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Introduction |
After protracted discussions with the representatives of the European
Commission, the Romanian Government has finally adopted Emergency
Ordinance 19/2009 (hereinafter referred to as “GEO 19”), to
improve the public procurement procedures (“PPP”), put in place
by Government Emergency Ordinance no.34/2006 (the “Public Procurement
Law”), and make them more flexible and efficient. This is not too
soon for an economy that could benefit enormously from the stimulus
provided by an infusion of funding to public infrastructure and
environmental projects throughout Romania.
Prior to March 2009, when GEO 19 became effective, the process of
awarding a public procurement contract (“PPA”) was exceedingly
complex and readily subject to allegations of a lack of transparency,
unfair conduct, and official corruption. This article addresses the new
aspects to public procurement created by GEO 19. For a more detailed
look into the provisions of the system of public procurement in Romania,
please visit The Romanian Digest™ Archive at
www.hr.ro , i.e., our July 2006 article –
“Romania’s New Public Procurement Law”. |
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Main amendments to GEO 19 |
The contracting authority – broader
definition
Until GEO 19 became effective, the public contracting authority was
represented by, among others, any organism of the state, either a public
authority or a public institution, acting at the central/regional/local
level, and also by any other entity of public law created in order to
satisfy the needs of general interest without a commercial or industrial
character. This last category of contracting authorities has been
broadened by GEO 19, in the sense that there is no need now for these
entities to arise from the public law. Therefore, contracting
authorities may now be represented also by entities created by private
law, which satisfy general interest needs and that do not have a
commercial or industrial character, such as associations or foundations.
However, these entities still have to comply with the specific
conditions set forth in the Public Procurement Law, i.e., to be financed
mostly by a contracting authority or by another entity of public law; to
be under the authority or control of a contracting authority or other
entity of public law; or more than a half of the members of its
management board or leading or supervising organ to be appointed by a
contracting authority or by another entity arising out of public law.
By broadening the definition of the contracting authority, more entities
will have to abide by the Public Procurement Law, creating greater
access to public funds for interested companies – but through more
formalities.
Another important amendment introduced by GEO 19 concerns the
applicability of the Public Procurement Law to the awarding of PPAs by
“structures” of the contracting authorities functioning in other states
when the value of the agreement that should be subject to a PPP is equal
or greater than €100,000 for products and services agreements, and
€750,000 for public works projects. Although such an amendment should be
significant in practice, it may raise difficulties with regard to the
interpretation of the term “structures” of contracting authorities, as
such term has not been defined by Romanian law, and, consequently, it is
unclear whether it should cover only entities without legal personality,
or also entities with legal personality.
Increased access to public funds
 As
a consequence of GEO 19, more interested entities should now have access
to public funds, because the monetary threshold under which the
contracting authority does no longer have the obligation to organize a
public tender has been increased from €10,000 to €15,000. Therefore,
products, services and works can now be acquired or performed directly
using public funds if the value for each of them does not exceed €15,000
without the cumbersome bidding process. This will also relieve the
burden from the contracting authorities of handling lots of paper work
and a large number of administrative tasks for small projects. By
increasing the threshold under which the organization of a PPP is no
longer mandatory, contracting authorities will free up approximately
10,000 files, representing 10-15% of the entire number of PPPs at the
national level (according to the president of the National Regulatory
and Monitoring Authority for Public Procurement - ANRMAP, in her speech
published on the website of ANRMAP).
Furthermore, the maximum threshold up to which the offer request
procedure (the simplest PPP) can be applied has been amended, as
follows: €100,000 for products and services (instead of €75,000), and
€750,000 for works projects (instead of €500,000). Additionally, the
estimated value of public works projects that are financed/subsidized
directly by more than 50% through a contracting authority, and over
which a PPP should be applied, has been increased from €2.5 million to
€5 million. In the case of services agreements, the estimated value has
increased from €125,000 to €200,000.
Another provision of GEO 19 refers to advertising agreements, for which
a PPP can be concluded without the special publication requirements in
the specially created system available on the internet, if the value of
the agreement does not exceed €20,000 (instead of the prior €2,000),
once more leading to less formalities and paperwork.
These increases in different threshold amounts allows for more
flexibility in the execution of different agreements, especially in the
case of public-private partnerships, for which Romania still does not
have any relevant legislation.
Benefiting from direct access to public funds allows for a reduction in
the red tape that usually characterizes PPPs and creates substantial
time savings. Public funds may even help some companies remain viable
and keep the economy afloat during the current economic crisis ensuring
some continued employment. On the other hand, if these provisions are
not to be properly implemented, abuses by contracting authorities and
even less transparency in the use of public money may occur.
More efficient procedure
In order to make a PPP more flexible and, in the end, more efficient,
shorter terms have been set by GEO 19. For instance, the term for
organizing the tender has been reduced to 30 days, while the term for
analyzing offers by contracting authorities has been reduced to 20 days.
Such term may be prolonged by a maximum 20 days, but only in
well-justified situations. The fact that the contracting authorities are
now obliged to provide an answer to an applicant within 20 days is
essential, because until now this has been a great impediment in the
efficient administration of PPPs. The lack of such a term up to now
permitted abusive behavior by the contracting authorities which often
unjustifiably delayed the evaluation of offers and the announcement of a
winning bidder.
Until now, the excessive documentation required for a PPP, and the
non-operative manner of rendering solutions in a PPP discouraged
potential investors. The high cost of obtaining requisite documentation
from contracting authorities was also an impediment to potential
applicants that sought an opportunity to bid upon a PPP. Because such
costs were barriers for many applicants, GEO 19 imposes the obligation
for any contracting authority to put such documentation at the disposal
of any interested applicant for free, obviously making the process of
awarding a PPA much more flexible and efficient.
Moreover, GEO 19 introduced several other measures which should
discourage abuses by contracting authorities, such as, an obligation to
register the contracting authority with the electronic system of public
procurements and to draft annual activity reports and submit them to the
ANRMAP.
The exercise of the right to challenge
aspects of the PPP
 With
regard to contesting a PPP, GEO 19 states that any person that deems
itself as aggrieved by an “alleged infringement of the public
procurement law” may bring an action in court in order to obtain the
annulment of the specific act which has allegedly generated the injury
and/or to obtain the recognition of an alleged right or legitimate
interest.
Furthermore, maximum terms were set for each part of the court
proceedings in order to make the judicial procedure of contesting
decisions regarding the award of PPAs rapid and efficient. Considering
the usual terms set by ordinary civil procedure in court, these specific
terms set by GEO 19 are very short – for instance, after the first
hearing, further matters will be made within a maximum of 10 days –
leading to an expedited procedure and to increased efficiency. However,
such limited terms may make it impossible to obtain certain evidence in
discovery procedures, which may impair parties’ ability to present their
case properly and harm the court’s ability to render a thorough and
detailed analysis of the file. Although this is a risk to be taken into
consideration, such short terms in the judicial procedures for a
contestation of a PPP is undoubtedly positive.
GEO 19 introduced a stamp tax of 2% of the estimated value of the
contract for any contestation taken to court to deter abusive
contestations and aimed against those entities that have become
“specialized” in contesting tender results and, by this, ultimately
blocking investments. Mention should be made that the courts have had
the means to sanction an abusive exercise of certain rights by parties
in an action. Note that Directive 2007/66/CE regarding the improvement
of appeals in the field of public procurement establishes that the
Member States have the obligation to ensure “efficient” appeals within
PPPs. Hopefully, the new stamp tax, which was meant to avoid abuses by
those who submit unjustified contestations, will not turn into an
impediment to the exercise of legitimate challenges to abusive conduct
by contracting authorities.
In addition to the right to contest in court certain aspects of a PPP,
persons that are involved in a tender procedure can submit contestations
against decisions of a contracting authority to the National Council for
Claim Resolutions (“CNSC”). This is a Romanian legal entity that
can rule over contestations against a PPP, decide in regard to the
procedures and operations undertaken by a contracting authority in a
PPP, and also issue official points of view on certain litigations when
a court makes a specific request in this respect.
Until the entry into force of GEO 19, the CNSC was under the authority
of ANRMAP, but now it has come under the authority of the General
Secretariat of the Romanian Government. It remains to be seen if such an
amendment in the supervisory body will improve the activity of CNSC.
Additionally, although, from the information posted on the internet with
regard to the activity of the CNSC between 2006-2008, the CNSC seems to
have had a very good record in resolving contestations, until the
enactment of GEO 19, there has been no coherent system for monitoring
and evaluating its activity. Consequently, GEO 19 provides for the
creation of an evaluation commission within the CNSC with the power to
monitor and evaluate the activity of the CNSC in general, and of the
persons charged with the resolution of contestations in particular,
which should lead to a higher degree of transparency, objectiveness and,
presumably, to the improved performance of the CNSC. In order to achieve
such a purpose, the evaluation commission must be an independent and
impartial entity; in order to make such an entity functional, a
regulation regarding its organization and operation is still required. |
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Conclusion |
 GEO
19 should bring the process of awarding a PPA to a new level of
efficiency and transparency with regard to the use of public money. The
shorter terms put in place should make the procedure more expeditious,
while the increase in the thresholds under which the organization of a
PPP is no longer mandatory should increase the access of a higher number
of companies to public funds stimulating the economy while maintaining a
high level of competitiveness. But if not implemented properly, such
provisions may cause an even greater lack of transparency in the
awarding of PPAs, more corruption and, ultimately, to court proceedings
against Romania due to the newly introduced stamp tax for contestations,
that may prove to be prohibitive. |
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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 2009 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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