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Main changes introduced by the new Public Procurement Act

The newly adopted Public Procurement Act (PPA) was passed by the 43rd National Assembly on February 2, 2016, and entered into force on April 15, 2016. It comes in response to the directives of the European Commission of 2014 in the field of public procurement. Although many of the texts remain the same, there are many important changes that need to be discussed.

It should be noted that PPA was planned and adopted as a framework act, i.e. anact that contains the basic principles and rules relating to public procurements. Specific rules are laid down in detail by the Regulations for implementation of the Public Procurement Act, which also entered into force on April 15, 2016.

There are three types of assignors, according to the newly adopted PPA - public, sector and “ad hoc” assignors. Public assignors, generally, are heads of state institutions, including separate structures of the executive authorities given that they are on-budget legal entities or entities representing public organizations. Sector assignors are entities representing public authorities and their associations, merchants or others, and performing one or more sectoral activities as well as the heads of central purchasing authorities established to meet the needs of sector assignors. “Ad hoc” assignor is an entity that awards contracts financing directly with public funds by more than 50 per cent construction with an estimated value greater than, or equal to, BGN 5, 000, 000 or services related to such construction with estimated value greater than, or equal to, BGN 408,762.

The Acts applies to the fields of construction, supplies of goods, and provision of services, which are complemented and set in detail. Exceptions to the scope of PPA are, for example, the arbitration, notary, legal, financial, postal, and media services as well as those relating to political election campaign, etc. As opposed to the previous PPA, defining six types of procedures for assigning of a public procurement - openprocedure, limited procedure, competitive dialogue, two types of negotiation procedures - with or without notice, and project competition, the newly adopted PPA establishes thirteen types of procedures, differentiating the procedures carried out by public or sector assignors and procurements in the fields of defense and security. Virtually, the only completely new procedure is "Innovation Partnership" which applies to procurements in the fields of research and development and includes negotiations with the admitted candidates. All the others are announced and reported in accordance with models under European regulations. Some of the thresholds above which an open tender must be held have changed. For construction, the threshold has increased to BGN 5, 000,000, but still remains below the common European one, which is nearly BGN 10, 000, 000. At the same time, the threshold for supplies of goods and services has fallen from BGN 404, 500 to BGN 262, 000.

It should be noted that procurement contracts with recurring or continuous implementation are entered into for a period which may not exceed five years unless otherwise required by the nature of the subject of the contract, the need for returning on the investment, or technical reasons and the assignor states the reasons for this in the opening decision. If at the time of the opening of the procedure financing is not secured, there is a new opportunity for concluding a conditional contract. The assignor shall specify this in the notice or the confirming interest invitation and shall provide a suspension clause in the draft contract. In this case, either party is entitled to terminate the contract without notice after three months as of its conclusion.

The new act, like the previous, proclaims the principles of free competition, equality, and non-discrimination, publicity and transparency, and adds the principle of proportionality. All the accessible electronic databases (Public Procurement Portal, Public Procurement Register, the new Unified National Electronic Web-based Platform, and Buyer’s Profile) are essential with regard to the compliance with the principles listed above.Article 39 of the new PPA requires the exchange of information regarding public procurement to be conducted by electronic means of communication. The tools and devices used, and their technical characteristics must be non-discriminatory, accessible and interoperable with the common market products of information and communication technologies for widespread use and not restricting the access of shareholders. This requirement enters into force on January 1, 2017 - for central purchasing authorities, and on July 1, 2017 – for the rest assignors. There are exceptions from the requirements for electronic exchange of information when the nature of the contract, the specifics of the instruments, devices, or file format that will be used are such that the electronic means of communication are impossible to represent some relevant information (e.g. requirement for presenting samples, models, etc.) or would severely impede the assignor.

Тhe European Single Procurement Document ( ESPD ) is completely new in the Bulgarian legislation. It shall be submitted upon application as well as when submitting a tender. The applicant or participant declares the absence of grounds for exclusion or the fulfillment of the selection criteria by presenting an ESPD. Art. 67 requires an applicant or participant who has indicated that they will use the capacity of a third party in order to prove compliance with the eligibility criteria or who will use subcontractors, to present a separate ESPD for each of these, allowing the use of ESPD already presented in a previous procurement procedure, provided that the applicant or participant confirm that the information it contains is up-to-date.

Significant innovation as of July 1, 2018, is the opportunity for the participants to prove their personal status and compliance with the selection criteria by an electronic document issued by a certification body which will replace the old requirements for large amounts of paperwork. When determining the documents to be submitted for proving compliance with the selection criteria, the assignors will require primarily documents included in "e-Certis" – the European Commission's electronic database. It is expected that the Council of Ministers will determine the bodies that will create and maintain official lists of approved economic entities for certain activities or certification bodies for compliance with technical specifications.

The new content of the Buyer’s profile includes reduced and refined list of documents while the requirement information related to payments, guarantee releases, and contracts for subcontractors to be published is removed. The assignor provides full, unlimited, and free access to all the documents in the Buyer’s profile.

Art. 40 of the new PPA regulates the Single National Electronic Web-based Platform. On this platform, as of July 1, 2017,it will be possible the decisions and notices in the Public Procurement Register and public procurement documentation to be published; inquiries to be made; explanations to be provided; invitations to be sent; applications for participation and tenders to be submitted, as well as other information and /or documentsto be exchanged. As of January 1, 2020,participants will be able to submit requests regarding contracts, to evaluate offers, to conclude a contract, and to perform billing and payment via the Web-based Platform. A requirement for electronic capability of the centralized procurement is provided in Art. 97, which shall enter into force as of January 1, 2017.It should be noted that central purchasing authorities may use electronic platforms for centralized procurement, other than the Single National Electronic Web-based Platform, provided that they ensure technical compatibility and connectivity with it.

There are new requirements for the records of public procurements that are created and maintained by the assignor. These files shall contain all the decisions, announcements, documentation, explanations, invitations, reports, final reports of the commission, tenders or requests for participation, preliminary control decisions of Public Procurement Agency, the contract or framework agreement, all related documents regarding implementation and reporting, and any other relevant documents and evidence. Thus, the new PPA aims to provide documentary traceability for all actions and decisions of the assignor as well as for the actions of the commissions for assignment of public procurements.

There is a new opportunity introduced for joint procurement. According to the new PPA, two or more entities may enter into joint procurement where each contractor is responsible for the implementation of their obligations under the parts conducted on their behalf and at their expense. A group of assignors may decide to create a central purchasing body. For the needs of the administration of executive authorities or certain sectors, such body is created by an act of the Council of Ministers while for the needs of the respective municipalities central purchasing body is established by a decision of the municipal councils.

There are new rules for subcontractors organized into a separate chapter. All subcontractors must simultaneously meet two requirements, namely fulfillment of the relevant selection criteria according to the type and proportion of the contract they will performas well as lack of grounds for exclusion from the procedure. Otherwise, the assignor requires their replacement. When the portion of the contract to be performed by the subcontractor may be given as a separate object of the contractor or the assignor, the assignor pays the subcontractor for that part on a request made by the contractor. Subcontractors may not reassign one or more of the activities that are included in the scope of the subcontract. As an exception, a subcontractor may be substituted or included during the execution of a public procurement if they meet the two requirements for subcontractor mentioned above.

Applicants or participants can rely on the capacity of third parties, irrespective of the legal relationship between them, in terms of criteria relating to economic and financial standing, technical capability and professional competence for a particular procurement. Third parties must comply with the relevant selection criteria and there must be absence of any grounds for exclusion from the procedure.Otherwise, the assignor requires their replacement.

There are changes regarding the guarantees in the procedure for assigning of public procurement. The participation guarantee is not regulated by the new PPA, as opposed to the old PPA where it was a mandatory element of the content of the offer of the participant.The assignor may require a guarantee to ensure fulfillment of the contract or a guarantee for advance allocations. The former one now is up to 5% of the contract value, as opposed to 1% in the old PPA, while the latter amounts to the total of the advance payment and is released within three days after returning or utilization of such payment. Concluding of an insurance contract is introduced as a new way to guarantee the performance of a contract in addition to the well-known forms in the old PPA - sum of money and bank guarantee.

There are new grounds under which public procurement contracts and framework agreements may be amended. The first of them is present should the amendments are included in the documentation for the procurement and in the contract by clear, precise and unambiguous terms. The second occurs when there is a need for additional supplies, services or construction and is impossible the contractor to be replaced for economic or technical reasons or such replacement would cause considerable difficulties, related to the maintenance and the operation, or would duplicate assignor’s expenses. Ground for amendment of the contract occurs also when such amendment appears necessary due to circumstances that could not be foreseen by the assignor even when the latter use all reasonable endeavours. In this case, as well as in the first, the amendments may not exceed 50 per cent of the value of the original contract. An amendment is also allowed if a replacement of the contractor with another contractor is necessary when the original contractor is unable to continue execution or there is a universal or partial succession. Amendments are also acceptable if they are not substantial or if they do not change the overall nature of the contract or framework agreement and their value is up to 10 percent of the value of the original contract for services and supplies and up to 15 percent of the value of the original construction contract while not exceeding the relevant threshold.

It is important to emphasize that in the case of changes in the terms of the contract, entailing changes in the bids of the participants, the amendments should not introduce conditions that would alter the range of shareholders and the subject matter of the contract. If a substantial modification of the contract is required and there are no grounds for amendment of the contract or framework agreement, the only possible exit is termination of the contract.

New rules are introduced in terms of the control in the field of public procurement. A new requirement for internal control in public assignors establishes internal specialized department which is part of the administration and responsible for managing the procurement cycle. The external preliminary control that is carried out by Public Procurement Agency is over public procurement procedures that must be published in Public Procurement Registry; negotiating procedures without prior notice or invitation; contracts assigned on the grounds of exceptions from the scope of the PPA; and amendments to the contracts. The external ex-post control is performed by the Bulgarian National Audit Office and the Financial Supervision Commission.

There are certain changes in the regulations related to administrative liability as the pecuniary penalty for entities is eliminated, leaving only a fine for the individual, and certain cases where the fine constitutes a percentage of the contract value.

While doubts in terms of corruption and misuse of public funds are still present, the new PPA is generally accepted as necessary and having a positive effect. It constitutes a summary of the whole European experience of the recent years and overcomes the weaknesses in the system. It is more detailed and comprehensive than the previous one, eliminates unnecessary difficulties and requirements, introduces new features, standard contracts and the computerization of the process, which will undoubtedly have a positive effect.