decree 7.581/11 provides for a different treatment to be given to public procurement procedures that are related to these events. Moreover, recent changes introduced measures to encourage national industry development, namely the possibility to favor national products and services in public procurement and the possibility to require offset measures in these proceedings. These last two changes have been brought by Law /10, which amended Law 8.666/93, and by Decree 7.546/11, which regulated these issues. Finally, Provisory Measure 544/11 was recently published to provide different treatment to public procurement in the defence area. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Law 8.666/93 provides that the same benefits provided to local companies in public procurement procedures can be extended to members of the Common Market of the South (Mercosur Argentina, Brazil, Paraguay and Uruguay). These benefits are basically the concession of preference margins to locally manufactured products or services that comply with Brazilian technical norms, so that when competing against foreign companies, the local company will have a margin within which its product or service may be of a higher price and still have the contract awarded to it. Therefore, in short, these locally manufactured products or services are also considered as products that originated from members of Mercosur. Baker & McKenzie 227

244 Another benefit is provided in Law 8.666/93 an additional margin is conceded to products and services that result from research and development performed in Brazil. However, this benefit does not extend to Mercosur countries; if research and development is performed in Mercosur countries, there will be no additional preference margin when competing for an award. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The basic principles are those of legality, impersonality, morality, equality, publicity, administrative probity, binding nature of the bid call document and objective judgment. Also included are the principles of isonomy, better proposal for the administration, and promotion of national sustainable development. These principles are meant to ensure that the administration gets better value for money. d. Is aerospace and defence procurement treated differently from other types of procurement? Yes. On September 2011, a Provisory Measure was issued setting forth new regulation for public procurement in these areas. Provisory Measure 544/11 creates a registry of defence companies before the Ministry of Defence and concedes to these companies some benefits when participating in public procurement. Among other things, when the government is procuring defence goods, it may restrict competition to companies that are registered and these companies will also enjoy tax benefits to perform activities related to defence. In order for a company to register before the Ministry of Defence, it must comply with a series of requirements to grant that the company is seated in Brazil, performs activities of research and development in Brazil and is effectively ruled by Brazilian partners. Finally, the Provisory Measure provides that administrative contracts related to defence must provide for technology transfer and offset rules, which will be set forth by the Ministry of Defence and/or by the bid call document. Notwithstanding the novel measure, it should be noted that the Ministry of Defence, along with Brazilian Singular Forces, have already adopted the usage of requiring offset and technology transfer measures in its contracts by means of internal ordinances and rulings. 228 Baker & McKenzie

245 Baker & McKenzie's Global Public Procurement Handbook Brazil 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? Every public agency is covered by Law 8.666/93, with few exceptions. One important exception is Brazilian Oil (Petrobrás), a government-controlled corporation who enjoys a simplified public procurement regime provided for by Decree 2.745/98. Also, Law 8.666/93 applies only partially to government-controlled corporations. In order to better define the application of Law 8.666/93 to these companies, Brazilian authorities and court decisions have made a distinction between core activities and non-core activities. Core activities concern those activities that constitute the goal of the company, the very economic activity whose performance is the reason behind its constitution. In order to procure goods and services related to core activities, a government-controlled company does not need to observe the provisions of Law 8.666/93. On the other hand, non-core activities are ancillary activities that do not relate directly to the company s purpose. The procuring of goods related to non-core activities must be performed by government-controlled companies according to Law 8.666/93. b. Which private entities are covered by the laws? Does not apply. c. Which types of contracts are covered? Every contract entered into with the public administration (administrative contracts). d. Are there anti-avoidance rules (including laws on bid rigging)? Yes, Law 8.666/93 itself provides that those who violate its provisions are subject to administrative and criminal penalties according to the nature of the violation, which includes bid rigging. Moreover, Law 8.429/92 provides for penalties to be applied to public personnel who practice improbity acts. Also, bid rigging or other conduct that violates competition standards are subject to criminal penalties provided for in Law 8.137/90. Lastly, there is a bill currently being discussed in the House of Representatives that provides for liability for legal persons that commit acts against local or foreign public administration; one of these acts is specifically Baker & McKenzie 229

246 defined in the bill as committing fraud against public procurement proceedings. 3. Procurement Procedures a. What procurement procedures can be followed? Article 22 of Law 8.666/93 provides for three main public procurement procedures that can be followed: public tender, price survey, and invitation to tender. The public tender is open to whoever wants to participate, provided it can present all qualifying documents required in the bid call document prior to the beginning of the bidding procedure. In the price survey, the bidding proceedings occur with competitors that were previously registered, which exempts the qualifying stage prior to the biddings since it already occurred at the time of the register. Finally, the invitation to tender is the procedure where the public administration invites companies to participate in the competition. Moreover, Law /02 provides for a different procedure that is much used for the acquisition of common goods and services, which are those whose performance and quality may be objectively defined in the bid call document according to market standards. This procedure can be performed also through electronic means, and its main characteristic is an inversion of the bidding procedure stages: the biddings occur prior to the analysis of the qualification documents, which will be analyzed only for the company that submitted the best bid. b. Are there any rules on the specifications/criteria? Basic and general criteria are set forth in Law concerning the documentation that must be presented in every public procurement procedure. These basic documents are, generally speaking, related to (i) legal status (e.g., corporate documents), (ii) technical qualification proof that the company is able to perform the contract s purpose adequately, (iii) economic and financial qualification proof of the company s financial health, (iv) tax regularity proof that the company duly complies with its fiscal obligations, and (v) declaration that the company complies with Article 7, section XXXIII of the Federal Constitution regarding employment of under-aged people. These are basic criteria required in every public procurement procedure. They are the criteria specified by the public administrator according to the 230 Baker & McKenzie

247 Baker & McKenzie's Global Public Procurement Handbook Brazil needs of the public entity and the peculiarities of the acquisition, and always in accord with the general principles mentioned in Section 3(a) above (e.g. the technical criteria must not restrict competition more than strictly necessary to meet the administration s needs). c. Can certain prospective bidders be excluded from the competition? Prospective bidders can be excluded if they do not present the documentation required by the bid call document (see Section 3(b) above). It should be noted that high regard is given to the mandatory nature of the requirements set forth in the bid call document. Therefore, any form of non-compliance, even if very small or of no practical consequence, can provide a reason for disqualifying the subject company. Another possibility for exclusion of prospective bidders falls under the penalty of prohibition to contract with the public administration. If a company breaches an administrative contract or if it practices an illegal act against the public administration, that company may be imposed such a penalty. This penalty involves the prohibition to participate in public procurement procedures or to contract with the public administration (with the entire administration or with the specific entity with which the company had signed the breached contract) for a up to a maximum period of 10 years. d. Are there any rules on the awarding of contracts? There are three types of rules upon which an awarding can be based: (i) the minor price, (ii) the best technique, or (iii) the minor price cumulated with the best technique. With respect to minor price, the contract will be awarded to the company that offers the best price and complies with the minimal requirements set forth in the bid call document. For best technique, the award will be conceded to the company that offers the best technical solution, but it should be noted that the price criteria is not completely set aside. As regard the third type, the award will be granted to the company that offers the best price together with the best technical solution, based on scores given by the public administration. e. Can bidders combine to submit a bid? If permitted by the bid call document, companies can form what is called a consortium, which is an association that aims to comply with the bid call document requirements by joining each company s characteristics. This Baker & McKenzie 231

248 consortium will be jointly liable before the public administration for the submitted bid and for the performance of the contract in case of awarding. This form of participation is only possible if expressly permitted by the bid call document and is the only way to submit a combined bid. Outside of this scope, a combined bid may be considered bid rigging and an act of fraud in the public procurement procedure. f. Are there any rules on alternative bids? None. As mentioned in item Section 3(c) above, the requirements set forth in the bid call document are the law of the public procurement procedure. Any bid that is submitted in disagreement with these requirements will lead to disqualification of the submitter. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Yes, Articles 24 and 25 of Law 8.666/93 provide for cases in which competitive bidding can be exempted. Article 24 sets forth cases in which the public administration has the ability to waive Law 8.666/93 provisions. Competitive bidding may exempted only in the cases provided for in this article, which leaves to the administrator s discretion the possibility to follow or not to follow the formal public procurement procedure. Such cases include, for example, acquisitions of small pecuniary amount, emergency situations, cases in which national security is at stake, and many others. Article 25, on the other hand, provides that competitive bidding may be waived when competition is impossible, such as when the supplier is a monopolist. The provision sets forth some examples which are nonexhaustive (e.g., the formal public procurement procedure is waived every time that competition is impossible or every time it is impossible to fix objective criteria in order to classify the bidders). Finally, it should be highlighted that the use of these provisions is subject to tight scrutiny by the regulator entities, such as the Courts of Accounts, since it gives opportunity to fraud. 232 Baker & McKenzie

249 Baker & McKenzie's Global Public Procurement Handbook Brazil 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? It is possible to appeal to the public authorities that are responsible for the bidding procedure in case of any illegality is present in the bid call document or in the conduct of the proceedings. If the appeal is not granted, it is still possible to file a lawsuit to enforce the correction of the illegalities. b. Are remedies available outside the scope of the legislation? Does not apply. c. Is there a specific forum before which disputes are heard? Disputes can be heard before State or Federal Courts depending on the entity against which enforcement is sought. If heard before a State Court, dispute resolution will be heard before a Treasury Court judge, whereas a federal judge will hear charges before the Federal Court. As for the location of the court, it is usually provided for in the contract and normally corresponds to the location of the headquarters of the public entity with which the contract is signed. Negotiation, mediation and arbitration are very controversial procedures when it comes to disputes with the public sector, and are not used except in specific situations. d. Are there any timing requirements where a party wants to enforce? Administrative appeals against the bid call document may be presented up to two working days prior to the beginning of the bidding procedure. Administrative appeals against acts of the authorities conducting the bidding procedure may be presented up to five days after the rendering of a decision, or 10 days after a decision that prohibits the company to contract with the public administration. Longer terms may be provided in the bid call document. As for judicial measures, a party has 120 days beginning from the performance of an administrative act to file a writ of mandamus against such act. The statute of limitations to annual an administrative act through a judicial measure other than a writ of mandamus is five years. Baker & McKenzie 233

250 It is worth highlighting that the timing to enforce judicial measures during public procurement procedures has much more to do with the duration of the proceeding than with the statute of limitations. This is because if the procedure is concluded, the contract signed or even terminated, judicial enforcement will be much harder, even if the term to file the lawsuit has not expired. e. What are the leading court decisions involving procurement disputes? Since Brazil is a civil law country, there are no unique leading decisions that set benchmarks to be followed. However, the majority of court decisions lead to the enforcement of principles provided for in the Federal Constitution or in Law 8.666/93, such as the principle of isonomy, public interest and competition. When a public procurement procedure is challenged in Brazilian courts, the tendency is to privilege these principles and allowing the participation of the biggest possible number of competitors without harming the public interest. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? As previously mentioned, there are a number of laws providing for public procurement other than Law 8.666/93. Aside from the Federal Constitution, there are laws providing for penalties such as Law 8.429/92 and there is the new regulation brought by Decree 7.581/11 concerning public procurement procedures related to the FIFA World Cup and the Olympic Games. Moreover, there are internal regulations, mainly those issued by the Ministry of Defence and the Singular Forces providing for defence acquisitions and offset requirements. Of these, Ordinance 764 is the basis for defence acquisitions and ICA and DCA are very important rulings issued by the Brazilian Air Force that details acquisitions made by the Air Force and the proceedings involving offset requirements. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? Yes, there are a few specific laws and practices that apply when procuring technology. 234 Baker & McKenzie

251 Baker & McKenzie's Global Public Procurement Handbook Brazil One of the most important provisions regarding procuring technology is Article 111 of Law 8,666/93 (which applies universally, regardless of the specific industry sector). It sets forth that, as a condition to the hiring, the bidders of the winning projects (i.e., those who had been chosen to contract with the government), should agree to assign to the government the patrimonial rights of their software or computer program. Article 24, XXV of Law 8,666/93 applies when procuring technology. It provides the exemption from bidding procedures in the case of procurement contracting carried out by the Institute of Science and Technology ( ICT ) or a funding agency for technology transfer and for licensing rights to use or exploit a protected creation. Furthermore, in 2010, the Brazilian government issued Decree No. 7174, which regulates the procurement of information technology goods and services and requires federal agencies and parastatal entities to give preferential treatment to locally produced computer products and goods or services with technology developed in Brazil. However, Brazil actually permits foreign companies that have established legal entities in Brazil to compete for procurement-related contracts funded by multilateral development bank loans. Notwithstanding the specific laws that apply when procuring technology, please note that this area is also regulated in Brazil by: (i) the Software Act ( Law 9,609 ), which protects software or computer programs as literary works; (ii) the Copyright Law ( Law 9,610 ) on a subsidiary basis; and (iii) the Brazilian Civil Code ( Law 10,406 ), as a general rule. Finally, based on current practice when procuring technology, the Brazilian government and the public sector generally use their own draft agreements including the mandatory clauses set forth in Article 55 of Law 8,666/93, rather than supplier s standard agreements. 8. Looking Ahead a. Are there any proposals to change the law in the future? Yes. Law 8.666/93 is deemed by many as having antiquated provisions that do not fit current administrative needs. In this sense, the issuing of Decree 7581/11, which provides for the Alternative Contract Regime that will be implemented for acquisitions regarding the FIFA World Cup and the Olympic Games, has made some legal scholars say that this alternative public Baker & McKenzie 235

252 procurement regime will substitute Law 8.666/93 at the end of the sport events. Likewise, the recent legislative trends to provide for benefits in bidding procedures for local companies and for companies that perform research and development in Brazil are still developing and changing the way public procurement takes place in Brazil. In the same manner, the Brazilian legal framework is still developing the treatment it gives to offset requirements in bidding procedures, and this is also a matter that will certainly see novel developments in the near future. 236 Baker & McKenzie

253 Baker & McKenzie's Global Public Procurement Handbook Colombia Colombia 1. The Laws a. What is the applicable legislation? Colombia has a public procurement and contracting statute comprised mainly by Law 80/1993 and Law 1150/2007 (the Procurement Statute ). This Procurement Statute is further developed by several decrees issued by the Colombian government. The Procurement Statute sets forth the general rules regarding (i) government-owned entities which must observe the statute (the Government-owned Entities ), (ii) principles of the contractual activity applicable to Government-owned Entities when dealing both with private and public parties, such as transparency, economy, accountability, contractual balance, among others, (iii) rights and obligations of Government-owned Entities and their contractors, (iv) mechanisms to participate in public procurement (i.e., public tenders, direct contracting etc.), among others (Law 80/1993, Articles 23 to 29). The Procurement Statute deals mainly with the procedures by which public procurement is carried out. The Procurement Statute does not as a general rule set forth the minimum contents of the agreements entered into by Government-owned Entities, which are generally subject to private rules found in the applicable civil or commercial legislation (Law 80/1993 Article 13). b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Current legislation in Colombia does not relate to or interact with trade agreements to which Colombia is a party. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The Procurement Statute establishes the principles that govern public procurement. The key principles set forth by the Procurement Statute are: Baker & McKenzie 237

254 Transparency - this principle for both the need of clear rules regarding the tender procedure and the rights of the parties to know the procedure and decisions of the Government-owned Entity, as well to challenge such decisions. As a general rule, all information submitted with a bid may be furnished to any interested party. Economy - this principle stresses the need to undertake contractual procedures in an expeditious manner. In principle, before a public procurement procedure is issued, the Government-owned Entity must have the relevant budget provisions and have conducted design, risks and feasibility studies. Once the request for proposals is issued, the Government-owned Entity must clearly follow the procedure set forth beforehand and the opportunities will elapse without undue delay. Efficiency and Liability of the Public Officer - public officers in charge of procurement procedures of the Government-owned Entities must undertake their duties bearing in mind the fact that they are managing public resources, thus they must try to allocate their resources as efficiently and effectively as possible and they will have both fiscal and disciplinary liability for discharging their duties with negligence or wilful misconduct. Contractual equilibrium - this principle states that a party that has entered into a contract with a Government-owned Entity has a right for maintaining the financial condition of the original proposal, which will be protected against any supervening facts that could alter such balance. This right leads to the possibility of filing a Suit to review the terms and conditions of the agreement whenever extraordinary unforeseeable circumstances have materially altered the initial financial condition of the agreement to the detriment of the private party. Regarding the principle of equal treatment, public procurement laws requires Government-owned Entities subject to the Procurement Statute to award higher points to offers that include local goods or services. Foreign goods or services will receive the same treatment (and thus the same amount of points) whenever the country of origin of such goods or services grants the same treatment to Colombian bidders (Law 816/2002, Articles 1 and 2). 238 Baker & McKenzie

255 Baker & McKenzie's Global Public Procurement Handbook Colombia d. Is aerospace and defence procurement treated differently from other types of procurement? As a general rule, procurement of goods and services related to national defence and security are performed through an abbreviated selection procedure which is a short-form competitive selection procedure (Law 1150/2007, Article 2(2)(i)). Furthermore, the procurement of goods and services for defense which are classified due to their nature is not subject to competitive bidding. Therefore, the relevant entity may contract them directly without following a specific procedure (Law 1150/2007, Article 2(4)(d)). Regardless of this possibility, in practice, Government-owned Entities in the defence sector still follows some form of competitive bidding even when the goods to be procured or services to be retained are of a classified nature. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? Generally, all Government-owned Entities are subject to the Procurement Statute. Such term is defined broadly and includes the Nation and national level agencies, the territorial subdivisions such as departments, municipalities and districts and their agencies. There are several decentralized entities both at the national and local level which are specialized by the scope of their duties but are also owned or controlled by other national or local entities which are subject to provisions of the Procurement Statue as well. However, some of these specialized entities,either because of their special regimes of organization or because of the application of other specific statutes are wholly or partially exempted from observing the Public Procurement Statute. Ecopetrol, for example, is a corporation and a national level Governmentowned Entity that is subject to private contractual regime. Additionally, some specialized and decentralized entities are subject to the Public Procurement Statute unless they undertake activities in competition with private players. These entities include the so-called industrial and commercial establishment of the state, or corporations in which Governmentowned Entities have a participation greater than 50%. b. Which private entities are covered by the laws? As a general rule, when purchasing goods or retaining services, the private entities are never subject to the Public Procurement Statute. Only when they intend to act as supplier of goods or service providers to a Government- Baker & McKenzie 239

256 owned Entity which is subject to the Procurement Statute is that they must follow that set of rules. c. Which types of contracts are covered? In principle, the procedure performed prior to the selection of a party to contract with a Government-owned Entity subject to the Public Procurement Statute must comply with such statute. However, as a general rule, the contents of the agreement, rather than the procedure to select a contractor, is subject to the applicable private commercial or civil rules. Therefore, all the types of contracts foreseen in private commercial law are covered by the Procurement Statute as long as one of the parties is a Government-owned Entity subject to the Procurement Statute. However, the Procurement Statute specifically states that it regulates directly the following contracts: civil works (construction) contracts; concession contracts; public trusts; and public credit contracts. d. Are there anti-avoidance rules (including laws on bid rigging)? Yes. Colombian competition and criminal laws establish measures in order to assure that procurement contracting takes place under normal and unaltered competition procedures. In this sense, the Anticorruption Statute enacted by Law 1474 of 2011 establishes that the act of entering into an agreement in order to unlawfully alter the procurement procedure in a public bid, public auction, abbreviated selection or merits qualification is considered a crime, punishable with imprisonment from 6 to 12 years and penalties between 200 minimum monthly wages (approximately US$66,000) and 1,000 minimum monthly wages (approximately US$330,000). Additionally, the Procurement Statute sets forth strict limits to the use of trust funds by the Government-owned Entities to avoid the use of these funds to skip the selection procedures set forth by the law. 240 Baker & McKenzie

257 Baker & McKenzie's Global Public Procurement Handbook Colombia 3. Procurement Procedures a. What procurement procedures can be followed? Public entities have various procedures available to carry out public procurement. The general rule is that the transparency and objective selection principles must be observed. Although this is the general rule, the Procurement Statute offers mechanism to expedite procurement in the cases therein defined. The procedures established in the Procurement Statute are the following: Public bid. Unless a specific rule provides that the selection of the contractor must be carried out through a different procedure, the Government-owned Entity must use this mechanism. The general principle is that once all bidders meet the minimum qualifications (experience, financial requirements, personnel available, etc,) the overriding awarding factor should be a mix of price and technical qualities offered. Abbreviated selection. While similar to a public bid, this mechanism is shorter and simpler, and is generally used when the contract amount is as low as the budget of an entity. It is also used to award contracts for the procurement of goods of standard quality such as stationery, common use machines, etc. When used to contract standard goods or services, the lowest price should be the key factor for the awarding of contracts. Merit-based qualification. This procedure is used to select the entities or individuals that will provide Government-owned Entities with consulting services (e.g., the selection of an investment bank to privatize a Government-owned Entity or a lawyer to represent the entity in arbitration). Unlike other selection mechanisms, merit-based qualification or contest is usually not awarded on the basis of the lowest price criterion, but rather on the basis of experience and academic qualification. Therefore, consultants cannot be chosen on price, but rather by qualification. Direct contracting. Entities are allowed to purchase goods or retain services without conducting competitive bidding in specific events, such as when there is an urgent need for the goods or services, when the amount of the agreement is low as per the budget of the Governmentowned Entity, or when acquiring assets that are only provided by one competitor in the market. In practice, to avoid investigations by the Baker & McKenzie 241

258 controlling bodies, even in cases where direct contracting is allowed, the Government-owned Entity will use some form of competitive bidding, even if not subject to the same rules as provided in the other mechanisms. De minims contracting. This is a very simple procedure used to award contracts for small values. b. Are there any rules on the specifications/criteria? Selection criteria are largely defined by each public entity in the corresponding rules for the public bid, abbreviated selection, merits qualification or contest or direct contracting procedures. However, public entities must follow the principles and general rules established in the Procurement Statute in order to ensure the objective selection and the capacity and suitability of the contractor. This means that they cannot request potential bidders to provide evidence of experience that is not relevant to the agreement to be awarded or that is so specific that it is designed to rule out potential bidders that are otherwise well-qualified for the job at hand. c. Can certain prospective bidders be excluded from the competition? In principle, every competitive procedure for the selection of bidders should be open to any person that comply with the experience, financial and other technical qualifications required for the performance of the agreement to be awarded. This means that grounds for exclusion of bidders should be general and not bidder-specific. The Procurement Statute sets forth several grounds that would prevent an individual or entity to participate in a public procurement procedure in the form of an incompatibility or inability regime. The general causes for exclusion of a person or company are, among others things, the following: those individuals or entities that cannot enter into contracts with a Government-owned Entity pursuant to the Constitution or the law; those individuals or entities that were precluded by the law to enter into a contract with a Government-owned Entity on specific grounds and entered into a contract regardless of such prohibition (they become precluded to enter into other contracts that they would have been able to execute had they not breached the law); 242 Baker & McKenzie

259 Baker & McKenzie's Global Public Procurement Handbook Colombia those individuals or entities who were a party to a contract with a Government-owned Entity and whose contract was unilaterally terminated by the Government-owned Entity for material breach under the so-called declaration of caducity; those individuals who have been judicially condemned to have their rights and public functions suspended (e.g., someone found criminally guilty for bribery); those individuals or entities that refrained from performing a public contract that was awarded to them; public officials; and those with close family ties with a high ranking officer of the Government-owned Entity awarding the contract. d. Are there any rules on the awarding of contracts? Yes, there are both procedural and substantive rules applicable to the awarding of contracts. For example, on the procedural side, the general rule for awarding public contracts within a public bid process is by holding a public hearing (Law 1150 of 2007, Article 9) in which the decision has to be made. Regardless of the hearing, the decision must be documented in an administrative ruling. Substantive rules are applicable to different types of procedures. For example, in public bid for the procurement of goods the Government-owned Entity must award the agreement by either of the following methods for weighing both the quality and price of the goods offered (Law 80/1993, Article 5): (i) by designing a mathematical formulae to define the points awarded to the price level and the points awarded to the quality offered, in which case the bidder with the best score as per the predefined formulae is awarded the contract; or (ii) by weighing price and quality of the goods offered to determined the best ratio of cost-benefit. In connection with abbreviated selection procedures, the same methods for awarding public bids may be used, unless the procedure is for the acquisition of standard goods in which case the contract must be awarded to the bidder offering the lowest price. Both in public bids and abbreviated procedures experience, minimum financial factors and organization s capacity (measured by the number of employees available to perform the agreement) are mandatory requirements Baker & McKenzie 243

260 but in no way can higher scores be awarded to a bidder on account of these factors. On the contrary, in a merit-based qualification or contest, both the technical aspects of the offer as well as the specific experience of the bidder and its work team are the decisive factors to award the contract. The price is irrelevant for the purpose of awarding a consulting agreement in a meritbased qualification or contest. e. Can bidders combine to submit a bid? Yes, the Procurement Statute establishes that the bidders may combine to submit a bid using the following mechanisms: Temporary union. This is an unincorporated joint venture by means of which two or more bidders may submit a single bid, and they must be jointly and severally liable for the fulfilment of the obligations of the contract if awarded to the temporary union. However, the fines that the contracting entity may impose should be imposed and enforced only against the member of the temporary union who breached the agreement, provided that the members of the temporary union clearly inform how the obligations under the agreement were to be divided when submitting the bid. Consortium. This is an unincorporated joint venture by means of which two or more bidders may submit a single bid, and they must be jointly and severally liable for the fulfilment of the obligations of the contract and for any consequences arising from the breach of the agreement, including fines imposed by the Government-owned Entity. Promise for future partnership. This is originally a non-incorporated joint venture for the purposes of the submission of a single bid. If the agreement is awarded, the parties shall complete the incorporation to perform the contract. A bidder can submit an offer both on its own and in a combined form with another bidder. However, the same bidder cannot bid individually and at the same time through a combined form or as part of two or more combined bidders. f. Are there any rules on alternative bids? The subject of alternative bidding is not expressly regulated in the Procurement Statute or any regulation regarding the matter. Government- 244 Baker & McKenzie

261 Baker & McKenzie's Global Public Procurement Handbook Colombia owned Entities are reluctant to accept alternative bids since the selection of an alternative bid could be seen by the regulators as a mechanism to avoid the rules set forth in the relevant request for proposals, which once issued are binding on the Government-owned Entity. Alternative biddings are generally only considered by the Governmentowned Entity when none of the main bids complies with the terms of the request for proposals. Furthermore, even in this case, the Governmentowned Entity is more likely to issue a new request for proposal derived from the alternative bids rather than awarding the contract directly based on the alternative bid. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Yes, the Procurement Statute sets forth certain events in which a competitive bidding need not be observed; the Government-owned Entity is not required to issue an open request for proposal or even request proposals from more than one potential contractor (Law 1150/2007, Article 2(4)). Among others, the cases in which direct contracting without a previous competitive bidding is allowed are: when the goods or services are needed in an state of urgency; when the goods and services are required for national defence purposes and they are of a classified nature; when the contract is needed for the development of scientific and technological activities; when there is no plurality of bidders in the market for the relevant product or service; or the lease or acquisition of real estate. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? General remedies available to Government-owned Entities As a general rule, a party to an agreement where both of the parties exchange promises and the promises made by one party are given as consideration for the promises of the other party, the non-breaching party will be entitled to Baker & McKenzie 245

262 three types of remedies in the event of breach by the other party (Civil Code Articles 1613 and 1546): avoidance, specific performance and damages. These three general remedies are available to Government-owned Entities. Because of their nature, the remedies of avoidance and specific performance are mutually exclusive a Government-owned Entity acting as plaintiff may not request, at the same time, that avoidance and specific performance be awarded as a consequence of a breach of contract. Instead, it will be necessary for the Government-owned Entity to choose one of the two remedies as a first option, and the second one may only be awarded if the court does not award the first (Civil Code, Article 1546). On the other hand, damages may be awarded independently or in addition to both the remedies of avoidance and specific performance, to the extent that the non-breaching party has sustained an indemnifiable loss. Unlike other legal systems, Colombian courts do not have the discretion to award either avoidance or specific performance of a contract a court is limited to the terms of the plaintiff s request. Special remedies available to the Government-owned Entities Government-owned Entities subject to the Procurement Statute must include certain specific clauses that vest them with special powers that can be enforced unilaterally through the issuance of administrative resolutions. Agreements in which the inclusion of the special powers is mandatory are those agreements for the performance of a service or utility deemed public, concession agreements for the exploitation of public assets or of a monopoly of a public nature, as well as civil works (construction) agreements. The inclusion of these special powers is optional regarding agreements for the provision of services. These special powers are: Unilateral interpretation of the agreement. If while performing the agreement, the parties disagree on the interpretation of a specific provision of the agreement and the difference may lead to paralysation of or a grave adverse effect on the public service to be satisfied or served, the Government-owned Entity may define how the agreement is to be interpreted. Unilateral modification of the agreement. If while performing the agreement the Government-owned Entity (i) realizes that the scope of 246 Baker & McKenzie

263 Baker & McKenzie's Global Public Procurement Handbook Colombia the contract needs to be increased, modified or decreased, (ii) the parties fail to reach an agreement as to the required changes, and (iii) such failure may lead to the paralysation of or have a grave adverse effect on the public service to be satisfied or served by the agreement, the Government-owned Entity may unilaterally order the modifications as necessary. Whenever the modifications ordered alter the value of the agreement in 20% or more, the contractor may terminate the agreement and stop its performance. Unilateral termination of the agreement. Upon the occurrence of certain specific events, the Government-owned Entity may unilaterally terminate the agreement before expiration of its term. Such particular instances include (i) events where the public service or utility affected by the agreement so requires, (ii) when the contractor that is an individual dies, (iii) when the contractor that is a legal entity is dissolved or enters into a procedure for its liquidation, or (iv) when the contractor generally ceases its payments. Caducity. When the agreement is materially breached by the contractor in way that gravelly and directly adversely affects the performance of the agreement, the Government-owned Entity may unilaterally terminate the agreement. In this event, the contractor will be prevented to enter in agreements with Government-owned Entities in the future. It should be noted that the decisions made by the Government-owned Entity may be challenged by the contractor before the competent courts. The contractor may request monetary relief resulting for undue interpretation, modification or termination of the agreement by the Government-owned Entity or seek adequate compensation to restore the balance of the contract disturbed by the unilateral interpretation or modification, even when accurate. Remedies limited to the private party in an agreement entered into with a Government-owned Entity In case of breach of contract by a Government-owned Entity, the remedy available for the contractor, as established in the Contentious Administrative Code (Administrative Code, Article 87), consists of a Contractual Action, which can be filed against the contracting entity before Colombian administrative courts, in order to seek a judicial declaration of nonfulfillment of obligations, the payment of the corresponding indemnifications and other declarations that may apply. Baker & McKenzie 247

264 The issue of whether specific performance is available is generally not discussed because, as a general rule, the Government-owned Entity will be required to pay an amount of money instead of rendering a service. When the Government-owned Entity is subject to the Procurement Statute, even if such entity is the one to render the services or supply the goods, specific performance will as general rule not be available because there is a longstanding principle that courts cannot order administrative authorities to carry out a specific action, but rather should limit relief granted to awarding damages. However, when the Government-owned Entity is authorized to deal as private player and is not subject to the Procurement Statute specific performance may be available against the Government-owned Entity. b. Are remedies available outside the scope of the legislation? There are no substantive restrains to the contractual freedom that the parties to an agreement, whether public or private, enjoy to negotiate and craft their own remedies in a contract. The guiding principles as to contractually-fashioned remedies are that any agreed remedies are valid if: they do not constitute a waiver of any statutory remedies for causes of action based on gross negligence or willful misconduct, unless such waiver is made after the affected party becomes aware or could become aware of the occurrence of a gross-negligent action or a willful misconduct (Civil Code, Article 1522); or in the context of a consumer relation, a waiver of the legal warranty and of the safety warranty may be invalid. As a matter of practice, a Government-owned Entity purchasing goods or retaining a service will generally request that the agreement includes both simple delay penalties as well as a liquidated damages clause. A simple delay penalty allows the Government-owned Entity to impose a fine or penalty on the contractor for each day (or other period of time) in which the contractor is delayed in the delivery of the goods or performance of the service (e.g., a US$1,000 penalty for each week of delay in meeting the final date in which a completed construction must be delivered by the contractor). Please note that delay penalties allow for double-dipping, that is, 248 Baker & McKenzie

265 Baker & McKenzie's Global Public Procurement Handbook Colombia the Government-owned Entity may claim both the penalty as well as the damages resulting from such delay. Liquidated damages are usually stipulated to relieve the Government-owned Entity from the burden of proving the damages it sustains on account of the breach by the contractor. While generally agreed upon, the Governmentowned Entity will seldom enforce the liquidated damages clause if there is no material breach giving rise to termination of the agreement. Unlike a mere delay penalty, a liquidated damages clause does not allow for double-dipping, but the Government-owned Entity can waive the liquidated damages clause and instead sue for the actual damages resulting directly for the breach. c. Is there a specific forum before which disputes are heard? Absent a valid arbitration clause, the contractual controversies action must be brought before special courts that hear disputes where one of the parties is a Government-owned Entity. While a Government-owned Entity may subject contractual disputes to arbitration (including international arbitration), if the contract is to be performed abroad, Government-owned Entities are generally reluctant to agree on arbitration as means of dispute resolution. The rationale behind this is that arbitration is generally expensive and Government-owned Entities have limited budgets that will not allow them easily to pay for expensive arbitration procedures and the fact that arbitration panels tend to be more even-handed in disputes to which a Government-owned Entity is a party to. Additionally, when the Government-owned Entity is subject to the Procurement Statute, there are material limitations as to the competence of an arbitration panel since matters such as the invalidity of administrative decisions could be deemed as not arbitrable. That results in numerous Suits to challenge the award granted by the Government-owned Entities based on the ground that the decision by the entity was illegal. d. Are there any timing requirements where a party wants to enforce? Yes. Disputes concerning decisions by the Government-owned Entity issued before the agreement is performed are subject to a 30-day statute of limitations as from the date the decision was notified or communicated. Such decisions include the decision to award the contract, the assessment of a specific proposal or the decision not to award the contract, among others things. If the agreement is performed within the 30-day period and an action Baker & McKenzie 249

266 has not been brought, then challenging the pre-contractual decisions can only be made as part of an action to declare the contract null and void (Administrative Code, Article 87). Disputes arising directly out of the performed contract are subject to a twoyear statute of limitation. The two-year period generally begins upon the termination of the agreement, although specific rules may provide for different starting moments (Administrative Code, Article 136). e. What are the leading court decisions involving procurement disputes? None. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? No, the Procurement Statute is the body of law that governs public contracting. However, it is subject to constant reform and amendment. It is important to mention that on 7 November 2011, the government enacted Decree 4170 of 2011, which created the new National Public Procurement Agency, which has been charged with the task of designing and monitoring the public policies regarding procurement, analyzing the market and proposing new regulations in order to achieve greater efficiency, transparency and optimization of State resources. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? As mentioned above, the Procurement Statute establishes the development of scientific and technological activities as an event in which a direct contracting procedure may be carried out. However, depending on the scope and purpose of the particular technology procurement, other laws regarding privacy and intellectual property may apply. 250 Baker & McKenzie

267 Baker & McKenzie's Global Public Procurement Handbook Colombia 8. Looking Ahead a. Are there any proposals to change the law in the future? At the moment, there are no formal proposals to change the current Procurement Statute. However, it is yet to be seen how recently enacted statutes (e.g. Law 1474/2011 dealing with anti-bribery) will affect the actual application of the current Procurement Statute. The national government has stated in the media that it intends to carry out a massive state reform in the near future, which will likely impact the current laws regarding public procurement. Additionally, jurisprudence regarding public procurement is generally evolving and, thus, courts will play an important role in public procurement matters. Baker & McKenzie 251

268 Mexico 1. The Laws a. What is the applicable legislation? The applicable legislation for public procurement in Mexico will depend on the public entity calling for the tender. In principle, Article 134 of the Mexican Constitution provides that the acquisitions, leases, dispositions of all kind of goods, rendering of services of any nature and the procurement of public work called by the Mexican Federation, the States, the Municipalities and the Federal District, will be awarded by public bidding through a call for tenders in order to guarantee to the Mexican State the best available conditions in connection with price, quality, financing, opportunity and further applicable circumstances. Although Article 134 of the Mexican Constitution serves as a cornerstone for the entire public contractual regime, there are certain special laws deriving from Article 134 that regulate public contracting, among which the most relevant are the following: the Law of Public Works and Services Related with the Same (the Works Law ); the Law of Acquisitions, Leases and Services for the Public Sector (the Acquisitions Law ); the Petroleos Mexicanos Law, its Regulations and the Administrative Provisions of Contracting for Acquisitions, Leases, Works and Services of the Substantive Activities of Productive Nature of Petroleos Mexicanos and Subsidiary Entities ( DAC ); the Regulations of the Electric Public Service Law; and the Natural Gas Regulations. Also, as supplementary legal ordinances to public contracting, Mexico has the Federal Civil Code, the Federal Law for the Administrative Procedure and the Federal Code for Civil Procedures. 252 Baker & McKenzie

269 Baker & McKenzie's Global Public Procurement Handbook Mexico b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Mexico has an extensive network of Free Trade Agreements ( FTA ), and each FTA has different requirements and rules concerning bidding processes. Specifically, the provisions of government procurement include among others, the following subjects: entities of the government that may issue a bid under the terms of the specific FTA; types of works, services or goods that are covered by the corresponding FTA; nationality of the bidders and shareholders controlling the bidder; rules for assessing the origin of goods (either rules of origin or marking rules of origin); and thresholds or requirements according to the respective FTA. Therefore, each FTA may have different rules that may serve to qualify or disqualify a bidder. Two of the most important FTAs entered by Mexico are the Economic Partnership, Political Co-ordination and Co-operation Agreement between the European Community and its Member States with Mexico ( EUFTA ) and the North America Free Trade Agreement ( NAFTA ). EUFTA includes several provisions on government procurement. These provisions set forth certain rules that should be met in order to have a bidding process covered under said FTA. EUFTA s Exhibit VI lists the entities of the Mexican government that may call for an international bid covered under this FTA. For instance, Petroleos Mexicanos ( PEMEX ) (Mexico s national oil company) and its four subsidiaries (PEMEX Refinación, PEMEX Exploración y Producción, PEMEX Gas y Petroquímica Básica y PEMEX Petroquímica) are covered under Exhibit VI. Similar to the EUFTA, NAFTA has several provisions regulating government procurement. These provisions regulate the activities that are covered and Baker & McKenzie 253

270 protected by NAFTA. The specific activities are listed in Exhibit b-3 of NAFTA. Moreover, pursuant to NAFTA s Article 1001, government procurement must be covered under NAFTA whenever the estimated value of the contract equals or exceeds the value of the updated thresholds established by NAFTA. The update of the thresholds should be in accordance with the inflationary rate of the United States of America. c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? Article 134 of the Mexican Constitution sets out the guiding principles for public procurement: efficiency, effectiveness, economy, transparency and honesty. The DAC provide the following principles for the PEMEX procurement: maximum transparency and publicity - priority will be given to dissemination and publicity of information relating to procurement procedures. Limitation to information access should only occur in those cases expressly provided by law; equality - the same criteria, conditions and opportunities should be applied to all participants in a direct award or restricted invitation; competitiveness - rules, conditions and criteria to promote competition among stakeholders should be established in order to obtain the best offering on the market; simplicity - the requirements, criteria, terms and conditions should be clear, objective and comparable, avoiding rules that add unnecessary complexity; and expedited procedures - procedures should be agile and efficient, and must avoid stages or steps that result in barriers or unnecessary delays. Additionally, the DAC further provide that these principles should be considered in all phases of the procurement process and during the execution of contracts, and must also be transformed into rules, conditions, and objective and verifiable criteria in order to facilitate accountability. 254 Baker & McKenzie

271 Baker & McKenzie's Global Public Procurement Handbook Mexico d. Is aerospace and defence procurement treated differently from other types of procurement? No, the public procurement of the aerospace and defence sector is regulated by the Acquisitions Law and the Works Law. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? In accordance with the Works Law and the Acquisitions Law, the public entities covered are: all administrative units of the Mexico s federal executive branch; the Ministries of State and the Legal Counsel of the Federal Executive Power; the Attorney General s Office; the decentralized entities; the state-owned entities and trusts where the settlor is the Federal Government or a state-owned entity; and the States, the Municipalities and the public entities with total or partial contribution from federal resources, in accordance with the covenants entered with the Federal Executive Power. Other public companies covered by such laws include, among others, PEMEX and its Subsidiary Entities, the Federal Commission of Electricity, the Ministry of Transportation and Communications, the Ministry of Energy. b. Which private entities are covered by the laws? Except for any entities that would fall into the category listed in Section 2 (a) above, no private entities are covered under the public procurement laws. c. Which types of contracts are covered? The contracts covered under the abovementioned laws are those that relate to procurement of public works, the services in connection with the same, acquisitions, leases and rendering of services of any nature. With respect to PEMEX, the DAC regulate those contracts related to the substantive activities of PEMEX, such as the exploration, exploitation, Baker & McKenzie 255

272 refining, transportation, storage, distribution and first-hand sales of petroleum and its by-products obtained from its refining. d. Are there anti-avoidance rules (including laws on bid rigging)? The procurement laws provide certain economic penalties for the bidders, service providers or contractors who violate these laws. Economic penalties are imposed by the Public Function Ministry ( SFP ). In addition, the SFP may temporally disqualify anyone from directly or indirectly participating in procurement procedures or enter into contracts regulated under the procurement laws upon the occurrence of certain circumstances, including, without limitation, submitting false information or acting with bad faith or wilful misconduct during any procurement procedure, performance of a contract or during its term, or in the submission of one conciliation or nonconformity request. 3. Procurement Procedures a. What procurement procedures can be followed? Typically, there are three different procurement procedures that can be followed, namely: (i) public bid (generally applied); (ii) restricted invitation; and (iii) direct award. Items (ii) and (iii) are exceptions to the tender requirement; by law, the general rule is that contracts or orders should be awarded through a public bid procedure. b. Are there any rules on the specifications/criteria? Since public bid is the typical procedure used, there are a number of requirements that should be met in order to award a contract or order through a restricted invitation procedure or a direct award. For instance, at the federal level, the federal procurement laws (the Acquisitions Law, the Works Law and the PEMEX Law and their Regulations and related provisions) regulate the specific scenarios under which a federal governmental entity or PEMEX may call for acquisitions, services, leases, works or related services, as well as services related to oil and gas substantive activities, through a restricted invitation or direct award procedure. For example, if a contract involves national security, then the governmental entity may award it through a restricted invitation or a direct award procedure and not follow a bidding process. 256 Baker & McKenzie

273 Baker & McKenzie's Global Public Procurement Handbook Mexico c. Can certain prospective bidders be excluded from the competition? Yes. For example, at the Federal level, the procurement laws (the Acquisitions Law, the Works Law and the PEMEX Law and their Regulations and related provisions) set forth the scenarios under which certain prospective bidders are to be excluded from participating (e.g., when a bidder has been banned from participating in procurement procedures by the SFP, in which case all federal governmental entities should refrain from contracting with such third party). Also, competition (antitrust) issues may impede a party from participating as a prospective bidder or as a party to a consortium. d. Are there any rules on the awarding of contracts? Yes, at the federal level, the federal procurement laws (the Acquisitions Law, the Works Law and the PEMEX Law and their Regulations and related provisions) regulate how contracts are to be awarded. These laws govern the procurement procedures and their terms and conditions are set forth/mirrored in the bidding rules, invitations or requests for proposal. The contracts or orders will be awarded if they comply with the terms of the said rules, invitation or direct award procedure. Likewise, there are specific rules for not awarding a contract or order. e. Can bidders combine to submit a bid? Yes, participation in the form of a consortium is allowed in tender procedures but not in restricted invitations and direct award procedures. The bid rules regulate, in accordance with the consortium provisions contained in the law, how two or more parties may combine to submit a bid and develop the project or operate a contract. Competition issues will also arise if the consortium parties affect fair competition by submitting a joint proposal. f. Are there any rules on alternative bids? There is no possibility of submitting a second bid under a same contracting procedure; if the proposal is not successful in meeting all technical and economic requirements, then the said proposal will be disqualified and the contract or order will be awarded to the compliant proposal. If there is no compliant proposal, then the parties should be entitled to file a proposal under a new procedure if the authority or entity decides to launch a new procedure. For instance, if a contract under tender is not awarded because there were no compliant proposals, then the entity or authority will be Baker & McKenzie 257

274 entitled to re-launch the project under another bidding procedure or under a restricted invitation or direct award procedure, in which case the bidders, invitees or awarded contractor may submit a new proposal, notwithstanding that they may have filed previous proposals under the original public bidding procedure. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? As a general rule, the public entities must contract public works or make their acquisitions through public bidding. However, when a public entity requiring the work or the acquisitions duly justifies that the public bidding procedure does not satisfy the best condition in connection with price, quality, financing, opportunity, efficiency, effectiveness, impartiality, honesty and transparency, it may elect not to carry out the public bidding procedure and award the contract through: (i) a restricted invitation procedure, or (ii) a direct award. Restricted invitation and direct award are considered exception procedures to the public bidding and should be properly justified, and the reasons why the public tender is not the most appropriate route to ensure the best contract conditions in terms of price, quality, timing, etc. must be clearly stated. Exceptional procedures are also allowed when a public tender has no bidders, provided that the essential contract requirements remain unchanged from the original tender. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? The federal procurement laws have remedies for challenging an award or protesting a bid. The remedy is called non-conformity. This procedure is intended to declare null and void any action or omission of the contracting entity that breaches or avoids the application of the law in the following stages: calls and instructions for public tenders and clarification meetings; tender evaluation and award; cancellation of the bidding process; 258 Baker & McKenzie

275 Baker & McKenzie's Global Public Procurement Handbook Mexico acts or omissions by the contracting entity calling the bidding process that prevent the execution of the contract. Once the bidding procedure is completed and the contract is awarded, those parties which were not favoured with the results of the procedure are entitled to challenge any part of the outcome through the procedures of: (i) dissent, (ii) appeal of review, (iii) contentious administrative trial, and (iv) amparo writ (constitutional trial). In the event that any of these challenge procedures are presented, it may delay or suspend the commencement or progress of the schedule for the awarded contract. b. Are remedies available outside the scope of the legislation? All the legal remedies against any action or omission of any contracting entity should be pursued under the applicable laws. However, some private entities have used public opinion as leverage to put some pressure on the contracting entity. c. Is there a specific forum before which disputes are heard? A non-conformity action may be filed before the SFP in the event a breach is claimed in connection with any stage of the process of the public bid or invitation to at least three interested parties referred under Section 5(a) above. The SFP, after analyzing the case and the evidence produced, should issue a resolution. Such resolution may: declare that the non-conformity action is, or is not, duly founded in law; declare the annulment of any action of the respective entity; or declare the execution of the contract. Some typical causes for dispute within bidding procedures or exemption procedures are the late delivery or performance of the works, the amount of the corresponding penalties, delays in payment or demand for payment for additional works. Suppliers may always file a request for conciliation with the SFP due to disagreements resulting from the performance of contracts. The SFP will hold a hearing in order to reconcile the parties and try to reach an agreement. Conciliation is not admitted when the contracts are terminated or under litigation, or when those contracts have been subjected to conciliation before and no agreement was reached. Baker & McKenzie 259

276 Moreover, other procedures may be initiated before different federal courts in addition to the foregoing remedies, such as the Tribunal Federal de Justicia Fiscal y Administrativa (Administrative and Fiscal Federal Justice Tribunal) and the Poder Judicial de la Federación (Federal Judicial Power). If the contract does not have any arbitration clause, the litigation will occur before the Federal Court of Tax and Administrative Justice and/or Federal Judges. d. Are there any timing requirements where a party wants to enforce? An affected party has six business days to file an application for nonconformity. In case of international public tenders under the coverage of treaties, the term to file a non-conformity action is 10 business days. In some cases, a non-conformity action may suspend a procurement procedure (e.g., by preventing the performance of the contract with the awarded company). In such cases, suspension must be guaranteed through a bond. Such guarantee should be posted for an amount equivalent to 10% to 30% of the amount of the economic proposal of the affected party filing the non-conformity action. e. What are the leading courts decisions involving procurement disputes? In Mexico, jurisprudence is the consistent interpretation that federal higher courts give to the laws as a result of litigation cases. The Federal Courts regularly issue decisions regarding the procurement regime. Some of the judicial resolutions and interpretation of the law in connection with public procurement concern, among other things: (i) early termination of public contracts; (ii) submission of proposals; (iii) electronic public bidding; (iv) the principles of the public bidding; and (v) definitive suspension of claimed actions. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Local (State and Municipal) public entities have procurement laws and regulations that differ from those of Federal entities. Such laws and regulations generally follow the principles set forth by their Federal counterparts; however, there can be important differences, and local laws 260 Baker & McKenzie

277 Baker & McKenzie's Global Public Procurement Handbook Mexico tend to be less-developed with regard to concepts such as multi-annual contracting and open-ended contracts. Furthermore, certain Federal Public Entities that have budgetary and functional independence have their independent procurement regulations, which often allow for more flexibility and are typically subject to internal contracting committees. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? In general, the procurement of technology follows the standard procurement laws and practices. However, three important considerations should be taken into account: (i) under the 2011 Budget Rationality Decree (which is published every year with minimal changes), technology acquisitions, especially computer and communications equipment, should follow a technology update program and are ordinarily subject to budget caps; (ii) the procurement of technology applied to national security issues can be exempted from the technology update program and budget caps; and (iii) in observance of Resolution 1540 of the Security Council of the United Nations, the procurement of technology and software that can be used for the development or use of weapons of mass destruction (including, for example, certain cryptographic technologies), may be subject to further approvals from the Ministry of Economy. 8. Looking Ahead a. Are there any proposals to change the law in the future? The Federal Government has implemented several programs to facilitate and expedite the procedures to carry out public procurement. Recently, the Mexican government implemented a program called Compras de Gobierno (Purchases from the Government), which is supported by electronic platforms to facilitate and expedite the negotiations related to public procurement, particularly in connection with issues related to public bidding, business opportunities, training, financing, online purchases, regulations and news. The main purpose of this program is to link the offer and demand of private companies and the government, as well as to grant access to related benefits such as training and financing. Baker & McKenzie 261

278 Moreover, the Federal Government, through the SFP, has established the electronic platform called CompraNet, which is the electronic system of governmental information related to public works and services, which serves as a database containing, among other information, available programs, sole registry of contractors, the calls for public bidding and the direct awards of contracts. By creating and promoting this type of programs, the Mexican government is showing its commitment to the following: contributing to the generation of general policies for public procurement; setting the conditions to support the openness of the information and the monitoring of the public acquisitions, leasing and services, as well as contracts for public works and related services; providing appropriate information for correct planning, programming and budgeting for public procurement and its general assessment. Furthermore, the Mexican executive has submitted a Public-Private Partnerships law project whose main purposes are the generation of better financing schemes for infrastructure projects and the elevation of the country s competitiveness. The project has already been approved by the Mexican Senate and is currently being reviewed by the Deputies Chamber. This initiative is considered a key project for the executive branch because public-private joint ventures can spur economic development and create employment this is because they allow the undertaking of infrastructure projects that private companies cannot carry out on their own and for which the Federal Government does not have enough resources to support. The above scheme is innovative because the State may enter into a contract to receive services from the private sector and would facilitate the investment of the private sector in public infrastructure, which is currently awarded through tender procedure. In addition to the foregoing, a bill to improve the public acquisitions processes is also being reviewed by the Deputies Chamber. The initiative consists in the amendment to the Acquisitions Law in order to implement the videotaping of the tender procedures in order to guarantee the transparency and quality on the State s acts and prevent such processes from fraud and corruption. 262 Baker & McKenzie

279 Baker & McKenzie's Global Public Procurement Handbook Mexico In view of the commitment from the government, important changes to the law are expected to improve and increase public procurement activities in the country. Baker & McKenzie 263

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283 Baker & McKenzie's Global Public Procurement Handbook North America North America In this regional overview, we focus on Canada and the United States, two countries where the principles underlying public procurement share much in common in their application, although the legal approaches differ significantly. As a federal jurisdiction, the division of powers in Canada puts the responsibility for the laws on public procurement squarely in the provincial and territorial domain, except for federal government procurement, which over time has developed its own set of rules. While the Canadian federal procurement framework readily qualifies as the most mature procurement framework of any jurisdiction in Canada, such framework is made more robust still by the application of the procurement chapters of the applicable trade agreements (domestic and international), which have the force of law in the federal sphere. By contrast, those same trade agreements do not have the force of law at the provincial and territorial level, where they also apply. The procurement chapters and their annexes, which apply to provincial/territorial governments and to broader public sector institutions such as hospitals, school boards, universities and colleges are merely policy pronouncements, with no available specialized bid protest or other mechanism to resolve disputes. This may soon change. Since 2009, the Canadian federal government and the provinces, working together, have been negotiating the terms of a comprehensive free trade agreement with the European Union. The new trade agreement, which is expected to be concluded in 2012, promises to open up access to government procurement opportunities across all levels of government in Canada to Member States of the European Union. If implemented, the terms of the agreement will be made enforceable against public sector entities on both sides of the Atlantic, supported by a dispute resolution body. In the absence of laws generally applicable at the sub-national level, so far only two provinces have taken the lead in passing legislation to govern the manner in which public sector organizations conduct their procurement activities. We reference such recent initiatives in the provinces of Quebec and Ontario in the chapter on Canada. While in most jurisdictions around the world the decisions of the courts typically serve to clarify the intent of the bodies of laws that govern public procurement, in Canada the reverse occurred. Given the general lack of Baker & McKenzie 267

284 legislative enterprise, the courts felt compelled to weigh in and begin to define some of the rules that matter to achieving a procurement process that is fair, open and transparent. We discuss briefly the leading court decisions in the answer to Section 5(e) in the chapter on Canada. The role played by the courts in Canada triggered some structural consequences, however. Because court decisions, by their nature, focus on the details of the dispute at hand, the principles they stand for may not necessarily apply well in all circumstances, if they apply at all. In a number of cases, such decisions were misunderstood and misapplied by procurement professionals, including legal advisors, almost certainty resulting in stunting the development of sound procurement practices in Canada. This year promises to usher in significant changes in procurement in Canada, with more provinces legislating in the area and the likely passage of the Canada-European Union comprehensive free trade agreement. We will report on those in next year s edition of the Handbook. A major theme in federal government procurement in the United States in 2011 was deficit reduction, which is expected to remain at the top of the agenda in 2012, and to affect federal contractors. The Budget Control Act of 2011 was enacted on 2 August The legislation introduced several complex mechanisms to identify ways to balance the budget, including the creation of the Congressional Joint Select Committee on Deficit Reduction, broadly known as the Super Committee, whose mandate was to recommend a deficit reduction strategy. However, with the Super Committee s failure to reach a deficit reduction plan in November, the mechanisms described in the statute were triggered, unleashing US$1.2 trillion in automatic across the board cuts, which will take effect in Contractors with a good grasp of the changes taking place will be better positioned to win government contracts. As federal budgets have tightened, the US Government has become even more aggressive in its enforcement activities. Companies doing business with the US Government, regardless where they are based or organized, should be aware of the potential litigation risks posed by the civil False Claims Act ( FCA ). The statute authorizes the imposition of severe penalties for the knowing submission of false claims and has become the US Government s primary tool for investigating and litigating allegations of fraud in public contracting. 268 Baker & McKenzie

285 Baker & McKenzie's Global Public Procurement Handbook North America In 2009, Congress expanded the FCA s scope and it is now one of the fastest growing areas of federal litigation. The statute is unique it authorizes cases to be brought either directly by the Department of Justice or by whistleblowers, known as qui tam relators, who act as private attorneys general by filing cases on behalf of the Government and sharing in any proceeds recovered. The statute s encouragement of bounty incentives in an era of budget shortfalls has resulted in waves of FCA cases that often attempt to cast garden variety breaches of contract as false claims worthy of bruising penalties and treble damages. In the fiscal year ending 30 September 2011, the Justice Department secured more than US$3 billion in FCA settlements and judgments. This is the second year in a row that the US Government has surpassed US$3 billion in recoveries under the FCA. The Justice Department has recovered US$8.7 billion in FCA cases since January 2009 the largest three-year total in the Department s history. It is likely that FCA recoveries will be even larger in According to the Government, whistleblowers filed 638 new FCA complaints during fiscal 2011, the largest number of FCA cases filed during any year to date. This has prompted speculation that FCA recoveries in 2012 could be two, or even three times those produced last year. The passing of the National Defense Authorization Act, 2012 ( NDAA ), which received final approval on 15 December 2011, is another example of the changing environment that contractors should be aware of. While the new statute authorizes appropriations for fiscal year 2012 for military activities of the Department of Defense, several of the NDAA s new contracting policies are designed to increase oversight of defense contractors and reduce the federal government s expenses. The following are examples: Restrictions on allowable employee compensation Section 803 of the NDAA extends the restriction on the allowability of compensation expenses paid to a contractor s senior executives to all contractor employees. Currently, the limit is Us$693,951, a benchmark figure set in 2010 by the Administrator for Federal Procurement Policy. The restriction does not prohibit paying senior executives or other contractor employees above the benchmark, but simply makes any such excess an unallowable cost (see FAR (p)). Contractor past performance Section 806(a) of the NDAA requires the Department of Defense to develop a strategy for ensuring that timely, accurate, and complete information on Baker & McKenzie 269

286 contractor performance is included in past performance databases used for making source selection decisions. Such strategy is to include, at a minimum, new rules on timeliness and completeness of past performance submissions and assignment of responsibility and management accountability for the completion of past performance evaluations. The new rules must also ensure that past performance submissions are consistent with award fee evaluations. T he NDAA protects the contractor s right to submit comments, rebuttals, or additional information for inclusion in the past performance database and to challenge a negative past performance evaluation in accordance with applicable laws, regulations, or procedures. Restrictions on contractor charges Section 808 of the NDAA limits the amount obligated for the Department of Defense spending on contract services in fiscal years 2012 and 2013 to the amount requested for contract services in the President s budget for fiscal year It also requires the Secretary of Defense to issue new guidance indicating that labor rates and overhead rates in contracts over US$10 million awarded in fiscal years 2012 or 2013 must not exceed labor rates and overhead rates paid to the contractor for contract services in fiscal year Additional access to contractor records Section 842 of the NDAA provides the Secretary of Defense authority to examine any contractor and first-tier subcontractor records to the extent necessary to ensure that funds available under the contract (i) are not subject to extortion or corruption; and (ii) are not provided directly or indirectly to persons or entities that are actively supporting an insurgency or otherwise actively opposing United States or coalition forces in a contingency operation. Such access would be available only upon a written determination by the contracting officer or comparable official that there is reason to believe such improper uses of funds have occurred. A sunset provision provides that this access-to-records authority will be effective for only three years. It remains unclear how the upcoming federal election this fall will affect government procurement and acquisition programs, though it is certain to distract the Government from making tough decisions and planning for the long term. Federal contractors may consider it prudent at this time to develop strategies to maintain their share of federal government business this year, which may include consolidating, downsizing, shedding overhead and 270 Baker & McKenzie

287 Baker & McKenzie's Global Public Procurement Handbook North America generally striving to maintain their core skills. We will report on some of these trends in next year s edition of the Handbook. Baker & McKenzie 271

288 Canada 1. The Laws a. What is the applicable legislation? Few Canadian jurisdictions (i.e., provinces and territories) have put in place legislation to regulate procurement procedures. Except for Québec and Ontario, which introduced an Act Respecting Contracting by Public Bodies (Québec) and the Broader Public Sector Procurement Directive in 2006 and 2011, respectively, the general common law procurement principles apply in Canada. Targeted provincial legal requirements also exist that focus on a particular service or industry sector. In Québec, An Act respecting contracting by public bodies (Québec), which came into force in October 2008, sets out the conditions governing contracts between public bodies and private contracts. The legislation promotes principles such as transparency in contracting processes, fair treatment and accountability. In Ontario, the Broader Public Sector Procurement Directive sets out 25 mandatory requirements prescribing how the procurement and contracting lifecycle is intended to operate in the province. b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement ( NAFTA )? Because there is no broad statutory framework for procurement in Canada, the question does not apply. Instead, there is a separate body of common law that is generally referred to as Contract A/Contract B, which is the law that applies to the bidding contract in a procurement process. The courts have consistently found an implied term of fairness in bidding contracts and have enforced the principle that a bidding contract does not come into effect unless the bidder submits a compliant bid, namely one that complies with the terms and conditions of the bid call document (whether a tender or request for proposals). Where it is in place, a bidding contract is treated by the courts as an ordinary contract, albeit one with many implied terms. Public agencies may opt out of the bidding contract by stating in their bid call document that the bidding contract will not apply. 272 Baker & McKenzie

289 Baker & McKenzie's Global Public Procurement Handbook Canada c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? The Canadian procurement process must be open, fair and transparent ( open means that anyone can bid; fair means that bidders and prospective bidders are treated equally; and transparent means that the rules are known to everyone). The underlying purpose of a procurement process that is open, fair and transparent is to support the principle of value for money. d. Is aerospace and defence procurement treated differently from other types of procurement? The federal procurement rules applicable to aerospace and defence procurement are generally the same as for other procurement processes, except for certain industry-specific rules which apply. As many as three federal departments are involved in major procurements of military services and equipment: Industry Canada, which is responsible for industrial and regional benefits (also known as offsets ); the Department of National Defence, which defines the budgetary, operational, technical and project management requirements of the acquisition; and Public Works and Government Services Canada ( PWGSC ), which manages the procurement process, negotiates the contract and then manages it once signed. Canada s offset requirements for major military procurements are reflected in the Industrial and Regional Benefits ( IRB ) programme, which requires successful bidders to make investments in advanced technology in select sectors and areas of Canada in amounts sometimes equal to the value of the specific contract. In addition, if a procurement is declared to be subject to the federal Defence Production Act, the underlying documents will be exempt from the rigorous disclosure requirements applicable under federal laws, helping to ensure that sensitive technology and information are appropriately protected. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? With the exception of Ontario s Broader Public Sector Procurement Directive and An Act respecting contracting by public bodies (Québec) in Québec, there are generally no statutory requirements in Canada. While the Québec statute applies to all public agencies in Québec, currently, only colleges, universities, school boards and hospitals are subject to the requirements of Baker & McKenzie 273

290 the Broader Public Sector Procurement Directive (the expectation is that the Directive will eventually apply to municipalities in Ontario, although there is no set timeline in which this is to occur). b. Which private entities are covered by the laws? The Contract A/Contract B framework applies to the procurement processes of private companies only if the bid call document is drafted in a way that introduces the framework. c. Which types of contracts are covered? Does not apply. d. Are there anti-avoidance rules (including laws on bid rigging)? The Competition Act (Canada) is generally intended to maintain and encourage competition. The statute focuses on two types of practices: (i) those subject to prosecution under criminal law, including practices such as bid rigging, conspiracies to lessen competition, price maintenance and refusal to supply, price-discrimination, and predatory pricing; and (ii) those subject to review by the Competition Tribunal (such as mergers, abuse of dominant position, tied-selling, refusal to deal, exclusive dealing, market restriction and delivered pricing). 3. Procurement Procedures a. What procurement procedures can be followed? Public agencies can use a broad range of approaches, provided they comply with the requirements of the bilateral or multi-national trade agreements, such as the North America Free Trade Agreement, the World Trade Organization Agreement on Government Procurement ( GPA ), and the domestic Agreement on Internal Trade (collectively, the Trade Agreements ), the common law, and the agency s own internal policies and procedures. Typically, a public agency is required to have internal policies and procedures governing contracting authorities, the manner of conducting procurement, and in what circumstances procurement may be conducted. For example, such policies and procedures often provide guidance on the following documents: Request for Information ( RFI ), which is used as an informationgathering tool; 274 Baker & McKenzie

291 Baker & McKenzie's Global Public Procurement Handbook Canada Request for Expressions of Interest, which is commonly used to identity which participants in the market are able and willing to provide the goods and/or services; Request for Qualifications ( RFQ ), which is used to pre-screen bidders based on a set of qualification criteria established by the public agency; Request for Proposals ( RFP ), which typically prescribes the outcome desired but not how the successful bidder will deliver the goods and/or services. The terms and conditions of the RFP typically vary significantly, depending on the needs of the public agency. The proposals may be legally binding or non-binding, depending on the intent of the public agency; Tender, which is normally used when what is being acquired is well defined (often a commodity product) and all that matters is price. b. Are there any rules on the specifications/criteria? Most bid call documents include mandatory requirements, which all submitted bids must satisfy. Any bid that fails to meet even a single mandatory requirement is deemed non-compliant. Only the criteria that were published in the bid call document may be relied on to evaluate the bids that are submitted, which means that the evaluation criteria must be developed before the release of the bid call document. The bid call document must be transparent. A public agency may make adjustments to the performance criteria after selecting the preferred bidder, but the right to make adjustments must be reserved in the bid call document. c. Can certain prospective bidders be excluded from the competition? It is possible to exclude prospective bidders from the competition through the RFQ pre-qualification process where, for instance, entities must pre-qualify based on a range of criteria, such as experience and financial strength. Where a pre-qualification process has been established, only those prospective bidders that meet the requirements may submit a bid. In addition, certain prospective bidders or companies that otherwise would have bid may be excluded from the competition even if they have met the RFQ requirements for a number of reasons such as, for example, poor performance under an earlier contract with the public agency, previous Baker & McKenzie 275

292 instances of fraud, or litigation between the entity and the public agency. In such instances, the procedure to exclude an entity must have been established well ahead of the particular competition in which the public agency seeks to exclude the entity, and the exclusion procedure must be complied with. It is also possible to exclude all but a single entity, where sole sourcing is permitted pursuant to the applicable framework. There are no prescribed rules on short-listing bidders. Public agencies typically address this question in their internal policies and procedures. d. Are there any rules on the awarding of contracts? The main rule is that contracts must be awarded in accordance with the rules set out in the bid call document (including the public agency s internal policies and procedures). A public agency may insert a broad range of reservations in a bid call document, including the right not to award a contract in accordance with the published evaluation criteria, but such reservations will not be supported by the courts if they are deemed to constitute an abuse of process (in the sense of defeating the principle of procedural fairness). e. Can bidders combine to submit a bid? There is no bar to submitting a joint bid, although in some circumstances bidders will need to be mindful of the requirements against bid rigging set out in the Competition Act. f. Are there any rules on alternative bids? An alternative bid may be defined either as the submission by a bidder of a second bid which is responsive to the evaluation criteria set out in the bid call document, or as the submission of a second bid which is non-responsive to the requirements of the bid call document. The former is acceptable but the latter constitutes a non-compliant bid and will not be considered. While public agencies have a great deal of latitude in defining the requirements of their bid call documents, all bids must be evaluated equally against the evaluation criteria set out in the bid call document. 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? The Trade Agreements generally include various grounds for exemptions to competitive bidding. These are supplemented by each public agency s 276 Baker & McKenzie

293 Baker & McKenzie's Global Public Procurement Handbook Canada internal policies and procedures, and may also be supplemented by sectorspecific provincial and municipal legislation. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? Does not apply. b. Are remedies available outside the scope of the legislation? Depending on the jurisdiction, the remedies are those applicable under the relevant Trade Agreements and those generally available under contract law and the common law on bidding and tendering. The Ontario Broader Public Sector Procurement Directive requires the public agencies to which it applies to negotiate, mediate or arbitrate disputes. c. Is there a specific forum before which disputes are heard? Typically the bid call document will prescribe how disputes are to be treated, which may include binding arbitration. At the federal level, pursuant to the Trade Agreements, disputes are typically first brought before the Canadian International Trade Tribunal. d. Are there any timing requirements where a party wants to enforce? The bid call document will usually set out any timing requirement that must be met by the parties to a dispute. Timelines may also be set by an arbitrator, where one is appointed. The time required to achieve finality in a dispute varies according to the dispute procedure relied on by the parties. e. What are the leading court decisions involving procurement disputes? There have been many court decisions involving procurement disputes, including those by the Supreme Court of Canada, which are followed by the lower courts across Canada. These main Supreme Court of Canada decisions are the following: Ontario v. Ron Engineering, in which the Supreme Court of Canada established the Contract A/Contract B paradigm; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Limited, in which the Supreme Court of Canada held it was an implied term of the Baker & McKenzie 277

294 tender contract that the owner was under an obligation to accept only a compliant tender; Martel Building Limited v. Canada, in which the Supreme Court of Canada found an implied obligation to treat all bidders fairly and equally; Double N Earthmovers Ltd. v. Edmonton (City), in which the Supreme Court of Canada held that owner/buyers were under no duty to investigate whether an apparently compliant bidder could actually comply with the requirements of Contract B; Tercon Contractors Ltd vs. British Columbia (Ministry of Transportation and Highways), in which the Supreme Court of Canada held that a well drafted, unambiguous exclusion clause could be sufficient to exclude liability for a breach of the duty of fairness. 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? The applicable Trade Agreements are relevant to procurement in Canada. The Agreement on Internal Trade (Canada), which was signed by the provinces of Canada, the federal government and the territories in 1995, applies as policy outside the federal environment, where it does not have the force of law. Nonetheless, it contains significant guidance on procurement principles and procedures and is an important reference for local government agencies. In addition, the Ontario Broader Public Sector Procurement Directive prescribes a number of procurement procedures having the force of law, which applies to procurement by colleges, universities, school boards and hospitals. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? The public procurement laws generally apply universally, regardless of the specific industry sector, but many public agencies also prescribe specific procedures applicable to procurement involving technology. In some cases, depending on the technology being acquired, the laws remain unchanged but 278 Baker & McKenzie

295 Baker & McKenzie's Global Public Procurement Handbook Canada the procurement strategies and techniques employed must be adjusted to accommodate the technology being acquired. 8. Looking Ahead a. Are there any proposals to change the law in the future? While the courts can be expected to continue to play an important role in procurement, some provinces are considering introducing significant reforms to procurement procedures, in part with a view to harmonizing the procurement framework across their jurisdictions. Baker & McKenzie 279

296 United States 1. The Laws a. What is the applicable legislation? The laws on public procurement in the United States operate at the federal, state and local government level. This edition of the Handbook focuses on federal procurement. In fiscal 2010, federal contract spending amounted to US$535 billion. At the federal level, the procurement process for executive branch agencies (i.e., not including the legislative and judicial bodies) is governed by a number of statutes, including two particular important ones: the Federal Property and Administrative Services Act, and the Armed Services Procurement Act. To streamline the various procurement rules introduced by statute is the Federal Acquisition Regulation ( FAR ), which governs acquisitions by all federal executive agencies. FAR is codified in Title 48 of then United States Code of Federal Regulations. It is issued pursuant to the Office of Federal Procurement Policy Act of 1974 (Pub. L and Title 41 of the United States Code), Chapter 7. Part 52 of the FAR contains standard contract clauses and solicitation provisions, some of which are typically incorporated by reference into contracts with contractors. The number of provisions incorporated by reference can be numerous. In addition, agencies typically issue their own acquisition policies and regulations, which supplement, or otherwise articulates how FAR is implemented. These are known as FAR Supplements. The FAR Supplements often impose additional requirements on contractors. FAR Supplements include the following: Army Federal Acquisition Regulation Supplement ( AFARS ); Commerce Acquisition Regulation ( CAR ); and Department of Defense Supplement ( DFARS ). 280 Baker & McKenzie

297 Baker & McKenzie's Global Public Procurement Handbook United States b. Does the legislation relate to or interact with any applicable trade agreement, such as the North American Free Trade Agreement ( NAFTA )? NAFTA was entered into between the United States, Canada and Mexico in Chapter 10 of NAFTA, entitled Government Procurement, applies to the measures adopted or maintained by the parties to NAFTA. NAFTA generally applies to federal procurement, although many exceptions exist, including in the event of [A]cquisitions of arms, ammunition, or war materials, or purchases indispensable for national security or for national defense purposes. (FAR (2)) As well, agency regulations include provisions dealing with the application of the trade agreements unique to individual agencies (FAR (b)). c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)? While federal procurement seeks to promote process integrity, value-formoney and fairness, it also seeks to achieve a wide range of policy objectives, including social, economic and political (see article by Kristi D. Caravella Robinson U.S. Federal Government Procurement: Organizational Structure, Process, and Current Issues, Chapter 13 in International Handbook of Public Procurement, edited by Khi V. Thai, CRC Press). d. Is aerospace and defense procurement treated differently from other types of procurement? There are special rules regarding the acquisition of military materiel, whether these appear in the aerospace or defense environment. As noted above, FAR Supplements are developed by specific agencies. In the defense sector, the Defense Federal Acquisition Regulation ( DFARS ) was developed by the Department of Defense ( DoD ), and governs DoD procurement activities. 2. Application of the Statutory Procurement Laws a. Which public agencies are covered by the laws? In federal procurement, in general all executive agencies are covered by the FAR, and the other laws referenced above. Baker & McKenzie 281

298 b. Which private entities are covered by the laws? The laws generally applicable in federal procurement normally apply to private companies depending on their status in the procurement process. c. Which types of contracts are covered? FAR generally covers all procurement contracts for goods, services and construction. In addition, the applicable trade agreements (such as NAFTA) set monetary thresholds prescribing the requirements to conduct an acquisition competition for each type of contract. For example, NAFTA stipulates that an open competition must be conducted where the value of the goods and/or services or construction exceeds the following thresholds (see FAR ): supply contract: $25,000 Canada, $70,079 Mexico; service contract: $70,079 Canada, $70,079 Mexico; and construction contract: $9,110,318 Canada, $9,110,318 Mexico. d. Are there anti-avoidance rules (including laws on bid rigging)? Subpart 3.3 of the FAR focuses on suspected antitrust violations. As examples of antitrust abuses, FAR 3.301(a) identifies collusive bidding, follow-the-leader pricing, rotated low bids, collusive price estimating systems and sharing of the business. Under FAR 3.303(b), agency personnel are obligated to report, in accordance with their own agency regulations, any evidence of antitrust abuse. Similarly, under FAR 303(a), agencies are required by 41 U.S.C. 253b(i) and 10 U.S.C. 2305(b)(9) to report to the Attorney General bids or proposals that demonstrate evidence of antitrust abuse. The provision goes on to list a number of practices or events having the potential to evidence antitrust abuses. 3. Procurement Procedures a. What procurement procedures apply? Under FAR, agencies have a broad range of flexibility to determine which method of procuring to use. The most common include the following: Bids, as in Invitation for Bids ( IFB ), in sealed bidding. 282 Baker & McKenzie

299 Baker & McKenzie's Global Public Procurement Handbook United States Offer, as in Solicitation for Offers ( SFO ) or Request for Offers ( RFO ). Proposal, as in Request for Proposals ( RFP ). See FAR for various competitive procedure available for achieving full and open competition. b. Are there any rules on the specifications/criteria? As a rule, federal procuring agencies set out detailed criteria/specifications describing their needs, which tends to increase the likelihood that the agencies will optimize value-for-money. By specifying detailed needs, agencies contribute to a more transparent procurement process and allow contractors to submit more responsive bids. For example, whether issuing an IFB or a RFP, the solicitation document should include all of the information that bidders will need to submit a responsive bid and it must also clearly state the basis upon which the bids will be evaluated for award. In the case of an IFB, the specifications should be fully described to provide prospective bidders with a clear understanding of the work required to be performed, and it should establish a standard for determining the rights and obligations of the parties. Specifications fall into three groups: design, performance and functional specifications. In the case of an RFP, the criteria to be used to evaluate the proposals should be comprehensively described, and the RFP should also establish the standard for determining the rights and obligations of the parties. c. Can certain prospective bidders be excluded from the competition? There a number of ways in which bidders prospective and actual may be excluded from a competition. These include the following: A pre-qualification document (i.e., a Request for Qualifications) may be issued that results in pre-qualifying the participants, which will then be permitted to submit responses in the competitive process to follow. A bidder may have submitted a non-responsive (i.e., a non-compliant) bid, which leads to the disqualification of the bidder s submission. An agency may be authorized to conduct a sole sourcing process, in circumstances, which means that would-be bidders will have no chance to submit a response. Baker & McKenzie 283

300 An agency may suspend or debar a bidder and exclude it from a competition, if the bidder has been convicted of a criminal offense, or has a civil judgment against it related to fraud in the performance of a public contract or the preponderance of evidence shows a wilful failure to perform a public contract. An exception may exists in FAR that has the effect of excluding certain prospective bidders from the competition, including: (i) acquisitions set aside for small businesses; (ii) acquisitions for military purposes, or relating to national security or national purposes; and (iii) acquisitions of end products for resale. d. Are there any rules on the awarding of contracts? There are rules in FAR that govern the awarding of contracts, although those may be supplemented by an agency s own rules. Among others, FAR sets out the following rules in this area: FAR 8.4 (Federal Supply Schedules) which includes Multiple Award Schedules in respect of contracts awarded by the Government Services Administration for supplies and services with more than one supplier, at varying prices; FAR 13 (Simplified Acquisition Procedures) prescribing simplified acquisition policies and procedures for the acquisition of supplies, services and commercial items not exceeding certain thresholds; FAR 14.4 (Opening of Bid and Awards of Contract) involving sealed bids; and FAR 15.3 (Source Selection) which prescribes the policies and procedures for selection in competitive negotiated acquisitions. e. Can bidders combine to submit a bid? In federal procurement in the United States, generally prospective bidders may collaborate with another party in submitting a single, integrated response. This is a common practice on large procurements where a single bidder my not internally possess all of the resources/capabilities required to submit a competitive response. f. Are there any rules on alternative bids? Section (b) of FAR specifies that any bid that does not conform to the essential requirements of the invitation for bids will be rejected. However, if the invitation specifically authorizes the submission of alternative bids and the supplies offered as alternates meet the requirements prescribed in the invitation, the bid will not be rejected. 284 Baker & McKenzie

301 Baker & McKenzie's Global Public Procurement Handbook United States 4. Exemptions to Competitive Bidding a. Are there any exemptions to competitive bidding? Under FAR, agencies are mandated to promote and provide for full and open competition in soliciting offers and awarding contracts (FAR 6.101), but certain exceptions exist. Some of these include: the property or service is available from only a single responsible source; the agency s needs for supplies or services is of such an urgent and unusual and compelling urgency that that the agency would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals; the award to a particular contractor is required to maintain supplies or services in case of a national emergency or to achieve industrial mobilization; to establish or maintain an essential engineering, research, or development capability, or to acquire the services of an expert for litigation; the terms of an agreement or treaty between the United States and a foreign government or organization preclude full and open competition; a statute expressly requires that the acquisition be made through another agency or from a specified or the agency s need is for a brand name commercial item for authorized resale; disclosure of the agency s needs would compromise national security; and the agency determines that non-competitive procedures are in the public interest and provides Congress with at least 30 days written notice prior to contract award. In addition, other exemptions/exceptions to competitive bidding are contained in the various FAR Supplements. 5. Remedies and Enforcement a. Are there any remedies and enforcement mechanisms in the legislation? FAR expressly authorizes the Government to end a contract sooner than anticipated by the terms of the contract. There are two primary types of terminations: terminations for default and terminations for convenience Baker & McKenzie 285

302 (See FAR 49.1). When the Government terminates a contract for default based on a contractor s failure to perform, it has the right to recover from the contractor the costs of reprocurement and also may pursue any other rights and remedies provided under the law. In contrast, the Government may terminate a contract for convenience without cause and simply because it perceives that it is in its best interests to do so. b. Are remedies available outside the scope of the legislation? The Government has numerous remedies at its disposal to recover damages for breaches of contract or improprieties related to the procurement process. For example, the False Claims Act ( FCA ), 31 USC 3729, et seq., permits the Government to recover treble damages from contractors that submit false claims for payment to a federal agency. The FCA s qui tam provisions allow whistleblowers or other private citizens to file lawsuits on behalf of themselves and the Government and to share in any recovery against the contractors. The Government also may institute criminal proceedings against a contractor that commits procurement-related fraud. The available criminal statutes include, among others, the Criminal False Claims Act (18 USC 287), the Procurement Integrity Act (41 USC 423, implemented at FAR 3.104), and the Anti-Kickback Act (41 USC 51, et seq.). Contractors that engage in procurement improprieties can be suspended and/or debarred from competing for government contracts for a specified time. Grounds for debarment include the conviction for a criminal offense, the imposition of a civil judgment arising from fraud in the performance of a public contract, or a judgment showing a willful failure to perform a public contract (FAR ). A contractor also may be temporarily suspended pending completion of an investigation into the grounds for possible debarment (FAR 9.407). c. Is there a specific forum before which disputes are heard? The US Court of Federal Claims and the US Court of Appeals for the Federal Circuit have primary jurisdiction over disputes concerning procurement decisions. The Court of Federal Claims has jurisdiction over bid protests and claims against the United States based upon express or implied-in-fact contracts. The Federal Circuit has jurisdiction over appeals from decisions of the Court of Federal Claims and from the Boards of Contract Appeals under the Contracts Disputes Act. The US District Courts have primary jurisdiction over civil suits brought by the Government and qui tam relators to recover 286 Baker & McKenzie

303 Baker & McKenzie's Global Public Procurement Handbook United States damages under the FCA and also for procurement-related criminal prosecutions by the Department of Justice. d. Are there any timing requirements where a party wants to enforce? A contractor may appeal an adverse decision by an agency to the appropriate Board of Contract Appeals within 90 days of an adverse decision or file suit against the Government in the Court of Federal Claims within one year. The Government and contractors have 60 days after judgment to appeal a decision of the Court of Federal Claims and 120 days to file an appeal of a decision by a Board of Contracts Appeals. Civil and criminal causes of action in US District Court are subject to applicable statutes of limitation. e. What are the leading court decisions involving procurement disputes? There are numerous court decisions interpreting US law in the context of government procurement. Decisions in this area include those by the US Supreme Court, US Court of Federal Claims, US Court of Appeals for the Federal Circuit, as well decisions by the Boards of Contract Appeals. Examples of significant court decisions are: Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995) (federal contracting programs that use racial classifications must undergo the highest strict scrutiny level of review to pass constitutional muster); United States v. Winstar Corp., 518 U.S. 839 (1996) (government contracts should be adjudicated by applying normal contract law principles); Department of the Army v. Blue Fox, Inc., 525 U.S. 255 (1999) (sovereign immunity bars unpaid subcontractor from bringing an action directly against the Government to recover its losses or for the Government s failure to require the prime contractor to post a bond); Scanwell Lab., Inc. v. Shaffer, 424 F.2d 859, 864 (D.C. Cir. 1970) (prospective contractors injured by arbitrary and capricious Government actions should be able to sue or protest to vindicate their very real interests, while at the same time furthering the public interest ). 6. Other Relevant Rules of Law a. Are there any related bodies of law of relevance to procurement by public agencies? Many laws of general application apply to federal agencies in procurement. There are also other laws that govern specific aspects of federal procurement, such as the American Recovery and Reinvestment Act of 2009, the False Baker & McKenzie 287

304 Claims Act, 31 USC 3729, et seq, which imposes liability on persons and companies who defraud governmental programs, and other statutes noted under Section 5(b) above. 7. Technology Law a. Are there any specific laws or practices that apply when procuring technology? There are many laws in federal procurement that deal with technology. For example, Subpart 34 of FAR deals with Major System Acquisition, and Subpart 39 deals with the Acquisition of Information Technology. In addition, FAR 37.6, which prescribes performance-based contracting, is often made to apply to the acquisition of systems, hardware, or software. New IT service contracts are typically performance-based unless justified in writing. 8. Looking Ahead a. Are there any proposals to change the law in the future? Federal procurement and contracting is a highly regulated process with many changes currently in progress, including an aggressive acquisition reform program being pushed through in the defense sector, with an emphasis on a greater number of fixed- price contracts. The acquisition process by the Pentagon is now regulated by new laws that were recently enacted by the Government. An important change currently making its way through is a proposal to amend FAR to require contractors to complete training that deals with the protection of privacy, in accordance with the Privacy Act of 1974, 5 U.S.C. 552a, Public Law No and the handling and safeguarding of personally identifiable information. 288 Baker & McKenzie

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307 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL United Nations Commission on International Trade Law (UNCITRAL) Commentary Sound and equitable principles underlying public procurement are indispensable for economic growth and development. Statistics on the size of world procurement markets abound and vary considerably, but whether it is 10% of global GDP or 15% or 20% matters little: it is a staggering market. And it is not just a question of size: public procurement reflects investments in areas of strategic importance to the economy information technology, infrastructure, education, health and through such areas, economies can grow and prosper. The underlying principles transparency, promoting competition and participation, and objectivity and fair treatment are fundamental to achieving value for money in public procurement. They also help to avoid abuse and corruption and so promote greater public confidence in procurement systems. Such principles underpin the 2011 UNCITRAL Model Law on Public Procurement, the Agreement on Government Procurement of the World Trade Organization (the GPA ), and the United Nations Convention Against Corruption. These form the basis for national procurement systems, many of which have been going through major reforms in recent years. The introduction of modern business techniques (notably e- commerce) has been an important driver of such reforms. The fact that reforms in procurement have the potential to deliver 5-10% better value for money measured both by better value in purchasing and lower costs of purchasing is highly desirable, as public procurement can represent 10-15% of a country s GDP (and considerably more in developing countries and those in transition). UNCITRAL s Model Law on Public Procurement, which follows this Commentary, was updated in 2011, and reflects a modern approach to public procurement. It is noteworthy that the United Nations Convention Against Corruption, which came into force at the end of 2005, has focused attention on the need to fight corruption and avoid conflicts of interest as part of procurement regulation and not as a separate topic on governments agendas. However, the relationship between achieving value for money and curbing abuse is not always an easy one, but it is through open discussions on the ways to achieve an appropriate balance that progress can be made. Baker & McKenzie 291

308 The benefits of opening procurement markets to international competition are also considerable and play a significant role in achieving any potential gain. UNCITRAL recognizes the incentive to international participation in systems where businesses know what to expect in overseas markets. Legal and regulatory reform in recent years has focused on the benefits of harmonizing applicable norms and standards, although many challenges remain. Many significant differences in policy exist on the question of how far procurement systems should be leveraged to achieve other government policy goals, and how to reconcile the pursuit of such goals with free trade obligations. This inaugural edition of Baker & McKenzie s Global Public Procurement Handbook describes the fundamentals of the public procurement laws of 26 countries, and it provides examples of the many benefits that modern procurement techniques can generate, and the safeguards that are needed to ensure their best impact. I commend the Handbook as a basis for sharing experiences and for suggesting practical steps to solving the many problems that procurement practice exposes. The Handbook will help to distil ideal norms and best practices in public procurement. The various approaches described in the Handbook will also help to achieve the many goals of procurement systems, and will inform and support ongoing reform efforts. I commend the Editors and contributors for its practical and focused approach, which will be of benefit to policy-makers, legislators, regulators and operators in procurement systems around the world and to interested observers alike. Caroline Nicholas Senior Legal Officer International Trade Law Division (UNCITRAL Secretariat), United Nations Office of Legal Affairs 292 Baker & McKenzie

309 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL UNCITRAL Model Law on Public Procurement Preamble WHEREAS the [Government] [Parliament] of... considers it desirable to regulate procurement so as to promote the objectives of: (a) Maximizing economy and efficiency in procurement; (b) Fostering and encouraging participation in procurement proceedings by suppliers and contractors regardless of nationality, thereby promoting international trade; (c) Promoting competition among suppliers and contractors for the supply of the subject matter of the procurement; (d) Providing for the fair, equal and equitable treatment of all suppliers and contractors; (e) Promoting the integrity of, and fairness and public confidence in, the procurement process; (f) Achieving transparency in the procedures relating to procurement. Be it therefore enacted as follows: Chapter I. General provisions Article 1 Scope of application This Law applies to all public procurement. Article 2 Definitions For the purposes of this Law: (a) Currency includes the monetary unit of account; (b) Direct solicitation means solicitation addressed directly to one supplier or contractor or a restricted number of suppliers or contractors. This excludes solicitation addressed to a limited number Official Records of the General Assembly, Sixty-sixth Session, Supplement No. 17 (A/66/17), annex I. Baker & McKenzie 293

310 of suppliers or contractors following pre-qualification or preselection proceedings; (c) Domestic procurement means procurement limited to domestic suppliers or contractors pursuant to article 8 of this Law; (d) Electronic reverse auction means an online real-time purchasing technique utilized by the procuring entity to select the successful submission, which involves the presentation by suppliers or contractors of successively lowered bids during a scheduled period of time and the automatic evaluation of bids; (e) Framework agreement procedure means a procedure conducted in two stages: a first stage to select a supplier (or suppliers) or a contractor (or contractors) to be a party (or parties) to a framework agreement with a procuring entity, and a second stage to award a procurement contract under the framework agreement to a supplier or contractor party to the framework agreement: (i) Framework agreement means an agreement between the procuring entity and the selected supplier (or suppliers) or contractor (or contractors) concluded upon completion of the first stage of the framework agreement procedure; (ii) Closed framework agreement means a framework agreement to which no supplier or contractor that is not initially a party to the framework agreement may subsequently become a party; (iii) Open framework agreement means a framework agreement to which a supplier (or suppliers) or a contractor (or contractors) in addition to the initial parties may subsequently become a party or parties; (iv) Framework agreement procedure with second-stage competition means a procedure under an open framework agreement or a closed framework agreement with more than one supplier or contractor in which certain terms and conditions of the procurement that cannot be established with sufficient precision when the framework agreement is concluded are to be established or refined through a second-stage competition; (v) Framework agreement procedure without second-stage competition means a procedure under a closed framework 294 Baker & McKenzie

311 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL Option I agreement in which all terms and conditions of the procurement are established when the framework agreement is concluded; (f) Pre-qualification means the procedure set out in article 18 of this Law to identify, prior to solicitation, suppliers or contractors that are qualified; (g) Pre-qualification documents means documents issued by the procuring entity under article 18 of this Law that set out the terms and conditions of the pre-qualification proceedings; (h) Pre-selection means the procedure set out in paragraph 3 of article 49 of this Law to identify, prior to solicitation, a limited number of suppliers or contractors that best meet the qualification criteria for the procurement concerned; (i) Pre-selection documents means documents issued by the procuring entity under paragraph 3 of article 49 of this Law that set out the terms and conditions of the pre-selection proceedings; (j) Procurement or public procurement means the acquisition of goods, construction or services by a procuring entity; (k) Procurement contract means a contract concluded between the procuring entity and a supplier (or suppliers) or a contractor (or contractors) at the end of the procurement proceedings; (l) Procurement involving classified information means procurement in which the procuring entity may be authorized by the procurement regulations or by other provisions of law of this State to take measures and impose requirements for the protection of classified information; (m) Procurement regulations means regulations enacted in accordance with article 4 of this Law; (n) Procuring entity means: (i) Any governmental department, agency, organ or other unit, or any subdivision or multiplicity thereof, that engages in procurement, except...; [and] Baker & McKenzie 295

312 Option II (i) Any department, agency, organ or other unit, or any subdivision or multiplicity thereof, of the [Government] [other term used to refer to the national Government of the enacting State] that engages in procurement, except...; [and] (ii) [The enacting State may insert in this subparagraph and, if necessary, in subsequent subparagraphs other entities or enterprises, or categories thereof, to be included in the definition of procuring entity ]; (o) Socio-economic policies means environmental, social, economic and other policies of this State authorized or required by the procurement regulations or other provisions of law of this State to be taken into account by the procuring entity in the procurement proceedings. [The enacting State may expand this subparagraph by providing an illustrative list of such policies.]; (p) Solicitation means an invitation to tender, present submissions or participate in request-for-proposals proceedings or an electronic reverse auction; (q) Solicitation document means a document issued by the procuring entity, including any amendments thereto, that sets out the terms and conditions of the given procurement; (r) Standstill period means the period starting from the dispatch of a notice as required by paragraph 2 of article 22 of this Law, during which the procuring entity cannot accept the successful submission and during which suppliers or contractors can challenge, under chapter VIII of this Law, the decision so notified; (s) A submission (or submissions) means a tender (or tenders), a proposal (or proposals), an offer (or offers), a quotation (or quotations) and a bid (or bids) referred to collectively or generically, including, where the context so requires, an initial or indicative submission (or submissions); (t) Supplier or contractor means, according to the context, any potential party or any party to the procurement proceedings with the procuring entity; (u) Tender security means a security required from suppliers or contractors by the procuring entity and provided to the procuring 296 Baker & McKenzie

313 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL entity to secure the fulfilment of any obligation referred to in paragraph 1 (f) of article 17 of this Law and includes such arrangements as bank guarantees, surety bonds, standby letters of credit, cheques for which a bank is primarily liable, cash deposits, promissory notes and bills of exchange. For the avoidance of doubt, the term excludes any security for the performance of the contract. Article 3 International obligations of this State relating to procurement [and intergovernmental agreements within [this State]] 1 To the extent that this Law conflicts with an obligation of this State under or arising out of any: (a) Treaty or other form of agreement to which it is a party with one or more other States; [or] (b) Agreement entered into by this State with an intergovernmental international financing institution[,] [; or] [(c) Agreement between the federal Government of [name of federal State] and any subdivision or subdivisions of [name of federal State] or between any two or more such subdivisions,] the requirements of the treaty or agreement shall prevail, but in all other respects the procurement shall be governed by this Law. Article 4 Procurement regulations The [name of the organ or authority authorized to promulgate the procurement regulations] is authorized to promulgate procurement regulations to fulfil the objectives and to implement the provisions of this Law. Article 5 Publication of legal texts 1. This Law, the procurement regulations and other legal texts of general application in connection with procurement covered by this Law, and all 1 The text in brackets in this article is relevant to, and intended for consideration by, federal States. Baker & McKenzie 297

314 amendments thereto, shall be promptly made accessible to the public and systematically maintained. 2. Judicial decisions and administrative rulings with precedent value in connection with procurement covered by this Law shall be made available to the public. Article 6 Information on possible forthcoming procurement 1. Procuring entities may publish information regarding planned procurement activities for forthcoming months or years. 2. Procuring entities may also publish an advance notice of possible future procurement. 3. Publication under this article does not constitute a solicitation, does not oblige the procuring entity to issue a solicitation and does not confer any rights on suppliers or contractors. Article 7 Communications in procurement 1. Any document, notification, decision or other information generated in the course of a procurement and communicated as required by this Law, including in connection with challenge proceedings under chapter VIII or in the course of a meeting, or forming part of the record of procurement proceedings under article 25 of this Law shall be in a form that provides a record of the content of the information and that is accessible so as to be usable for subsequent reference. 2. Direct solicitation and communication of information between suppliers or contractors and the procuring entity referred to in article 16, paragraph 1 (d) of article 17, paragraphs 6 and 9 of article 18, paragraph 2 (a) of article 41 and paragraphs 2 to 4 of article 50 of this Law may be made by means that do not provide a record of the content of the information, on the condition that immediately thereafter confirmation of the communication is given to the recipient of the communication in a form that provides a record of the content of the information and that is accessible so as to be usable for subsequent reference. 3. The procuring entity, when first soliciting the participation of suppliers or contractors in the procurement proceedings, shall specify: (a) Any requirement of form; 298 Baker & McKenzie

315 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (b) In procurement involving classified information, if the procuring entity considers it necessary, measures and requirements needed to ensure the protection of classified information at the requisite level; (c) The means to be used to communicate information by or on behalf of the procuring entity to a supplier or contractor or to any person, or by a supplier or contractor to the procuring entity or other entity acting on its behalf; (d) The means to be used to satisfy all requirements under this Law for information to be in writing or for a signature; and (e) The means to be used to hold any meeting of suppliers or contractors. 4. The procuring entity may use only those means of communication that are in common use by suppliers or contractors in the context of the particular procurement. In any meeting held with suppliers or contractors, the procuring entity shall use only those means that ensure in addition that suppliers or contractors can fully and contemporaneously participate in the meeting. 5. The procuring entity shall put in place appropriate measures to secure the authenticity, integrity and confidentiality of information concerned. Article 8 Participation by suppliers or contractors 1. Suppliers or contractors shall be permitted to participate in procurement proceedings without regard to nationality, except where the procuring entity decides to limit participation in procurement proceedings on the basis of nationality on grounds specified in the procurement regulations or other provisions of law of this State. 2. Except when authorized or required to do so by the procurement regulations or other provisions of law of this State, the procuring entity shall establish no other requirement aimed at limiting the participation of suppliers or contractors in procurement proceedings that discriminates against or among suppliers or contractors or against categories thereof. 3. The procuring entity, when first soliciting the participation of suppliers or contractors in the procurement proceedings, shall declare whether the participation of suppliers or contractors in the procurement proceedings is limited pursuant to this article and on which ground. Any such declaration may not later be altered. Baker & McKenzie 299

316 4. A procuring entity that decides to limit the participation of suppliers or contractors in procurement proceedings pursuant to this article shall include in the record of the procurement proceedings a statement of the reasons and circumstances on which it relied. 5. The procuring entity shall make available to any person, upon request, its reasons for limiting the participation of suppliers or contractors in the procurement proceedings pursuant to this article. Article 9 Qualifications of suppliers and contractors 1. This article applies to the ascertainment by the procuring entity of the qualifications of suppliers or contractors at any stage of the procurement proceedings. 2. Suppliers or contractors shall meet such of the following criteria as the procuring entity considers appropriate and relevant in the circumstances of the particular procurement: (a) That they have the necessary professional, technical and environmental qualifications, professional and technical competence, financial resources, equipment and other physical facilities, managerial capability, reliability, experience and personnel to perform the procurement contract; (b) That they meet ethical and other standards applicable in this State; (c) That they have the legal capacity to enter into the procurement contract; (d) That they are not insolvent, in receivership, bankrupt or being wound up, their affairs are not being administered by a court or a judicial officer, their business activities have not been suspended and they are not the subject of legal proceedings for any of the foregoing; (e) That they have fulfilled their obligations to pay taxes and social security contributions in this State; (f) That they have not, and their directors or officers have not, been convicted of any criminal offence related to their professional conduct or the making of false statements or misrepresentations as to their qualifications to enter into a procurement contract within a period of... years [the enacting State specifies the period of time] 300 Baker & McKenzie

317 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL preceding the commencement of the procurement proceedings, or have not been otherwise disqualified pursuant to administrative suspension or debarment proceedings. 3. Subject to the right of suppliers or contractors to protect their intellectual property or trade secrets, the procuring entity may require suppliers or contractors participating in procurement proceedings to provide appropriate documentary evidence or other information to satisfy itself that the suppliers or contractors are qualified in accordance with the criteria referred to in paragraph 2 of this article. 4. Any requirement established pursuant to this article shall be set out in the pre-qualification or pre-selection documents, if any, and in the solicitation documents and shall apply equally to all suppliers or contractors. A procuring entity shall impose no criterion, requirement or procedure with respect to the qualifications of suppliers or contractors other than those provided for in this Law. 5. The procuring entity shall evaluate the qualifications of suppliers or contractors in accordance with the qualification criteria and procedures set out in the pre-qualification or pre-selection documents, if any, and in the solicitation documents. 6. Other than any criterion, requirement or procedure that may be imposed by the procuring entity in accordance with article 8 of this Law, the procuring entity shall establish no criterion, requirement or procedure with respect to the qualifications of suppliers or contractors that discriminates against or among suppliers or contractors or against categories thereof, or that is not objectively justifiable. 7. Notwithstanding paragraph 6 of this article, the procuring entity may require the legalization of documentary evidence provided by the supplier or contractor presenting the successful submission so as to demonstrate its qualifications for the particular procurement. In doing so, the procuring entity shall not impose any requirements as to the legalization of the documentary evidence other than those provided for in the laws of this State relating to the legalization of documents of the type in question. 8. (a) The procuring entity shall disqualify a supplier or contractor if it finds at any time that the information submitted concerning the qualifications of the supplier or contractor was false or constituted a misrepresentation; Baker & McKenzie 301

318 (b) A procuring entity may disqualify a supplier or contractor if it finds at any time that the information submitted concerning the qualifications of the supplier or contractor was materially inaccurate or materially incomplete; (c) Other than in a case to which subparagraph (a) of this paragraph applies, a procuring entity may not disqualify a supplier or contractor on the ground that information submitted concerning the qualifications of the supplier or contractor was inaccurate or incomplete in a non-material respect. The supplier or contractor may, however, be disqualified if it fails to remedy such deficiencies promptly upon request by the procuring entity; (d) The procuring entity may require a supplier or contractor that was pre-qualified in accordance with article 18 of this Law to demonstrate its qualifications again in accordance with the same criteria used to pre-qualify such supplier or contractor. The procuring entity shall disqualify any supplier or contractor that fails to demonstrate its qualifications again if requested to do so. The procuring entity shall promptly notify each supplier or contractor requested to demonstrate its qualifications again as to whether or not the supplier or contractor has done so to the satisfaction of the procuring entity. Article 10 Rules concerning description of the subject matter of the procurement and the terms and conditions of the procurement contract or framework agreement 1. (a) The pre-qualification or pre-selection documents, if any, shall set out a description of the subject matter of the procurement; (b) The procuring entity shall set out in the solicitation documents the detailed description of the subject matter of the procurement that it will use in the examination of submissions, including the minimum requirements that submissions must meet in order to be considered responsive and the manner in which those minimum requirements are to be applied. 2. Other than any criterion, requirement or procedure that may be imposed by the procuring entity in accordance with article 8 of this Law, no description of the subject matter of a procurement that may restrict the participation of suppliers or contractors in or their access to the 302 Baker & McKenzie

319 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL procurement proceedings, including any restriction based on nationality, shall be included or used in the pre-qualification or pre-selection documents, if any, or in the solicitation documents. 3. The description of the subject matter of the procurement may include specifications, plans, drawings, designs, requirements, testing and test methods, packaging, marking or labelling or conformity certification, and symbols and terminology. 4. To the extent practicable, the description of the subject matter of the procurement shall be objective, functional and generic. It shall set out the relevant technical, quality and performance characteristics of that subject matter. There shall be no requirement for or reference to a particular trademark or trade name, patent, design or type, specific origin or producer unless there is no sufficiently precise or intelligible way of describing the characteristics of the subject matter of the procurement and provided that words such as or equivalent are included. 5. (a) Standardized features, requirements, symbols and terminology relating to the technical, quality and performance characteristics of the subject matter of the procurement shall be used, where available, in formulating the description of the subject matter of the procurement to be included in the pre-qualification or pre-selection documents, if any, and in the solicitation documents; (b) Due regard shall be had for the use of standardized trade terms and standardized conditions, where available, in formulating the terms and conditions of the procurement and the procurement contract or the framework agreement to be entered into in the procurement proceedings, and in formulating other relevant aspects of the prequalification or pre-selection documents, if any, and solicitation documents. Article 11 Rules concerning evaluation criteria and procedures 1. Except for the criteria set out in paragraph 3 of this article, the evaluation criteria shall relate to the subject matter of the procurement. 2. The evaluation criteria relating to the subject matter of the procurement may include: (a) Price; Baker & McKenzie 303

320 (b) The cost of operating, maintaining and repairing goods or of construction; the time for delivery of goods, completion of construction or provision of services; the characteristics of the subject matter of the procurement, such as the functional characteristics of goods or construction and the environmental characteristics of the subject matter; and the terms of payment and of guarantees in respect of the subject matter of the procurement; (c) Where relevant in procurement conducted in accordance with articles 47, 49 and 50 of this Law, the experience, reliability and professional and managerial competence of the supplier or contractor and of the personnel to be involved in providing the subject matter of the procurement. 3. In addition to the criteria set out in paragraph 2 of this article, the evaluation criteria may include: (a) Any criteria that the procurement regulations or other provisions of law of this State authorize or require to be taken into account; (b) A margin of preference for the benefit of domestic suppliers or contractors or for domestically produced goods, or any other preference, if authorized or required by the procurement regulations or other provisions of law of this State. The margin of preference shall be calculated in accordance with the procurement regulations. 4. To the extent practicable, all non-price evaluation criteria shall be objective, quantifiable and expressed in monetary terms. 5. The procuring entity shall set out in the solicitation documents: (a) Whether the successful submission will be ascertained on the basis of price or price and other criteria; (b) All evaluation criteria established pursuant to this article, including price as modified by any preference; (c) The relative weights of all evaluation criteria, except where the procurement is conducted under article 49 of this Law, in which case the procuring entity may list all evaluation criteria in descending order of importance; (d) The manner of application of the criteria in the evaluation procedure. 304 Baker & McKenzie

321 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL 6. In evaluating submissions and determining the successful submission, the procuring entity shall use only those criteria and procedures that have been set out in the solicitation documents and shall apply those criteria and procedures in the manner that has been disclosed in those solicitation documents. No criterion or procedure shall be used that has not been set out in accordance with this provision. Article 12 Rules concerning estimation of the value of procurement 1. A procuring entity shall neither divide its procurement nor use a particular valuation method for estimating the value of procurement so as to limit competition among suppliers or contractors or otherwise avoid its obligations under this Law. 2. In estimating the value of procurement, the procuring entity shall include the estimated maximum total value of the procurement contract or of all procurement contracts envisaged under a framework agreement over its entire duration, taking into account all forms of remuneration. Article 13 Rules concerning the language of documents 1. The pre-qualification or pre-selection documents, if any, and the solicitation documents shall be formulated in [the enacting State specifies its official language or languages] [and in a language customarily used in international trade, unless decided otherwise by the procuring entity in the circumstances referred to in paragraph 4 of article 33 of this Law]. 2. Applications to pre-qualify or for pre-selection, if any, and submissions may be formulated and presented in the language of the pre-qualification or pre-selection documents, if any, and solicitation documents, respectively, or in any other language permitted by those documents. Article 14 Rules concerning the manner, place and deadline for presenting applications to pre-qualify or applications for pre-selection or for presenting submissions 1. The manner, place and deadline for presenting applications to prequalify or for pre-selection shall be set out in the invitation to pre-qualify or for pre-selection and in the pre-qualification or pre-selection documents, as applicable. The manner, place and deadline for presenting submissions shall be set out in the solicitation documents. Baker & McKenzie 305

322 2. Deadlines for presenting applications to pre-qualify or for pre-selection or for presenting submissions shall be expressed as a specific date and time and shall allow sufficient time for suppliers or contractors to prepare and present their applications or submissions, taking into account the reasonable needs of the procuring entity. 3. If the procuring entity issues a clarification or modification of the prequalification, pre-selection or solicitation documents, it shall, prior to the applicable deadline for presenting applications to pre-qualify or for preselection or for presenting submissions, extend the deadline if necessary or as required under paragraph 3 of article 15 of this Law in order to afford suppliers or contractors sufficient time to take the clarification or modification into account in their applications or submissions. 4. The procuring entity may, at its absolute discretion, prior to a deadline for presenting applications to pre-qualify or for pre-selection or for presenting submissions, extend the applicable deadline if it is not possible for one or more suppliers or contractors to present their applications or submissions by the deadline initially stipulated because of any circumstance beyond their control. 5. Notice of any extension of the deadline shall be given promptly to each supplier or contractor to which the procuring entity provided the prequalification, pre-selection or solicitation documents. Article 15 Clarifications and modifications of solicitation documents 1. A supplier or contractor may request a clarification of the solicitation documents from the procuring entity. The procuring entity shall respond to any request by a supplier or contractor for clarification of the solicitation documents that is received by the procuring entity within a reasonable time prior to the deadline for presenting submissions. The procuring entity shall respond within a time period that will enable the supplier or contractor to present its submission in a timely fashion and shall, without identifying the source of the request, communicate the clarification to all suppliers or contractors to which the procuring entity has provided the solicitation documents. 2. At any time prior to the deadline for presenting submissions, the procuring entity may for any reason, whether on its own initiative or as a result of a request for clarification by a supplier or contractor, modify the solicitation documents by issuing an addendum. The addendum shall be 306 Baker & McKenzie

323 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL communicated promptly to all suppliers or contractors to which the procuring entity has provided the solicitation documents and shall be binding on those suppliers or contractors. 3. If as a result of a clarification or modification issued in accordance with this article, the information published when first soliciting the participation of suppliers or contractors in the procurement proceedings becomes materially inaccurate, the procuring entity shall cause the amended information to be published in the same manner and place in which the original information was published and shall extend the deadline for presentation of submissions as provided for in paragraph 3 of article 14 of this Law. 4. If the procuring entity convenes a meeting of suppliers or contractors, it shall prepare minutes of the meeting containing the requests submitted at the meeting for clarification of the solicitation documents and its responses to those requests, without identifying the sources of the requests. The minutes shall be provided promptly to all suppliers or contractors to which the procuring entity provided the solicitation documents, so as to enable those suppliers or contractors to take the minutes into account in preparing their submissions. Article 16 Clarification of qualification information and of submissions 1. At any stage of the procurement proceedings, the procuring entity may ask a supplier or contractor for clarification of its qualification information or of its submission, in order to assist in the ascertainment of qualifications or the examination and evaluation of submissions. 2. The procuring entity shall correct purely arithmetical errors that are discovered during the examination of submissions. The procuring entity shall give prompt notice of any such correction to the supplier or contractor that presented the submission concerned. 3. No substantive change to qualification information or to a submission, including changes aimed at making an unqualified supplier or contractor qualified or an unresponsive submission responsive, shall be sought, offered or permitted. 4. No negotiations shall take place between the procuring entity and a supplier or contractor with respect to qualification information or submissions, nor shall any change in price be made pursuant to a clarification that is sought under this article. Baker & McKenzie 307

324 5. Paragraph 4 of this article shall not apply to proposals submitted under articles 49, 50, 51 and 52 of this Law. 6. All communications generated under this article shall be included in the record of the procurement proceedings. Article 17 Tender securities 1. When the procuring entity requires suppliers or contractors presenting submissions to provide a tender security: (a) The requirement shall apply to all suppliers or contractors; (b) The solicitation documents may stipulate that the issuer of the tender security and the confirmer, if any, of the tender security, as well as the form and terms of the tender security, must be acceptable to the procuring entity. In cases of domestic procurement, the solicitation documents may in addition stipulate that the tender security shall be issued by an issuer in this State; (c) Notwithstanding the provisions of subparagraph (b) of this paragraph, a tender security shall not be rejected by the procuring entity on the grounds that the tender security was not issued by an issuer in this State if the tender security and the issuer otherwise conform to requirements set out in the solicitation documents, unless the acceptance by the procuring entity of such a tender security would be in violation of a law of this State; (d) Prior to presenting a submission, a supplier or contractor may request the procuring entity to confirm the acceptability of a proposed issuer of a tender security or of a proposed confirmer, if required; the procuring entity shall respond promptly to such a request; (e) Confirmation of the acceptability of a proposed issuer or of any proposed confirmer does not preclude the procuring entity from rejecting the tender security on the ground that the issuer or the confirmer, as the case may be, has become insolvent or has otherwise ceased to be creditworthy; (f) The procuring entity shall specify in the solicitation documents any requirements with respect to the issuer and the nature, form, amount and other principal terms and conditions of the required tender security. Any requirement that refers directly or indirectly to the 308 Baker & McKenzie

325 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL conduct of the supplier or contractor presenting the submission may relate only to: (i) Withdrawal or modification of the submission after the deadline for presenting submissions, or before the deadline if so stipulated in the solicitation documents; (ii) Failure to sign a procurement contract if so required by the solicitation documents; and (iii) Failure to provide a required security for the performance of the contract after the successful submission has been accepted or failure to comply with any other condition precedent to signing the procurement contract specified in the solicitation documents. 2. The procuring entity shall make no claim to the amount of the tender security and shall promptly return, or procure the return of, the security document after the earliest of the following events: (a) The expiry of the tender security; (b) The entry into force of a procurement contract and the provision of a security for the performance of the contract, if such a security is required by the solicitation documents; (c) The cancellation of the procurement; (d) The withdrawal of a submission prior to the deadline for presenting submissions, unless the solicitation documents stipulate that no such withdrawal is permitted. Article 18 Pre-qualification proceedings 1. The procuring entity may engage in pre-qualification proceedings with a view to identifying, prior to solicitation, suppliers and contractors that are qualified. The provisions of article 9 of this Law shall apply to prequalification proceedings. 2. If the procuring entity engages in pre-qualification proceedings, it shall cause an invitation to pre-qualify to be published in the publication identified in the procurement regulations. Unless decided otherwise by the procuring entity in the circumstances referred to in paragraph 4 of article 33 of this Law, the invitation to pre-qualify shall also be Baker & McKenzie 309

326 published internationally, so as to be widely accessible to international suppliers or contractors. 3. The invitation to pre-qualify shall include the following information: (a) The name and address of the procuring entity; (b) A summary of the principal required terms and conditions of the procurement contract or the framework agreement to be entered into in the procurement proceedings, including the nature, quantity and place of delivery of the goods to be supplied, the nature and location of the construction to be effected or the nature of the services and the location where they are to be provided, as well as the desired or required time for the supply of the goods, the completion of the construction or the provision of the services; (c) The criteria and procedures to be used for ascertaining the qualifications of suppliers or contractors, in conformity with article 9 of this Law; (d) A declaration as required by article 8 of this Law; (e) The means of obtaining the pre-qualification documents and the place where they may be obtained; (f) The price, if any, to be charged by the procuring entity for the prequalification documents and, subsequent to pre-qualification, for the solicitation documents; (g) If a price is to be charged, the means of payment for the prequalification documents and, subsequent to pre-qualification, for the solicitation documents, and the currency of payment; (h) The language or languages in which the pre-qualification documents and, subsequent to pre-qualification, the solicitation documents are available; (i) The manner, place and deadline for presenting applications to prequalify and, if already known, the manner, place and deadline for presenting submissions, in conformity with article 14 of this Law. 4. The procuring entity shall provide a set of pre-qualification documents to each supplier or contractor that requests them in accordance with the invitation to pre-qualify and that pays the price, if any, charged for those documents. The price that the procuring entity may charge for the pre- 310 Baker & McKenzie

327 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL qualification documents shall reflect only the cost of providing them to suppliers or contractors. 5. The pre-qualification documents shall include the following information: (a) Instructions for preparing and presenting pre-qualification applications; (b) Any documentary evidence or other information that must be presented by suppliers or contractors to demonstrate their qualifications; (c) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the prequalification proceedings without the intervention of an intermediary; (d) References to this Law, the procurement regulations and other laws and regulations directly pertinent to the pre-qualification proceedings, and the place where those laws and regulations may be found; (e) Any other requirements that may be established by the procuring entity in conformity with this Law and the procurement regulations relating to the preparation and presentation of applications to prequalify and to the pre-qualification proceedings. 6. The procuring entity shall respond to any request by a supplier or contractor for clarification of the pre-qualification documents that is received by the procuring entity within a reasonable time prior to the deadline for presenting applications to pre-qualify. The procuring entity shall respond within a time period that will enable the supplier or contractor to present its application to pre-qualify in a timely fashion. The response to any request that might reasonably be expected to be of interest to other suppliers or contractors shall, without identifying the source of the request, be communicated to all suppliers or contractors to which the procuring entity has provided the pre-qualification documents. 7. The procuring entity shall take a decision with respect to the qualifications of each supplier or contractor presenting an application to pre-qualify. In reaching that decision, the procuring entity shall apply Baker & McKenzie 311

328 only the criteria and procedures set out in the invitation to pre-qualify and in the pre-qualification documents. 8. Only suppliers or contractors that have been pre-qualified are entitled to participate further in the procurement proceedings. 9. The procuring entity shall promptly notify each supplier or contractor presenting an application to pre-qualify whether or not it has been prequalified. It shall also make available to any person, upon request, the names of all suppliers or contractors that have been pre-qualified. 10. The procuring entity shall promptly communicate to each supplier or contractor that has not been pre-qualified the reasons therefor. Article 19 Cancellation of the procurement 1. The procuring entity may cancel the procurement at any time prior to the acceptance of the successful submission and, after the successful submission is accepted, under the circumstances referred to in paragraph 8 of article 22 of this Law. The procuring entity shall not open any tenders or proposals after taking a decision to cancel the procurement. 2. The decision of the procuring entity to cancel the procurement and the reasons for the decision shall be included in the record of the procurement proceedings and promptly communicated to any supplier or contractor that presented a submission. The procuring entity shall in addition promptly publish a notice of the cancellation of the procurement in the same manner and place in which the original information regarding the procurement proceedings was published, and return any tenders or proposals that remain unopened at the time of the decision to the suppliers or contractors that presented them. 3. Unless the cancellation of the procurement is a consequence of irresponsible or dilatory conduct on the part of the procuring entity, the procuring entity shall incur no liability, solely by virtue of its invoking paragraph 1 of this article, towards suppliers or contractors that have presented submissions. Article 20 Rejection of abnormally low submissions 1. The procuring entity may reject a submission if the procuring entity has determined that the price, in combination with other constituent elements of the submission, is abnormally low in relation to the subject matter of 312 Baker & McKenzie

329 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL the procurement and raises concerns with the procuring entity as to the ability of the supplier or contractor that presented that submission to perform the procurement contract, provided that the procuring entity has taken the following actions: (a) The procuring entity has requested in writing from the supplier or contractor details of the submission that gives rise to concerns as to the ability of the supplier or contractor to perform the procurement contract; and (b) The procuring entity has taken account of any information provided by the supplier or contractor following this request and the information included in the submission, but continues, on the basis of all such information, to hold concerns. 2. The decision of the procuring entity to reject a submission in accordance with this article, the reasons for that decision, and all communications with the supplier or contractor under this article shall be included in the record of the procurement proceedings. The decision of the procuring entity and the reasons therefor shall be promptly communicated to the supplier or contractor concerned. Article 21 Exclusion of a supplier or contractor from the procurement proceedings on the grounds of inducements from the supplier or contractor, an unfair competitive advantage or conflicts of interest 1. A procuring entity shall exclude a supplier or contractor from the procurement proceedings if: (a) The supplier or contractor offers, gives or agrees to give, directly or indirectly, to any current or former officer or employee of the procuring entity or other governmental authority a gratuity in any form, an offer of employment or any other thing of service or value, so as to influence an act or decision of, or procedure followed by, the procuring entity in connection with the procurement proceedings; or (b) The supplier or contractor has an unfair competitive advantage or a conflict of interest, in violation of provisions of law of this State. 2. Any decision of the procuring entity to exclude a supplier or contractor from the procurement proceedings under this article and the reasons Baker & McKenzie 313

330 therefor shall be included in the record of the procurement proceedings and promptly communicated to the supplier or contractor concerned. Article 22 Acceptance of the successful submission and entry into force of the procurement contract 1. The procuring entity shall accept the successful submission unless: (a) The supplier or contractor presenting the successful submission is disqualified in accordance with article 9 of this Law; (b) The procurement is cancelled in accordance with paragraph 1 of article 19 of this Law; (c) The submission found successful at the end of evaluation is rejected as abnormally low under article 20 of this Law; or (d) The supplier or contractor presenting the successful submission is excluded from the procurement proceedings on the grounds specified in article 21 of this Law. 2. The procuring entity shall promptly notify each supplier or contractor that presented submissions of its decision to accept the successful submission at the end of the standstill period. The notice shall contain, at a minimum, the following information: (a) The name and address of the supplier or contractor presenting the successful submission; (b) The contract price or, where the successful submission was ascertained on the basis of price and other criteria, the contract price and a summary of other characteristics and relative advantages of the successful submission; and (c) The duration of the standstill period as set out in the solicitation documents and in accordance with the requirements of the procurement regulations. The standstill period shall run from the date of the dispatch of the notice under this paragraph to all suppliers or contractors that presented submissions. 3. Paragraph 2 of this article shall not apply to awards of procurement contracts: (a) Under a framework agreement procedure without second-stage competition; 314 Baker & McKenzie

331 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (b) Where the contract price is less than the threshold amount set out in the procurement regulations; or (c) Where the procuring entity determines that urgent public interest considerations require the procurement to proceed without a standstill period. The decision of the procuring entity that such urgent considerations exist and the reasons for the decision shall be included in the record of the procurement proceedings. 4. Upon expiry of the standstill period or, where there is none, promptly after the successful submission was ascertained, the procuring entity shall dispatch the notice of acceptance of the successful submission to the supplier or contractor that presented that submission, unless the [name of court or courts] or the [name of the relevant organ designated by the enacting State] orders otherwise. 5. Unless a written procurement contract and/or approval by another authority is/are required, a procurement contract in accordance with the terms and conditions of the successful submission enters into force when the notice of acceptance is dispatched to the supplier or contractor concerned, provided that the notice is dispatched while the submission is still in effect. 6. Where the solicitation documents require the supplier or contractor whose submission has been accepted to sign a written procurement contract conforming to the terms and conditions of the accepted submission: (a) The procuring entity and the supplier or contractor concerned shall sign the procurement contract within a reasonable period of time after the notice of acceptance is dispatched to the supplier or contractor concerned; (b) Unless the solicitation documents stipulate that the procurement contract is subject to approval by another authority, the procurement contract enters into force when the contract is signed by the supplier or contractor concerned and by the procuring entity. Between the time when the notice of acceptance is dispatched to the supplier or contractor concerned and the entry into force of the procurement contract, neither the procuring entity nor that supplier or contractor shall take any action that interferes with the entry into force of the procurement contract or with its performance. Baker & McKenzie 315

332 7. Where the solicitation documents stipulate that the procurement contract is subject to approval by another authority, the procurement contract shall not enter into force before the approval is given. The solicitation documents shall specify the estimated period of time following dispatch of the notice of acceptance that will be required to obtain the approval. A failure to obtain the approval within the time specified in the solicitation documents shall not extend the period of effectiveness of submissions specified in the solicitation documents or the period of effectiveness of the tender security required under article 17 of this Law, unless extended under the provisions of this Law. 8. If the supplier or contractor whose submission has been accepted fails to sign any written procurement contract as required or fails to provide any required security for the performance of the contract, the procuring entity may either cancel the procurement or decide to select the next successful submission from among those remaining in effect, in accordance with the criteria and procedures set out in this Law and in the solicitation documents. In the latter case, the provisions of this article shall apply mutatis mutandis to such submission. 9. Notices under this article are dispatched when they are promptly and properly addressed or otherwise directed and transmitted to the supplier or contractor or conveyed to an appropriate authority for transmission to the supplier or contractor by any reliable means specified in accordance with article 7 of this Law. 10. Upon the entry into force of the procurement contract and, if required, the provision by the supplier or contractor of a security for the performance of the contract, notice of the procurement contract shall be given promptly to other suppliers or contractors, specifying the name and address of the supplier or contractor that has entered into the contract and the contract price. Article 23 Public notice of the award of a procurement contract or framework agreement 1. Upon the entry into force of the procurement contract or conclusion of a framework agreement, the procuring entity shall promptly publish notice of the award of the procurement contract or the framework agreement, specifying the name of the supplier (or suppliers) or contractor (or contractors) to which the procurement contract or the framework 316 Baker & McKenzie

333 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL agreement was awarded and, in the case of procurement contracts, the contract price. 2. Paragraph 1 is not applicable to awards where the contract price is less than the threshold amount set out in the procurement regulations. The procuring entity shall publish a cumulative notice of such awards from time to time but at least once a year. 3. The procurement regulations shall provide for the manner of publication of the notices required under this article. Article 24 Confidentiality 1. In its communications with suppliers or contractors or with any person, the procuring entity shall not disclose any information if non-disclosure of such information is necessary for the protection of essential security interests of the State or if disclosure of such information would be contrary to law, would impede law enforcement, would prejudice the legitimate commercial interests of the suppliers or contractors or would impede fair competition, unless disclosure of that information is ordered by the [name of the court or courts] or the [name of the relevant organ designated by the enacting State] and, in such case, subject to the conditions of such an order. 2. Other than when providing or publishing information pursuant to paragraphs 2 and 10 of article 22 and to articles 23, 25 and 42 of this Law, the procuring entity shall treat applications to pre-qualify or for pre-selection and submissions in such a manner as to avoid the disclosure of their contents to competing suppliers or contractors or to any other person not authorized to have access to this type of information. 3. Any discussions, communications, negotiations or dialogue between the procuring entity and a supplier or contractor pursuant to paragraph 3 of article 48 and to articles 49 to 52 of this Law shall be confidential. Unless required by law or ordered by the [name of the court or courts] or the [name of the relevant organ designated by the enacting State], no party to any such discussions, communications, negotiations or dialogue shall disclose to any other person any technical, price or other information relating to these discussions, communications, negotiations or dialogue without the consent of the other party. Baker & McKenzie 317

334 4. Subject to the requirements in paragraph 1 of this article, in procurement involving classified information, the procuring entity may: (a) Impose on suppliers or contractors requirements aimed at protecting classified information; and (b) Demand that suppliers or contractors ensure that their subcontractors comply with requirements aimed at protecting classified information. Article 25 Documentary record of procurement proceedings 1. The procuring entity shall maintain a record of the procurement proceedings that includes the following information: (a) A brief description of the subject matter of the procurement; (b) The names and addresses of suppliers or contractors that presented submissions, the name and address of the supplier (or suppliers) or contractor (or contractors) with which the procurement contract is entered into and the contract price (and, in the case of a framework agreement procedure, the name and address of the supplier (or suppliers) or contractor (or contractors) with which the framework agreement is concluded); (c) A statement of the reasons and circumstances relied upon by the procuring entity for the decision as regards means of communication and any requirement of form; (d) In procurement proceedings in which the procuring entity, in accordance with article 8 of this Law, limits the participation of suppliers or contractors, a statement of the reasons and circumstances relied upon by the procuring entity for imposing such a limit; (e) If the procuring entity uses a method of procurement other than open tendering, a statement of the reasons and circumstances relied upon by the procuring entity to justify the use of such other method; (f) In the case of procurement by means of an electronic reverse auction or involving an electronic reverse auction as a phase preceding the award of the procurement contract, a statement of the reasons and circumstances relied upon by the procuring entity for the use of the 318 Baker & McKenzie

335 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL auction and information about the date and time of the opening and closing of the auction; (g) In the case of a framework agreement procedure, a statement of the reasons and circumstances upon which it relied to justify the use of a framework agreement procedure and the type of framework agreement selected; (h) If the procurement is cancelled pursuant to paragraph 1 of article 19 of this Law, a statement to that effect and the reasons and circumstances relied upon by the procuring entity for its decision to cancel the procurement; (i) If any socio-economic policies were considered in the procurement proceedings, details of such policies and the manner in which they were applied; (j) If no standstill period was applied, a statement of the reasons and circumstances relied upon by the procuring entity in deciding not to apply a standstill period; (k) In the case of a challenge or appeal under chapter VIII of this Law, a copy of the application for reconsideration or review and the appeal, as applicable, and a copy of all decisions taken in the relevant challenge or appeal proceedings, or both, and the reasons therefor; (l) A summary of any requests for clarification of the pre-qualification or pre-selection documents, if any, or of the solicitation documents and the responses thereto, as well as a summary of any modifications to those documents; (m) Information relative to the qualifications, or lack thereof, of suppliers or contractors that presented applications to pre-qualify or for pre-selection, if any, or submissions; (n) If a submission is rejected pursuant to article 20 of this Law, a statement to that effect and the reasons and circumstances relied upon by the procuring entity for its decision; (o) If a supplier or contractor is excluded from the procurement proceedings pursuant to article 21 of this Law, a statement to that effect and the reasons and circumstances relied upon by the procuring entity for its decision; Baker & McKenzie 319

336 (p) A copy of the notice of the standstill period given in accordance with paragraph 2 of article 22 of this Law; (q) If the procurement proceedings resulted in the award of a procurement contract in accordance with paragraph 8 of article 22 of this Law, a statement to that effect and of the reasons therefor; (r) The contract price and other principal terms and conditions of the procurement contract; where a written procurement contract has been concluded, a copy thereof. (In the case of a framework agreement procedure, in addition a summary of the principal terms and conditions of the framework agreement or a copy of any written framework agreement that was concluded); (s) For each submission, the price and a summary of the other principal terms and conditions; (t) A summary of the evaluation of submissions, including the application of any preference pursuant to paragraph 3 (b) of article 11 of this Law, and the reasons and circumstances on which the procuring entity relied to justify any rejection of bids presented during the auction; (u) Where exemptions from disclosure of information were invoked under paragraph 1 of article 24 or under article 69 of this Law, the reasons and circumstances relied upon in invoking them; (v) In procurement involving classified information, any requirements imposed on suppliers or contractors for the protection of classified information pursuant to paragraph 4 of article 24 of this Law; and (w) Other information required to be included in the record in accordance with the provisions of this Law or the procurement regulations. 2. The portion of the record referred to in subparagraphs (a) to (k) of paragraph 1 of this article shall, on request, be made available to any person after the successful submission has been accepted or the procurement has been cancelled. 3. Subject to paragraph 4 of this article, or except as disclosed pursuant to paragraph 3 of article 42 of this Law, the portion of the record referred to in subparagraphs (p) to (t) of paragraph 1 of this article shall, after the decision on acceptance of the successful submission has become known 320 Baker & McKenzie

337 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL to them, be made available, upon request, to suppliers or contractors that presented submissions. 4. Except when ordered to do so by the [name of court or courts] or the [name of the relevant organ designated by the enacting State], and subject to the conditions of such an order, the procuring entity shall not disclose: (a) Information from the record of the procurement proceedings if its non-disclosure is necessary for the protection of essential security interests of the State or if its disclosure would be contrary to law, would impede law enforcement, would prejudice the legitimate commercial interests of the suppliers or contractors or would impede fair competition; (b) Information relating to the examination and evaluation of submissions, other than the summary referred to in subparagraph (t) of paragraph 1 of this article. 5. The procurement entity shall record, file and preserve all documents relating to the procurement proceedings, according to procurement regulations or other provisions of law of this State. Article 26 Code of conduct A code of conduct for officers or employees of procuring entities shall be enacted. It shall address, inter alia, the prevention of conflicts of interest in procurement and, where appropriate, measures to regulate matters regarding personnel responsible for procurement, such as declarations of interest in particular procurements, screening procedures and training requirements. The code of conduct so enacted shall be promptly made accessible to the public and systematically maintained. Baker & McKenzie 321

338 Chapter II. Methods of procurement and their conditions for use; solicitation and notices of the procurement Section I. Methods of procurement and their conditions for use Article 27 Methods of procurement 2 1. The procuring entity may conduct procurement by means of: (a) Open tendering; (b) Restricted tendering; (c) Request for quotations; (d) Request for proposals without negotiation; (e) Two-stage tendering; (f) Request for proposals with dialogue; (g) Request for proposals with consecutive negotiations; (h) Competitive negotiations; (i) Electronic reverse auction; and (j) Single-source procurement. 2. The procuring entity may engage in a framework agreement procedure in accordance with the provisions of chapter VII of this Law. Article 28 General rules applicable to the selection of a procurement method 1. Except as otherwise provided for in articles 29 to 31 of this Law, a procuring entity shall conduct procurement by means of open tendering. 2. A procuring entity may use a method of procurement other than open tendering only in accordance with articles 29 to 31 of this Law, shall select the other method of procurement to accommodate the 2 States may choose not to incorporate all the methods of procurement listed in this article into their national legislation, although an appropriate range of options, including open tendering, should be always provided for. On this question, see the Guide to Enactment of the UNCITRAL Model Law on Public Procurement (A/CN.9/ ). States may consider whether, for certain methods of procurement, to include a requirement for high-level approval by a designated organ. On this question, see the Guide to Enactment. 322 Baker & McKenzie

339 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL circumstances of the procurement concerned and shall seek to maximize competition to the extent practicable. 3. If the procuring entity uses a method of procurement other than open tendering, it shall include in the record required under article 25 of this Law a statement of the reasons and circumstances upon which it relied to justify the use of that method. Article 29 Conditions for the use of methods of procurement under chapter IV of this Law (restricted tendering, requests for quotations and requests for proposals without negotiation) 1. The procuring entity may engage in procurement by means of restricted tendering in accordance with article 45 of this Law when: (a) The subject matter of the procurement, by reason of its highly complex or specialized nature, is available only from a limited number of suppliers or contractors; or (b) The time and cost required to examine and evaluate a large number of tenders would be disproportionate to the value of the subject matter of the procurement. 2. A procuring entity may engage in procurement by means of a request for quotations in accordance with article 46 of this Law for the procurement of readily available goods or services that are not specially produced or provided to the particular description of the procuring entity and for which there is an established market, so long as the estimated value of the procurement contract is less than the threshold amount set out in the procurement regulations. 3. The procuring entity may engage in procurement by means of request for proposals without negotiation in accordance with article 47 of this Law where the procuring entity needs to consider the financial aspects of proposals separately and only after completion of examination and evaluation of the quality and technical aspects of the proposals. Baker & McKenzie 323

340 Article 30 Conditions for the use of methods of procurement under chapter V of this Law (two-stage tendering, requests for proposals with dialogue, requests for proposals with consecutive negotiations, competitive negotiations and singlesource procurement) 1. A procuring entity may engage in procurement by means of two-stage tendering in accordance with article 48 of this Law where: (a) The procuring entity assesses that discussions with suppliers or contractors are needed to refine aspects of the description of the subject matter of the procurement and to formulate them with the detail required under article 10 of this Law, and in order to allow the procuring entity to obtain the most satisfactory solution to its procurement needs; or (b) Open tendering was engaged in but no tenders were presented or the procurement was cancelled by the procuring entity pursuant to paragraph 1 of article 19 of this Law and where, in the judgement of the procuring entity, engaging in new open-tendering proceedings or a procurement method under chapter IV of this Law would be unlikely to result in a procurement contract. 2. [Subject to approval by the [name of the organ designated by the enacting State to issue the approval]], 3 a procuring entity may engage in procurement by means of request for proposals with dialogue in accordance with article 49 of this Law where: (a) It is not feasible for the procuring entity to formulate a detailed description of the subject matter of the procurement in accordance with article 10 of this Law, and the procuring entity assesses that dialogue with suppliers or contractors is needed to obtain the most satisfactory solution to its procurement needs; (b) The procuring entity seeks to enter into a contract for the purpose of research, experiment, study or development, except where the contract includes the production of items in quantities sufficient to establish their commercial viability or to recover research and development costs; 3 The enacting State may consider enacting the provisions in brackets if it wishes to subject the use of this procurement method to a measure of ex ante control. 324 Baker & McKenzie

341 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (c) The procuring entity determines that the selected method is the most appropriate method of procurement for the protection of essential security interests of the State; or (d) Open tendering was engaged in but no tenders were presented or the procurement was cancelled by the procuring entity pursuant to paragraph 1 of article 19 of this Law and where, in the judgement of the procuring entity, engaging in new open-tendering proceedings or a procurement method under chapter IV of this Law would be unlikely to result in a procurement contract. 3. A procuring entity may engage in procurement by means of request for proposals with consecutive negotiations in accordance with article 50 of this Law where the procuring entity needs to consider the financial aspects of proposals separately and only after completion of examination and evaluation of the quality and technical aspects of the proposals, and it assesses that consecutive negotiations with suppliers or contractors are needed in order to ensure that the financial terms and conditions of the procurement contract are acceptable to the procuring entity. 4. A procuring entity may engage in competitive negotiations, in accordance with the provisions of article 51 of this Law, in the following circumstances: (a) There is an urgent need for the subject matter of the procurement, and engaging in open-tendering proceedings or any other competitive method of procurement, because of the time involved in using those methods, would therefore be impractical, provided that the circumstances giving rise to the urgency were neither foreseeable by the procuring entity nor the result of dilatory conduct on its part; (b) Owing to a catastrophic event, there is an urgent need for the subject matter of the procurement, making it impractical to use opentendering proceedings or any other competitive method of procurement because of the time involved in using those methods; or (c) The procuring entity determines that the use of any other competitive method of procurement is not appropriate for the protection of essential security interests of the State. Baker & McKenzie 325

342 5. A procuring entity may engage in single-source procurement in accordance with the provisions of article 52 of this Law in the following exceptional circumstances: (a) The subject matter of the procurement is available only from a particular supplier or contractor, or a particular supplier or contractor has exclusive rights in respect of the subject matter of the procurement, such that no reasonable alternative or substitute exists, and the use of any other procurement method would therefore not be possible; (b) Owing to a catastrophic event, there is an extremely urgent need for the subject matter of the procurement, and engaging in any other method of procurement would be impractical because of the time involved in using those methods; (c) The procuring entity, having procured goods, equipment, technology or services from a supplier or contractor, determines that additional supplies must be procured from that supplier or contractor for reasons of standardization or because of the need for compatibility with existing goods, equipment, technology or services, taking into account the effectiveness of the original procurement in meeting the needs of the procuring entity, the limited size of the proposed procurement in relation to the original procurement, the reasonableness of the price and the unsuitability of alternatives to the goods or services in question; (d) The procuring entity determines that the use of any other method of procurement is not appropriate for the protection of essential security interests of the State; or (e) [Subject to approval by the [name of the organ designated by the enacting State to issue the approval] and,] following public notice and adequate opportunity to comment, procurement from a particular supplier or contractor is necessary in order to implement a socio-economic policy of this State, provided that procurement from no other supplier or contractor is capable of promoting that policy. 326 Baker & McKenzie

343 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL Article 31 Conditions for use of an electronic reverse auction 1. A procuring entity may engage in procurement by means of an electronic reverse auction in accordance with the provisions of chapter VI of this Law, under the following conditions: (a) It is feasible for the procuring entity to formulate a detailed description of the subject matter of the procurement; (b) There is a competitive market of suppliers or contractors anticipated to be qualified to participate in the electronic reverse auction, such that effective competition is ensured; and (c) The criteria to be used by the procuring entity in determining the successful submission are quantifiable and can be expressed in monetary terms. 2. A procuring entity may use an electronic reverse auction as a phase preceding the award of the procurement contract in a procurement method, as appropriate under the provisions of this Law. It may also use an electronic reverse auction for award of a procurement contract in a framework agreement procedure with second-stage competition in accordance with the provisions of this Law. An electronic reverse auction under this paragraph may be used only where the conditions of paragraph 1 (c) of this article are satisfied. Article 32 Conditions for use of a framework agreement procedure 1. A procuring entity may engage in a framework agreement procedure in accordance with chapter VII of this Law where it determines that: (a) The need for the subject matter of the procurement is expected to arise on an indefinite or repeated basis during a given period of time; or (b) By virtue of the nature of the subject matter of the procurement, the need for that subject matter may arise on an urgent basis during a given period of time. 2. The procuring entity shall include in the record required under article 25 of this Law a statement of the reasons and circumstances upon which it relied to justify the use of a framework agreement procedure and the type of framework agreement selected. Baker & McKenzie 327

344 Section II. Solicitation and notices of the procurement Article 33 Solicitation in open tendering, two-stage tendering and procurement by means of an electronic reverse auction 1. An invitation to tender in open tendering or two-stage tendering and an invitation to an electronic reverse auction under article 53 of this Law shall be published in the publication identified in the procurement regulations. 2. The invitation shall also be published internationally, so as to be widely accessible to international suppliers or contractors. 3. The provisions of this article shall not apply where the procuring entity engages in pre-qualification proceedings in accordance with article 18 of this Law. 4. The procuring entity shall not be required to cause the invitation to be published in accordance with paragraph 2 of this article in domestic procurement and in procurement proceedings where the procuring entity decides, in view of the low value of the subject matter of the procurement, that only domestic suppliers or contractors are likely to be interested in presenting submissions. Article 34 Solicitation in restricted tendering, request for quotations, competitive negotiations and single-source procurement: requirement for an advance notice of the procurement 1. (a) When the procuring entity engages in procurement by means of restricted tendering on the grounds specified in paragraph 1 (a) of article 29 of this Law, it shall solicit tenders from all suppliers and contractors from which the subject matter of the procurement is available; (b) When the procuring entity engages in procurement by means of restricted tendering on the grounds specified in paragraph 1 (b) of article 29 of this Law, it shall select suppliers or contractors from which to solicit tenders in a non-discriminatory manner, and it shall select a sufficient number of suppliers or contractors to ensure effective competition. 2. Where the procuring entity engages in procurement by means of request for quotations in accordance with paragraph 2 of article 29 of this Law, it 328 Baker & McKenzie

345 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL shall request quotations from as many suppliers or contractors as practicable, but from at least three. 3. Where the procuring entity engages in procurement by means of competitive negotiations in accordance with paragraph 4 of article 30 of this Law, it shall engage in negotiations with a sufficient number of suppliers or contractors to ensure effective competition. 4. Where the procuring entity engages in single-source procurement in accordance with paragraph 5 of article 30 of this Law, it shall solicit a proposal or price quotation from a single supplier or contractor. 5. Prior to direct solicitation in accordance with the provisions of paragraphs 1, 3 and 4 of this article, the procuring entity shall cause a notice of the procurement to be published in the publication identified in the procurement regulations. The notice shall contain at a minimum the following information: (a) The name and address of the procuring entity; (b) A summary of the principal required terms and conditions of the procurement contract or the framework agreement to be entered into in the procurement proceedings, including the nature, quantity and place of delivery of the goods to be supplied, the nature and location of the construction to be effected or the nature of the services and the location where they are to be provided, as well as the desired or required time for the supply of the goods, the completion of the construction or the provision of the services; (c) A declaration pursuant to article 8 of this Law; and (d) The method of procurement to be used. 6. The requirements of paragraph 5 of this article shall not apply in cases of urgent need as referred to in paragraphs 4 (a), 4 (b) and 5 (b) of article 30 of this Law. Article 35 Solicitation in request-for-proposals proceedings 1. An invitation to participate in request-for-proposals proceedings shall be published in accordance with paragraphs 1 and 2 of article 33 of this Law, except where: (a) The procuring entity engages in pre-qualification proceedings in accordance with article 18 of this Law or in pre-selection Baker & McKenzie 329

346 proceedings in accordance with paragraph 3 of article 49 of this Law; (b) The procuring entity engages in direct solicitation under the conditions set out in paragraph 2 of this article; or (c) The procuring entity decides not to cause the invitation to be published in accordance with paragraph 2 of article 33 of this Law in the circumstances referred to in paragraph 4 of article 33 of this Law. 2. The procuring entity may engage in direct solicitation in request-forproposals proceedings if: (a) The subject matter to be procured is available from only a limited number of suppliers or contractors, provided that the procuring entity solicits proposals from all those suppliers or contractors; (b) The time and cost required to examine and evaluate a large number of proposals would be disproportionate to the value of the subject matter to be procured, provided that the procuring entity solicits proposals from a sufficient number of suppliers or contractors to ensure effective competition and selects suppliers or contractors from which to solicit proposals in a non-discriminatory manner; or (c) The procurement involves classified information, provided that the procuring entity solicits proposals from a sufficient number of suppliers or contractors to ensure effective competition. 3. The procuring entity shall include in the record required under article 25 of this Law a statement of the reasons and circumstances upon which it relied to justify the use of direct solicitation in request-for-proposals proceedings. 4. The procuring entity shall cause a notice of the procurement to be published in accordance with the requirements set out in paragraph 5 of article 34 of this Law when it engages in direct solicitation in requestfor-proposals proceedings. 330 Baker & McKenzie

347 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL Chapter III. Open tendering Section I. Solicitation of tenders Article 36 Procedures for soliciting tenders The procuring entity shall solicit tenders by causing an invitation to tender to be published in accordance with the provisions of article 33 of this Law. Article 37 Contents of invitation to tender The invitation to tender shall include the following information: (a) The name and address of the procuring entity; (b) A summary of the principal required terms and conditions of the procurement contract to be entered into as a result of the procurement proceedings, including the nature, quantity and place of delivery of the goods to be supplied, the nature and location of the construction to be effected or the nature of the services and the location where they are to be provided, as well as the desired or required time for the supply of the goods, the completion of the construction or the provision of the services; (c) A summary of the criteria and procedures to be used for ascertaining the qualifications of suppliers or contractors, and of any documentary evidence or other information that must be submitted by suppliers or contractors to demonstrate their qualifications, in conformity with article 9 of this Law; (d) A declaration pursuant to article 8 of this Law; (e) The means of obtaining the solicitation documents and the place where they may be obtained; (f) The price, if any, to be charged by the procuring entity for the solicitation documents; (g) If a price is to be charged for the solicitation documents, the means and currency of payment; (h) The language or languages in which the solicitation documents are available; (i) The manner, place and deadline for presenting tenders. Baker & McKenzie 331

348 Article 38 Provision of solicitation documents The procuring entity shall provide the solicitation documents to each supplier or contractor that responds to the invitation to tender in accordance with the procedures and requirements specified therein. If pre-qualification proceedings have been engaged in, the procuring entity shall provide a set of solicitation documents to each supplier or contractor that has been prequalified and that pays the price, if any, charged for those documents. The price that the procuring entity may charge for the solicitation documents shall reflect only the cost of providing them to suppliers or contractors. Article 39 Contents of solicitation documents The solicitation documents shall include the following information: (a) Instructions for preparing tenders; (b) The criteria and procedures, in conformity with the provisions of article 9 of this Law, that will be applied in the ascertainment of the qualifications of suppliers or contractors and in any further demonstration of qualifications pursuant to paragraph 5 of article 43 of this Law; (c) The requirements as to documentary evidence or other information that must be presented by suppliers or contractors to demonstrate their qualifications; (d) A detailed description of the subject matter of the procurement, in conformity with article 10 of this Law; the quantity of the goods; the services to be performed; the location where the goods are to be delivered, construction is to be effected or services are to be provided; and the desired or required time, if any, when goods are to be delivered, construction is to be effected or services are to be provided; (e) The terms and conditions of the procurement contract, to the extent that they are already known to the procuring entity, and the form of the contract, if any, to be signed by the parties; (f) If alternatives to the characteristics of the subject matter of the procurement, the contractual terms and conditions or other requirements set out in the solicitation documents are permitted, a 332 Baker & McKenzie

349 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL statement to that effect and a description of the manner in which alternative tenders are to be evaluated; (g) If suppliers or contractors are permitted to present tenders for only a portion of the subject matter of the procurement, a description of the portion or portions for which tenders may be presented; (h) The manner in which the tender price is to be formulated and expressed, including a statement as to whether the price is to cover elements other than the cost of the subject matter of the procurement itself, such as any applicable transportation and insurance charges, customs duties and taxes; (i) The currency or currencies in which the tender price is to be formulated and expressed; (j) The language or languages, in conformity with article 13 of this Law, in which tenders are to be prepared; (k) Any requirements of the procuring entity with respect to the issuer and the nature, form, amount and other principal terms and conditions of any tender security to be provided by suppliers or contractors presenting tenders in accordance with article 17 of this Law, and any such requirements for any security for the performance of the procurement contract to be provided by the supplier or contractor that enters into the procurement contract, including securities such as labour and material bonds; (l) If a supplier or contractor may not modify or withdraw its tender prior to the deadline for presenting tenders without forfeiting its tender security, a statement to that effect; (m) The manner, place and deadline for presenting tenders, in conformity with article 14 of this Law; (n) The means by which, pursuant to article 15 of this Law, suppliers or contractors may seek clarification of the solicitation documents and a statement as to whether the procuring entity intends to convene a meeting of suppliers or contractors at this stage; (o) The period of time during which tenders shall be in effect, in conformity with article 41 of this Law; (p) The manner, place, date and time for the opening of tenders, in conformity with article 42 of this Law; Baker & McKenzie 333

350 (q) The criteria and procedure for examining tenders against the description of the subject matter of the procurement; (r) The criteria and procedure for evaluating tenders in accordance with article 11 of this Law; (s) The currency that will be used for the purpose of evaluating tenders pursuant to paragraph 4 of article 43 of this Law and either the exchange rate that will be used for the conversion of tender prices into that currency or a statement that the rate published by a specified financial institution and prevailing on a specified date will be used; (t) References to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found; (u) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the procurement proceedings without the intervention of an intermediary; (v) Notice of the right provided under article 64 of this Law to challenge or appeal decisions or actions taken by the procuring entity that are allegedly not in compliance with the provisions of this Law, together with information about the duration of the applicable standstill period and, if none will apply, a statement to that effect and the reasons therefor; (w) Any formalities that will be required, once a successful tender has been accepted, for a procurement contract to enter into force, including, where applicable, the execution of a written procurement contract and approval by another authority pursuant to article 22 of this Law, and the estimated period of time following the dispatch of the notice of acceptance that will be required to obtain the approval; (x) Any other requirements established by the procuring entity in conformity with this Law and the procurement regulations relating to the preparation and presentation of tenders and to other aspects of the procurement proceedings. 334 Baker & McKenzie

351 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL Section II. Presentation of tenders Article 40 Presentation of tenders 1. Tenders shall be presented in the manner, at the place and by the deadline specified in the solicitation documents. 2. (a) A tender shall be presented in writing, signed and: (i) If in paper form, in a sealed envelope; or (ii) If in any other form, according to the requirements specified by the procuring entity in the solicitation documents, which shall ensure at least a similar degree of authenticity, security, integrity and confidentiality; (b) The procuring entity shall provide to the supplier or contractor a receipt showing the date and time when its tender was received; (c) The procuring entity shall preserve the security, integrity and confidentiality of a tender and shall ensure that the content of the tender is examined only after it is opened in accordance with this Law. 3. A tender received by the procuring entity after the deadline for presenting tenders shall not be opened and shall be returned unopened to the supplier or contractor that presented it. Article 41 Period of effectiveness of tenders; modification and withdrawal of tenders 1. Tenders shall be in effect during the period of time specified in the solicitation documents. 2. (a) Prior to the expiry of the period of effectiveness of tenders, the procuring entity may request suppliers or contractors to extend the period for an additional specified period of time. A supplier or contractor may refuse the request without forfeiting its tender security; (b) Suppliers or contractors that agree to an extension of the period of effectiveness of their tenders shall extend or procure an extension of the period of effectiveness of tender securities provided by them or provide new tender securities to cover the extended period of effectiveness of their tenders. A supplier or contractor whose tender Baker & McKenzie 335

352 security is not extended, or that has not provided a new tender security, is considered to have refused the request to extend the period of effectiveness of its tender. 3. Unless otherwise stipulated in the solicitation documents, a supplier or contractor may modify or withdraw its tender prior to the deadline for presenting tenders without forfeiting its tender security. The modification or notice of withdrawal is effective if it is received by the procuring entity prior to the deadline for presenting tenders. Section III. Evaluation of tenders Article 42 Opening of tenders 1. Tenders shall be opened at the time specified in the solicitation documents as the deadline for presenting tenders. They shall be opened at the place and in accordance with the manner and procedures specified in the solicitation documents. 2. All suppliers or contractors that have presented tenders, or their representatives, shall be permitted by the procuring entity to participate in the opening of tenders. 3. The name and address of each supplier or contractor whose tender is opened and the tender price shall be announced to those persons present at the opening of tenders, communicated on request to suppliers or contractors that have presented tenders but that are not present or represented at the opening of tenders, and included immediately in the record of the procurement proceedings required by article 25 of this Law. Article 43 Examination and evaluation of tenders 1. (a) Subject to subparagraph (b) of this paragraph, the procuring entity shall regard a tender as responsive if it conforms to all requirements set out in the solicitation documents in accordance with article 10 of this Law; (b) The procuring entity may regard a tender as responsive even if it contains minor deviations that do not materially alter or depart from the characteristics, terms, conditions and other requirements set out in the solicitation documents or if it contains errors or oversights that can be corrected without touching on the substance of the 336 Baker & McKenzie

353 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL tender. Any such deviations shall be quantified, to the extent possible, and appropriately taken account of in the evaluation of tenders. 2. The procuring entity shall reject a tender: (a) If the supplier or contractor that presented the tender is not qualified; (b) If the supplier or contractor that presented the tender does not accept a correction of an arithmetical error made pursuant to article 16 of this Law; (c) If the tender is not responsive; (d) In the circumstances referred to in article 20 or 21 of this Law. 3. (a) The procuring entity shall evaluate the tenders that have not been rejected in order to ascertain the successful tender, as defined in subparagraph (b) of this paragraph, in accordance with the criteria and procedures set out in the solicitation documents. No criterion or procedure shall be used that has not been set out in the solicitation documents; (b) The successful tender shall be: (i) Where price is the only award criterion, the tender with the lowest tender price; or (ii) Where there are price and other award criteria, the most advantageous tender ascertained on the basis of the criteria and procedures for evaluating tenders specified in the solicitation documents in accordance with article 11 of this Law. 4. When tender prices are expressed in two or more currencies, for the purpose of evaluating and comparing tenders, the tender prices of all tenders shall be converted to the currency specified in the solicitation documents according to the rate set out in those documents, pursuant to subparagraph (s) of article 39 of this Law. 5. Whether or not it has engaged in pre-qualification proceedings pursuant to article 18 of this Law, the procuring entity may require the supplier or contractor presenting the tender that has been found to be the successful tender pursuant to paragraph 3 (b) of this article to demonstrate its qualifications again, in accordance with criteria and procedures conforming to the provisions of article 9 of this Law. The criteria and procedures to be used for such further demonstration shall be set out in Baker & McKenzie 337

354 the solicitation documents. Where pre-qualification proceedings have been engaged in, the criteria shall be the same as those used in the prequalification proceedings. 6. If the supplier or contractor presenting the successful tender is requested to demonstrate its qualifications again in accordance with paragraph 5 of this article but fails to do so, the procuring entity shall reject that tender and shall select the next successful tender from among those remaining in effect, in accordance with paragraph 3 of this article, subject to the right of the procuring entity to cancel the procurement in accordance with paragraph 1 of article 19 of this Law. Article 44 Prohibition of negotiations with suppliers or contractors No negotiations shall take place between the procuring entity and a supplier or contractor with respect to a tender presented by the supplier or contractor. Chapter IV. Procedures for restricted tendering, requests for quotations and requests for proposals without negotiation Article 45 Restricted tendering 1. The procuring entity shall solicit tenders in accordance with the provisions of paragraphs 1 and 5 of article 34 of this Law. 2. The provisions of chapter III of this Law, except for articles 36 to 38, shall apply to restricted-tendering proceedings. Article 46 Request for quotations 1. The procuring entity shall request quotations in accordance with the provisions of paragraph 2 of article 34 of this Law. Each supplier or contractor from which a quotation is requested shall be informed whether any elements other than the charges for the subject matter of the procurement itself, such as any applicable transportation and insurance charges, customs duties and taxes, are to be included in the price. 2. Each supplier or contractor is permitted to give only one price quotation and is not permitted to change its quotation. No negotiations shall take place between the procuring entity and a supplier or contractor with respect to a quotation presented by the supplier or contractor. 338 Baker & McKenzie

355 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL 3. The successful quotation shall be the lowest-priced quotation meeting the needs of the procuring entity as set out in the request for quotations. Article 47 Request for proposals without negotiation 1. The procuring entity shall solicit proposals by causing an invitation to participate in the request-for-proposals-without-negotiation proceedings to be published in accordance with paragraph 1 of article 35 of this Law, unless an exception provided for in that article applies. 2. The invitation shall include: (a) The name and address of the procuring entity; (b) A detailed description of the subject matter of the procurement, in conformity with article 10 of this Law, and the desired or required time and location for the provision of such subject matter; (c) The terms and conditions of the procurement contract, to the extent that they are already known to the procuring entity, and the form of the contract, if any, to be signed by the parties; (d) The criteria and procedures to be used for ascertaining the qualifications of suppliers or contractors and any documentary evidence or other information that must be presented by suppliers or contractors to demonstrate their qualifications, in conformity with article 9 of this Law; (e) The criteria and procedures for opening the proposals and for examining and evaluating the proposals in accordance with articles 10 and 11 of this Law, including the minimum requirements with respect to technical, quality and performance characteristics that proposals must meet in order to be considered responsive in accordance with article 10 of this Law, and a statement that proposals that fail to meet those requirements will be rejected as non-responsive; (f) A declaration pursuant to article 8 of this Law; (g) The means of obtaining the request for proposals and the place where it may be obtained; (h) The price, if any, to be charged by the procuring entity for the request for proposals; Baker & McKenzie 339

356 (i) If a price is to be charged for the request for proposals, the means and currency of payment; (j) The language or languages in which the request for proposals is available; (k) The manner, place and deadline for presenting proposals. 3. The procuring entity shall issue the request for proposals: (a) Where an invitation to participate in the request-for-proposalswithout-negotiation proceedings has been published in accordance with the provisions of paragraph 1 of article 35 of this Law, to each supplier or contractor responding to the invitation in accordance with the procedures and requirements specified therein; (b) In the case of pre-qualification, to each supplier or contractor prequalified in accordance with article 18 of this Law; (c) In the case of direct solicitation under paragraph 2 of article 35 of this Law, to each supplier or contractor selected by the procuring entity; that pays the price, if any, charged for the request for proposals. The price that the procuring entity may charge for the request for proposals shall reflect only the cost of providing it to suppliers or contractors. 4. The request for proposals shall include, in addition to the information referred to in subparagraphs (a) to (e) and (k) of paragraph 2 of this article, the following information: (a) Instructions for preparing and presenting proposals, including instructions to suppliers or contractors to present simultaneously to the procuring entity proposals in two envelopes: one envelope containing the technical, quality and performance characteristics of the proposal, and the other envelope containing the financial aspects of the proposal; (b) If suppliers or contractors are permitted to present proposals for only a portion of the subject matter of the procurement, a description of the portion or portions for which proposals may be presented; (c) The currency or currencies in which the proposal price is to be formulated and expressed, the currency that will be used for the purpose of evaluating proposals and either the exchange rate that will be used for the conversion of proposal prices into that currency 340 Baker & McKenzie

357 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL or a statement that the rate published by a specified financial institution and prevailing on a specified date will be used; (d) The manner in which the proposal price is to be formulated and expressed, including a statement as to whether the price is to cover elements other than the cost of the subject matter of the procurement itself, such as reimbursement for transportation, lodging, insurance, use of equipment, duties or taxes; (e) The means by which, pursuant to article 15 of this Law, suppliers or contractors may seek clarification of the request for proposals, and a statement as to whether the procuring entity intends to convene a meeting of suppliers or contractors at this stage; (f) References to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found; (g) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the procurement proceedings without the intervention of an intermediary; (h) Notice of the right provided under article 64 of this Law to challenge or appeal decisions or actions taken by the procuring entity that are allegedly not in compliance with the provisions of this Law, together with information about the duration of the applicable standstill period and, if none will apply, a statement to that effect and the reasons therefor; (i) Any formalities that will be required, once the successful proposal has been accepted, for a procurement contract to enter into force, including, where applicable, the execution of a written procurement contract and approval by another authority pursuant to article 22 of this Law, and the estimated period of time following the dispatch of the notice of acceptance that will be required to obtain the approval; (j) Any other requirements that may be established by the procuring entity in conformity with this Law and the procurement regulations relating to the preparation and presentation of proposals and to the procurement proceedings. Baker & McKenzie 341

358 5. Before opening the envelopes containing the financial aspects of the proposals, the procuring entity shall examine and evaluate the technical, quality and performance characteristics of proposals in accordance with the criteria and procedures specified in the request for proposals. 6. The results of the examination and evaluation of the technical, quality and performance characteristics of the proposals shall immediately be included in the record of the procurement proceedings. 7. The proposals whose technical, quality and performance characteristics fail to meet the relevant minimum requirements shall be considered to be non-responsive and shall be rejected on that ground. A notice of rejection and the reasons for the rejection, together with the unopened envelope containing the financial aspects of the proposal, shall promptly be dispatched to each respective supplier or contractor whose proposal was rejected. 8. The proposals whose technical, quality and performance characteristics meet or exceed the relevant minimum requirements shall be considered to be responsive. The procuring entity shall promptly communicate to each supplier or contractor presenting such a proposal the score of the technical, quality and performance characteristics of its respective proposal. The procuring entity shall invite all such suppliers or contractors to the opening of the envelopes containing the financial aspects of their proposals. 9. The score of the technical, quality and performance characteristics of each responsive proposal and the corresponding financial aspect of that proposal shall be read out in the presence of the suppliers or contractors invited, in accordance with paragraph 8 of this article, to the opening of the envelopes containing the financial aspects of the proposals. 10. The procuring entity shall compare the financial aspects of the responsive proposals and on that basis identify the successful proposal in accordance with the criteria and the procedure set out in the request for proposals. The successful proposal shall be the proposal with the best combined evaluation in terms of: (a) the criteria other than price specified in the request for proposals; and (b) the price. 342 Baker & McKenzie

359 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL Chapter V. Procedures for two-stage tendering, requests for proposals with dialogue, requests for proposals with consecutive negotiations, competitive negotiations and single-source procurement Article 48 Two-stage tendering 1. The provisions of chapter III of this Law shall apply to two-stagetendering proceedings, except to the extent that those provisions are derogated from in this article. 2. The solicitation documents shall call upon suppliers or contractors to present, in the first stage of two-stage-tendering proceedings, initial tenders containing their proposals without a tender price. The solicitation documents may solicit proposals relating to the technical, quality or performance characteristics of the subject matter of the procurement, as well as to contractual terms and conditions of supply and, where relevant, the professional and technical competence and qualifications of the suppliers or contractors. 3. The procuring entity may, in the first stage, engage in discussions with suppliers or contractors whose initial tenders have not been rejected pursuant to provisions of this Law concerning any aspect of their initial tenders. When the procuring entity engages in discussions with any supplier or contractor, it shall extend an equal opportunity to participate in discussions to all suppliers or contractors. 4. (a) In the second stage of two-stage-tendering proceedings, the procuring entity shall invite all suppliers or contractors whose initial tenders were not rejected in the first stage to present final tenders with prices in response to a revised set of terms and conditions of the procurement; (b) In revising the relevant terms and conditions of the procurement, the procuring entity may not modify the subject matter of the procurement but may refine aspects of the description of the subject matter of the procurement by: (i) Deleting or modifying any aspect of the technical, quality or performance characteristics of the subject matter of the procurement initially provided and adding any new characteristics that conform to the requirements of this Law; Baker & McKenzie 343

360 (ii) Deleting or modifying any criterion for examining or evaluating tenders initially provided and adding any new criterion that conforms to the requirements of this Law, only to the extent that the deletion, modification or addition is required as a result of changes made in the technical, quality or performance characteristics of the subject matter of the procurement; (c) Any deletion, modification or addition made pursuant to subparagraph (b) of this paragraph shall be communicated to suppliers or contractors in the invitation to present final tenders; (d) A supplier or contractor not wishing to present a final tender may withdraw from the tendering proceedings without forfeiting any tender security that the supplier or contractor may have been required to provide; (e) The final tenders shall be evaluated in order to ascertain the successful tender as defined in paragraph 3 (b) of article 43 of this Law. Article 49 Request for proposals with dialogue 1. The procuring entity shall solicit proposals by causing an invitation to participate in the request-for-proposals-with-dialogue proceedings to be published in accordance with paragraph 1 of article 35 of this Law, unless an exception provided for in that article applies. 2. The invitation shall include: (a) The name and address of the procuring entity; (b) A description of the subject matter of the procurement, to the extent known, and the desired or required time and location for the provision of such subject matter; (c) The terms and conditions of the procurement contract, to the extent that they are already known to the procuring entity, and the form of the contract, if any, to be signed by the parties; (d) The intended stages of the procedure; (e) The criteria and procedures to be used for ascertaining the qualifications of suppliers or contractors and any documentary evidence or other information that must be presented by suppliers or 344 Baker & McKenzie

361 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL contractors to demonstrate their qualifications, in conformity with article 9 of this Law; (f) The minimum requirements that proposals must meet in order to be considered responsive in accordance with article 10 of this Law and a statement that proposals that fail to meet those requirements will be rejected as non-responsive; (g) A declaration pursuant to article 8 of this Law; (h) The means of obtaining the request for proposals and the place where it may be obtained; (i) The price, if any, to be charged by the procuring entity for the request for proposals; (j) If a price is to be charged for the request for proposals, the means and currency of payment; (k) The language or languages in which the request for proposals is available; (l) The manner, place and deadline for presenting proposals. 3. For the purpose of limiting the number of suppliers or contractors from which to request proposals, the procuring entity may engage in preselection proceedings. The provisions of article 18 of this Law shall apply mutatis mutandis to the pre-selection proceedings, except to the extent that those provisions are derogated from in this paragraph: (a) The procuring entity shall specify in the pre-selection documents that it will request proposals from only a limited number of preselected suppliers or contractors that best meet the qualification criteria specified in the pre-selection documents; (b) The pre-selection documents shall set out the maximum number of pre-selected suppliers or contractors from which the proposals will be requested and the manner in which the selection of that number will be carried out. In establishing such a limit, the procuring entity shall bear in mind the need to ensure effective competition; (c) The procuring entity shall rate the suppliers or contractors that meet the criteria specified in the pre-selection documents according to the manner of rating that is set out in the invitation to pre-selection and the pre-selection documents; Baker & McKenzie 345

362 (d) The procuring entity shall pre-select suppliers or contractors that acquired the best rating, up to the maximum number indicated in the pre-selection documents but at least three, if possible; (e) The procuring entity shall promptly notify each supplier or contractor whether it has been pre-selected and shall, upon request, communicate to suppliers or contractors that have not been preselected the reasons therefor. It shall make available to any person, upon request, the names of all suppliers or contractors that have been pre-selected. 4. The procuring entity shall issue the request for proposals: (a) Where an invitation to participate in the request-for-proposals-withdialogue proceedings has been published in accordance with the provisions of paragraph 1 of article 35 of this Law, to each supplier or contractor responding to the invitation in accordance with the procedures and requirements specified therein; (b) In the case of pre-qualification, to each supplier or contractor prequalified in accordance with article 18 of this Law; (c) Where pre-selection proceedings have been engaged in, to each preselected supplier or contractor in accordance with the procedures and requirements specified in the pre-selection documents; (d) In the case of direct solicitation under paragraph 2 of article 35 of this Law, to each supplier or contractor selected by the procuring entity; that pays the price, if any, charged for the request for proposals. The price that the procuring entity may charge for the request for proposals shall reflect only the cost of providing it to suppliers or contractors. 5. The request for proposals shall include, in addition to the information referred to in paragraphs 2 (a) to (f) and (l) of this article, the following information: (a) Instructions for preparing and presenting proposals; (b) If suppliers or contractors are permitted to present proposals for only a portion of the subject matter of the procurement, a description of the portion or portions for which proposals may be presented; (c) The currency or currencies in which the proposal price is to be formulated and expressed, the currency that will be used for the 346 Baker & McKenzie

363 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL purpose of evaluating proposals and either the exchange rate that will be used for the conversion of proposal prices into that currency or a statement that the rate published by a specified financial institution and prevailing on a specified date will be used; (d) The manner in which the proposal price is to be formulated and expressed, including a statement as to whether the price is to cover elements other than the cost of the subject matter of the procurement itself, such as reimbursement for transportation, lodging, insurance, use of equipment, duties or taxes; (e) The means by which, pursuant to article 15 of this Law, suppliers or contractors may seek clarification of the request for proposals and a statement as to whether the procuring entity intends to convene a meeting of suppliers or contractors at this stage; (f) Any element of the description of the subject matter of the procurement or term or condition of the procurement contract that will not be the subject of dialogue during the procedure; (g) Where the procuring entity intends to limit the number of suppliers or contractors that it will invite to participate in the dialogue, the minimum number of suppliers or contractors, which shall be not lower than three, if possible, and, where appropriate, the maximum number of suppliers or contractors and the criteria and procedure, in conformity with the provisions of this Law, that will be followed in selecting either number; (h) The criteria and procedure for evaluating the proposals in accordance with article 11 of this Law; (i) References to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found; (j) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the procurement proceedings without the intervention of an intermediary; Baker & McKenzie 347

364 (k) Notice of the right provided under article 64 of this Law to challenge or appeal decisions or actions taken by the procuring entity that are allegedly not in compliance with the provisions of this Law, together with information about the duration of the applicable standstill period and, if none will apply, a statement to that effect and the reasons therefor; (l) Any formalities that will be required, once the successful offer has been accepted, for a procurement contract to enter into force, including, where applicable, the execution of a written procurement contract and approval by another authority pursuant to article 22 of this Law, and the estimated period of time following dispatch of the notice of acceptance that will be required to obtain the approval; (m) Any other requirements that may be established by the procuring entity in conformity with this Law and the procurement regulations relating to the preparation and presentation of proposals and to the procurement proceedings. 6. (a) The procuring entity shall examine all proposals received against the established minimum requirements and shall reject each proposal that fails to meet these minimum requirements on the ground that it is non-responsive; (b) Where a maximum limit on the number of suppliers or contractors that can be invited to participate in the dialogue has been established and the number of responsive proposals exceeds that limit, the procuring entity shall select the maximum number of responsive proposals in accordance with the criteria and procedure specified in the request for proposals; (c) A notice of rejection and the reasons for the rejection shall be promptly dispatched to each respective supplier or contractor whose proposal was rejected. 7. The procuring entity shall invite each supplier or contractor that presented a responsive proposal, within any applicable maximum, to participate in the dialogue. The procuring entity shall ensure that the number of suppliers or contractors invited to participate in the dialogue, which shall be at least three, if possible, is sufficient to ensure effective competition. 8. The dialogue shall be conducted by the same representatives of the procuring entity on a concurrent basis. 348 Baker & McKenzie

365 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL 9. During the course of the dialogue, the procuring entity shall not modify the subject matter of the procurement, any qualification or evaluation criterion, any minimum requirements established pursuant to paragraph 2 (f) of this article, any element of the description of the subject matter of the procurement or any term or condition of the procurement contract that is not subject to the dialogue as specified in the request for proposals. 10. Any requirements, guidelines, documents, clarifications or other information generated during the dialogue that is communicated by the procuring entity to a supplier or contractor shall be communicated at the same time and on an equal basis to all other participating suppliers or contractors, unless such information is specific or exclusive to that supplier or contractor or such communication would be in breach of the confidentiality provisions of article 24 of this Law. 11. Following the dialogue, the procuring entity shall request all suppliers or contractors remaining in the proceedings to present a best and final offer with respect to all aspects of their proposals. The request shall be in writing and shall specify the manner, place and deadline for presenting best and final offers. 12. No negotiations shall take place between the procuring entity and suppliers or contractors with respect to their best and final offers. 13. The successful offer shall be the offer that best meets the needs of the procuring entity as determined in accordance with the criteria and procedure for evaluating the proposals set out in the request for proposals. Article 50 Request for proposals with consecutive negotiations 1. The provisions of paragraphs 1 to 7 of article 47 of this Law shall apply mutatis mutandis to procurement conducted by means of request for proposals with consecutive negotiations, except to the extent that those provisions are derogated from in this article. 2. Proposals whose technical, quality and performance characteristics meet or exceed the relevant minimum requirements shall be considered to be responsive. The procuring entity shall rank each responsive proposal in accordance with the criteria and procedure for evaluating proposals as set out in the request for proposals and shall: Baker & McKenzie 349

366 (a) Promptly communicate to each supplier or contractor presenting a responsive proposal the score of the technical, quality and performance characteristics of its respective proposal and its ranking; (b) Invite the supplier or contractor that has attained the best ranking, in accordance with those criteria and procedure, for negotiations on the financial aspects of its proposal; and (c) Inform other suppliers or contractors that presented responsive proposals that their proposals may be considered for negotiation if negotiations with the supplier (or suppliers) or contractor (or contractors) with a better ranking do not result in a procurement contract. 3. If it becomes apparent to the procuring entity that the negotiations with the supplier or contractor invited pursuant to paragraph 2 (b) of this article will not result in a procurement contract, the procuring entity shall inform that supplier or contractor that it is terminating the negotiations. 4. The procuring entity shall then invite for negotiations the supplier or contractor that attained the second-best ranking; if the negotiations with that supplier or contractor do not result in a procurement contract, the procuring entity shall invite the other suppliers or contractors still participating in the procurement proceedings for negotiations on the basis of their ranking until it arrives at a procurement contract or rejects all remaining proposals. 5. During the course of the negotiations, the procuring entity shall not modify the subject matter of the procurement; any qualification, examination or evaluation criterion, including any established minimum requirements; any element of the description of the subject matter of the procurement; or term or condition of the procurement contract other than financial aspects of proposals that are subject to the negotiations as specified in the request for proposals. 6. The procuring entity may not reopen negotiations with any supplier or contractor with which it has terminated negotiations. 350 Baker & McKenzie

367 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL Article 51 Competitive negotiations 1. Paragraphs 3, 5 and 6 of article 34 of this Law shall apply to the procedure preceding the negotiations. 2. Any requirements, guidelines, documents, clarifications or other information relative to the negotiations that is communicated by the procuring entity to a supplier or contractor before or during the negotiations shall be communicated at the same time and on an equal basis to all other suppliers or contractors engaging in negotiations with the procuring entity relative to the procurement, unless such information is specific or exclusive to that supplier or contractor or such communication would be in breach of the confidentiality provisions of article 24 of this Law. 3. Following completion of negotiations, the procuring entity shall request all suppliers or contractors remaining in the proceedings to present, by a specified date, a best and final offer with respect to all aspects of their proposals. 4. No negotiations shall take place between the procuring entity and suppliers or contractors with respect to their best and final offers. 5. The successful offer shall be the offer that best meets the needs of the procuring entity. Article 52 Single-source procurement Paragraphs 4 to 6 of article 34 of this Law shall apply to the procedure preceding the solicitation of a proposal or price quotation from a single supplier or contractor. The procuring entity shall engage in negotiations with the supplier or contractor from which a proposal or price quotation is solicited unless such negotiations are not feasible in the circumstances of the procurement concerned. Baker & McKenzie 351

368 Chapter VI. Electronic reverse auctions Article 53 Electronic reverse auction as a stand-alone method of procurement 1. The procuring entity shall solicit bids by causing an invitation to the electronic reverse auction to be published in accordance with article 33 of this Law. The invitation shall include: (a) The name and address of the procuring entity; (b) A detailed description of the subject matter of the procurement, in conformity with article 10 of this Law, and the desired or required time and location for the provision of such subject matter; (c) The terms and conditions of the procurement contract, to the extent they are already known to the procuring entity, and the form of the contract, if any, to be signed by the parties; (d) A declaration pursuant to article 8 of this Law; (e) The criteria and procedures to be used for ascertaining the qualifications of suppliers or contractors and any documentary evidence or other information that must be presented by suppliers or contractors to demonstrate their qualifications in conformity with article 9 of this Law; (f) The criteria and procedure for examining bids against the description of the subject matter of the procurement; (g) The criteria and procedure for evaluating bids in accordance with article 11 of this Law, including any mathematical formula that will be used in the evaluation procedure during the auction; (h) The manner in which the bid price is to be formulated and expressed, including a statement as to whether the price is to cover elements other than the cost of the subject matter of the procurement itself, such as any applicable transportation and insurance charges, customs duties and taxes; (i) The currency or currencies in which the bid price is to be formulated and expressed; (j) The minimum number of suppliers or contractors required to register for the auction in order for the auction to be held, which shall be sufficient to ensure effective competition; 352 Baker & McKenzie

369 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (k) [If any limit on the number of suppliers or contractors that can be registered for the auction is imposed in accordance with paragraph 2 of this article, the relevant maximum number and the criteria and procedure, in conformity with paragraph 2 of this article, that will be followed in selecting it;] (l) How the auction can be accessed, including appropriate information regarding connection to the auction; (m) The deadline by which suppliers or contractors must register for the auction and the requirements for registration; (n) The date and time of the opening of the auction and the requirements for identification of bidders at the opening of the auction; (o) The criteria governing the closing of the auction; (p) Other rules for the conduct of the auction, including the information that will be made available to the bidders in the course of the auction, the language in which it will be made available and the conditions under which the bidders will be able to bid; (q) References to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found; (r) The means by which suppliers or contractors may seek clarification of information relating to the procurement proceedings; (s) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the procurement proceedings before and after the auction without the intervention of an intermediary; (t) Notice of the right provided under article 64 of this Law to challenge or appeal decisions or actions taken by the procuring entity that are allegedly not in compliance with the provisions of this Law, together with information about the duration of the applicable standstill period and, if none will apply, a statement to that effect and the reasons therefor; Baker & McKenzie 353

370 (u) Any formalities that will be required after the auction for a procurement contract to enter into force, including, where applicable, ascertainment of qualifications or responsiveness in accordance with article 57 of this Law and the execution of a written procurement contract pursuant to article 22 of this Law; (v) Any other requirements established by the procuring entity in conformity with this Law and the procurement regulations relating to the procurement proceedings. 2. [The procuring entity may impose a maximum limit on the number of suppliers or contractors that can be registered for the electronic reverse auction only to the extent that capacity constraints in its communications system so require, and shall select the suppliers or contractors to be so registered in a non-discriminatory manner. The procuring entity shall include a statement of the reasons and circumstances upon which it relied to justify the imposition of such a maximum limit in the record required under article 25 of this Law.] 3. The procuring entity may decide, in the light of the circumstances of the given procurement, that the electronic reverse auction shall be preceded by an examination or evaluation of initial bids. In such case, the invitation to the auction shall, in addition to information listed in paragraph 1 of this article, include: (a) An invitation to present initial bids, together with instructions for preparing initial bids; (b) The manner, place and deadline for presenting initial bids. 4. Where the electronic reverse auction has been preceded by an examination or evaluation of initial bids, the procuring entity shall promptly after the completion of the examination or evaluation of initial bids: (a) Dispatch the notice of rejection and reasons for rejection to each supplier or contractor whose initial bid was rejected; (b) Issue an invitation to the auction to each qualified supplier or contractor whose initial bid is responsive, providing all information required to participate in the auction; (c) Where an evaluation of initial bids has taken place, each invitation to the auction shall also be accompanied by the outcome of the 354 Baker & McKenzie

371 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL evaluation, as relevant to the supplier or contractor to which the invitation is addressed. Article 54 Electronic reverse auction as a phase preceding the award of the procurement contract 1. Where an electronic reverse auction is to be used as a phase preceding the award of the procurement contract in a procurement method, as appropriate, or in a framework agreement procedure with second-stage competition, the procuring entity shall notify suppliers or contractors when first soliciting their participation in the procurement proceedings that an auction will be held, and shall provide, in addition to other information required to be included under provisions of this Law, the following information about the auction: (a) The mathematical formula that will be used in the evaluation procedure during the auction; (b) How the auction can be accessed, including appropriate information regarding connection to the auction. 2. Before the electronic reverse auction is held, the procuring entity shall issue an invitation to the auction to all suppliers or contractors remaining in the proceedings, specifying: (a) The deadline by which the suppliers or contractors must register for the auction and requirements for registration; (b) The date and time of the opening of the auction and requirements for the identification of bidders at the opening of the auction; (c) Criteria governing the closing of the auction; (d) Other rules for the conduct of the auction, including the information that will be made available to the bidders during the auction and the conditions under which the bidders will be able to bid. 3. Where an evaluation of initial bids has taken place, each invitation to the auction shall also be accompanied by the outcome of the evaluation as relevant to the supplier or contractor to which the invitation is addressed. Baker & McKenzie 355

372 Article 55 Registration for the electronic reverse auction and the timing of the holding of the auction 1. Confirmation of registration for the electronic reverse auction shall be communicated promptly to each registered supplier or contractor. 2. If the number of suppliers or contractors registered for the electronic reverse auction is insufficient to ensure effective competition, the procuring entity may cancel the auction. The cancellation of the auction shall be communicated promptly to each registered supplier or contractor. 3. The period of time between the issuance of the invitation to the electronic reverse auction and the auction shall be sufficiently long to allow suppliers or contractors to prepare for the auction, taking into account the reasonable needs of the procuring entity. Article 56 Requirements during the electronic reverse auction 1. The electronic reverse auction shall be based on: (a) Price, where the procurement contract is to be awarded to the lowest-priced bid; or (b) Price and other criteria specified to suppliers or contractors under articles 53 and 54 of this Law, as applicable, where the procurement contract is to be awarded to the most advantageous bid. 2. During the auction: (a) All bidders shall have an equal and continuous opportunity to present their bids; (b) There shall be automatic evaluation of all bids in accordance with the criteria, procedure and formula provided to suppliers or contractors under articles 53 and 54 of this Law, as applicable; (c) Each bidder must receive, instantaneously and on a continuous basis during the auction, sufficient information allowing it to determine the standing of its bid vis-à-vis other bids; (d) There shall be no communication between the procuring entity and the bidders or among the bidders, other than as provided for in subparagraphs (a) and (c) of this paragraph. 356 Baker & McKenzie

373 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL 3. The procuring entity shall not disclose the identity of any bidder during the auction. 4. The auction shall be closed in accordance with the criteria specified to suppliers or contractors under articles 53 and 54 of this Law, as applicable. 5. The procuring entity shall suspend or terminate the auction in the case of failures in its communication system that put at risk the proper conduct of the auction or for other reasons stipulated in the rules for the conduct of the auction. The procuring entity shall not disclose the identity of any bidder in the case of suspension or termination of the auction. Article 57 Requirements after the electronic reverse auction 1. The bid that at the closure of the electronic reverse auction is the lowestpriced bid or the most advantageous bid, as applicable, shall be the successful bid. 2. In procurement by means of an auction that was not preceded by examination or evaluation of initial bids, the procuring entity shall ascertain after the auction the responsiveness of the successful bid and the qualifications of the supplier or contractor submitting it. The procuring entity shall reject that bid if it is found to be unresponsive or if the supplier or contractor submitting it is found unqualified. Without prejudice to the right of the procuring entity to cancel the procurement in accordance with paragraph 1 of article 19 of this Law, the procuring entity shall select the bid that was the next lowest-priced or next most advantageous bid at the closure of the auction, provided that that bid is ascertained to be responsive and the supplier or contractor submitting it is ascertained to be qualified. 3. Where the successful bid at the closure of the auction appears to the procuring entity to be abnormally low and gives rise to concerns on the part of the procuring entity as to the ability of the bidder that presented it to perform the procurement contract, the procuring entity may follow the procedures described in article 20 of this Law. If the procuring entity rejects the bid as abnormally low under article 20, it shall select the bid that at the closure of the auction was the next lowest-priced or next most advantageous bid. This provision is without prejudice to the right of the procuring entity to cancel the procurement in accordance with paragraph 1 of article 19 of this Law. Baker & McKenzie 357

374 Chapter VII. Framework agreement procedures Article 58 Award of a closed framework agreement 1. The procuring entity shall award a closed framework agreement: (a) By means of open-tendering proceedings, in accordance with provisions of chapter III of this Law, except to the extent that those provisions are derogated from in this chapter; or (b) By means of other procurement methods, in accordance with the relevant provisions of chapters II, IV and V of this Law, except to the extent that those provisions are derogated from in this chapter. 2. The provisions of this Law regulating pre-qualification and the contents of the solicitation in the context of the procurement methods referred to in paragraph 1 of this article shall apply mutatis mutandis to the information to be provided to suppliers or contractors when first soliciting their participation in a closed framework agreement procedure. The procuring entity shall in addition specify at that stage: (a) That the procurement will be conducted as a framework agreement procedure, leading to a closed framework agreement; (b) Whether the framework agreement is to be concluded with one or more than one supplier or contractor; (c) If the framework agreement will be concluded with more than one supplier or contractor, any minimum or maximum limit on the number of suppliers or contractors that will be parties thereto; (d) The form, terms and conditions of the framework agreement in accordance with article 59 of this Law. 3. The provisions of article 22 of this Law shall apply mutatis mutandis to the award of a closed framework agreement. Article 59 Requirements for closed framework agreements 1. A closed framework agreement shall be concluded in writing and shall set out: (a) The duration of the framework agreement, which shall not exceed the maximum duration established by the procurement regulations; 358 Baker & McKenzie

375 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (b) The description of the subject matter of the procurement and all other terms and conditions of the procurement established when the framework agreement is concluded; (c) To the extent that they are known, estimates of the terms and conditions of the procurement that cannot be established with sufficient precision when the framework agreement is concluded; (d) Whether, in a closed framework agreement concluded with more than one supplier or contractor, there will be a second-stage competition to award a procurement contract under the framework agreement and, if so: (i) A statement of the terms and conditions of the procurement that are to be established or refined through second-stage competition; (ii) The procedures for and the anticipated frequency of any second-stage competition, and envisaged deadlines for presenting second-stage submissions; (iii) The procedures and criteria to be applied during the secondstage competition, including the relative weight of such criteria and the manner in which they will be applied, in accordance with articles 10 and 11 of this Law. If the relative weights of the evaluation criteria may be varied during the second-stage competition, the framework agreement shall specify the permissible range; (e) Whether the award of a procurement contract under the framework agreement will be to the lowest-priced or to the most advantageous submission; and (f) The manner in which the procurement contract will be awarded. 2. A closed framework agreement with more than one supplier or contractor shall be concluded as one agreement between all parties unless: (a) The procuring entity determines that it is in the interests of a party to the framework agreement that a separate agreement with any supplier or contractor party be concluded; Baker & McKenzie 359

376 (b) The procuring entity includes in the record required under article 25 of this Law a statement of the reasons and circumstances on which it relied to justify the conclusion of separate agreements; and (c) Any variation in the terms and conditions of the separate agreements for a given procurement is minor and concerns only those provisions that justify the conclusion of separate agreements. 3. The framework agreement shall contain, in addition to information specified elsewhere in this article, all information necessary to allow the effective operation of the framework agreement, including information on how the agreement and notifications of forthcoming procurement contracts thereunder can be accessed and appropriate information regarding connection, where applicable. Article 60 Establishment of an open framework agreement 1. The procuring entity shall establish and maintain an open framework agreement online. 2. The procuring entity shall solicit participation in the open framework agreement by causing an invitation to become a party to the open framework agreement to be published following the requirements of article 33 of this Law. 3. The invitation to become a party to the open framework agreement shall include the following information: (a) The name and address of the procuring entity establishing and maintaining the open framework agreement and the name and address of any other procuring entities that will have the right to award procurement contracts under the framework agreement; (b) That the procurement will be conducted as a framework agreement procedure leading to an open framework agreement; (c) The language (or languages) of the open framework agreement and all information about the operation of the agreement, including how the agreement and notifications of forthcoming procurement contracts thereunder can be accessed and appropriate information regarding connection; (d) The terms and conditions for suppliers or contractors to be admitted to the open framework agreement, including: 360 Baker & McKenzie

377 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (i) A declaration pursuant to article 8 of this Law; (ii) [If any maximum limit on the number of suppliers or contractors that are parties to the open framework agreement is imposed in accordance with paragraph 7 of this article, the relevant number and the criteria and procedure, in conformity with paragraph 7 of this article, that will be followed in selecting it;] (iii) Instructions for preparing and presenting the indicative submissions necessary to become a party to the open framework agreement, including the currency or currencies and the language (or languages) to be used, as well as the criteria and procedures to be used for ascertaining the qualifications of suppliers or contractors and any documentary evidence or other information that must be presented by suppliers or contractors to demonstrate their qualifications in conformity with article 9 of this Law; (iv) An explicit statement that suppliers or contractors may apply to become parties to the framework agreement at any time during the period of its operation by presenting indicative submissions, subject to any maximum limit on the number of suppliers or contractors and any declaration made pursuant to article 8 of this Law; (e) Other terms and conditions of the open framework agreement, including all information required to be set out in the open framework agreement in accordance with article 61 of this Law; (f) References to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found; (g) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the procurement proceedings without the intervention of an intermediary. 4. Suppliers or contractors may apply to become a party or parties to the framework agreement at any time during its operation by presenting Baker & McKenzie 361

378 indicative submissions to the procuring entity in compliance with the requirements of the invitation to become a party to the open framework agreement. 5. The procuring entity shall examine all indicative submissions received during the period of operation of the framework agreement within a maximum of working days [the enacting State specifies the maximum period of time], in accordance with the procedures set out in the invitation to become a party to the open framework agreement. 6. The framework agreement shall be concluded with all qualified suppliers or contractors that presented submissions unless their submissions have been rejected on the grounds specified in the invitation to become a party to the open framework agreement. 7. [The procuring entity may impose a maximum limit on the number of parties to the open framework agreement only to the extent that capacity limitations in its communications system so require, and shall select the suppliers or contractors to be parties to the open framework agreement in a non-discriminatory manner. The procuring entity shall include in the record required under article 25 of this Law a statement of the reasons and circumstances upon which it relied to justify the imposition of such a maximum limit.] 8. The procuring entity shall promptly notify the suppliers or contractors whether they have become parties to the framework agreement and of the reasons for the rejection of their indicative submissions if they have not. Article 61 Requirements for open framework agreements 1. An open framework agreement shall provide for second-stage competition for the award of a procurement contract under the agreement and shall include: (a) The duration of the framework agreement; (b) The description of the subject matter of the procurement and all other terms and conditions of the procurement known when the open framework agreement is established; (c) Any terms and conditions of the procurement that may be refined through second-stage competition; 362 Baker & McKenzie

379 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL (d) The procedures and the anticipated frequency of second-stage competition; (e) Whether the award of procurement contracts under the framework agreement will be to the lowest-priced or the most advantageous submission; (f) The procedures and criteria to be applied during the second-stage competition, including the relative weight of the evaluation criteria and the manner in which they will be applied, in accordance with articles 10 and 11 of this Law. If the relative weights of the evaluation criteria may be varied during second-stage competition, the framework agreement shall specify the permissible range. 2. The procuring entity shall, during the entire period of operation of the open framework agreement, republish at least annually the invitation to become a party to the open framework agreement and shall in addition ensure unrestricted, direct and full access to the terms and conditions of the framework agreement and to any other necessary information relevant to its operation. Article 62 Second stage of a framework agreement procedure 1. Any procurement contract under a framework agreement shall be awarded in accordance with the terms and conditions of the framework agreement and the provisions of this article. 2. A procurement contract under a framework agreement may be awarded only to a supplier or contractor that is a party to the framework agreement. 3. The provisions of article 22 of this Law, except for paragraph 2, shall apply to the acceptance of the successful submission under a framework agreement without second-stage competition. 4. In a closed framework agreement with second-stage competition and in an open framework agreement, the following procedures shall apply to the award of a procurement contract: (a) The procuring entity shall issue a written invitation to present submissions, simultaneously to: (i) Each supplier or contractor party to the framework agreement; or Baker & McKenzie 363

380 (ii) Only to those suppliers or contractors parties to the framework agreement then capable of meeting the needs of that procuring entity in the subject matter of the procurement, provided that at the same time notice of the second-stage competition is given to all parties to the framework agreement so that they have the opportunity to participate in the second-stage competition; (b) The invitation to present submissions shall include the following information: (i) A restatement of the existing terms and conditions of the framework agreement to be included in the anticipated procurement contract, a statement of the terms and conditions of the procurement that are to be subject to second-stage competition and further detail regarding those terms and conditions, where necessary; (ii) A restatement of the procedures and criteria for the award of the anticipated procurement contract, including their relative weight and the manner of their application; (iii) Instructions for preparing submissions; (iv) The manner, place and deadline for presenting submissions; (v) If suppliers or contractors are permitted to present submissions for only a portion of the subject matter of the procurement, a description of the portion or portions for which submissions may be presented; (vi) The manner in which the submission price is to be formulated and expressed, including a statement as to whether the price is to cover elements other than the cost of the subject matter of the procurement itself, such as any applicable transportation and insurance charges, customs duties and taxes; (vii) Reference to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found; (viii) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive 364 Baker & McKenzie

381 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL communications directly from suppliers or contractors in connection with the second-stage competition without the intervention of an intermediary; (ix) Notice of the right provided under article 64 of this Law to challenge or appeal decisions or actions taken by the procuring entity that are allegedly not in compliance with the provisions of this Law, together with information about the duration of the applicable standstill period and, if none will apply, a statement to that effect and the reasons therefor; (x) Any formalities that will be required once a successful submission has been accepted for a procurement contract to enter into force, including, where applicable, the execution of a written procurement contract pursuant to article 22 of this Law; (xi) Any other requirements established by the procuring entity in conformity with this Law and the procurement regulations relating to the preparation and presentation of submissions and to other aspects of the second-stage competition; (c) The procuring entity shall evaluate all submissions received and determine the successful submission in accordance with the evaluation criteria and the procedures set out in the invitation to present submissions; (d) The procuring entity shall accept the successful submission in accordance with article 22 of this Law. Article 63 Changes during the operation of a framework agreement During the operation of a framework agreement, no change shall be allowed to the description of the subject matter of the procurement. Changes to other terms and conditions of the procurement, including to the criteria (and their relative weight and the manner of their application) and procedures for the award of the anticipated procurement contract, may occur only to the extent expressly permitted in the framework agreement. Baker & McKenzie 365

382 Article 64 Right to challenge and appeal Chapter VIII. Challenge proceedings 4 1. A supplier or contractor that claims to have suffered or claims that it may suffer loss or injury because of the alleged non-compliance of a decision or action of the procuring entity with the provisions of this Law may challenge the decision or action concerned. 2. Challenge proceedings may be made by way of [an application for reconsideration to the procuring entity under article 66 of this Law, an application for review to the [name of the independent body] under article 67 of this Law or an application or appeal to the [name of the court or courts]]. 3. [A supplier or contractor may appeal any decision taken in challenge proceedings under article 66 or 67 of this Law in the [name of the court or courts]]. Article 65 Effect of a challenge 1. The procuring entity shall not take any step that would bring into force a procurement contract or framework agreement in the procurement proceedings concerned: (a) Where it receives an application for reconsideration within the time limits specified in paragraph 2 of article 66; (b) Where it receives notice of an application for review from the [name of the independent body] under paragraph 5 (b) of article 67; or (c) Where it receives notice of an application or of an appeal from the [name of the court or courts]. 2. The prohibition referred to in paragraph 1 shall lapse working days [the enacting State specifies the period] after the decision of the procuring entity, the [name of the independent body] or the [name of the court or courts] has been communicated to the applicant or appellant, as 4 Certain options are presented in this Chapter in square brackets. See the Guide to Enactment of the UNCITRAL Model Law on Public Procurement (A/CN.9/ ) for guidance on those options. 366 Baker & McKenzie

383 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL the case may be, to the procuring entity, where applicable, and to all other participants in the challenge proceedings. 3. (a) The procuring entity may at any time request the [name of the independent body] or the [name of the court or courts] to authorize it to enter into the procurement contract or framework agreement on the ground that urgent public interest considerations so justify; (b) The [name of the independent body], upon consideration of such a request [, or of its own motion,] may authorize the procuring entity to enter into the procurement contract or framework agreement where it is satisfied that urgent public interest considerations so justify. The decision of the [name of the independent body] and the reasons therefor shall be made part of the record of the procurement proceedings, and shall promptly be communicated to the procuring entity, to the applicant, to all other participants in the challenge proceedings and to all other participants in the procurement proceedings. Article 66 Application for reconsideration before the procuring entity 1. A supplier or contractor may apply to the procuring entity for a reconsideration of a decision or an action taken by the procuring entity in the procurement proceedings. 2. Applications for reconsideration shall be submitted to the procuring entity in writing within the following time periods: (a) Applications for reconsideration of the terms of solicitation, prequalification or pre-selection or decisions or actions taken by the procuring entity in pre-qualification or pre-selection proceedings shall be submitted prior to the deadline for presenting submissions; (b) Applications for reconsideration of other decisions or actions taken by the procuring entity in the procurement proceedings shall be submitted within the standstill period applied pursuant to paragraph 2 of article 22 of this Law, or, where none has been applied, prior to the entry into force of the procurement contract or the framework agreement. 3. Promptly after receipt of the application, the procuring entity shall publish a notice of the application and shall, not later than three (3) working days after receipt of the application: Baker & McKenzie 367

384 (a) Decide whether the application shall be entertained or dismissed and, if it is to be entertained, whether the procurement proceedings shall be suspended. The procuring entity may dismiss the application if it decides that the application is manifestly without merit, the application was not submitted within the deadlines set out in paragraph 2 of this article or the applicant is without standing. Such a dismissal constitutes a decision on the application; (b) Notify all participants in the procurement proceedings to which the application relates about the submission of the application and its substance; (c) Notify the applicant and all other participants in the procurement proceedings of its decision on whether the application is to be entertained or dismissed; (i) If the application is to be entertained, the procuring entity shall in addition advise whether the procurement proceedings are suspended and, if so, the duration of the suspension; (ii) If the application is to be dismissed or the procurement proceedings are not suspended, the procuring entity shall in addition advise the applicant of the reasons for its decision. 4. If the procuring entity does not give notice to the applicant as required in paragraphs 3 (c) and 8 of this article within the time-limit specified in paragraph 3 of this article, or if the applicant is dissatisfied with the decision so notified, the applicant may immediately thereafter commence proceedings [in the [name of the independent body] under article 67 of this Law or in the [name of the court or courts]]. Where such proceedings are commenced, the competence of the procuring entity to entertain the application ceases. 5. In taking its decision on an application that it has entertained, the procuring entity may overturn, correct, vary or uphold any decision or action taken in the procurement proceedings to which the application relates. 6. The decision of the procuring entity under paragraph 5 of this article shall be issued within working days [the enacting State specifies the period] after receipt of the application. The procuring entity shall immediately thereafter communicate the decision to the applicant, to all other participants in the challenge proceedings and to all other participants in the procurement proceedings. 368 Baker & McKenzie

385 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL 7. If the procuring entity does not communicate its decision to the applicant in accordance with the requirements of paragraphs 6 and 8 of this article, the applicant is entitled immediately thereafter to commence proceedings [in the [name of the independent body] under article 67 of this Law or in the [name of the court or courts]]. Where such proceedings are commenced, the competence of the procuring entity to entertain the application ceases. 8. All decisions of the procuring entity under this article shall be in writing, shall state the action taken and the reasons therefor, and shall promptly be made part of the record of the procurement proceedings, together with the application received by the procuring entity under this article. Article 67 Application for review before an independent body 1. A supplier or contractor may apply to the [name of the independent body] for review of a decision or an action taken by the procuring entity in the procurement proceedings, or of the failure of the procuring entity to issue a decision under article 66 of this Law within the time limits prescribed in that article. 2. Applications for review shall be submitted to the [name of the independent body] in writing within the following time periods: (a) Applications for review of the terms of solicitation, pre-qualification or pre-selection or of decisions or actions taken by the procuring entity in pre-qualification or pre-selection proceedings shall be submitted prior to the deadline for presenting submissions; (b) Applications for review of other decisions or actions taken by the procuring entity in the procurement proceedings shall be submitted: (i) Within the standstill period applied pursuant to paragraph 2 of article 22 of this Law; or (ii) Where no standstill period has been applied, within working days [the enacting State specifies the period] after the time when the applicant became aware of the circumstances giving rise to the application or when the applicant should have become aware of those circumstances, whichever is earlier, but not later than working days [the enacting State specifies the period] after the entry into force of the procurement contract or Baker & McKenzie 369

386 the framework agreement [or a decision to cancel the procurement]; (c) Notwithstanding subparagraph (b) (i) of this paragraph, a supplier or contractor may request the [name of the independent body] to entertain an application for review filed after the expiry of the standstill period, but not later than working days [the enacting State specifies the period] after the entry into force of the procurement contract or the framework agreement [or a decision to cancel the procurement], on the ground that the application raises significant public interest considerations. The [name of the independent body] may entertain the application where it is satisfied that significant public interest considerations so justify. The decision of the [name of the independent body] and the reasons therefor shall promptly be communicated to the supplier or contractor concerned; (d) Applications for review of the failure of the procuring entity to issue a decision under article 66 of this Law within the time limits prescribed in that article shall be submitted within working days [the enacting State specifies the period] after the decision of the procuring entity should have been communicated to the applicant in accordance with the requirements of paragraphs 3, 6 and 8 of article 66 of this Law, as appropriate. 3. Following receipt of an application for review, the [name of the independent body] may, subject to the requirements of paragraph 4 of this article: [(a)] Order the suspension of the procurement proceedings at any time before the entry into force of the procurement contract; [and (b) Order the suspension of the performance of a procurement contract or the operation of a framework agreement that has entered into force;] if and for as long as it finds such a suspension necessary to protect the interests of the applicant unless the [name of the independent body] decides that urgent public interest considerations require the procurement proceedings[, the procurement contract or the framework agreement, as applicable,] to proceed. The [name of the independent body] may also order that any suspension applied be extended or lifted, taking into account the aforementioned considerations. 370 Baker & McKenzie

387 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL 4. The [name of the independent body] shall: (a) Order the suspension of the procurement proceedings for a period of ten (10) working days where an application is received prior to the deadline for presenting submissions; and (b) Order the suspension of the procurement proceedings [or the performance of a procurement contract or the operation of a framework agreement, as the case may be] where an application is received after the deadline for presenting submissions and where no standstill period has been applied; unless the [name of the independent body] decides that urgent public interest considerations require the procurement proceedings[, the procurement contract or the framework agreement, as applicable,] to proceed. 5. Promptly upon receipt of the application, the [name of the independent body] shall: (a) Suspend or decide not to suspend the procurement proceedings [or the performance of a procurement contract or the operation of a framework agreement, as the case may be] in accordance with paragraphs 3 and 4 of this article; (b) Notify the procuring entity and all identified participants in the procurement proceedings to which the application relates of the application and its substance; (c) Notify all identified participants in the procurement proceedings to which the application relates of its decision on suspension. Where the [name of the independent body] decides to suspend the procurement proceedings [or the performance of a procurement contract or the operation of a framework agreement, as the case may be], it shall in addition specify the period of the suspension. Where it decides not to suspend them, it shall provide the reasons for its decision to the applicant and to the procuring entity; and (d) Publish a notice of the application. 6. The [name of the independent body] may dismiss the application and shall lift any suspension applied, where it decides that: Baker & McKenzie 371

388 (a) The application is manifestly without merit or was not presented in compliance with the deadlines set out in paragraph 2 of this article; or (b) The applicant is without standing. The [name of the independent body] shall promptly notify the applicant, the procuring entity and all other participants in the procurement proceedings of the dismissal and the reasons therefor and that any suspension in force is lifted. Such a dismissal constitutes a decision on the application. 7. The notices to the applicant, the procuring entity and other participants in the procurement proceedings under paragraphs 5 and 6 of this article shall be given no later than three (3) working days after receipt of the application. 8. Promptly upon receipt of a notice under paragraph 5 (b) of this article, the procuring entity shall provide the [name of the independent body] with effective access to all documents relating to the procurement proceedings in its possession, in a manner appropriate to the circumstances. 9. In taking its decision on an application that it has entertained, the [name of the independent body] may declare the legal rules or principles that govern the subject matter of the application, shall address any suspension in force and shall take one or more of the following actions, as appropriate: (a) Prohibit the procuring entity from acting, taking a decision or following a procedure that is not in compliance with the provisions of this Law; (b) Require the procuring entity that has acted or proceeded in a manner that is not in compliance with the provisions of this Law to act, to take a decision or to proceed in a manner that is in compliance with the provisions of this Law; (c) [Overturn in whole or in part an act or a decision of the procuring entity that is not in compliance with the provisions of this Law [other than any act or decision bringing the procurement contract or the framework agreement into force]; (d) Revise a decision by the procuring entity that is not in compliance with the provisions of this Law [other than any act or decision 372 Baker & McKenzie

389 Baker & McKenzie's Global Public Procurement Handbook - UNCITRAL bringing the procurement contract or the framework agreement into force]; (e) Confirm a decision of the procuring entity; (f) Overturn the award of a procurement contract or a framework agreement that has entered into force in a manner that is not in compliance with the provisions of this Law and, if notice of the award of the procurement contract or the framework agreement has been published, order the publication of notice of the overturning of the award;] (g) Order that the procurement proceedings be terminated; (h) Dismiss the application; (i) Require the payment of compensation for any reasonable costs incurred by the supplier or contractor submitting an application as a result of an act or decision of, or procedure followed by, the procuring entity in the procurement proceedings that is not in compliance with the provisions of this Law, and for any loss or damages suffered[, which shall be limited to the costs of the preparation of the submission or the costs relating to the application, or both]; or (j) Take such alternative action as is appropriate in the circumstances. 10. The decision of the [name of the independent body] under paragraph 9 of this article shall be issued within working days [the enacting State specifies the period] after receipt of the application. The [name of the independent body] shall immediately thereafter communicate the decision to the procuring entity, to the applicant, to all other participants in the application for review and to all other participants in the procurement proceedings. 11. All decisions of the [name of the independent body] under this article shall be in writing, shall state the action taken and the reasons therefor and shall promptly be made part of the record of the procurement proceedings, together with the application received by the [name of the independent body] under this article. Baker & McKenzie 373

390 Article 68 Rights of participants in challenge proceedings 1. Any supplier or contractor participating in the procurement proceedings to which the application relates, as well as any governmental authority whose interests are or could be affected by the application, shall have the right to participate in challenge proceedings under articles 66 and 67 of this Law. A supplier or contractor duly notified of the proceedings that fails to participate in such proceedings is barred from subsequently challenging under articles 66 and 67 of this Law the decisions or actions that are the subject matter of the application. 2. The procuring entity shall have the right to participate in challenge proceedings under article 67 of this Law. 3. The participants in challenge proceedings under articles 66 and 67 of this Law shall have the right to be present, represented and accompanied at all hearings during the proceedings; the right to be heard; the right to present evidence, including witnesses; the right to request that any hearing take place in public; and the right to seek access to the record of the challenge proceedings subject to the provisions of article 69 of this Law. Article 69 Confidentiality in challenge proceedings No information shall be disclosed in challenge proceedings and no public hearing under articles 66 and 67 of this Law shall take place if so doing would impair the protection of essential security interests of the State, would be contrary to law, would impede law enforcement, would prejudice the legitimate commercial interests of the suppliers or contractors or would impede fair competition. 374 Baker & McKenzie

391 Baker & McKenzie's Global Public Procurement Handbook Baker & McKenzie Offices Worldwide Office phone numbers and addresses change from time to time. Please refer to for current contact information. Argentina - Buenos Aires Baker & McKenzie SC Avenida Leandro N. Alem 1110, Piso 13 C1001AAT Buenos Aires Argentina Intn l Tel: ; Fax: ; Australia - Melbourne Baker & McKenzie Level 19, CBW 181 William Street Melbourne Victoria 3000 Melbourne GPO Box 2119T DX 334 Melbourne Australia Intn l Tel: Fax: Australia Sydney Baker & McKenzie Level 27, A.M.P. Centre 50 Bridge Street Sydney, NSW 2000 Postal Address: P.O. Box R126, Royal Exchange Sydney, N.S.W Australia Intn l Tel: Fax: Austria - Vienna Diwok Hermann Petsche Rechtsanwälte GmbH Schottenring Vienna Austria Intn l +43 (1) Fax: +43 (1) Baker & McKenzie 375

392 Azerbaijan - Baku Baker & McKenzie - CIS, Limited The Landmark III,8th Floor 96 Nizami Street Baku AZ1010 Azerbaijan Intn l Tel: Fax: Bahrain - Manama Baker & McKenzie Limited 18th Floor, West Tower Bahrain Financial Harbour PO Box 11981, Manama Kingdom of Bahrain Intn l: Fax: Belgium - Antwerp Baker & McKenzie CVBA/SCRL Meir Antwerp Belgium Intn l Tel: Fax: Belgium - Brussels Baker & McKenzie CVBA/SCRL Avenue Louise 149 Louizalaan 11th Floor 1050 Brussels Belgium Intn l Tel: Fax: Belgium - ELC Baker & McKenzie CVBA/SCRL 149 Avenue Louise Eighth Floor 1050 Brussels, Belgium Intn l Tel: Fax: Brazil - Brasilia Trench, Rossi e Watanabe Advogados SAF/S Quadra 02, Lote 04, Sala 203 Edificio Comercial Via Esplanada Brasília - DF Brazil Intn l Tel: Fax: Brazil - Porto Alegre Trench, Rossi e Watanabe Advogados Avenida Borges de Medeiros, 2233, 4 andar Centro Porto Alegre, RS, Brazil Intn l Tel: Fax: Brazil - Rio de Janeiro Trench, Rossi e Watanabe Advogados Av. Rio Branco, 1, 19 andar, Setor B Rio de Janeiro, RJ, , Brazil Postal Address: Caixa Postal 1470, Rio de Janeiro, RJ, Brazil Intn l Tel: Fax: ; Brazil - Sao Paulo Trench, Rossi e Watanabe Advogados Av. Dr. Chucri Zaidan, 920, 13 andar Market Place Tower I Sao Paulo, SP, Brazil Intn l Tel: Tel: Fax: Baker & McKenzie

393 Baker & McKenzie's Global Public Procurement Handbook Canada - Toronto Baker & McKenzie LLP Brookfield Place 181 Bay Street, Suite 2100 P.O. Box 874 Toronto, Ontario M5J 2T3 Candada Intn l Tel: Fax: Chile - Santiago Cruzat, Ortúzar & Mackenna Ltda Nueva Tajamar 481 Torre Norte, Piso 21 Las Condes, Santiago Chile Intn l Tel: Fax: ; ; China - Beijing Baker & McKenzie LLP - Beijing Representative Office Suite 3401, China World Office 2 China World Trade Center 1 Jianguomenwai Dajie Beijing People s Republic of China Intn l Tel: Fax: ; China - Hong Kong - SAR Baker & McKenzie 14th Floor, Hutchison House 10 Harcourt Road Hong Kong SAR and 23rd Floor, One Pacific Place 88 Queensway Hong Kong SAR Intn l Tel: Tel: Cable: ABOGADO Telex: [Answer back: ABOG HX] Fax: ; ; China - Shanghai Baker & McKenzie LLP Unit 1601, Jin Mao Tower 88 Century Avenue, Pudong Shanghai People s Republic of China Intn l Tel: Tel: Fax: Colombia - Bogota Baker & McKenzie Colombia S.A. Avenida 82 No , piso 6 Postal Address: Apartado Aéreo No Bogotá, D.C. Colombia Intn l Tel: ; Fax: Czech Republic - Prague Baker & McKenzie v.o.s., advokátní kancelár Praha City Center Klimentská Prague 1 Czech Republic Intn l Tel: Fax: Egypt Cairo Baker & McKenzie (Helmy, Hamza & Partners) Nile City Building, North Tower Twenty-First Floor Cornich El Nil Ramlet Beaulac, Cairo Egypt Intn l Tel: Fax: Baker & McKenzie 377

394 England - London Baker & McKenzie LLP 100 New Bridge Street London EC4V 6JA England Intn l Tel: Fax: France - Paris Baker & McKenzie SCP 1 rue Paul Baudry Paris France Intn l Tel: Fax: Germany - Berlin Baker & McKenzie Partnerschaft von Rechtsanwälten, Wirtschaftsprüfern, Steuerberatern und Solicitors Friedrichstraße 88/Unter den Linden Berlin Germany Intn l Tel: Fax: Germany - Dusseldorf Baker & McKenzie Partnerschaft von Rechtsanwälten, Wirtschaftsprüfern, Steuerberatern und Solicitors Neuer Zollhof Dusseldorf Germany Intn l Tel: Fax: Germany - Frankfurt Baker & McKenzie Partnerschaft von Rechtsanwälten, Wirtschaftsprüfern, Steuerberatern und Solicitors Bethmannstrasse Frankfurt/Main, Germany Intn l Tel: Fax: Germany - Munich Baker & McKenzie Partnerschaft von Rechtsanwälten, Wirtschaftsprüfern, Steuerberatern und Solicitors Theatinerstrasse Munich Germany Intn l Tel: Fax: Hungary - Budapest Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Ügyvédi Iroda Andrássy-út Budapest Hungary Intn l Tel: Fax: Indonesia - Jakarta Hadiputranto, Hadinoto & Partners The Indonesia Stock Exchange Building Tower II, 21st Floor Sudirman Central Business District Jl. Jendral Sudirman Kav Jakarta 12190, Indonesia Intn l Tel: ; ; ; Fax: ; ; ; ; ; Baker & McKenzie

395 Baker & McKenzie's Global Public Procurement Handbook Italy - Milan Studio Professionale Associato a Baker & McKenzie 3 Piazza Meda Milan Italy Intn l Tel: Fax: Italy - Rome Studio Professionale Associato a Baker & McKenzie Viale di Villa Massimo, Rome Italy Intn l Tel: Fax: Japan - Tokyo Baker & McKenzie GJBJ Tokyo Aoyama Aoki Koma Law Office (Gaikokuho Joint Enterprise) The Prudential Tower Nagatacho 2-chome Chiyoda-ku, Tokyo Japan Intn l Tel: Fax: Kazakhstan - Almaty Baker & McKenzie - CIS, Limited Samal Towers, Samal-2, 8th Fl. 97 Zholdasbekov Street Almaty Kazakhstan Intn l Tel: Fax: Luxembourg Baker & McKenzie 12 rue Eugène Ruppert 2453 Luxembourg Luxembourg Tel: Fax: Malaysia - Kuala Lumpur Wong & Partners Level 21, The Gardens South Tower Mid Valley City Lingkaran Syed Putra Kuala Lumpur Malaysia Tel: Fax: Mexico - Guadalajara Baker & McKenzie Abogados, S.C. Blvd. Puerta de Hierro 5090 Fracc. Puerta de Hierro Zapopan, Jalisco México Intn l Tel: Fax: Mexico - Juarez Baker & McKenzie Abogados, S.C. P.T. de la Republica 3304, Piso Cd. Juárez, Chihuahua México Mailing Address:P.O. Box 9338 El Paso, Texas Overnight Courier Address: 6248 Edgemere, #504 El Paso, TX Intn l Tel: Fax: Mexico - Mexico City Baker & McKenzie, S.C. Edificio Scotiabank Inverlat, Piso 12 Blvd. M. Avila Camacho México, D.F. Mexico Intn l Tel: Fax: Baker & McKenzie 379

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399 Baker & McKenzie's Global Public Procurement Handbook United States - San Diego Baker & McKenzie LLP High Bluff Drive, Third Floor San Diego, California United States Intn l Tel: Fax: United States - San Francisco Baker & McKenzie LLP Two Embarcadero Center, 11th Floor San Francisco, California United States Intn l Tel: Fax: ; United States - Washington, DC Baker & McKenzie LLP 815 Connecticut Avenue, N.W. United States Washington, DC Intn l Tel: Fax: Venezuela - Caracas Baker & McKenzie SC (Despacho de Abogados) Centro Bancaribe, Intersección Av. Principal de Las Mercedes con inicio de Calle París Urbanización Las Mercedes Caracas 1060 Venezuela Postal Address: P.O. Box 1286 Caracas 1010-A, Venezuela Cable: ABOGADO-CARACAS Fax: ; Venezuela - Valencia Baker & McKenzie SC Edificio Torre Venezuela, Piso No. 4 Av. Bolivar cruce con Calle 154 (Misael Delgado) Urbanización La Alegria Postal Address: P.O. Box 1155 Valencia, Estado Carabobo Venezuela Intn l Tel: Fax: Vietnam - Hanoi Baker & McKenzie (Vietnam) Ltd. (Hanoi Branch Office) 13/F, Vietcombank Tower 198 Tran Quang Khai Street Hoan Kiem District, Hanoi Socialist Republic of Vietnam Intn l Tel: Fax: Vietnam - Ho Chi Minh City Baker & McKenzie (Vietnam) Ltd. 12th Floor, Saigon Tower 29 Le Duan Blvd. District 1, Ho Chi Minh City Socialist Republic of Vietnam Intn l Tel: Fax: US Mailing Address: Baker & McKenzie M-287 c/o Jet International P.O. Box 2200 Greer, SC USA Intn l Tel: Tel: Baker & McKenzie 383

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