Last week, the Parliament of Estonia (Riigikogu) passed amendments to the Public Procurement Act (RHS). In total, almost 300 changes are envisaged in the act, which is impressive in terms of numbers, but will not lead to drastic changes.
The current Public Procurement Act has been in force since 1 September 2017 and transposed three EU public procurement directives. Preparations for amending the law began immediately after the adoption of the act, as it could be assumed at the time that the law would still require at least one round of amendments. Thus, the package has gone through a very long and thorough period of preparation by the Ministry of Finance in cooperation with stakeholders.
The preparation of the amendments was preceded by a stakeholder consultation, which allowed valuable input from market participants, contracting authorities, law firms and other interested parties to be taken on board. Drafting of the amendments was also helped by the discrepancies and bottlenecks identified in Commentaries of the Public Procurement Act, a book compiled by experts in procurement law in Estonia and with input from the European Commission. Thus, it’s definitely the case that the amendments were drafted based on the best knowledge available.
The success of the consultations is clearly indicated by the fact that there were no major disputes in the Riigikogu over the bill and the proceedings went smoothly. It can be assumed that after the current package, no major changes to the Public Procurement Act will be envisaged for many years to come, unless they result from European Union initiatives. For example, on 8 April the Council of the European Union adopted a regulation imposing restrictive measures on public procurement in connection with Russia’s activities in Ukraine, prohibiting the award and continuation of public contracts with Russian citizens and entities or bodies established in Russia.
Although the amendments deliberately did not address fundamental issues, it would still be appropriate to take a look at what the changes will bring.
Changes in deadlines
The Public Procurement Act, which has been in force up to the present, failed to specify a number of important deadlines for some procedures.
For example, the law has so far not set a minimum deadline for the submission of tenders for the procurement of social and other specific services, such as health services, training services, legal services and many other day-to-day services. In some cases, this has led to the practice of setting excessively short deadlines for the submission of tenders.
The amendments stipulate that the minimum time limit for the submission of tenders for such services is 10 days. In the initial version of the draft, fifteen days were provided for this, but based on feedback from stakeholders, 10 were finally left in the law as a compromise.
The minimum time limit for the submission of tenders will also be amended in part of the simple procurement procedure for lower-value public contracts. In the case of supplies and services, the contracting authority must in the future allow a minimum of ten days for the submission of tenders instead of the current five working days. These terms do not change when procuring works.
With regard to deadlines, tenderers will certainly like the clarification that, in the case of special procedures and design contests, the contracting authority must extend the deadline for submitting tenders on the same grounds and for the same reasons as for other public procurement procedures. In other words, if the contracting authority changes the terms of the contract in the middle of a public procurement procedure, the contracting authority must, as a general rule, extend the time limit for submitting tenders accordingly.
The deadlines for submitting a request for a review of procurement documents will also be made identical, and will be the same as in the special procedure for social and other specific services and the procedure for concluding a concession contract: five working days before the deadline for the submission of tenders, applications or designs. For a simple procurement procedure, the deadline is two working days.
Following the practice of the Public Procurement Review Committee, the deadlines for contesting a simple procurement procedure will be applied to contestation of any public procurements below the lowest threshold. In such cases, the appellants must act particularly expeditiously.
The application of the standstill period has been unified, but will be applied less frequently
The standstill period will be 14 days after notification of the contracting authority’s last decision for most public procurement above the threshold. During this period, the contracting authority is not entitled to award the contract. Earlier regulation meant the length of the standstill period varied according to whether the estimated value of the procurement was lower or higher than the EU threshold. However, there remains a divergence in the standstill period in the case of a simple procurement procedure, which continues to be five working days from the notification of the decision.
According to the directives, contracting authorities will in future also have to indicate the standstill period in notices about their decisions. However, the legislation does not foresee any consequences for non-compliance with this obligation.
Contracting authorities will also be given a significantly shorter deadline for submitting information to the public procurement register on breaches of procurement contracts. Until now, this had to be done only after the end of the performance of the public contract. According to the new regulation, this must be done within 30 days of the implementation of a legal remedy, such as termination of the contract or application of a contractual penalty. In many cases, this means a time difference that can be measured in years.
The purpose of the amendment is to ensure that other contracting authorities receive more rapid information on tenderers who may not be able to perform their contracts properly. Having such information provided to the register, in some cases years after the violation, certainly did not serve the purposes of the law.
As regards the application of the standstill period, the stricter national rule, which allowed the standstill period to not apply only if no more than one tenderer had submitted a tender, has been abandoned. Upon entry into force of the amendments, the standstill period shall not apply when, at the end of the procedure – i.e. at the time of notification of the last decision – there is no more than one tenderer in the procedure. This may be the case, for example, when all but one tenderer withdraw their tenders, the remaining tenderers are not qualified or excluded, their tenders are rejected and these decisions can no longer be challenged.
The regulation of special procedures will be clarified and legal certainty will increase
One of the most important changes is the clarification of the regulation of special procedures, which extend the specific to “regular” procurement procedures to special procedures. The current law only defines a limited number of fundamental rules for special procedures and otherwise allows the contracting authority to design the procedure itself.
However, as it is recognised in practice that certain rules in public procurement are so universal that they should be extended, regardless of how the law refers to these procedures, they have been made either fully mandatory or “semi-mandatory” for special procedures. For example, fundamental rules on whether a contracting authority must reject a non-compliant tender or whether the most economically advantageous tender must be declared successful.
This is a double-edged sword. On the one hand, it deprives the contracting authority of a degree of flexibility in designing the procedure itself, but at the same time it saves the hassle of describing these rules in the procurement documents, as the obligations would come directly from the law. Ultimately, however, the change is to be welcomed, as it provides greater legal certainty and does not give rise to disputes in situations where, for example, a contracting authority has forgotten to include an important regulation in the procurement documents. In this case, the provisions of the law can be followed directly.
Ideologically similar unification is also envisaged in the definition of trade secrets. Upon entry into force of the act, the defining and protection of business secrets shall be applied on the same basis and in the same manner in all public procurement procedures.
Contracting authorities can and have to make more decisions
The amendments provide the basis for making various decisions which have not been provided for in the law so far, and on which the law has so far remained silent. For example, if the contracting authority has included a precondition that the tenderer must examine the place of performance of the contract or check the documents explaining the procurement documents on the spot, or reserved the contract for a sheltered workshop.
If the tenderer does not comply with these conditions but nevertheless submits a tender, the contracting authority must render a decision that the tender will not be accepted. This decision can also be challenged in the Public Procurement Review Committee and later, if necessary, in the courts.
However, the most important change in decision-making is the obligation to issue the last decision of the contracting authority separately from other decisions. Many Estonian contracting authorities, whose usual practice is to make all decisions – the decisions based on the ESPD, the decision to declare a tender successful, and the decision to exclude or qualify the successful tenderer – have likely erred in this respect. The final decision on the qualification of the successful tenderer and the grounds for exclusion must be taken separately.
Rules for amending of public contracts will be specified
The rules on the modification of public contracts have been clarified, but as the basis for the regulation lies in the directives, no fundamental changes are envisaged. Consequently the changes cannot be expected to take into account the uncertainty caused by the war in Ukraine, which is also clearly reflected in the performance of procurement contracts.
Importantly, the clarification of the so-called de minimis rule bring the provision into line with the directives. Under current law, there may be a misconception that small changes can be made in such a way that the total cost of all amendments does not exceed the percentages given in the provision, provided that the cost of each change is below the international threshold.
However, it follows from the Directive that assessment of the admissibility of several amendments is based on their cumulative value. In other words, if several changes are made on the same basis, the total value of these changes must be below the international threshold.
Contracting authorities have the possibility to terminate public contracts if the contractor has grounds for exclusion that become apparent during the performance of the contract
Due to some practical examples, the law has been supplemented with a provision allowing the contracting authority to cancel or withdraw from the contract if, during the performance of the contract, it becomes apparent that the contractor has a mandatory ground for exclusion, such as tax debt.
Although the law does not explicitly provide for this, the legislator has clarified in the explanatory memorandum that in case of a tax debt, it is possible to give the undertaking additional time to pay or reschedule it, or, for example, to take into account the amount of debt incurred. Therefore, it is not the purpose of the regulation that the contract should be terminated as a first option, but tenderers must undoubtedly take into account the need to keep their house in order in the same way during the performance of the contract as during the procurement procedure.
Interim relief in procurement disputes is reversed
The law also unifies the principles of interim relief in review proceedings and subsequent possible court proceedings. Under the current rules, it is impossible to award a contract during or immediately after the review procedure, unless authorised by the Review Committee. In court proceedings, the burden has been reversed compared to the review proceedings – the appellant must receive interim relief from the court, which prohibits the conclusion of the contract during the court proceedings.
Due to both the requirements of the directives and the desire to unify practices, it is stipulated that the so-called automatic ban on the awarding of a contract also applies to court proceedings, and the contracting authority must instead apply to the court for permission to award a contract. Thus, the contracting authority must also play a more active role in court proceedings in the future if it wishes to “see” the procured goods, services or works before the end of the litigation.
Amended Public Procurement Act will enter into force on 1 June 2022, and public procurement procedures which started before that date will be completed in accordance with the requirements of the previous version of the law.
Our counsel Kadri Härginen and senior associate Mario Sõrm submitted a total of 22 proposals to the draft law, of which 15 found their way into the adopted law.