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Latest developments in the regulatory frame of the public procurement in Bulgaria 2014


Goals and prerequisites
In mid-2013 the new Bulgarian government announced as one of the priority goals of radical changes to the Public Procurement Act (PPA). PPA was passed in 2004, but throughout the process of accession of Bulgaria to the EU it was substantially revised in 2006, where it had transposed the two relevant EU Directives: Directive 2004/18/EC of the European Parliament and of the Council on the coordination of procedures for the award of public contracts for works, supplies and services, and Directive 2004/17/EC of the European Parliament and of the Council on the coordination of procedures for the procurement of entities operating in the water, energy, transport and postal services. On February 26, 2014 the new Directive 2014/24/EU of the European Parliament and of the Council on public procurement and repealing Directive 2004/18/EC was adopted. Repeal of Directive 2004/18/EC is effective as of April 18, but the deadline for reaching compliance of national legislation with the new directive is 04/18/2016. Thus amendments in PPA are not produced by the need to transpose the newly adopted Directive 2014/24/ EU and therefore they do not reflect its rules. It can be predicted that the transposition will be a longer process, which might be launched within the current year. Until then, its provisions shall not apply and can be only grounds for interpretation of one or another provision of law.
 
Publicly stated objectives of the amendments of 2014 are the standard ones related to eliminating defects found, promoting market competition and hence the competitiveness of the economy as a whole, efficient and appropriate spending of the public funds and increasing public trust in the institutions and the authority of the public sector.  In particular, they are limited to the following:
  1. Sharply increasing responsibility in spending of public funds and resources.
  2. Reduction of administrative and bureaucratic burden on business.
  3. Encouraging the business, and particularly small and medium enterprises.
  4. Improving the efficiency and appropriateness in the public spending.
  5. Curbing corruption and discrimination cases to participants through a series of system measures for higher publicity of procedures and documentation.
 
It should be noted that some of the amendments are effective as from 1/7/2014, while others – as from 01/10/2014. This could be explained by the need for an intense organizational preparation for the introduction of new rules of the second group as will be seen hereinafter.
 
In light of the above consideration the amendments to the Act can be structured in several key measures.
 
Scope of the law - objects and subjects of procurement
Construction is redefined as an object of public procurement. Unlike the current version of Art.3, § 1, item 3, which used to specify the categories of construction in its respective ratios to the project design and joint equipment supply (engineering), the new version has been simplified as far a reference to the very detailed Annex 1 is made again. Thus the change cannot be treated as essential one, but rather as improvement.
 
Specified and is slightly extended is the range of supplies and services for which the PPA does not apply (Art.4). In particular, archeological excavations (as part of research) are added, which therefore will not require public procurement.
 
Directives and PPA are open to candidates or bidders for procurement who are associations of individuals and entities. Quite frequent employers’ practice was to request the form of common/civil law partnership under the Law on Obligations and Contracts. It was found contrary to Art.4, § 2 of Directive 2004/18/EC. In order to discontinue this conflict the new version of Art. 9 introduce an explicit ban contracting authorities to require any specific legal form for the associations as a prerequisite to participate. The principle of conformity is introduced here: everyone can file a tender, regardless of its legal status, if he performs his regular business in the same form in the country of origin. Once he can contract supplying or performing services or public works in that form in his country, therefore his removal form tendering on the grounds of non-compliance in the form is prohibited from now onwards. This applies both to associations that may be or may not be a legal person (entity) and to any other legal form of business setting known.
 
Regarding scope of the procurement contracts for which the law does not apply (Art.12, § 1) the expansion of their range it should be noted. In particular, outside the scope of the Act are assigned:
  • Contracts concluded between a sectoral employer  and an affiliated undertaking, provided that at least 80 percent of the average annual turnover of the affiliated company for the last three years has been realized by the provision of such services, supplies or works of associated enterprises (item 6).
  • The contracts between a public entity  and its sole proprietor company (affiliate), provided that the principal’s control over the company is not limited and that at least 80 percent of affiliate company’s  turnover is formed by businesses associated with the statutory performance of the contracting authority ( item 13 ).
  • Litigation, i.e. procurement of legal services related to pending or future cases where the contracting authority is, or is likely to be a party before a court, arbitration or conciliation board (item 16).
 
The above activities and supplies can be freely negotiated, but especially as regards item 13, the determination of the contract price should be based on the methodology which is yet to be approved by the Council of Ministers by the expected amendments of the PPA Implementing Regulation. In this case, the contract is subject to termination in the event that that rate falls below a certain threshold. In other words, if sales of the sole state or municipal company on the free market is increased by more than 20 per cent of the total sales (turnover), it shall immediately be treated as entirely market oriented entity and therefore would be prohibited from the privilege any direct contracts with the principal. These circumstances are subject to just introduced incidental notification regime - providing data at the request of the Agency for Public Procurement (PPA).
 
Expertise for the preparation and implementation of procedures
Through the new version of Art.19, § 1, item 8 seeks radical change of the status of the so -called "experts list" maintained by the Agency (APP). Unlike the previous list of experts where everyone could practically fit alone (and that list so far has limited practical significance) the new rule establishes that in order to be enlisted an expert should be proposed by a professional or trade association or executive authority within the meaning of the (Public) Administration Act. It is assumed the professional qualities of the experts will be best proven and guaranteed in this way. These refer to also experts who may be involved by contracting authority for the preparation of procurement documentation or to be appointed members of the tender committees. Of course, any other expert may file for enlistment not being institutionally proposed, but in this case he or she will be required to submit evidence of particular qualification and practical experience as provided by statutes.
 
Significant change represents detailing the participation of experts, including external experts in the preparation of contracts (Art. 8, § 7-8). An obligation is introduced for contracting authorities to ensure the participation of at least one expert who has the professional competence related to the subject of the contract. This especially refers to his/her contribution for the technical specifications (ToR), the methodology for the evaluation of tenders (if the criterion picked up is the “economically most beneficial tender”, but not the lowest price), and also competition programs in the project design contest. An innovation represents the newly introduced requirement for full identification of the experts who prepared the papers through their personal signatures on the documents. In the absence of a suitably qualified expert in the administration of the contracting authority, one from the list approved and maintained by the Agency (by specialties profiles) must be selected. Once prepared the papers, exterior expert is not allowed to participate in the procedure for procurement in any capacity - either as a member of the evaluation of the tenders, or as a participant/candidate or party. The original idea was that these requirements only apply to the procurement belonging to the group subject of announcement in the Official Journal of the EU. In the course of work on the bill, however, this requirement was introduced as general rule. A serious training of contracting and the Agency for its implementation is to be undertaken, and probably for that reason provision comes into force on 10.01.2014.
 
Thresholds
Thresholds for conducting procurement procedures have not undergone any changes.
 
Procedures
Procedures for the award as a system have not undergone major changes. Some restriction refers to the scope of electronic tender. Services related to production of territorial development plans under the Spatial Planning Act are now explicitly excluded from the scope of PPA (Art.16b, § 2).
 
The new Art.16c has introduced a new variety of technical proposal - namely, electronic catalog where the subject of the contract is the delivery of goods that have been standardized, or that are likely to be subject of development or reinforcement their own standards. Electronic catalog can be applied only where the contractor had foreseen it for the particular procurement. Since the rules for this are scarce, their further development in the Regulation is expected. The rationales of the government to introduce this measure are associated with the gradual transition to e-procurement at the EU level. It is assumed that this form would allow suppliers to take part in the online procedures throughout the entire internal market. This is expected to eventually result in significant savings and improved procurement outcomes while reducing losses and errors.
 
Preliminary control 
The scope of the ex-ante control by the Agency (Art. 20a) expands to also covering the rationales for the criteria selected and compliance with the statutory requirements for them. As a rule, all the procedures above the values entailing an open procedure are subject to preliminary control now, but it must end with an explicit (written) opinion only when the nature of the procedure restricts competition, i.e. in restricted procedures, negotiations with notice and competitive dialogue. Instructions given by the opinion are not binding on the contracting authority. But if they were rejected deviations must be justified in written. The initial proposal of the government was the Agency to issue directions when found non-compliance with the law. This proposal was put under the rationales related to the need to implement the recommendations of the Council on the Convergence Programme of Bulgaria for the period 2012-2016 in which the terms of the Agency recommended: "To ensure proper implementation of public procurement legislation, extending the „ex ante" control carried out by the Agency, in order to prevent irregularities”. A different version was adopted instead, however leaving the employer discretion and laying the liability entirely on him. Is also to be noticed that the above rules are not applicable to sectoral (non-public) employers as long as their procurement procedures falls as a rule beyond the scope of ex ante control.
 
Publicity
Within the context of red tape reduction measures requirement for introduction of so called "Buyer profile" is (new Art. 22b-22d). The profile must be a part of the contracting authority web or a separate site having unlimited public access. Profile should be containing the utmost complete documentation for each procurement contract (to the extent that legally protected information is not involved), formal opinions and guidance on the Agency, and any other data relevant to the award and execution of contracts. All the procurement notices published should be hyperlinked to particular data at the Agency register/web. In close prospective Employers should provide capacity for exchange of documents with electronic signature. Provisions relating to the registration information and profile of the buyer enter into force on 10/01/2014, since their implementation obviously entails certain organizational time exceeding the time limit for entry into force of the other provisions (1/7/2014 ). Given the scale of the assigned duties it is quite probable that many smaller entities will not fulfill this obligation within the prescribed period. Moreover creation of a web-based portal at this scale requires itself a procurement procedure.
 
Estimated contract value shall be explicitly stated with the procurement notice (Art.25, § 2, item 3). This provision is expected to limit the cases in which the contracting authorities will be forced to terminate the contract pursuant to Art.39, § 1, item 3 of the PPA due to excess by offers of the financial resource that they can provide for its implementation.
Applicable requirements for publicity are raised, as employers are required to also send notifications to the media for every contract in addition to its publication in specialized registers and the buyer profile.
 
Last but not least it should be borne in mind that the minutes of the tender committee, which determines the final selection immediately becomes public through publication on the buyer profile (Art. 73, § 4). For long time receiving a copy of the commission's final resolution with particular rationales was a problem for the participants.
 
Documents, announcements and clarifications
The new version of Art.28, § 4 lifted the participants’ obligation to purchase documentation. Instead an obligation for contracting authorities to publish all documentation on the buyer profile is introduced (except for the commercially protected and classified information). The draft law rationales said that this approach will limit the options for corruption, as the administration of the contracting authority will have no information on who bought tender papers and who will potentially submit a tender. Accordingly, the administration will not be able to provide this information to the competitive potential participants.
 
Some changes are introduced about the manner in which the procurement is publicly noticed (Art. 27-27a). Obviously drive was to uniform the tender documents to the utmost possible extent. The list of notices to be produced under a standard form is extended. Practically all notices under the threshold for announcement in the Official Journal of the EU should be uniformed. Any person (but not only stakeholders as until now) may file an irregularity notification that may bring particular changes in the procurement notice by the contracting authority.
The new version of Art.29 better specifies the time frame for seeking and receiving clarifications on the tender papers. Previous periods of 6 and 3 (for a public call for tenders) days prior to the deadline for submission of tenders in various cases have been raised to 10 and 7 days. The deadline for clarification is 4 days. If the clarifications are given later than 6 (3) days prior to the deadline for submission of tenders, it is subject to a corresponding extension of the tendering term. These provisions allocate responsibilities in a more precise manner, thus limiting the options to manipulate the timing.
 
General conditions for participation and compliance
It is assessed that the collection and preparation of documents for compliance with the requirements of Art. 47, § 1 and 2 of the PPA and the selection of documents consumes about 95 percent of the total time available to applicants and participants for preparation of offers. This is identified by the government as one of the major thresholds for participation in procurement procedures. This is why the law makes an attempt to introduce a general prohibition for administrations to require applicants to proof the circumstances contained in public data records or data that is known to the administration, as has already been collected or created by state authority. Provided at the time of application or tender, the candidate or participant to certify the absence of barriers to participation, respectively - compliance with the requirements specified in the notice by a single statement instead of the previous dozen supporting documents incl. statements. This single definitive statement should include information on public registers verifying the relevant circumstances or the competent authority under the laws of the state in which the candidate or participant is established, which is obliged to officially provide the employer with the information about these circumstances. Circumstances which are not available in public records shall be further proved by the candidate who has won the procedure and got the contract. This only applies to contractor and is only relevant at the time of conclusion of the contract. In any event he is not obliged to prove facts and circumstances contained in the public registers, but only to indicate the source.
 
Therefore, the contracting authority is no longer entitled to determine alone whether to require the participant compulsory registration on the professional or trade register in the state in which he is established as a condition of participation. When such registration is a statutory requirement as a condition for performance of the contract, the contracting authority may only apply the requirement through declaration or certificate of availability of such registration by the competent authorities under the relevant national law. If the law does not require that then the contracting authority has no right to require it, as evidenced by the new version of Art.49, § 1.
 
Regarding admittance of economic operators to participation in public procurement the law well distinguishes two categories of general requirements: (a) those where failure to comply with ultimately leads to removal of the non-compliant candidate from further participation and (b) those where failure to comply with could lead to removal at the discretion of the employer (only if it is explicitly provided by the tender papers). One of these requirements refers to tax integrity. Lack of any obligations to a public budget was a requirement at the discretion of the sponsor. By the amendments to Art.47 this requirement becomes mandatory and applicable to all procedures. If an applicant or participant in the procedure has duties to the state and municipalities that are established by an act of a competent authority if not deferred or rescheduled, he/she is to be removed from the procedure in all cases, but not if the contracting authority has indicated in this notice (as in the law previous provision).
 
Similar in nature amendments to the law are provided in the direction of increasing the social responsibility of the business. It is now mandatory to be proven that the applicants have no obligations for social security contributions established by an effective public act. The contracting authority is obliged to remove such applicant / participant having no discretion whether to do it as before (Art.47, § 1, item 4). Opposite to the above, contracting authority shall have the right (but not the obligation) to remove an applicant or participant who is convicted of a crime against the employment rights of the personnel or a crime connected with a breach of health and safety rules at work.
 
Conditions and criteria for selection
Amendments are primarily focused on the conditions and criteria for the selection of candidates and participants, where lawmakers have undertaken a serious attempt to consistently introduce the principle of proportionality in each phase of the process.
 
In addition to the general requirement for non-discriminatory conditions for applicants or participants, a rule was made: a prohibition to include conditions that are not consistent with the procurement subject and the amount or the scope of the contract (Art.25, § 5). This is a logical development of the existing provision, as far as the same case is concerned: when the requirements are irrelevant in view of the subject, the amount or scope. Even without such a provision it is obvious that otherwise there would be a misuse of law, where the employer requires the contractor to have the equipment and facilities, many more than the usual, necessary for the implementation of such contract. Within the explanatory memorandum to the bill the subject measures are identified as aimed at protecting small and medium business and improving its access to public procurement. It is stated that this would create guarantees for the implementation of the principle of proportionality and that this is a measure against frequent malpractices where restrictions are placed on participation in the procedure for a wide range of entities who actually have the ability and capacity to perform the contract, but are hampered by artificial barriers that are placed mostly in determining the selection criteria.
 
Selection logically precedes the evaluation of tenders. Traditionally selection criteria are understood as a set of minimum requirements for economic and financial status of the candidate or participant, technical capabilities and / or qualification, which identification and implementation is not mandatory for the contracting authority, or at least not in its entirety. However, if there is any envisaged, employer has to identify the documents that it must be proved by. The law amendments clarify that employers can bring one or more groups requirements or as an alternative to not provide any. The choice belongs entirely to the contracting authority. It is essential that the new version of the law requires compliance (proportionality) between the criteria and supporting documents, on the one hand and the object, the object value, complexity, quantity, scope of the contract and the purpose of the works, supplies or services on the other hand. For even greater clarity a rule indicates that recognized experience in the sector may be introduced as a selection criterion, but the use of several sets of conditions or requirements is strictly prohibited (Art.25 , § 6). These are as follows:
  1. Conditions related to the execution of public contracts only.
  2. Conditions related to implementation of specified programs or projects.
  3. Conditions related to specific sources of financing.
  4. Requirement for a specific number of executed contracts with specific reference to their subject and others.
 
The understanding is that the above enlisted practices fall in direct violation of the general constraint under Art.25, § 5 and therefore they are added as the most common examples of such violations. The stated purpose of the above provisions (Art.25, § 5 and 6) is to cease the common contracting practice of putting to candidates or participants requirements that do not correspond to the specific procurement volume and value and thus restricting competition. These rules transpose one of the mayor rules of Art.44 of Directive 2004/18/EC, namely that the scope of the information and the minimum conditions for a specific contract must be related and proportionate to the subject of the contract. In terms of SMEs access to public procurement market, the introduced ban is to mean that “small” requirements must be set for "small" procurement as stated in the bill rationales.
 
When the contract has lots, the selection criteria for each of the lots must comply with the characteristics for the position described. These provisions are further explored in Art.49-51 of the Act, respectively, for the general, technical and financial requirements.
 
With the same purpose (implementation of the proportionality principle within the PPA) provisions of Art. 49-51a, which are relevant to the selection criteria for candidates and procedures for procurement are substantially amended. The purpose of selecting a candidate or participant is to let him/her provide evidence that he/she is able to perform the particular contract. In this sense, the presentation of the relevant experience should only be seen as a means of demonstrating the capability, and not as the goal of the selection.
 
Proving the technical capacity and / or qualifications of the candidate or participants has undergone corresponding changes in the direction of easing. It is specified that this proving can only be done by a list of supplies or services and evidence that they are actually provided. Experience in construction can be proved alternatively in either of three ways:
  1. By reference to public records, containing information about the statements for entering buildings in operation, if there are details of the competent authorities which issued these instruments, the value, the date of the completion, place and type construction, or
  2. Through certificates of satisfactory completion dated and signed by the issuer, if referring to the value, the date of completion, the location, the type and volume of construction, as well as whether works have been implemented in accordance with the applicable regulations, or
  3. Through copies of documents evidencing performance, the type and volume of completed works (Art.51, § 1, item 2 and § 4).
 
It is assumed that the above amendments satisfy the requirements of Art.48, § 2 of Directive 2004/18/EC which is aimed at reducing the administrative burden on applicants and participants. It is thus understood that they will no longer be required to prove the execution of works, if the same is accepted by the competent government authority, but only to refer to those authorities and the employer has the right to check the listed information. As only few classes construction are subject to formal entry into operation by a public authority provided a proof by any other alternative means is possible, for example certificates of satisfactory execution.
 
Proof of education, vocational training and experience of the applicant or participant and / or their particular managerial staff, including those responsible for providing the services or managing the work, has changed. There will not be necessary to provide support by documents, but they only must be "designated" (i.e. referred to - Art.51, § 1, item 7). Reference (designation) is a term used to in Directive 2004/18/EC, which is to mean that the candidate / participant should submit the required information in a table form if indicated and sample provided by the employer or a simple statement. This does not preclude employer from requesting at his discretion the winner to support allegations in the statement appropriate documents. The vision of the government is that the focus is increasingly moved towards the professional experience rather than education and training as the rapid development of the labor market over the past two decades brought the effect of discrepancies between diplomas and the real capacity of experts which may be considerably higher. The reason is the massive retraining within the course of the work and the accumulation of a significant project experience, different from the nominal subject of the majority of experts.
 
A substantial challenge for lawmakers is overcoming the massive malpractice contracting authorities to only determine turnover requirement, moreover equal to the maximum amount permitted by law. The reasons for this phenomenon are either lack of capacity or lack of willingness to lay down certain adequate requirements for financial and economic status of the candidates or participants. Since the total turnover and specific turnover for the activities covered by the contract itself, does not prove the existence of financial capacity to perform the contract, this is the reason why Art.25, § 6 received significant changes and the reason for the repeal of Art.50, § 1, item 3.
 
The requirements to the financial and economic situation of applicants and participants are not mandatory anymore. They may be provided "only if for contract performance financial resources for the provision of materials, supplies, wages and salaries and related taxes and insurance, and others are necessary". For these cases, there is a limit to the size requirements of financial resources, which must be available to the candidate or participant. Provided contracting authority is not allowed to require this resource to exceed 50 percent of the declared estimated contract value. Candidate himself should decide how this resource is to be proven. He may choose between bank certificate, his own annual financial report (if publication of such is required by the law of the country in which he is established) or part of the annual financial report (Art.50, § 1). The government's intentions were to decisively discontinue the practice of placing higher, but irrelevant to the participants’ requirements or requirements that can be met only by specific economic operators. It is recognized that this is usually done either as a result of a serious misunderstanding of the purpose of the selection, or to commit fraud, and that it is virtually impossible to define common rules due to diversity of the objects of public procurement. That is why the approach has been taken to only enlist the documents through which candidates or participants may prove their good economic and financial standing and technical capabilities and / or professional qualifications. The practical purpose of this provision is to require the contracting authority to determine whether the contractor is expected to have financial resources available as a condition to fulfill the contract, and only if he has to - what must be the size of these resources in order to secure the contract performance. It is recognized that financial resources for the various classes of procurement is different. For example, in the case of service contracts, most often the only financial resources available to the contractor are the one sufficient to purchase supplies and to pay wages and social security payments. As regards public works contract, however, financial resources are to be available in amounts that must ensure the purchase of materials that would be used in the construction. For this reason, the maximum financial and economic resources, the availability of the contracting authorities may address to the applicants and participants must comply with the requirements of Art.25, § 6 and may not exceed the estimated cost of the contract. In the opinion of the Competition Protection Commission (CPC) regarding this particular draft rule of the bill is stated that if the required financial resources are to the amount of the estimated procurement value, in practice the participants would be required to have their own means by which to self-finance the full range of activities included in the subject contract, which in turn makes the scheme of advance and interim payments senseless. With respect to these considerations, the CPC has proposed to only demand the resources necessary for the provision of materials, supplies, wages and salaries and related taxes and insurance, etc. That is, the required resources may not be more than 50 percent of the estimated contract value. This was the cause and reason to adopt such legislative solution.
 
Also aimed at overcoming the initial barrier to the "entry" to the public procurement market provided the applicant may use third party compliance with the requirements of economic and financial standing and appropriate technical capabilities. Until now such third party could only be their partner in a possible association (consortium). Now, the new version of Art.51a allows participants to use the resources of subcontractors, affiliated enterprises and others, if only proved that their resources will be available. So each new (including for the purpose of the contract) or small economic operator may win the contract irrespective of the kind of relationships between him and the “carrier” of the of conformity (resources). And if the capabilities of these entities (partners, subcontractors, and affiliates) meet the requirements set and they explicitly commit it to the procured supply, service or works contracting authority is not permitted to disqualify the candidate or participant.
 
Independent participation of related parties or associated enterprises as candidates or participants in the same procedure is now explicitly prohibited (Art.55, § 7). This negative fact is to be proved by statements of lack of connectivity with other participants.
 
Evaluation of tenders
The amended law is another attempt to introduce a common understanding of what constitutes "a methodology for the comprehensive evaluation of tenders". Evaluation indicators and their relative weight are expressly mentioned as an integral and essential part of the methodology, along with instructions for determining the assessment for each indicator, which until used to be subject of uncertainty based on several somewhat contradictory rules (Art.28, § 1 7 and § 2). It is also possible now to determine the minimum and maximum values of quantitative indicators in methodology, as long as they comply with the technical specifications. It is believed that this prevents the use of unrealistically low or elevated values of prices, terms and other key indicators. The use of the "lowest price" criterion to procure design and construction, as well as design contests is explicitly prohibited now (Art.37, § 3, item 2).
 
The public procurement contract
A trend to unify the contract content may be monitored now. Introduction of a minimum mandatory content of contracts and approval of the recommended standard contracts and attachments thereto are oncoming. This should be carried out by 1/10/2014, with the Implementing Regulations of the law (Art.41, § 1). This innovation is due to systemic findings of auditing authorities and professional associations for the existence of contracts that lack essential content, such as requirements to contract implementation and to acceptance of performance by the contracting authority, responsibility for failure, lack of procedures for utilization of bank guarantees, lack of data on those involved in the association - contractor, and many others. Also provided offers are to be subject to similar standard forms, together with the attachments thereto (Art.28, § 4). It should not be forgotten that the offer also becomes part of the contract. Attachments should embrace all the statements, reports, references, certificates and the like. It is assumed that this will overcome the vicious practices leading to poor procurement documentation, unfairly prepared and incoherent documentation. The above comments should be reminded, that the contracting authorities are now required to publish online all the documentation with its particular appendices, and the contracts with all the annexes and supplementary agreements. Publication is to be made both in the Public Procurement Registry and within the now introduced buyer’s profile.
 
The system of control on the implementation of contracts for procurement has also undergone some adjustments. The Chamber for Public Audit and bodies of the Agency for State Financial Inspection are now granted powers to control the actual implementation of the contracts and framework agreements. This control, however, will focus on formal and quantitative indicators, as expressly provided that these authorities can not exercise control over the quality of performance (Art.123, § 1).
 
Amendment and termination of contract
Particular interest represents the grounds for the modification of a procurement contract. There is a general prohibition on that, with few exceptions only. Following the amendments now the range of exceptions has been expanded. This expansion was justified by the need to protect the public interest in the case of procurement of high value and long-term performance (Art. 43). New ground for contract variations refers to a complete or partial replacement of the goods included in the scope of supply contracts (including their components) when it is in the interest of the contracting authority, does not increase the value of the contract and where replacement products conform to the requirements of the technical specifications, having at least the same functional characteristics as compared to the replaced.
 
An attempt for detailed settling receives the grounds for contract termination prior to completion of its implementation. On the first place the grounds for termination may be provided by the contract itself. Expected approval of a standard contract forms would illustrate to what extent the government will provide the employers freedom to negotiate these reasons according to established international practice, particularly within the investment process. Also provided the contracting authority may terminate the concluded procurement contract, if due to unforeseen circumstances is unable to meet its obligations. As a matter of fact it is only a variation of the existing rule. The innovation is that these circumstances must be unforeseen, and not just occurred.
 
Until now PPA was not governing the consequences of the possible conversion (merger or acquisition) of the contractor. In order to ensure the quality and timely completion of performance these consequences are now provided by the lawmakers. Successor contractor may (but is not obliged to) continue implementation of the public procurement contract, if he/she satisfies the general requirements for admission of candidates and participants, respectively - the stated selection criteria. If he/she is not corresponding to these requirements, the contract should be considered terminated. In this case liability in tort is available following possible judicial intervention. To ensure the fulfillment of this objective, this liability is joint and several of the original and the new contractor (assignee).
 
Subcontractors
Some basic restrictions on the availability of subcontractors are lifted. This is simply left to the discretion of the candidate / participant himself (Art.56, § 2). He should only indicate the estimated subcontractors, the types of work on the subject of the contract that are planned to be offered to subcontractors, and their particular share (percentage) of the contract value. Therefore economic operators are now unrestricted for the use of subcontractors. At the same time, the government's proposal for introduction of a new article 25a was not accepted, which was to establish the rule that in announcing public works contracts over BGN 2.64 million contracting authority shall determine the share that participants must provide to the subcontractors, where this share cannot be less than 30 percent and higher than 70 percent of the total procured value.
 
The requirements to possible subcontractors for specific experience are now cancelled. So does the list of mandatory documents that had to be submitted referring to subcontractors. Therefore, it is not necessary to prove the existence of economic, financial and technical capacity and / or professional qualification "according to the type and proportion of their participation" anymore.  Thus any economic operator may be a subcontractor, even if he/she has never received procurement contracts, as the responsibility is entirely born by the contractor (Art.25 of Directive 2004/18/EC). The consequence is that the contractor has the right at any time to replace any subcontractor who fails to do the assigned work. Through interpretation can be concluded that this rule will only apply where the contractor has represented the capacity of particular subcontractor as a ground to win the order. Obviously in this case his removal would mean retrospectively falling in discrepancy with the required economic, financial and technical capacity and / or professional qualifications.
 
The liberalization of the general arrangements for subcontractors is accompanied by the introduction of specific requirements to contracts with them. To this end, a whole new Section VII "Subcontract" (Art.45a and 45b) is introduced in Chapter Three of the Act. This is quite logical, since providing free choice of subcontracting the contracting authority should be assured that the contract will be properly carried out. This is even more relevant where the subcontractor is the main “carrier” of the capacity to perform the contract. Innovations are limited to the following points:
  1. Assigning part of the actions/works to entities not having the status of subcontractors is forbidden. Nevertheless this does not exclude the possibility to assign simple supplies (without installation) and services that are not identical with the contract for procurement. On the other hand, the contractor is not required to announce all his subcontractors, as in some cases this is not possible, and in other subcontractor may refuse to enter into a contract. Therefore, this provision should be interpreted narrowly, as evidenced by the formal rationales of the government and the relevant provisions of Directive 2009/81/EC on special procurement.
  2. Subcontractors must meet the general requirements to the contractor under Art.47, § 1 and 5 (for tax integrity, a clean criminal record, lack of bankruptcy, conflicts of interest, etc.).
  3. Subcontracts shall be submitted to the contracting entity (an original though), if the subcontractor is specified in the offer.
  4. Reassignment of activities already outsourced to subcontractors is forbidden.
  5. The presentation of evidence that all payments to subcontractors are completed is now a newly introduced condition for final payment to the contractor. The intention was to regulate relations contractor – subcontractor in a way that would terminate the existing practice of systematic non-payment by the contractors to subcontractors. The original government proposal for direct payments to subcontractors with the possibility of a challenge by the contractor was not supported by the Parliament.
  6. Agreement with any subcontractor can be terminated at any time but only on the legal grounds explicitly stated in the law: default or event of non-compliance with integrity and capacity to perform the contract. In this case, the contractor is entitled to replace the subcontractor. In the cases of non-compliance the contract termination and replacement of the subcontractor are even mandatory.
 
Framework Agreement
The law allows now the establishment of a framework agreement with less than three potential contractors where there is no sufficient number of candidates or participants who meet the selection criteria, or a sufficient number of bids that meet the previously announced terms of the contracting authority (Art.93a, § 2). Evidenced by its previous wording it can be concluded that now the law establishes a rule for a framework agreement with even two potential contractors. Until now it was considered inadmissible since they were required to be at least three or by exception - only one. That is promoted as a measure to encourage competition. A new requirement is introduced that the framework agreement should also specify the procedure for the conclusion of public contracts, including deadlines for submission and evaluation of the tenders. At the same time a mandatory minimum tenders content is introduced, namely limit for completion of the contract (if not defined in the framework agreement); price offered and technical proposal for the contract. When the evaluation criterion agreed by the framework agreement is the lowest price, submission of a technical proposal is not necessary (Art.93b).
 
Negotiated contracting
Rules for directly negotiated contracting have undergone some minor changes. The content of the application for negotiation with announcement was unified in an even greater extent to the request to participate in pre-selection for the restricted procedure. The opening of bids is now to be made in public without restrictions on the audience. Two of the grounds for negotiation without notice are now modified. First, circumstances representing force majeure are redefined. The new wording is more unclear, as it the element of "unpredictability" is now removed and this is in principle the essential element defining the state of force majeure. Therefore, it can be argued that the term "exceptional circumstances" in the new version matches the concept of force majeure. Any exceptional circumstance (even a predictable one) having effects that cannot be overcome by the general (regular) procedures and that necessitates urgent action is now a ground for negotiation without notice (Art.90, § 1, item 4). For unknown reasons and rationales, one more reason to negotiate without notice was added: for supplies and services in the field of physical education and sports, if the estimated value is more than BGN 66 000.
 
Public call for tenders
Simplified procedure for procurement by public call for tenders (Article 101a – 101g) has undergone a number of significant changes. They are directed towards suspension of the opportunity to conduct an open procedure (in practice) while ensuring the rights of persons who submit bids, and publicity. They are the following:
  1. Requirements for financial and economic standing defined by the call for are now prohibited.
  2. Mandatory content of the public call is also amended, as an effort to move towards simplification. For this purpose, provided it is to be prepared in a standard form.
  3. Terms of Reference (technical specifications) and draft contract should be directly attached to the call.
  4. Rules for the opening of bids, the committee and the bids evaluation are unified with the general rules to a very large extent.
  5. When bids are not submitted, the contracting authority may procure the contract upon negotiations with the contractor of his choice. In these cases, the contracting authority is bound by the estimated value, the technical specifications (ToR) and the draft contract of the initial call.
 
Appeals and Judicial Review
In order to expedite judicial review an amendment was made to Chapter XI of the Act, concerning the question of when the term for appeal against the decision, which opened the tender process starts. So far, this was the date of receipt of the documentation (Art.120, § 6). Following the introduction of higher standards of openness and creating a profile of the buyer, the obvious intention of the lawmakers was that period shall run from the date of actual delivery. Within the same logical sequence it is further provided that the summoning of the parties shall be carried out under the rules of the Code of Administrative Procedure (allowing summoning by email for example), but not by the rules of the Civil Procedure Code as before (Art. 122b, § 6). Instituting the proceedings requires payment of public charges, where only contracting authorities are exempted. A previously existing significant misunderstanding is now cleared as the amount of the fine imposed by the CPC for a violation is now amounted to up to 10 percent of the value of the signed contract (in cases where employer has concluded a contract although interdiction on that is imposed) instead of fixed 10 per cent. Indeed, the provision has nature of a warranty, but the principle of proportionality requires consideration of the punitive measure to the particular factual situation, especially if the objectives of the law can be achieved through the lighter measure.
 
Prepared by Assen Dyulgerov, attorney-at-law
Dyulgerova & Penkova Lawyers Partnership, of counsel
 
   
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