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Introduction |
 Romania’s
existing legislation dealing with public procurement, public-private
partnerships and concessions is currently undergoing an overhaul in line
with the country’s continuing attempts to address its obligations under
its Accession Treaty with the European Union. Under the Treaty, Romania
must complete its commitments to bring its own public procurement
legislation (PPL) in line with that of the EU’s acquis communautaire.
The current PPL, while an improvement over past practice, is still
considered as inadequate to meet Romania’s needs as it joins the EU. To
address these shortcomings, Romania’s authorities plan a series of
legislative initiatives during the first half of 2006 which is expected
to usher in significant changes to the current PPL system. Investors,
both in Romania and abroad, looking to participate in procurement
tenders organized by Romania’s government and institutions, are well
advised to consider the shortcomings still plaguing the current system,
as well as the changes on the horizon.
This article will assess Romania’s legal and institutional system as it
relates specifically to public procurements; the status of the
current regime, its shortcomings as well as probable areas of
improvement for near-term legislative initiatives in early 2006.
Previous editions of the Romanian Digest, most notably our September
2003 and December 2004 issues on public-private partnerships (PPPs),
have already touched upon some of the other areas associated with public
tenders, so this article will not repeat those previous topics. However,
it suffices to say that changes scheduled to affect the system of public
procurements as soon as the first half of 2006 are due to have a similar
impact upon the regimes affecting PPPs and concessions in Romania as
well. |
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What is Public Procurement? |
In general, public procurement is the term used to describe the
purchasing of works, supplies and services by national, regional and
local public authorities. The public sector, utilities and other
specialized government bodies, referred to as “contracting authorities,”
need to purchase goods and services for a huge range of activities. Many
of these are large contracts which must be advertised nationally and
internationally. Within the EU, the annual value of these contracts was
an estimated 16% of the Union’s combined GNP in 2004. This represents
significant and potentially profitable opportunities for private
companies to supply the public sector at home and overseas.
The types of contracts subject to public procurement vary widely. Some
examples include the supply of goods, such as office machines, computer
equipment and software licenses, street lighting materials and medical
products, as well as the provision of services, such as financial and
insurance services, IT services or facilities management “know-how.”
The EU has drafted a series of regulations which now apply to Romania by
virtue of Romania’s bilateral obligations under its program of accession
within the EU. In 2004, the most important directives dealing with
public procurement included Directives 2004/17/EC & 2004/18/EC (the
“2004 EU Directives”). More specifically, Directive 2004/18/EC covers
the coordination of procedures for the award of public works, supply and
services contracts, while Directive 2004/17/EC deals with the
coordination of procedures for the award of contracts in the water,
energy, transport and postal services sectors. These two directives
replaced Directives 92/50/EEC, 93/36/EEC, 93/37/EEC and 92/38 EEC,
relating to the coordination of procedures for the award respectively of
public service contracts, public supply contracts, public works
contracts and contracts in the water, energy, transport and
telecommunications sectors, setting January 31, 2006 as the time limit
for member states to comply with their provisions.
The principles underlying these and other EU regulations is the removal
of barriers, and the opening up of new, nondiscriminatory and
competitive markets. The rules aim to ensure the free movement of goods
and services within the EU, and that public sector purchasing decisions
are based on value for money achieved through competition. |
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Romania’s Current Legislation |
The public procurement system in Romania is regulated by Law 212/2002,
on the approval of Emergency Governmental Ordinance No. 60/2001, and its
implementing norms set forth in Government Decision No. 461/2001, as
modified. Some other relevant legislation and internal directives
include:
- Law No. 219/1998, on the system of
concessions, as amended by Law No. 528/2004, on the modification and
completion of Emergency Government Ordinance No. 16/2002, concerning
contracts of public-private partnership;
- Government Ordinance No. 16/2002, as
amended by Law No. 470/2002, Emergency Ordinance No. 15/2003, Law No.
293/2003 and Law No. 528/2004;
- Government Decision No. 1587/2003, on the
application of the conciliation procedure for resolving disputes
regarding the award of public procurement contracts;
- Government Decision No. 1186/2001, on
procurement in the area of national defense;
- Order of the Minister of Public Finance No. 1012/2001, and Common
Orders of the Minister of Public Finance and the Minister of Public
Works, Transportation and Housing No. 1013/873/2001 and 1014/874/2001,
all of which govern the structure, content and use of the “Standard
Documentation for the Elaboration and the Presentation of the Tender”
for public procurement of goods, services and other various “works”
respectively;
While a full description of the current PPL regime is outside of the
scope of this article, it suffices to say that the PPL regime is
considered a significant improvement over past practice. A June 2005
Assessment Report by the SIGMA organization, which is a joint initiative
of the OECD and the EU, concluded that “a significant effort has been
made in the development of primary as well as secondary legislation,
with the result that the current legal framework [relating to public
procurements] now includes standard tender documents, model notices and
contract forms, guidelines and instructions.”
Some additional highlights of the current regime include the following:
- The current PPL covers all public
authorities and institutions at all levels of government. Legal
entities (both public and private) operating in the utilities sector
are also covered, as long as they hold a monopoly position or have
been granted special or exclusive rights.
- Basic procurement procedures in most
cases where the threshold is greater than €40,000 are open and
restricted procedures, but the negotiated procedure may be used under
clearly-defined circumstances.
- The current PPL is largely based on the
text of EC Directives adopted prior to the approval of the 2004 EU
Directives.
- The procurement procedures set standards
for common advertising rules. Tender announcements, tender award
notices and indicative notices are published in the Official Gazette.
- The public authority acting as the procurement body is obliged to
form a tender commission and to define all tasks and responsibilities
related to the handling of procurement contracts within the entity.
The contracting entity formally grants the award and concludes the
contract in accordance with the commission’s decision.
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Criticism of Current Regime: EU and SIGMA
Reports |
 The most recent European Commission assessment of Romania’s progress in
the area of public procurements is contained in the European
Commission’s “2005 Comprehensive Monitoring Report for Romania.”
Notwithstanding the very real progress Romania has made as embodied in
the current regime, the Report continues to list this as an “area of
significant concern” and notes that “the legislative efforts to achieve
full alignment with the acquis need to be continued.” According to the
Report, these efforts will have to include the transposition of the 2004
EU Directives, as well as “the elaboration of a fully coherent and
comprehensive legal framework for public procurement, including
harmonized rules on concessions and public-private partnerships, a fully
aligned framework for e-procurement as well as an independent and
efficient remedies mechanism.” The Report goes on to say that “Romania
has to demonstrate continued commitment to fully respecting and
enforcing competitive and transparent public procurement procedures” in
order to avoid the significant abuses of the past. Finally, it concludes
that “significant efforts are needed to strengthen administrative
capacities both at the central and operational levels in the relevant
procuring entities. Administrative procedures and systems for the
monitoring and controlling of procurement activities should be
substantially upgraded.”
Echoing the EU criticism, the previously-mentioned SIGMA 2005 Assessment
Report adds that legislative improvement has been overshadowed by
lagging progress in two principal areas: i) the application of new and
existing legislation, institutional coordination and the training of
responsible personnel and managers; and, ii) inadequate monitoring and
complaint mechanisms. These two areas are addressed separately, as
follows:
a) Application of legislation, coordination and training
According to the SIGMA report, “[t]he public procurement system needs to
be improved at the operational level to ensure uniform and open
procurement practices, and to promote competition in the domestic
market.” According to the SIGMA report, the current system falls short
for several reasons:
- Inconsistent and inadequate capacity of
contracting entities to effectively carry out public procurement
operations. While several ministries and other bodies covered by the
PPL (including large utilities) have developed effective procurement
procedures and internal decision-making routines, great difficulties
remain within legal governments and small procuring entities.
- Procuring entities have failed to create,
within their structures, separate units that are primarily focused on
the procurement process. As a result, few permanent staff members view
procurement as a long-term career opportunity, and, accordingly, have
not developed their professional skills in this area.
- Outside of the formal reporting functions
between procuring entities and a central procurement body, few clear
links exist between the different elements of the system. Accordingly,
the necessary “know-how” is not passed from one institution to another
unless that coordination is done by that central body.
- The entire procurement system suffers
from poor communication, both inside and outside the system. For
example, while Romania published approximately 8,000 tender notices in
the Official Gazettle for 2004, only about 6,000 contract award
notices have been recorded, which means that the results of
approximately 2,000 tenders are not accounted for. In addition, very
little data is available concerning the award of small and medium
sized contracts of up to €100,000 by the public authorities.
- Lack of adequate formal public
procurement units within the larger procuring entities at the central
and local government levels reduces the professional capacity of
managers responsible for procurement.
- Recent training programs, while a step in the right direction,
have, thus far, had an insignificant impact on Romania’s actual needs.
For example, only about 1,000 individuals, out of a total of roughly
10,000 civil servants in need of training in the public procurement
process, managed to secure even elementary outside training by the end
of 2004.
b) Inadequate monitoring and complaint mechanisms
Auditing public procurement is one of the functions of the Romanian
Court of Audit (RCoA) when dealing with bodies (including central and
local entities, other autonomous budget organizations and utilities)
covered by its audit mandate. According to the SIGMA Assessment Report,
“it is generally recognized that the capacity of the RCoA to carry out
such audits is insufficient, and a great deal remains to be done to
strengthen procedures in this area.” In addition, current auditing
techniques involve merely a review of the formal aspects of the
procurement procedure (i.e., its adherence to legal norms), but current
RCoA procedures or guidelines covering performance audits (i.e., to
review the efficiency of the conduct of each procurement body) is almost
completely lacking. In the area of complaint review, the SIGMA
Assessment Report noted the lack of complaint mechanisms still plaguing
the current regime. For example, many appellate aspects available under
the 2004 and previous EU Directives, especially as they relate to
procedures of conciliation and attestation, were lacking under Romanian
law. In addition, Romanian courts will have to further develop their
institutional ability to handle appeals and award damages in favor of
tender participants suing Romanian institutions. |
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Romania’s Efforts to Overhaul the System in
2005 |
In order to address at least some of the shortcomings set out in the EU
and SIGMA reports, the Romanian authorities went on to pass several
pieces of legislation in the second half of 2005, the most important of
which were: i) Government Decision No. 901/2005, which endorsed a
strategy to reform the public procurement system for the years
2005-2007; and, ii) Emergency Ordinance No. 74/2005, which established
the National Authority for the Regulation and Monitoring of Public
Acquisitions (the “NARMPA”).
a) 2005-2007 strategy
The strategy approved by the Romanian Government was designed in
consultation with EU officials and aims to push through legal and
institutional adjustments, as well as the adoption of the EU practices
in the field and streamlining efficiency, transparency and
competitiveness of the public procurement system, specifically along the
lines of the 2004 EU Directives. In addition to these changes, the
Romanian authorities have promised to submit semi-annual progress
reports to the EU.
According to the Romanian authorities, the action guidelines are thought
to improve the existing legal framework and strengthen the ability of
the authorities to initiate legislative reforms. The new laws on public
procurement must come into force six months before Romania joins the EU,
at the latest. However, adjusting the Romanian laws to the EU
legislation is only the first guideline of the strategy. The second step
constitutes strengthening the capacity of the authorities to enact the
laws on public procurement at the level of all Romanian contracting
authorities, both central and local, at the level of such authorities’
institutional structure, for the purpose of regulating and monitoring
public procurement activities, all of which goes a long way in
addressing many of the concerns set forth in the EU and SIGMA reports.
A commission made up of the state secretaries of various Romanian
ministries, such as the ministries of European Integration, Finance,
Justice, Transport, Building and Tourism, Communications and IT, and the
Ministry of Environment and Water Management will monitor the progress
of the implementation of the measures along the lines set forth in the
2005-2007 Strategy. The commission will meet quarterly, or whenever
needed, but it is not as yet clear which role various NGO’s, not to
mention NARMPA, will have in their proceedings.
b) The National Authority
The second important event to take place in 2005 is the establishment of
a new coordinating body in the form of NARMPA, with the powers to
coordinate and refine Romania’s public procurement regime, both from the
perspective of institution-building and legislative reform. NARMPA has
also been given authority to “monitor, evaluate and control” the use of
standard procurement documents in particular tenders, assist with civil
servant training activities, as well as represent the Romanian
authorities in all public procurement consultative bodies in which the
EU is also a participant. As such, it has taken over some of the
responsibilities and authority previously held by various departments
within the Romanian Ministry of Public Finance, and the Ministry of
Transportation, Construction and Tourism. NARMPA.
NARMPA started its operations in October 2005, and is due to have a
maximum of 125 employees (mostly from the Finance and Transportation
ministries), although it remains unclear as to what resources it
currently has at its disposal. Equally unclear is the true extent of
NARMPA’s authority, since the current legislation explicitly
subordinates NARMPA’s power to the Romanian Government, and continues to
emphasize a strong role for the traditional ministries over the
2005-2007 strategy. In addition, as of the time of writing, the norms
governing NARMPA’s operations have yet to be formulated, so we will have
to wait for more clarity in 2006. |
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Conclusion |
 Addressing the shortcomings of Romania’s procurement system is not only
good strategy for joining the EU, but also good medicine for addressing
some of the ills plaguing Romania’s public institutions. A faulty public
procurement system usually means that public money will be diverted to
line the pockets of officials and paid to undeserving “winners” of
public tenders, as well as providing a poor supply of goods and services
to Romania’s authorities – and to the public at-large. Romania’s
pot-holed roads, crumbling infrastructure and its poorly-supplied public
services speak volumes about government mismanagement of existing
resources.
In this light, we can only applaud the formation of NARMPA to create,
monitor and reform the existing regime into something more in tune with
EU norms, and the needs of Romania’s public sector. We also look forward
to an honest, consistent, effective and transparent implementation of
the 2005-2007 strategy, so that Romania’s public procurement regime,
already improved, will finally meet the moral and legal challenges which
confront it prior to accession into the European Union in 2007. |
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2006 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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