The new Serbian Law on Public Procurement came into effect on 1 April 2013, replacing the former legislation enacted in 2008. The legislative overhaul is part of the wider fight against corruption and strengthening of state finances, acknowledging that the added costs of non-competitive tenders may run to hundreds of millions of Euro. Efficiency, cost-effectiveness, competition, transparency, equality and environmental protection are the stated principles that should govern all public procurement procedures.

The number of exemptions has been reduced in the new legislation. Public procurement funded from foreign credits granted by international organizations and international financial institutions is still excluded from its scope. In addition, special provisions apply to public procurement in the areas of water management, energy, transport and postal services.

Part of the new law is dedicated to prevention of corruption. It explicitly requires the Public Procurement Office to draft a plan for combating corruption in public procurement procedures, and contracting authorities with an estimated annual value of public procurement in excess of one billion dinars (ca. 8,950,000 Euro) to adopt an internal plan for preventing corruption. In addition to stringent record-keeping requirements, contracting authorities must also devise clear rules governing the planning, execution, control and monitoring of public procurement procedures. The new legislation includes specific provisions on conflicts of interest and a duty to report corruption. Whistleblower protection is introduced in the form of a right to indemnification for individuals who are sanctioned (e.g. dismissed) as a result of reporting a violation.  

The law introduces some new measures, such as the monitoring of public procurement over RSD 1 billion dinars (ca. 8,950,000 Euro) by “civil supervisors”, who are either experts in the domain of public procurement or associations dealing with the  prevention of corruption or conflicts of interests. The law also sets out in detail the rules for public procurement of standardized goods and services (done solely by electronic means using the open procedure), as well as for electronic auctions. It also introduces a “competitive dialogue” procedure, applicable in cases where the subject matter of the procurement is of such complexity (e.g. in light of its technical specifications or legal or economic structure) that the contract cannot be awarded through regular procedures.

The new legislation includes refinements of the many requirements applying at various stages of the public procurement procedure: notice, invitation and publication, tender documents, public procurement value, technical specifications, eligibility criteria, bidding process and awarding of contracts. Domestic bidders are still advantaged over foreign bidders, as are goods of domestic origin, subject however to the provisions of the Central Europe Free Trade Agreement and the Stabilization and Association Agreement (for EU bidders).

In terms of sanctions, non-compliance may lead to the imposition of fines, though it remains to be determined whether they are high enough to constitute a real deterrent. Contracting authorities may be fined up to RSD1,000,000 (ca. 8,950 Euro) for breaching procedural or technical obligations (e.g. record-keeping, publication). For more serious violations, such as failure to follow public procurement procedures when no exemption exists or accepting bids of interested persons, fines may go up to RSD 1,500,000 (ca. 13,400 Euro). Bidders who provide inaccurate or false information, hire undisclosed sub-contractors or act as an interested person, for example, can be fined up to RSD1,000,000 (ca. 8,950 Euro). Individuals (physical persons) acting for a contracting authority or bidder may also be fined a more modest sum.

Strengthening institutional capacity with adequate resources (financial/human) and technical capabilities will be critical to the successful implementation of the law, especially considering the broad mandate given to some bodies. The Public Procurement Office is tasked with monitoring the application of the law and the conduct of public procurement, providing assistance to contracting authorities and bidders, running the Public Procurement Portal and proposing measures to improve the public procurement system. The Republic Commission for the Protection of Rights in Public Procurement Procedures is responsible for ensuring the protection of rights in public procurement procedures and conducting minor offence proceedings. Harmonization of work between these institutions and others who have an implementing role will be important.

The new law on public procurement is one of the government’s important achievements in setting up a framework to prevent and fight corruption. In Transparency International’s latest Corruption Perception Index (CPI 2012), Serbia had marginally improved its standing, and stood at 80th overall, a score still denoting pervasive corruption problems. The hopes are high that the resources invested in the implementation of the new law to support its objectives will improve the situation.