Fresh News

Wednesday, 30 May

Press statements by the Minister of Public Finance Eugen Teodorovici on the implementation norms of the Public Procurement Law

Eugen Teodorovici: Good evening! Considering the fact that public procurement issue is an important one and there have been very many questions since our last presentation on how the Government intends to amend the legislative framework on public procurement, I deemed it necessary to have one more presentation on what is to be approved on tomorrow and next week’s Cabinet meeting, for all who are following us and are interested in having an overview of everything that means amendments to public procurement.

The Government’s decision stemmed from the situation we all know for years, that almost full deadlock over public procurement, deadlocks which surely cost us a great deal of money from state budget and not only, loans and even European money or especially European money. We intend to make these amendments that would bring a necessary simplification in public money spending, start of large investment projects.

It has been talked a lot unfortunately, and in an unjustified way, about the alleged lack of public consultation or public debate process, which is not fair. I can tell you that there have been talks with all associative structures- the Association of Romanian Towns, the Association of Municipalities, the National Union of County Councils in Romania, the Association of Experts in Public Procurement, employers in fields such as: construction, services, IT & C, Coalition for Romania’s development. Therefore, there has been a broad consultation process for months and what the Government is adopting is the result of this public debate. There is also the agreement of the European Commission on everything the Government is amending – it amended last week on the Cabinet meeting, it amends on tomorrow’s Cabinet meeting and, of course, on the next Cabinet meeting, an emergency ordinance and a Government decision, therefore, norms for the implementation of these primary documents.

A very important element consists in the fact that the direct procurement that we legislated in Romania, in a very restrictive way, used to lead to a resource expense of about 30% for procurement of 8% from the budget of some contracting authorities. Therefore, we spent a lot of resources for rather insignificant procurement. And this is one of the reasons why the legislative framework is changing these days.

We also talked about a centralized structure within the Ministry of Finance, in fact, a structure that would make public procurement in a centralized way, a concept that was further used over the past years and produced the expected effects. Here are many arguments conducive to such a decision, but we will talk during our presentation and I will start very briefly, so as not to take too much of your time.

First of all, I mentioned a large number of complaints. And I can give you a figure to see exactly what that „national sport” of lodging complaints means in Romania. We had approximately 3,800 complaints annually at CNSC; this means somewhere, on average, a complaint per day. So far, there were and are, in Romania, companies that had this practice as a priority to challenge anything for the sake of challenging, which, of course, led to delays and non-spending of public money and especially the non-production of those expected effects in the economy. It was a strange situation: there were decisions of the National Council for Contestations, decisions that varied, for the same case, we had different decisions; or within a public procurement procedure on multiple lots, the same company could expect a decision of being removed on a lot and on another lot, within the same auction, the same highway, for example, not to be removed , for the same reasons, which, of course, created an unpleasant situation.

There are very many structures with control responsibilities, and this must stop in Romania, to have a great deal of earmarked resources and responsibilities on control area, and less on the area which should produce these effects in economy, starting from public procurements up to expenditure and not only. Therefore, this will radically change.

We have, as I said, overregulation, an excess of regulation on everything that meant the national procedure below the thresholds that the directive mentioned. Nobody has asked them to do so, but as I said, this custom, to say so, at the level of the public structures, led to an excessive number of procedures, tasks that were only hindrances, with negative effects in the economy. This - you'll see in the presentation - has been removed. But, of course, a change is being made in correlation with other legislative provisions from normative acts. I give you an example: Executive Decision 907/ 2016, on development stages and the framework contents of feasibility studies. There were many normative acts with various provisions that eventually led to a halt, to even unpleasant conclusions from audit structures, national or European ones. There were very many delays in the tender evaluation and winners’ designation. The insufficient staff within the public procurement central structure, who could not be present as law provides, to all public procurement procedures, and therefore, led to unjustified slowdown in these evaluation stages. This thing too changed, the role of National Agency was simplified and there is not anymore that obligation to be present as representative of the National Public Procurement Agency to each stage, presence which was compulsory until yesterday. Direct procurement were blocked as it was compulsory to go in the electronic system for any small procurement, immediately necessary. Alike, for a long and unjustified time, of course, delays in effective payments. Laws amended through the ordinance that the Government adopted last week, and which will be published in the Official Gazette tomorrow, amended the four basic normative acts: Laws 98, 99, 100 and 101, all refer to areas related to public procurement, classical, concessions, sectorial procurements and, of course, those related to remedies, that is, those complaints. And there were a few European provisions that we had to take into account in these amendments. The Court of Accounts will be the structure that will perform that control, including of the way public procurement was unfolded. Thus, a double control so far mandatory, ie of the National Public Procurement Agency, as well as of the Court of Accounts of Romania, is eliminated.

Therefore, through the amendments to the normative acts that I mentioned a little earlier, it is the Court of Accounts that will carry out this ex-post control after the public procurement contract was awarded. The lowest price criterion is a subject that has been discussed very much and we introduced in the normative act adopted by the Romanian Government last week that the best value for money, the best price-quality ratio criteria will be used for products and services over 648,288 lei and for works over 24,977 million lei. Below these ceilings, you can use the lowest price criterion. The conditions in which public procurement contracts can be modified without the need to resume the award process, have been clarified. There were situations where, for objective reasons, expansion of a certain infrastructure work, sewerage system, water supply system was needed, and we were obliged to resume a public procurement procedure which, you realized, took a long time, it could be blocked , the current builder of the initial work had to wait and so, there were miscorrelations and including waste of time and especially money, and not only, in fact, in the case of drinking water, assuring European standards for the Romanian citizens, in line with European requirements, and as it is normal in Romania too, a level of drinking water quality at European level. And this has practically changed, a normal, logical procedure is allowed, that is, an extension of the initial contract, is still allowed today, without being forced to resume the entire process from zero.

There are also situations which unfortunately, in Romania too, require a quick approach, urgent one, to solve, remedy certain situations caused by natural disasters. There are certain infrastructure projects which need to be urgently remedied to ensure people’s access to a certain area, and in order to avoid the isolation of certain local communities. Not only, there are very many examples, there were very many situations over the past years, floods, snows, and very many possible situations and this can change, in fact it changed through the new normative act, the respective work is being carried out, while in parallel, the contract award procedure is unfolded. It is a practice that for many years, the administrative –territorial units requires, as they are facing most often such situations. Also, unfortunately, the result was communicated at each procedural stage of the public procurement process, which led to complaints. Therefore, the result was communicated once a stage was completed, and all of the aforementioned companies, those accustomed to lodging complaints, actually appealed. And then we made it clear that we will communicate the result of the award at the end of the process, so that there is only one moment when, if one wants to uphold his right, can lodge a complaint to the structures that we, as state, established as legal remedies, namely the National Council for Solving Complaints and the court.

An important amendment, even if the threshold difference is not perhaps an important one. There were situations when companies, and especially Romanian ones, because of arrears or unpaid tax liabilities, could not participate in the auctions and then we raised this threshold, precisely to allow those companies, as I said , especially the Romanian ones, because here was the big problem and the big hindrance in the access to auctions. We raised this ceiling so that those companies with such unrelieved tax liabilities under 10,000 lei could participate in public procurement.

I was talking about discouraging this unjustified practice of lodging complaints, and here we have the bail and the fee for lodging the complaint. The bail pertains to the moment when the complaint is being lodged with the National Council for Solving Complaints and here, we have a value threshold of 2 percent of the estimated value of the contract, but no more than 880,000 lei. Whoever wants to lodge complaints, should lodge a bail. Such a situation pertains to the introduction of the fee for lodging a complaint with the Court of Appeals, and here, the value amount is 2 percent of the estimated value of the contract for amounts up to 100 million lei and of 2 million lei plus 1 percent of what exceeds 100 million lei. It is a European practice, other countries deter even more such practices, but in order not to take the step towards such an approach, I chose this path, a middle way. Simplification of procedures. Here, these amendments will be made on the occasion of the approval by the Romanian Government next week, of the implementation norms to the ordinance to which I have just presented the related amendments. Namely, we have the good execution guarantees topic. Here, it was an intense discussion regarding the elimination of insurances from the current practice, we had very many situations in which the contracting authorities for those contractors who have not observed the contract obligations, could not execute those insurance policies and basically, with money taken and the work not performed, you could not execute that insurance policy, this situation must stop. Where does last week’s amendment lead to?

We accept the insurance policy for the participation guarantee, but for the execution part, the guarantee will still be required to redress things. And when practice may change, there may be a discussion that the insurance policy too should represent an instrument that can be accepted in this public procurement process, including as regards works performance.

The number of evaluation stages was reduced. We had somewhere perhaps 15 such stages on average, perhaps more in some situations, and I stated that only four of them will remain: the single public procurement document, the technical, financial appraisal, and the procedure report. There are only four steps that will remain, which again leads to simplification. We eliminated the annual procurement strategy for authorities with investment budgets below 125 million lei, we have simplified, as I said, the direct procurement, following the European model, so we have only taken over a European practice and, of course, avoided by modifying the norms, the overlap of information between the data sheet and the participation notice. Unfortunately, the busy but still unclear legislation led to a practice that was very often criticized by national auditors but especially by those at the European Commission's level regarding the situations in which the contracts were effectively split up in an artificial manner. There were situations when it was intentional, but also situations that were caused by legislation that was not clear enough. This has been done in the new provisions so that situations of this kind are avoided.

Also, clarifications regarding the use of the technical –economic criteria and equally important, the number of clarification requests was limited, in the sense of consolidating everything coming from possible bidders. There will be two moments when contracting authority will answer to the market: in the sense of clarifying those questions raised by potential bidders and not each time, because otherwise, the current practice showed that one can lose track of what they were looking for, where they start from and where they wanted to get, and basically, the offer could not be made, could not be achieved clearly.

And after that, some companies were eliminated from procurements, and this of course generated grievances. Therefore, it was decided to have two moments in which, we effectively answer the market for eventual clarifications, in a consolidated way. We have the obligation as country to make an ex-ante verification of nearly 15 percent of the overall procedures nationwide. The European funds issue will remain only in the responsibility of those structures in charge of managing the European funds, and the National Public Procurement Agency will strictly deal with everything that means procedures related to public funds, at national or local levels. Of course, there are different rules in terms of loans too, according to the rules imposed by each financier, but our obligation is to have 15% ex-ante checks, a percentage that will decrease year by year by 5% hopefully, according to the result that will show a definite improvement in the public procurement process. So, in about two years and something, three years at the most, this ex-ante control will virtually disappear.

 

A new change, I spoke a little earlier that a new structure will be established at the level of the Ministry of Finance, by merging with another structure, currently in the structure of the Ministry of Health. This new structure will deal in a centralized manner with public procurement. In other words, at central level, offers or the need of certain goods, works when required by a central public structure, will be met by this newly established entity which will be operational from July 1st. Therefore, on july 2018, it needs to be operational, for such centralized procurements to already start operating. In other words, we centralize demand and there will be a simple procedure of public procurement to optimize spending, eliminate unjustified price differences – we have very many examples when the same product has different prices at the level of central public structures, cost optimization for medicines. You have as examples some of the products that we will start with, at central level, these public procurements, namely: medicines, fuel, computer equipment, cars, bulbs, cleaning products, office equipment and more. These are the main products that our support from the European Investment Bank has shown very clearly to be the pilot projects or assets that we have to start with in order to make a substantial reduction in public spending. As I said, July 1 is a very tight term, but it is mandatory for this structure to become operational, because by the end of the year we already have the first examples of spending cuts in the public area. As I said, it is a merger, actually bringing to the Ministry of Finance that centralized structure from the Ministry of Health, and it will be a different approach, these things will be accomplished at the central level, at the Ministry of Finance, in a centralized manner.

The change in this approach is very important, this approach changes through the ordinance approved by Government last week which will be published tomorrow in the Official Gazette, the implementation norms of this ordinance will be next week on the Government’s agenda, and a tomorrow’s emergency ordinance on the Cabinet meeting’s agenda referred to centralized procurement. An important aspect is that the contracting authority will be obliged to sign the public procurement contract once the National Council for Solving Complaints decides one way or other, the way the contracting authority completed the award report, of course. The current practice showed that this structured centered on complaints has 95 percent chances to win or eventually, of keeping what it said, as decision at the level of the High Court.  A very important aspect is that we do not have to wait until the last stage in the solving of a case, whoever wants to lodge a complaint, goes to CNSC, the works contract is decided and signed, work starts and if that company wants to further lodge complaint with the High Court, it does so, and if it wins, that profit margin, in a percentage about to be established by the Finance Ministry, will be covered from the budget of the contracting authority. This reinforces responsibility. When you assumed to be contracting authority, you are obliged to know the law, and especially given the new legal ground, you have no reason why not to sign the works contract when the first structure, the complaint solving one confirmed that the way you  carry out the procurement, is a fair one. Therefore, we state that these are very useful amendments which will lead to starting those investment projects, because as I said many times at the Government level, the number one priority for this government now is to kick off public investments and surely, create an environment for the private sector to come with their investment share where they want so. Thank you and there will other talks of this kind at the level of the Ministry of Finance, there will be many other questions and technical discussions that we will hold as aforementioned, at the level of Finance Ministry. Thank you.



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