Innovations in the Law on Public Procurement

The “Department of Economics and Finance of Katon Karagai district”, on the basis of a letter from the Inspection of Financial Control in the East Kazakhstan Region, informs that on December 4, 2015, the Head of State signed Law “On Public Procurement” No. 434-V (hereinafter - the Law), which entered into force on January 01, 2016.
The law was adopted in accordance with the instructions of the Head of State, as well as within the framework of the Plan of the Nation - “100 concrete steps” to implement five institutional reforms.
On December 11, 2015, by order of the Minister of Finance of the Republic of Kazakhstan No. 648, the new Rules for public procurement (hereinafter referred to as the Rules) were approved, which, like the Law, came into force on January 01, 2016.
In accordance with the new Law and the new Rules, a new platform for the government procurement web portal was put into operation.
At the planning stage, there was a problem of budget planning at inflated prices. To solve this problem, the Law introduced exclusively an electronic format for concluding contracts. This will allow you to generate complete and reliable information on the purchased goods, works, services on the web portal and determine their average purchase prices (the so-called “Price Module”).
Thus, the budgets of state organizations will be formed not on the basis of price lists, as it was before the innovations, but on the basis of average purchase prices formed on the web portal, which will also serve as a guide for budget planning.
If an agreement is concluded at prices exceeding the range established by the Price Module, the risk management system will automatically be activated, which will be the basis for the audit.
The problems of late public procurement were solved by the Law by introducing the institution of a preliminary annual public procurement plan. In particular, customers are given the opportunity to conduct public procurement prior to the approval of the budget, based on the positive conclusion of the relevant budget commission. In this case, the contract will be sent to the winner only after the approval of the corresponding budget.
The law introduced the institution of preliminary discussion of technical specifications. This will allow potential suppliers to familiarize themselves with the technical specifications in advance and, if necessary, challenge the “impossible” conditions of the tender documentation.
At the stage of consideration of applications, there was a problem of unjustified rejection of applications, which leads to the recognition of procurements as failed. These issues have been resolved by establishing the following standards. First, procurement participants are given the opportunity to view documents together after opening applications. In other words, from now on, procurement participants will be able to see which documents were enclosed by their competitors in the applications. This will allow them to evaluate the validity of decisions made by customers.

Second, rejection of applications without specifying specific reasons was also one of the most common violations of customers. In this regard, the Law establishes the obligation of customers to describe in detail and specifically the reasons for rejection of applications, indicating supporting documents. In case of failure to comply with these requirements, the Code of Administrative Offenses of the Republic of Kazakhstan provides for administrative liability of officials.
Thirdly, the obstacles to the development of fair competition are the rules that allow public procurement to be carried out from a single source (by direct conclusion of an agreement), that is, where the choice of a supplier was determined by customers without competitive procedures. In this regard, the Law reduces the number of grounds for such purchases from 68 to 54 positions.
In addition, procurement requirements from a single source are being tightened. Now, customers should justify the need for procurement from a single source. Based on the results of such purchases, they are required to prepare a report justifying the choice of supplier and the price of the contract, which should be posted on the web portal.
At the stage of summing up and concluding agreements, there were problems with their appeal. So, earlier the appeal of the results did not stop the conclusion of the contract, which allowed customers to make purchases conducted in violation of the law. Now, according to the new Law, if there is a complaint about the results of public procurement, the conclusion of the contract will be suspended until this complaint is examined.
In addition, at this stage there was a problem when potential suppliers recognized as winners avoid signing a contract. Moreover, such facts are massive.
According to the new Law, potential suppliers who have evaded the conclusion of the contract will be automatically included in the Register of unscrupulous participants in public procurement (hereinafter referred to as the Register) by the web portal on the day of evading the conclusion of the contract.
So, if the procurement winner does not sign the contract within 3 days, using his digital signature, on the fourth day he will already be in the Register.
In addition, given the massive nature of evading contracts, as well as to prevent disruption of public procurement, the Law introduced the concept of “second winner”. So, in case of avoidance of the winner from the conclusion of the contract, the contract will be concluded with the second winner, which will also be subject to the condition of automatic inclusion in the Register in case of evasion from the conclusion of the contract.
At the stage of execution of contracts, there are problems of unjustified refusal to accept goods, work, services and late payment. To solve them, the Law provides for the following standards: electronic invoices, electronic invoices for the supply of goods, electronic acts of work performed and services rendered are introduced (shall be enforced from January 1, 2017). This measure will allow, through a web portal, to record the fact of delivery of goods, work, services; The law sets a deadline for full payment to the supplier, not exceeding 30 days from the date of fulfillment of contractual obligations.
As part of the transparency of procedures, the Law transfers 100% of public procurements to electronic format, with the exception of purchases constituting state secrets.
Given the complete automation of the procurement processes, the possibility of remote monitoring has appeared, and therefore, the Law introduced standards for conducting cameral control by the authorized state body.
The Law and the Rules provide for a number of other rules aimed at simplifying and transparency of public procurement, which ultimately will minimize corruption risks and increase the efficiency of the public procurement process.