Dear clients and cooperation partners,
On 1 July 2017 the major part of the Public Procurement Law (PPL) and the law on Procurement carried out by contracting entities that operate in water management, energy, transport and postal services sector (Public utilities sector PPL) will come into force. Changes in the Code of Civil Procedure (CCP) concerning proceedings in public procurement cases will also come into force.
In addition, accompanying rules such as Low value procurement policies and Methodology for identifying qualification requirements for suppliers are coming into force. Also specified are additional cases resulting in blacklisting a supplier by placing them on the List of unreliable suppliers, along with cases in which a supplier can be added to the List of suppliers that provided false information.
The new regulation completes implementation of EU public procurement reform in Lithuania. The reform included adoption of European Parliament and European Council directives 2014/24/EU and 2014/25/EU.
Compared to the previous version of the law that was valid until 1 July 2017, among other changes the new regulation encourages contracting authorities (contracting entities) to select the most economically advantageous tender, reduces in-house transactions, and establishes more flexible rules on changing procurement contracts. These changes should improve market competitiveness and transparency, ensure maximum value for money in procurement and promote innovation.
You will find more detailed information on these recent changes below. Click on the links to read more about each topic:
- Exclusions from application of PPL / Public utilities sector PPL laid down for additional areas
- New restrictions on in-house transactions
- Clearer and more detailed regulation on confidential information
- Changes in simplified public procurement procedures
- Economic efficiency to be prioritised
- New type of procurement procedure – innovation partnership
- Requirement to divide international procurement into lots
- Preliminary market consultations possible in preparation for procurement procedure
- Qualifications of candidates or tenderers based on European Single Procurement Document
- Broader list of cases excluding economic operators from participating in procurement
- Contracting authorities can transfer payments directly to a subcontractor
- More flexible rules on modifying and terminating contracts
- Period shortened for submitting claim to contracting authorities or the court
- Increase in stamp duty for procurement court disputes and other CCP changes implemented
Exclusions from application of PPL / Public utilities sector PPL laid down for additional areas
The new regulation extends the list of areas to which public procurement rules will not apply. Among activities excluded from the scope of the rules are:
- legal services provided by a lawyer who represents or advises a client on issues related to arbitration, mediation and court proceedings;
- financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments;
- loans, whether or not in connection with the issue, sale, purchase or transfer of securities or other financial instruments.
New restrictions on in-house transactions
State-owned companies, limited liability companies and private limited liability companies in which state-controlled shares ensure more than half of all votes at the general meeting of shareholders will no longer be allowed to enter into in-house transactions. In addition, in-house transactions are only allowed with other contracting authorities (contracting entities) and only in exceptional cases under strict conditions applied to turnover, control, and absence of private capital. Municipalities and municipally-controlled companies will be allowed to enter into in-house transactions.
In order to enable supervision of in-house transactions, VAT invoices, invoices, credit and debit documents and pro forma invoices (the same as in the case of other types of procurement) will have to be submitted using tools provided by the E-sąskaita (E-invoice) information system during implementation of the contract (an exception applies to cases when public procurement contracts are concluded orally).
Clearer and more detailed regulation on confidential information
Under the new regulation information cannot be considered confidential if it:
- would violate the law;
- contains grounds for removal, standards of qualification, quality and protection of environment systems; an exception applies to cases where personal data protection or obligations on the tenderer based on contracts signed with third parties would be violated;
- concerns the entities engaged and subcontractors; an exception applies to cases where personal data protection would be violated;
- would violate the requirement to announce the contract, to issue information (an exception applies if this would violate personal data protection or the public interest, the legitimate interests of a particular tenderer or if it would have a negative impact on competition between tenderers).
Changes in simplified public procurement procedures
After the new PPL and Public utilities sector PPL come into force, simplified public procurement will be conducted in line with rules set by law. Under the new regulation essentially the same rules apply to simplified public procurement as for international procurement (several exceptions apply).
Small value procurement (where the value of goods and services is less than EUR 58,000 and the value of work is less than EUR 145,000) must follow rules set by the Public Procurement Office on Low value procurement policies; for contracting entities operating under Public utilities sector PPL, rules established by themselves will apply.
Economic efficiency to be prioritised
The new regulation limits the scope of procurement in which tenders are evaluated based on ‘the lowest price’ criterion. That way, contracting entities are encouraged to choose the most economically advantageous tender. The most economically advantageous tender will be selected based on the price-quality ratio. Procurement based on ‘the lowest price’ criterion will not be allowed to take up more than 70 % of the total public procurement value of a contracting authority / contracting entity in any calendar year (excluding small value procurement).
New type of procurement procedure – innovation partnership
Seeking to encourage economic progress and innovation, a new type of procurement procedure – innovation partnership – has been established. This procedure can be used when contracting authorities seek to purchase a new product that has not yet been created. Innovation partnership is implemented in two stages: (1) development of the innovative product; (2) purchase of a large amount of the product. Innovation partnership should be based on the procedural rules that apply to the competitive procedure with negotiation, and contracts should be awarded on the sole basis of the best price-quality ratio.
Requirement to divide international procurement into lots
International procurement must be (in simplified procurement – can be) carried out dividing contracts into lots, each of which would have a separate purchase agreement and a set size and subject-matter. Division could be on a quantitative or qualitative basis, or based on implementation stages. The purpose of this regulation is to encourage participation by small and medium enterprises as well as to increase competition in public procurement. Where the contracting authority decides that it would not be appropriate to divide the contract into lots, the main reasons for the contracting authority’s choice must be indicated.
Preliminary market consultations possible in preparation for procurement procedure
Before launching a procurement procedure, contracting authorities will no longer be entitled to announce technical specification projects and assess comments received. In addition, the updated law enables preliminary market consultations. For the purpose of achieving higher quality in procurement, contracting authorities can seek advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure as well as in preparing procurement documentation. A candidate or tenderer that has advised the contracting authority can participate in the procurement process if competition is not distorted thereby.
Qualifications of candidates or tenderers based on European Single Procurement Document
In order to make public procurement procedures more flexible, contracting authorities / contracting entities evaluate a candidate’s or tenderer’s compliance with exclusion requirements and qualifications. Evaluation is first of all based on self-declaration – the European Single Procurement Document. A successful tenderer will be asked to submit supporting documents. A contracting authority / contracting entity may also ask tenderers and candidates at any stage during the procedure to submit all or part of the supporting documents. A tenderer can be excluded from participating in a procurement procedure at any time if it appears that grounds for exclusion appeared before or during the procedure.
Broader list of cases excluding economic operators from participating in procurement
New reasons for compulsory exclusion:
- the contracting authority / contracting entity has enough evidence to conclude that an economic operator has entered into agreements with other economic operators aimed at distorting competition;
- a distortion of competition from the prior involvement of an economic operator in preparing the procurement procedure cannot be remedied by other, less intrusive measures;
- an economic operator has provided false information about compliance with the requirements set by the contracting authority (in these cases the economic operator is placed on the List of suppliers that provided false information);
- an economic operator has tried to unduly influence the decision-making process of the contracting authority;
- an economic operator has previously shown significant deficiency in performing a substantive requirement under a public contract, a contract with a contracting entity, or a concession contract (in these cases the economic operator is placed on the List of unreliable suppliers);
- an economic operator committed a professional violation and due to infringements of financial liability or audit legislation the economic operator or one of its managers was penalised by way of an administrative penalty or economic sanction.
The new regulation also enables economic operators to improve (“self-cleaning”). This means showing that violations resulting, for example, in being placed on the List of unreliable suppliers will not interfere with participation by the economic operator in public procurement process and its performance of public contracts.
Contracting authorities can transfer payments directly to a subcontractor
A contracting authority / contracting entity may pay for services or goods supplied directly to the subcontractor when the contract allows it and the subcontractor so requires. When the subcontractor expresses such a request, a tripartite agreement defining the procedure for direct payment to the subcontractor is entered into by the contracting authority, the contractor and the subcontractor.
More flexible rules on modifying and terminating contracts
Under the new regulations, consent of the Public Procurement Office is no longer required to modify contracts or framework agreements. Contracts or framework agreements can be changed:
- according to conditions set out in the initial procurement contract;
- for additional work, services or supplies (provided by the original contractor) that have become necessary and that were not included in the initial procurement; the value of any modification must not exceed 50 % of the value of the original contract, while the total value of all changes must not exceed 100 % of the value of the original contract;
- where the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee; the value of any modification must not exceed 50 % of the value of the original contract, while the total value of all changes must not exceed 100 % of the value of the original contract;
- where a new contractor replaces the original contractor as a consequence of reorganisation, liquidation, restructuring or insolvency, when the contractor’s liabilities to subcontractors are taken over;
- the modification, in spite of its value, does not alter the overall nature of the contract, ie, the modification would not result in another contractor winning the contract, or economic equilibrium would not alter in favour of the contractor, or the volume of the contract would not expand significantly.
Contracts made before the new regulation came into force can also be amended under the new regulations. However, a contract can only be amended during the term of the contract.
Period shortened for submitting claim to contracting authorities or the court
A contractor can submit a claim to a contracting authority / contracting entity and submit a request or bring an action to the court within 10 days (for simplified public procurement – 5 working days) from the day written notice of the decision was sent to the contractor or from the day an announcement was made about the decision (if there is no requirement to inform contractors about decisions in writing). If notice about the decision was not sent to the contractors by electronic means, the contractor can submit a claim or bring an action to the court within 15 days from the day that written notice of the decision was sent.
Increase in stamp duty for procurement court disputes and other CCP changes implemented
From 1 July 2017 a claim challenging the contracting authority’s decisions attracts payment of stamp duty of EUR 300-5,000; the amount depends on the value of the procurement and the stage of the procurement procedure:
- EUR 300 in low-value contracts; EUR 350 if the action against the successful tenderer was brought to court after the award decision was announced;
- EUR 1,000 in simplified public procurement procedures, EUR 2,000 when the action against the successful tenderer was brought to court after the award decision was announced;
- EUR 3,000 in international public procurement, EUR 5,000 when an action against the successful tenderer was brought to court after the award decision was announced;
If the action is brought to court by electronic means, 75 % of the set stamp duty is payable.
A new rule is introduced whereby the court terminates the proceedings if it finds that the applicant’s arguments against a decision by the contracting authority / contracting entity to refuse to handle its application are unfounded.