The future of public procurement, between electronic auctions and public-private partnerships

Dialogue with the Public Procurement Magazine on the current issues in public procurement

In the past few years, VASS Lawyers has noted itself through the legal counselling given in the public procurement area. How would you describe the way the system currently works for companies and public Institutions in our country? What should be done, in your opinion, to stimulate the procurement through SEAP?

Public procurement area has proven itself to be extremely dynamic in the past two years, being directly affected by the economic crisis and frequent legislative changes. The economic crisis has brought to the forefront the issue of poor absorption of European funds through public procurement and, therefore, the required measures for increasing transparency and simplifying the procedures must be taken.

However, the approved measures did not always have the expected results, the public procurement procedure remaining quite difficult, as the number of annulled procedures due to admission of claims or procedural flaws has been high. Therefore, most of our clients believe that the legislation in force is extremely thick, cumbersome and unpredictable. Contracting authorities are facing the same issue, and many experts from the public procurement departments have either transferred to other departments, or moved to the private sector, considering that the risks involved in organizing the procedures is too high.

However, 2011 brought a new blast through the recent measures adopted by the Romanian Government and by NARMPP – National Authority for Regulating and Monitoring Public Procurement. To be more specific, the authority became responsible of verifying in detail the instructions to tender within the tender documentation, prior to publication in SEAP, which is likely to reduce significantly the number of claims against the awarding documentation and, respectively, the annulled public procurement procedures.

Also, important strides have been made recently in solving the unpredictability matter in public procurement. We speak of unpredictability as the views of NARMPP or UCVPP, of jurisprudence of the Council and courts are often contradictory, as there is no unitary approach of all the parties involved in the process of awarding public procurement contracts. Therefore, NARMPP recently published two orders whereby it certifies, on one hand the concept of sectoral contracts, and, on the other hand, the qualification and selection criteria that may be imposed on by the contracting authorities not being considered restrictive and limiting. Both issues have given everyone a hard time until now.

When it comes to public procurement we should not neglect the aspect regarding the Electronic Public Procurement System (Romanian – SEAP). Romania has one of the most praised electronic procurement systems.  Contract notices and the tender documentation are published through the system, ensuring transparency and publicity of the procedures that exceed the thresholds set by O.U.G. 34/2006. Moreover, at least 40% of the total value of the public procurement contracts awarded in one year must be organized through SEAP.

Of late years, the share of electronic public procurement procedures held by Romanian contracting authorities has gradually increased, from 2.2% in 2008 to 13.1% in 2009 and to 15% in 2010. Therefore, important progress has been made in the past 3 years, but there still is some reluctance towards using SEAP, which, however, may be overcome through some relatively simple measures.

To start with, I believe that besides the punitive measures, authorities in charge should focus on measures that foster the use of the system, by providing the necessary IT infrastructure to all contracting authorities and organizing training programs at local and regional level. Only so, contracting authorities from small towns, many of them located in remote areas without internet access, may start using the system. Furthermore, given that NARMPP controls the tender documentation prior to publication in SEAP, NARMPP could send the contracting authorities an alert for each procedure that can be held or completed through an electronic auction. The alert should contain both the call for organizing an electronic auction, and also instructions regarding its course.

Competition Council President, Bogdan Chiritoiu, stated recently that a progressive increase of the ceiling of electronic auctions is necessary, starting from the current 40%. What is the status in other EU countries in the field (average of auctions conducted through an electronic system)?

Indeed, the Competition Council recently published a very interesting report on public procurement in Romania. The study unequivocally shows that whenever the authorities held electronic procedures for awarding public contracts, they obtained much lower prices. Hence, the conclusion of the report: we must increase the number of electronic auctions over the threshold of 40%.

On principle, I totally agree with the conclusion, as the procedure for online public procurement is faster, more transparent and with lower costs for contracting authorities. But I believe that a decision in this regard should only be taken after evaluating the degree of achievement for the 40% threshold in 2011.

Extension of online procedures has clearly become one of the key targets in public procurement at EU level. The European Commission estimates that less than 5% of the public procurement procedures are now held online, the percentage varying greatly from one Member state to another. Therefore, countries such as Lithuania, Cyprus or Portugal are front-ranked, with percentages of 60%-90%. Furthermore, in Portugal conducting awarding procedure of public contracts online has become mandatory.

In the past few years you have brought your contribution to developing a virtual community of businessmen and experts in public procurement. When do you think that this community will reach the critical mass that is necessary for carrying out a wide awareness of the importance of public procurement?

I believe that participants in public procurement procedures are already aware of the importance of carrying out this process correctly. Implementing  the procedures may become difficult due to different factors, such as lack of experience, legislative instability or non-unitary implementation of legislation. Through the virtual community that we have created we wish to offer to those interested the adequate instruments needed for a correct implementation of effective legislation. We provide the latest information in public procurement area by delivering articles and professional legal opinion regarding specific legislative changes and we also offer the possibility of interaction between the community members.

How effective are the National Authority for Regulating and Monitoring Public Procurement (NARMPP) and the National Council for  Solving Complaints (NCSC)? What is your clients’ relationship with these institutions?

First of all, the efficiency of NCSC is proved by the timeliness in solving the claims. In public procurement area, time is an extremely important element, because many times filing a claim has the effect of suspending the procedure for the entire period of its settlement. Furthermore, the tight deadlines established by the law for filing or settling the claims are challenges that all the participants in the procedure have to face, including NCSC.

Regarding NARMPP, the new competence in verifying the documentation for the awarding before publication in SEAP should lead to more efficient public procurement by preventing irregularities that may be challenged later. Although it prolongs the ongoing of the public procurement procedures with at least 14 days, it can significantly reduce the number of annulled procedures.

I could say that our relationship with the two institutions has always been characterized by the professionalism of both parties. In fact, this year we achieved for our clients several positive results with regard to the claims we submitted to NCSC and, if appropriate, the challenges we submitted to Courts of Appeal.

The current government adopted a new law to encourage public-private partnerships (PPP), but this caused discontent and controversy. In your opinion, what are the main strengths of the regulatory document?

The legislative act that implements public-private partnership in Romania is a result of a more intense need of such a contractual formula.

If the contractual PPP (e.g. concession) is regulated by G.E.O. no.34/2006, the institutional PPP, which involves the participation of public and private partners together in a private entity (e.g. company), has been neglected by the Romanian lawmaker in the past five years. All this, in a context where, in Europe, about 40% of PPPs are institutional PPPs, and public-private partnerships have become a more and more interesting way of financing the public projects.

Beyond the possible polemics on the content of the PPP law and on some aspects that are going, for certain to be grinded in practice or as a result of it, apart from the purpose of this law, salutary in itself, there are some elements that create the premises of an effective enforcement of the PPP. One of them aims at similarity with the procedure regulated by G.E.O. nr. 34/2006.

Many of the steps and rules for organizing a procedure for awarding a public procurement contract may be found in the procedure for awarding a public-private partnership contract, this aspect being able to eliminate the reluctance of authorities to the use of PPP, or, in other words, the proverbial fear of the unknown. Thus, authorities are not to start from scratch when awarding a PPP contract, as the procurement department already has an idea of what this kind of procedure entails. Companies also have the same advantage.

In addition to that, for the award of PPP contracts the only criterion applicable is “the most economically advantageous tender” which contributes significantly to the removal of dissatisfaction of questionable quality of services and works purchased at the lowest prices.

The Public Procurement Magazine has reached its 50th edition. What is your message to managers of private or public companies and to heads of state institutions, regarding the achievement of effective PPPs?

Public-private partnership is definitely an excellent business opportunity for multinational companies, or even for national ones, but also one of the most viable financing alternatives for contracting authorities.

Still, I do not recommend initiation of such projects without a careful preparation of the awarding procedure and of the public-private partnership contract, since initiation of a PPP project is complex and long-lasting. For instance, in Great Britain, a country with a vast expertise in the field, the process of developing an important PPP contract lasts nearly one year, in order for the implementation of the project to achieve the ultimate goal: value for money.

On the other hand, there are many advantages of public-private partnerships: cost and  risk reduction for central or local authorities, know-how and private management usage in public projects or increased efficiency in implementation. Moreover, as pointed out many times, Romania needs the PPP formula to hope for an integral absorption of EU allocated funds.

Public procurement & PPP

We advise our clients on public procurement, utilities, concessions and PPP projects, in all phases of the tendering process and contract implementation.