Infrastructure and PPP

Public Procurement legal framework still in the making.

The primary legislation governing the procurement of public works and services concession contracts has been recently modified by the Emergency Government Ordinance no. 19/2009 regarding the field of public acquisition related regulations (EGO 19/2009). Amendments aim to ensure achievement of enhanced compliance of the legislative framework with the relevant European Union requirements, expedite the public procurement procedures, while maintaining and strengthening the control over and transparency of public money expenditure. The new piece of legislation transposes the Directive 2007/66/EC of the European Parliament and of the Council, amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts, as published in the Official Journal of the European Union no. L335 of 20 December 2007.New legislation is seeking to:

1. Expedite the public procurement procedures

Reduced deadlines for offers’ submission

For the purpose of expediting the public procurement processes, the minimum timeframe to be allocated for offers preparation and submission in some specific procurement procedures has been reduced. However, the compressed mandatory waiting periods for bid submission are only relevant for the procurement of small scale projects in terms of value,and provided always that the contracting authority has not exercised discretion to set extended timelines in consideration for the complexity of works and services subject to tender.

For contracts worth more than EUR 125.000 or EUR 400.000, depending on the actual nature of the contracting authority initiating the procedure, the reduced deadlines for bid preparation and submission are not applicable. It is to be expected that infrastructure projects would generally not qualify for the new offer filing deadlines, either pursuant to law or pursuant to the contracting authority’s decision.

Reduced deadline S for offers examination and issuance of the award decision

Irrespective of the type of the procedure applied or the value of the procurement contract, the contracting authority must examine the offers and make an award decision within a maximum of 20 days, except that special circumstances, whether or not project related, may legitimate a decision by the contracting authority to extend the initial timeframe by no more than 20 additional days.

2. Discourage litigation

To insulate the public procurement procedures from abusive court challenges that could delay the finalization thereof and in order to pave the way to expeditious completion, EGO 19/2009 has instituted a stamp duty amounting to 2% of the estimated value of the public contract subject to court scrutiny. From the perspective of projects of large magnitude this new value of the stamp duty might be viewed as restricting access to justice and requiring reconsideration.

3. Accelerate dispute resolution

Pursuant to the latest legislative amendments, the overall timeframe necessary for court review and determination on claims challenging the legality of public procurement procedures has been compressed by limiting the term in which the court procedure may be initiated, the maximum waiting periods between two hearings and before the delivery of the court decision, etc. It is debatable whether such accelerated procedure fully enables the parties to exercise all rights and enjoy the entire range of guarantees that are regulated as fundamentals of the Romanian dispute resolution system, particularly in case the court scrutiny regards complex procurement procedures.

4. Less value-restricted recourse to simplified procedures

As amended, the public procurement legislation has expanded the value range of services and work contracts that may be purchased pursuant to simplified procedures. Consequently, the contracting authority may currently recourse to a request for offers anytime the value of the contract, net of VAT, is below or equal to the RON equivalent of:
– EUR 100,000 for procurement of services;
– EUR 750,000 for procurement of works.

5. Preservation of procurement contracts

The new legislation vests courts with discretion to give prevalence to compelling public interest over legality and decide the preservation of the effects of public contracts which otherwise meet the conditions to be ruled as null and void. Consequently, for public interest reasons, the court may allow performance of a null and void procurement contract, provided that such contract has already produced effects or the nullity thereof would have more negative consequences than positive ones. In such circumstances, however, the court may either (i) limit the duration of the contract, and / or (ii) sanction the contracting authority by fine amounting to 2% of the value of the procurement contract.

6. Other changes

Increased bidding costs

Any side payment commitment issued by a parent company and/or affiliate of a bidder to demonstrate the bidder’s economic and financial good standing must be provided in authenticated form. If performed in Romania, the authentication procedure shall entail a notarization fee determined as a percentage of the commitment value and, hence, trigger significant costs at an early stage of the procurement process.

Bidders’ indemnification

The new law specifically recognizes the right of the bidders to indemnification for the bid preparation and/or other public procurement participation costs provided that it is demonstrated: (a) a violation by the contracting authority of the public procurement legislation and (b) the fact that the participant requesting indemnification would have been declared as winning bidder had the contracting authority not infringed the law. Indemnification claims in relation to the award procedure shall trigger the payment of a stamp duty in the amount equivalent to 2% of the value of alleged damages.

Negotiations with sole bidder

In case of procurement procedures conducted as either restricted tender, competitive dialogue or negotiation with the prior publication of a contract notice, the new law permits negotiations with one bidder only, provided cumulatively that (i) no more than one bidder meets the qualification criteria set forth in the tender documentation, and (ii) the tender documentation does not specifically require a different minimum number of preselected bidders as a condition for the continuation of the procedure.

Administrative clarifications

Assignment of rights and obligations under public contracts

Further to specific inquiries addressed to the National Authority for Regulating and Monitoring Public Procurement, we have received a series of clarifications as regards the assignment of rights and obligations under public contracts.

The regulatory authority advises that monetary rights may be assigned to a third party, subject to prior notification to the contracting authority and the prior approval thereof, issued in authentic form.

The assignment of both rights and obligations deriving from a public works or services contract is deemed as an infringement of the legal principles governing public procurement (in particular, of the requirement that the contract is always performed by a contractor selected pursuant to a competitive procedure, based on specific technical and financial criteria).

In light of the above, concerns regarding the possibility to accommodate step-in rights for financiers need to be further addressed.

Upcoming PPP legislation

New legislation specifically designed for the award and implementation of PPP projects is currently under consideration to better address the needs of large scale and complex projects pursuant to tailor-made public procurement provisions.