Considerable legal reform brought to the public procurement sector in Romania

Mon | 01.08.2016

Legal

In view of the deficiencies of the public procurement process in Romania and the requirement for transposing the EU directives in the field, a much awaited change has been implemented and, consequently, the public procurement legal framework has been significantly reformed.

Previously, on primary level, the public procurement sector was regulated by the Government Emergency Ordinance no. 34/2006 on the award of public procurement contracts (“GEO 34/2006”). The previous legal background has not led to the best results in the public procurement sector. The criticism related most often to the lack of transparency of the public procurement process and to difficult to accomplish qualification and selection criteria, especially for SMEs.

As of the 26th of May 2016, Emergency Ordinance nº 34/2006 regulating public procurement matters in Romania has been repealed and a set of four new laws entered into force, as follows:

1. Law no. 98/2016 on classic public procurement representing the general framework in the field
2. Law no. 99/2016 on sectorial procurement

The relevant activities are specifically envisioned by this law and are represented by the gas and heat, electricity, water, transport services, ports and airports, postal services and, extraction of oil and gas and the extraction of coal or other solid fuels sectors.

The contracting entity is to organize market consultations to prepare the sectorial procurement and the possibility of concluding framework agreements for a maximum of 8 years is also foreseen.

3. Law no. 100/2016 on concessions of works and services

This act is a first for the Romanian legislative environment and it excludes its application to activities regulated through sectorial procurements.

A substantiation study is required when the public authority intends to perform a project by awarding a long-term contract covering either the execution of works and operation of the work result or the management and operation of services.

An analysis if the award of the respective contract implies a significant transfer of operating risks to the economic operator is also necessary, otherwise the contract is considered a classic procurement.

4. Law no. 101/2016 on remedies and appeals 
In the field of awarding public procurement, sectorial procurement and concessions contracts.

Furthermore, the classic and sectorial public procurement laws have been complemented by a secondary legislation of methodological norms in force as of the 6th of June 2016.

Among the most important amendments implemented through the new legislative framework, we mention the following:

  1. Introduction of the concept of the most economically advantageous tender in terms of award criteria. To determine the most economically advantageous tender: the contracting authority is entitled to apply one of the following awarding criteria:  lowest price/ lowest cost/best quality-price ratio/best quality-cost ratio.
  2. Tenderers to initially submit a unique European procurement document in electronic format (DUAE). Following this, only the tenderer ranked first would be required the justifying documents stipulated in the tender documentation. However, exceptional situations are foreseen, in which the tenderer may be required to submit supporting documents to prove the information provided in the DUAE at any time throughout the proceeding.
  3. Decrease of the minimum durations of the award procedures and the increase of efficiency by introducing the mandatory use of electronic means.
  4. Clarification and definitions of providers and subcontractors are provided, eliminating an important issue, frequently occurring under the former legislation.
  5. Encouragement of use of the centralised purchasing, resulting in the simplification of the awarding process, reduction of transaction costs, the professionalization of the public procurement awarding process for an efficient use of public funds.     
  6. Possibility of a direct payment to the subcontractors proposed in the tender upon their request. Moreover, if a case of exclusion is observed, the possibility of replacing the proposed subcontractors is now regulated under certain circumstances.
  7. Regulation of the conditions in which a public procurement contract may be amended throughout its execution, without a new awarding procedure, as well as the case resulting in the unilateral termination of a public procurement contract by the contracting authorities.
  8. Redefinition of the concept of ¨conflict of interest¨ so as to extend the spectrum defined by the former legislation, which was resumed to family or capital relations.


Positive impact on SMEs 

Breaking down public procurement contracts
Although GEO 34/2006 regulated the contracting authority’s possibility of dividing public procurement contracts into lots, it did not provide a set of specific rules in relation to such division. According to the new legislation, the division of public procurement contracts into lots becomes a rule and the contracting authority is required to justify its decision should it choose not to divide the awarded contracts into smaller lots.

Thus, the authorities shall:
1) determine the subject of each lot by adapting the size of individual contracts so as to better match the capacity of SMEs
2) according to the different trades and specializations involved, tailor the content of each public procurement contract to closely match the specialized business sectors of SMEs or the various subsequent phases of the projects.

Contracts awarding criteria
Previously, a major barrier for SMEs in doing business with the public sector was represented by the practice of the authorities with respect to awarding public procurements contracts based on the lowest price criterion, selecting price before quality.

Although the new legislation maintains the lowest price criterion amongst the criteria for determining the most economically advantageous tender, it also provides that the lowest price or lowest cost criteria cannot be adopted for awarding certain types of contracts, such as:
1)agreements for works or services with the object of intellectual activities involving a high level of complexity (e.g. services agreements with the object of technical assistance or consultancy, design or supervision related to high complexity projects);
2)public procurement contracts for works or services related to trans-European transport infrastructure projects and county roads.

The methodological norms on the implementation of the classic and sectorial public procurement laws establish that a system of evaluation factors and specific algorithms have to be used for determining the winning tender. These evaluation factors and the aforementioned algorithm are mandatory to be provided and further detailed in the tender documentation.

With respect to the agreements for works or services with the object of intellectual activities involving a high level of complexity, for which the best quality-price or best quality-cost ratio is mandatory to be applied, the methodological norms establish that the percentage allocated to the price criterion cannot exceed 40%.

Subcontractors
Another innovation benefitting SMEs and introduced by the recently entered into force laws consists of the possibility for subcontractors to request the contracting authority to directly pay the subcontractor for the corresponding part or parts of the contract performed by the subcontractor.

In this respect, the subcontractors are required to express their option regarding the direct payment from the contracting authority at the moment of the procurement contract’s signing, or at the moment they become part of the procurement contract.

As a general rule, the contracting authority carries out direct payments to subcontractors when their performance is confirmed by relevant documents agreed upon by all three parties, respectively the authority, the contractor and the subcontractor. Nevertheless, if the contractor unreasonably refuses to collaborate, it is possible for the relevant documents ascertaining the subcontractors performance to be agreed upon only between the contracting authority and the subcontractor.

European single procurement document
The new legislative frame provides the possibility for the tenderers to initially submit a European Single Procurement Document (ESPD), in the standard form provided by the Commission Implementing Regulation 2016/7, further to which only the tenderer ranked first would be required to provide the justifying documents on the fulfilment of the requests stipulated in the tender documentation.

Under the new system, tenderers must provide a statement according to which they are able, upon request and without delay, to provide the supporting documents that prove their compliance, unless they are already accessible via public registers. This means less administrative burden for businesses, particularly for entities that do not win the tender procedure.

Transparency in public procurement procedures
The new laws in the public procurement field provide the obligation for contracting authorities to conduct all open and restricted auctions procedures entirely by means of electronic communications.

Breaching by an authority of the legal obligation with respect to submitting, for publication, a notice when it initiates an open or restricted tender procedure, a competitive negotiation or dialogue, or an innovation partnership is deemed an administrative offence and is punished with a fine ranging between 5.000 RON to 30.000 RON. The fine is applied to the contracting authority, which, depending on the specific situation, is required to take measures against the persons involved in the public procurement procedure subject of the offence.


Electronic System for Public Procurement (SEAP) registration procedure

  • Filing the online registration form available at www.e-licitatie.ro;
  • Sending a registration form, signed by the legal representative of the economic operator or the person expressly empowered to represent the economic operator in relations with third parties (in this event a certified copy of the power of attorney shall be attached) and the documents ascertaining the form of business organization of the applicant in the attention of a SEAP registrar;
  • Transmitting by the SEAP registrar, by way of electronical means of communication, of the digital registration certificate and instructions for its use.


CONTACT US
Please get in touch if you would like to discuss how this legislation will affect your business or if you would like to receive further information on Romania’s public procurement reform.

Georgiana Sirbu
Managing Associate and Head of Spanish Desk
Stratulat Albulescu

Georgiana has an extensive experience in advising clients in international transactions and implementation of complex projects.She is specialised in energy law, real estate and public procurement and has strong credentials from local and international law firms and companies. Prior to Stratulat Albulescu Attorneys at Law, she was part of NNDKP team and subsequently acted as Head of Legal of a major PV energy group in Barcelona, Spain. In this role she was responsible with the management of all legal matters of the company´s operations spanning across Spain, Romania, Chile, Mexico and Brazil.

ReliableResourcefulRelentless
Stratulat Albulescu  Attorneys at Law is a  young and dynamic Romanian law firm,  providing legal advice in all business  sectors and in all areas of Business Law and Dispute Resolution in Romania. Our team is comprised of lawyers who are leaders in their disciplines. We serve a diverse client base ranging from multinational corporations to local companies. Our clients appreciate us for our in-depth knowledge of legal matters in Romania and our prompt and practical legal solutions which we deliver by employing Partner-led close teamwork, cost effectiveness and imaginative thinking. The firm works in close co-operation with highly-respected law firms throughout Europe and elsewhere and has significant experience in cross-border transactions, with our lawyers providing legal advice in the English, French, Italian, Romanian and Spanish languages.

We also recommend

High-profile additions at S...

12.10.2016

New approaches to the suspe...

17.07.2016

Business Incubators: Legal ...

23.06.2016

2017

2016