Reform of public procurement in transition economies and UNCITRAL Model Law: a permanent cycle. Expert opinion by Samira Musayeva. PRINT E-mail
musayeva[24/06/2013] Reform of public procurement in transition economies: a permanent cycle. Expert opinion by Samira Musayeva.

Samira Musayeva, national of Azerbaijan, is a licensed lawyer. Since September 2000, she has worked as a legal officer in the Office of Legal Affairs of the United Nations Secretariat. Currently she is with the International Trade Law Division of the Office (the UNCITRAL secretariat), working on various issues of international commercial law within the purview of UNCITRAL and servicing UNCITRAL and its working group in the area of public procurement.

Before joining the United Nations Secretariat, Mrs. Musayeva worked as an associate lawyer with international law firm Baker & McKenzie specializing in general corporate, commercial and real estate law. She represented clients in Azerbaijan and Kazakhstan, primarily in "large-scale" privatization and concession projects in energy, telecommunication, construction and real estate sectors. Mrs Musayeva received diploma in law (international public and private law) with distinction from the Rasulzadeh Baku State University, Azerbaijan, in 1995, and LL.M. in Comparative Legal Studies with honor from the John Marshall Law School, Chicago, USA, in 1996.

On the reasons for revision of the 1994 UNCITRAL Model Law:

The main reason for revision of UNCITRAL's Model Law on Public Procurement in 2011 was the need to remove obstacles to e-procurement that existed in the 1994 text. There were other reasons, such as the need to strengthen transparency and accountability provisions in compliance with the United Nations Convention against Corruption that entered into force in 2005. We also needed to reflect lessons learned from the use of the 1994 text, but the widespread use of the Internet and the possibility of e-procurement on an open platform provided by the Internet (as opposed to closed proprietary systems for the exchange of e-data that existed when the 1994 text was prepared) was the main driving force of the reforms.

On adjustments of the Model Law to respect the specificities of national legislation in transition countries:

The Model Law was definitely not intended to be one size fits all. Certain provisions of the Model Law, such as those in chapters I (General provisions) and VIII (Challenge proceedings) and article 28 (General rules applicable to the selection of a procurement method) of chapter II, should not be varied much upon enactment since they represent a set of interlinked provisions aimed at achieving the objectives of the sound procurement system. But even with respect to those provisions, the enacting State is expected to choose certain options among those identified in the text and fill in the missing provisions deferred explicitly to the enacting State. Some issues are to be addressed in the secondary legislation (procurement regulations and the like).

Chapter III contains basic features of open tendering. The approach in the 2011 Model Law, like in the 1994 Model Law, is that open tendering must be included in the local procurement law as a default procurement method. We may confidently say that chapter III is the least controversial among all other chapters in the Model Law since its provisions stood the test of time (they are based on the 1994 version and were enacted in those countries that used the 1994 text as a template for their procurement law).
Other chapters and the related provisions from chapter II are to be enacted according to the local circumstances; some chapters like on electronic reverse auctions (ERAs) and framework agreements (FAs) could be omitted altogether if the enacting State decides not to provide for these procurement techniques in its procurement law. The reasons for such a decision could be different: the lack of sufficient local capacity for using these procurement techniques appropriately, anticipated risks of misuse and anti-competitive impact on the market. The same applies to the provisions throughout the Model Law that regulate procurement methods alternative to open tendering: the enacting State may decide to include only some of them and omit others but a minimum set of procurement methods appropriate for different level of complexity of the subject matter being procured should be provided.
Special attention is to be paid to the enactment of the provisions on the competitive negotiations and/or single-source procurement: both are methods of last resort under the Model Law, to be used only under very limited circumstances identified in the Law; the competitive negotiations should always be considered first, as the alternative to single-source procurement; and essential safeguards provided for in the Model Law, such as an advance notice that the procurement will be held using these methods and reasons therefor and the possibility of challenge to the selection of the procurement method, must also be enacted.

On the specificities of reforming public procurement in the CIS countries and Mongolia; difficulties and the Model Law's response:

Countries in the CIS region and Mongolia are transition economies with rapidly evolving local economic and social conditions and changing priorities that affect the regulation of procurement. As a result of these evolving priorities, procurement regulation is not stable and goes through an almost permanent cycle of reform. All countries go through the cycles of procurement reform but the frequency with which procurement law reforms happen in those countries is particularly high.
Proximity to the EU is an important factor since some States aspire to become an EU member or get access to the EU market. Becoming a member of the World Trade Organization, and acceding to its Agreement on Government Procurement (GPA), are also on the agenda of many of those countries. These factors may be the main driving force of procurement reforms there.
At the same time, there is a tendency in those countries to implement public procurement reforms in isolation rather than in conjunction with reforms in other areas of law as well as with institution-building measures and implementation of socio-economic policy goals and international obligations of the State generally. As a result, the effective coordination and cooperation among relevant State authorities engaged in issues relevant to public procurement reforms may not necessarily be achieved. For example, procurement agencies may not even be aware of steps taken by the State as regards accession to the GPA or about the relevance of public procurement reforms in the context of implementation of State's obligations under the United Nations Convention against Corruption (in particular, its article 9). (All these countries ratified this Convention but some of them assume that their procurement law system is sound because it was based on the 1994 Model Law of UNCITRAL. As noted earlier, some revisions were introduced in the 1994 text exactly because some of its provisions were considered inadequate for proper implementation of the requirements of the Convention at the national level (major concern has been raised for example about the 1994 list of exemptions from the review and the absence of provisions on conflict of interest).
The biggest challenge that reformers face in these countries from the regulatory point of view is to establish a sufficiently flexible legislative framework that would accommodate evolving needs in those countries and meet the requirements of various international institutions and donors. The Model Law is of help in this respect since its many provisions are drafted in a flexible way (e.g. they defer some fluctuating or varying concepts to procurement regulations - margins of preference, low-value thresholds, duration of standstill period, etc.) and allow discretion on the procuring entity where such discretion is necessary or will make sense, for example in choosing appropriate means of communication in the context of a particular procurement. It also allows States to take a step-by-step approach in introducing e-procurement, e-procurement techniques and more sophisticated methods of procurement that presuppose the existence of the mature market and the ability and capacity of the public sector to carefully analyse the market and actively interact with it in order to obtain the most satisfactory solution to public needs. In this context, we are talking about such methods as, for example, request for proposals with dialogue that aim at encouraging innovative solutions to complex public needs in infrastructure development, renewable energy, etc.
During the work on the Model Law, we aimed at reflecting in the text the requirements of the Convention against Corruption, as already mentioned earlier, and also achieving as much harmonization as possible with international and regional instruments regulating or applicable to public procurement, such as the GPA, the EU procurement directives and procurement guidelines of various multilateral development institutions. We can therefore say that, when the Model Law's basic set of principles, requirements and safeguards is transposed to the national system, the enacting State may be confident that it will put in place a legal framework that will satisfy the Convention against Corruption and the current requirements of the GPA, the EU and bilateral and multilateral donors.
There are other challenges that the reformer faces, many of them are of institutional nature or arise from insufficient local capacity. The limited supply base and the difficulty in attracting foreign bidders to local markets in some of those countries are real challenges. In this respect, the countries concerned can benefit from the provisions of the Model Law and its Guide to Enactment (adopted by UNCITRAL in 2012; available at http://www.uncitral.org/uncitral/en/uncitral_texts/procurement_infrastructure/2012Guide.html) aimed specifically at addressing these challenges. In this respect, the Guide in particular may serve as a useful source of information about procurement strategies that can be used to overcome these difficulties. It highlights the need for local capacity-building and institutional reforms that must accompany legislative reforms if the objectives of the Model Law are to be achieved. The States can also learn from experience accumulated by other countries that faced and overcame the same problems (e.g. distant isolated countries, land-locked countries).

On the impact of the public procurement legislation reform on relations between public and private sector in transition economies:

Establishing cosy relations between the public and private sectors is not the goal of the public procurement law reform. Ensuring the relative stability, transparency, predictability and certainty of the regulatory framework applicable to public procurement is. The regulatory framework and implementing measures (such as training) should promote competition and public confidence in the procurement process and foster and encourage participation of the private sector in procurement proceedings. Special attention should be paid to the needs of particular groups of the private sector (such as micro-, small- and medium-sized enterprises) that may be in a more disadvantageous position to access the public procurement market than big enterprises or other entities with the well-established access to public procurement. Thus special public awareness campaigns and training courses could be designed that would target these groups.
Particular types of cooperation between the public and private sectors, such as the one envisaged in the request for proposals with dialogue under the Model Law that presupposes the active role of the private sector in finding the best solution to the procurement needs, may lead to abuses. There should be safeguards and capacity in place to prevent and combat them.

On the impact of the public procurement legislation reform on legal system in transition economies:

Perhaps the influence is not on the overall legal system but definitely on areas related to public procurement; those areas in turn influence public procurement reforms: e-commerce law as regards e-procurement; anti-monopoly regulation as relevant to the selection of a method of procurement or technique and other decisions that may have short- or long-term impacts on the competition in the market, in particular in the context of ERAs and FAs; criminal law system that should support achieving integrity in the procurement (e.g. measures towards prevention and combatting commercial fraud, forgeries, bribery, etc.); and the court system that should ensure effective and efficient adjudication of disputes and appeals.

Topics for the opinion of the Public Procurement Expert were prepared by Ms Martina Kovacova, Coordinator of the EBRD UNCITRAL Initiative Project.

The views and opinions expressed herein are solely personal and can in no way be interpreted as the official position of the EBRD or UNCITRAL.
 
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