On 1 March 2017, the new Public Procurement Law became effective. The new Public Procurement Law is supplemented by a host of Cabinet of Ministers Regulations, which aim to expand the law and detail how public procurement should be performed. It is laid down in the new law that the contract price threshold for the application of the law to small procurements is increased to EUR 10 000 and it is still permitted that public supply or service procurements within the range of EUR 10 000 to EUR 42 000 and public construction contracts within the range of EUR 20 000 to EUR 170 000 are carried out according to the simplified procurement procedure prescribed in Article 9 of the new Public Procurement Law.
The new regulation on public procurement is based on Directive 2014/24/EU of 26 February 2014 on public procurement which repeals Directive 2004/18/EC. The purpose of the new Directive is to modernise and clarify the existing regulation of public procurement and to incorporate certain aspects of related well-established case-law of the Court of Justice of the European Union.
Compulsory publication of the planned procurements
According to the new law, starting from 1 June 2017, the contracting authorities are required to publish information on the expected procurements within the annual budget by providing information on the planned subject-matter of procurement and the time of publishing the call for proposals. This will enable suppliers to have timely information on procurements that the relevant contracting authority will organise during
the year. At the same time, the contracting authority will be able to update information as and when necessary, and subsequently add procurements that were not foreseen earlier.
New procurement procedures
The new regulation introduces new types of procurement procedure – competitive procedure with negotiation, and innovation partnership procedure. In addition to the existing negotiated procedure and tender dialogue the two new procurement procedures will enable contracting authorities to enter into negotiations with selected candidates in order to tailor the content of proposals to the contracting authority’s needs. All this has rendered the procurement procedure more flexible and increases the possibility of achieving mutually beneficial solutions with the contracting
authority’s needs aligned to market capabilities.
Electronic submission of proposals
As part of modernising public procurement, it is intended to gradually migrate to electronic submission of proposals. It is intended that proposals in procurement procedures with the expected contract prices equal to or higher than the threshold set by the Cabinet of Ministers (EUR 5 225 000 for construction works and EUR 135 000 services and goods supply contracts) will be submitted electronically starting from 1 October 2017 and those under this threshold from 1 April 2018. As regards the small procurements carried out according to Article 9 and the procurement of services listed in the Appendix 2 it will be possible to submit proposals electronically only from 1 January 2019.
Procurement process documentation
The new law contains a more detailed regulation on the form of procurement documentation. For example, it is specified that when proposals are submitted electronically the applicant has the right to sign the entire set of documents with a single secure digital signature. It is now explicitly stated in the law that contracting authorities should issue minutes that reflect the procurement procedure and other procurement documentation (other than proposals) within three working days after an appropriate request has been made.
Economically most advantageous tender as the main selection criterion
The key contract award criterion according to the new Public Procurement Law is the most economically advantageous tender. It is determined by the contracting authority on the basis of the price or cost, or cost and quality, or only price. According to the law, the contracting authorities are still permitted to use only the price criterion in their comparison and assessment of proposals if the technical specification is detailed to the necessary extent and other criteria have no significant weight. It does not apply to small tenders carried out according to the Article 9 and services referred to in Appendix 2 where the contracting authority still has the right to use the criterion of the lowest price.
The new law changes the regulation concerning sub-contractors. The law states that the contracting authorities are obliged to ask the bidders to disclose in their proposals all sub-contractors that will have a share in contract that is equal to or exceeds ten per cent of the total contract value and disclose the particular share of the contract provided to each of such sub-contractors. In case of a public construction or public service contract the authorities may request the significant tasks under the contract to be carried out by the bidder itself. Contracting authorities will be permitted to request that the contractor and the person on whose capabilities it relies undertake joint liability for the contract.
The new law contains regulation, for the protection of the rights of sub-contractors involved in public construction works. In case of public construction contract the contracting authorities may include in the procurement documents a clause stipulating direct payments to the sub- contractors reducing the amount of future payment to the contractor.
Replacement of sub-contractors and personnel
The new Public Procurement Law includes also requirements for replacement of sub-contractors and personnel involved in the performance of the contract. It is laid down that the approval of the contracting authority is required in order to replace sub-contractors and personnel or to involve a new subcontractor. The new personnel shall meet the requirements set for personnel in the procurement documents or should have at least the same qualification and experience as the personnel that was assessed when the most economically advantageous proposal was selected.
Also, sub-contractors who replace those initially involved must meet the requirements set in the procurement documents but and if a sub-contractor on whose capabilities the selected applicant relies is replaced, the new sub-contractor should have the same qualifications. In addition, it is specified in the law that the contracting authorities cannot accept a new sub-contractor if such a change, had it been made in the initial proposal, would have impacted the selection of the bid.
Deposit in case of complaints
The new regulation does not alter the procedure for submission and review of complaints related to breaches of the procurement procedure. However, when a complaint is filed to the Procurement Supervision Bureau a deposit should be paid. It can be paid in cash or provided as a bank guarantee or an insurance policy. The maximum amount of the deposit is 0.5% of the expected contract price but not more than EUR 15 000 for public construction contracts and EUR 840 for public service and supply contracts.
According to the transitional provisions of the new law, if the call for tenders was published or the decision on the procurement (where no call for tenders is required) was made prior to 1 March 2017 the procurement procedure must be completed, including contested or appealed, according to the previous law. If the above happened after 1 March, the new law must be applied.
New Public Services Providers Procurement Law
The above regulation of the Public Procurement Law does not apply to providers of public utility services. To implement the requirements of Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors which repealed Directive 2004/17/EC, a new Public Services Providers Procurement Law has been adopted that will enter into force on 1 April 2017.
Author: Laura Vilka, Senior Associate, KPMG in Latvia.