1

Law in transition onlineStrengthening public procurement

Autumn 2010An introduction

Eliza Niewiadomska11 October 2010, ANKARA, Turkey

2

Law in transition – a focus on public procurement

Why is a public procurement regulation back on the governments’ agenda?

Why it is so challenging to regulate public procurement sector?

Why the governments need to reform public procurement again and again?

What we have learned on procurement in the public sector in the last twenty years?

3

OUR CONTRIBUTORS

Professor Simon Evenett – St. Gallen University, Switzerland

Robert Anderson – the WTO GPA Secretariat, Geneva, Switzerland

Caroline Nicholas – the UNCITRAL Secretariat, Vienna, Austria

Andrea Sundstrand – University of Stockholm, Sweden

Dr Hasan Gul – Kamu Ihale Kurumu, Turkey

Klodiana Cankja – Agjencia e Prokurimit Publik, Albania

Evgeny Smirnov, Jan Jackholt – the EBRD Procurement Department

EBRD Legal Transition Programme Team

4

Evgeny Smirnov, Jan Jackholt - the EBRD Procurement Department

Evgeny Smirnov is a senior procurement specialist in the EBRD procurement policy department. He joined the Bank in 2000 and has worked with the Infrastructure Business Group on numerous projects in the municipalities and utilities sector.

Before joining the EBRD he worked as a consultant on World Bank projects in Russia. Prior to that he held several senior positions in the Ministry of Foreign Economic Affairs of the Russian Federation.

Evgeny holds a Master degree in Water Sector Management and Environmental Engineering from the Moscow State University of Environmental Engineering. He also holds a diploma in Management of Government Procurement.

Jan Jackholt is the Head of Procurement at the EBRD and he has worked with the EBRD Procurement Department for last 11 years.

Before joining the Bank he worked in procurement in Latvia, Estonia, Zambia, and Vietnam.

Jan is of Swedish origin and holds a Master degree in Business and Economics from Uppsala University.

5

Professor Simon Evenett – St. Gallen University

Simon J. Evenett is Professor of International Trade and Economic Development, University of St. Gallen, Switzerland.

He is Programme Director of the International Trade and Regional Economics Programme of the Centre of Economic Policy Research.

Professor Evenett is an expert in the commercial policy and strategies of the USA, EU, and the rising economic powers, such as China.

Simon Evenett obtained his bachelor degree in economics from the University of Cambridge and his doctoral degree (again in economics) from Yale University.

Previously he has taught at Oxford University and for ten years held fellowships at the Brookings Institution, Washington DC.

6

Robert Anderson – the WTO GPA Secretariat

Robert Anderson is Counsellor in the Intellectual Property Division of the Secretariat of the World Trade Organization (WTO) in Geneva, Switzerland

He was previously the lead Secretariat staff member supporting the WTO Working Group on Trade and Competition Policy when that body was active from 1997 through 2003.

Prior to joining the WTO in 1997, Mr. Anderson worked for fifteen years in the Canadian Competition Bureau where he held various senior positions and gained experience in the areas of: (i) competition policy advocacy and legislative reform; (ii) competition ("antitrust") law enforcement and case analysis; and (iii) international dimensions of competition law and policy.

7

Caroline Nicholas – the UNCITRAL Secretariat

Caroline Nicholas is a lawyer with the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) and she serves as the Secretary to the UNCITRAL Working Group on Procurement, which is revising UNCITRAL’s 1994 Model Law on Procurement of Goods, Construction and Services.

She works with the main international players in procurement and procurement reform (such as the WTO, The World Bank and regional development banks, the OECD, IDLO, and regional trade organizations, such as COMESA) to promote harmonization in procurement rules and to support international trade and development.

8

Andrea Sundstrand – University of Stockholm

Andrea Sundstrand holds an LLM degree from the Uppsala University in Sweden, and is presently a lecturer at the Faculty of Law, Stockholm University, Sweden, where she is a PhD candidate.

Andrea has previously worked eleven years as a senior advisor at the Swedish PP remedies authority, where her areas of responsibility mainly covered the utilities sectors, the question of contracting authorities and the issues surrounding concessions and PPP-projects.

She is a barrister, member of the Swedish Bar Association. Andrea worked for several major law firms in Sweden, before starting her own law office in 2007.

9

Dr Hasan Gul – Kamu Ihale Kurumu, Turkey

Hasan GÜL graduated from University of Ankara, Faculty of Political Sciences, and Department of Economics. He obtained master’s degree in the field of Economics from the University of Akron in 1994, and doctor’s degree from University of Istanbul, Social Sciences Institute in 2002.

In his career he held several senior positions in the Ministry of Finance.

He has been appointed Chairman of the Public Procurement Authority in April 2006.

10

Klodiana Cankja – Agjencia e Prokurimit Publik, Albania

Klodiana Cankja graduated from University of Bucharest in Romania. She holds a master degree in law and a master degree in political science.

In her career she worked as a lawyer and legal adviser for several institutions in Albania, on the local and central level of public administration.

She has been appointed Director of PPA in Albania in October 2005.

11

THIS EDITION’S CONTENT

EBRD 2010 assessment: review of remedies systems

Sound procurement - making it happen

The reform of procurement practices in an era of fiscal restraint

The WTO GPA: an emerging tool of global integration and good governance

Reform of the UNCITRAL Model Law on procurement

Procurement in the utilities sector

Modernising public procurement and creating an independent public procurement regulatory authority

eProcurement in a transition country: a big step in Albania

12

What this article is about?

13

Sound procurement - making it happen

What is procurement?

Challenges

The EBRD role : improving the business culture in the region

Public procurement is based on four fundamental principles: economy, efficiency, transparency, and accountability. The art of procurement is to get and maintain the right balance between all four principles during the project cycle. In recent decades there were numerous attempts to develop the best set of procurement standards including the Bank’s own Procurement Policies and Rules.

Despite well established principles, flexible policies and a proactive approach as far as the implementation of projects is concerned, we still face a number of challenges within the Bank’s countries of operations.

14

Reform of the UNCITRAL Model Law on procurement

Purpose and use of the PP Model Law

Scope of the PP Model Law

The objectives of the PP Model Law

Reform of the PP Model Law

What’s new ?

In 1994 UNCITRAL issued its Model Law on Procurement of Goods, Construction and Services (the PP Model Law). The PP Model Law is a template available to national governments seeking to introduce or reform public procurement legislation for their internal market.

In 2004 UNCITRAL’s Working Group on procurement was charged with updating the PP Model Law to reflect new procurement practices, in particular regarding electronic procurement (e-procurement) and related aspects of electronic commerce, and the experience gained in the use of the PP Model Law as a basis for legal reform.

15

The reform of public procurement practices in an era of fiscal restraint

Optimisation of the performance of national procurement systems should be at a greater premium during an era of fiscal restraint.

The degree to which budget cuts result in fewer public services and the like is mitigated by steps that enhance "value for money."

Professor Evenett explores the three principles to guide PP reform initiatives:

Principle one: Do not overload public purchasing policies with too many objectivesPrinciple two: Promote competition and, whenever possible, treat tenderers equallyPrinciple three: Combine procurement reform initiatives with other governance reforms

16

Procurement in the utilities sector

Contracts covered by the EU Utilities Directive

How the PP policy apply to:

– State – owned contracting entities

– Private contracting entities in utilities sector?

Special exceptions for the utilities

Remedies

How EU procurement policies apply to the utilities sector in different countries?

The utilities sector consists of the water, energy, transport, and postal sectors.

Both state owned and commercial organisations are obliged to apply the provisions of the EU Utilities Directive when they purchase goods, services, and works to pursue an activity in one of these sectors.

17

The WTO GPA: an emerging tool of global integration and good governance

Main elements of the WTO Agreement on Government Procurement (GPA)

Work under way to broaden the membership of the Agreement

The ongoing renegotiation of the Agreement

The recent economic crisis and trends in world infrastructure spending

Who’s new?

The World Trade Organization Agreement on Government Procurement (GPA) is working to expand its role as an instrument of global economic integration and good governance.

The article reviews key developments in this area, including the main elements of the existing GPA, efforts to expand membership of the Agreement and its ongoing renegotiation.

Three contextual factors that enhance the role of the Agreement as an instrument of global governance.

18

Turkey : Modernising public procurement and creating an independent public procurement regulatory authority

Evolution of the Turkish public procurement system

Legislative reform

Institutional structure

Why PPA is a success?

In the last decade Turkey has dramatically changed its public procurement system.

Contemporary public procurement regulation has been introduced, a reformist approach and modern procurement techniques adopted, and an independent public procurement regulatory body has been established to raise the profile of procurement and drive up national public procurement sector capability.

19

eProcurement in a transition country: a big step in Albania

The government of Albania has worked hard to establish modern public procurement regulation and introduce electronic procurement.

The article describes how from 2007 the Albanian Public Procurement Agency (PPA) has designed and implemented an electronic eProcurement platform for conducting public procurements.

It is a fact hard to believe, but in Albania, a country struggling to transform its economy and lacking a telecommunication infrastructure, all public procurement has been conducted via an eProcurement platform since the beginning of 2009.

Seeking a transparent PP system. The choice: Electronic procurement

The benefits of going online. How the new system works?

A strong political push

Achievements so far. What are clear advantages?

Challenges: people are the key to success

20

The EBRD 2010 Public Procurement Legal Frameworks Assessment

21

EBRD Legal Transition Programme PP Assessment Team

Eliza Niewiadomska

Ozlem Barut Sarah Wilson

Natasha Naaimi Begaim Nanaeva

The EBRD LTP PP assessment team is supported by GDS – a consultancy consortium embracing PP experts from Poland, Hungary and Greece.

22

2010 EBRD Public Procurement Legal Frameworks Assessment – Scope & Focus

A. Legislation and Institutional Framework Assessment Check List

B. Public Procurement Process Questionnaire

C. Review & RemediesCase Study

assess the level of development of the public procurement legislation

identify elements of law and practice that discriminate against or reduce the efficiency and economy of the regulationStart:

March2010

Final Report:January 2011

23

2010 EBRD Public Procurement Legal Framework Assessment – Initial Findings

0

50

100

150

200

250

300

350

400

450

Turkmen

istan

Uzbekis

tanAze

rbaija

nTaji

kistan

FYR Mace

donia

Kyrgyz

Repu

blic

Bosnia

& Herze

govin

aArm

enia

Moldova

Poland

Estonia

Ukraine

Kazakh

stan

Roman

iaAlba

niaMong

oliaSerb

ia

Slovak R

epub

licBelar

usCroa

tiaRus

siaSlove

niaBulg

aria

Latvi

aTurk

eyLith

uania

Georgi

aMonte

negro

Hunga

ry

24

The EBRD PP Assessment: quality of PP legislation

Hungary

0

10

20

30

401

2

3

4

5

67

8

9

10

11

Turkey

0

10

20

30

401

2

3

4

5

67

8

9

10

11

Kazakhstan

0

10

20

30

401

2

3

4

5

67

8

9

10

11

Legend:1 = Accountability2 = Integrity3 = Transparency4 = Competition5 = Efficiency of the contract6 = Economy of the process7 = Proportionality8 = Uniformity9 = Stability10 = Flexibility11 = Enforceability

25

The EBRD PP Assessment: balance between integrity safeguards and efficiency instruments

TurkeyKey:

Blue shaded:Integrity instruments provided for by the national PP regulation

Blue clear:Integrity regulatory gap

Green shaded:Efficiency instruments provided for by the national PP regulation

Green clear: Efficiency regulatory gap

26

The EBRD PP Assessment: Quality of legislation on PP remedies

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Uzbek

istan

Turkmen

istan

Moldov

aTaji

kistan

Azerba

ijan

Kazak

hstan

Bulgari

a

Bosnia

& Herz

egov

inaUkra

ineBela

rusEsto

niaLa

tvia

Lithu

ania

Mongo

liaTurk

eyGeo

rgia

Poland

Albania

Roman

ia

Slovak

Rep

ublic

Sloven

iaArm

enia

Serbia

FYR Mac

edon

ia

Kyrgyz

Rep

ublic

Monten

egro

Russia

Croatia

Hunga

ry

27

The EBRD PP Assessment: Efficiency of remedies in practice - SIMPLICITY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Kyrgyz

Rep

ublic

Roman

iaAlba

niaBulg

aria

Croatia

Estonia

Georgi

aMold

ova

Slovak

Rep

ublic

Hunga

ryArm

enia

Azerba

ijan

Belarus

Bosnia

& Herz

egov

ina

FYR Mac

edon

iaKaz

akhs

tanLa

tvia

Lithu

ania

Mongo

liaMon

teneg

roPola

ndRus

siaSerb

iaSlov

enia

Tajikis

tanTurk

ey

Turkmen

istan

Ukraine

Uzbek

istan

28

The EBRD PP Assessment: Efficiency of remedies in practice - SPEED

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bosnia

& Herz

egov

inaPola

ndArm

eniaCroa

tia

FYR Mac

edon

iaGeo

giaKaz

akhs

tan

Kyrgyz

Rep

ublic

Moldova

Roman

ia

Slovak R

epubli

cTurk

ey

Turkmen

istan

Ukraine

Uzbek

istan

Hungary

Albania

Azerbaij

anBela

rusBulga

riaEsto

niaLatv

iaLit

huan

iaMon

golia

Montene

groRus

siaSerbi

aSlov

eniaTaji

kistan

29

The EBRD PP Assessment: Efficiency of remedies in practice - COST

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Estonia

Latvi

aLit

huan

iaArm

enia

Azerba

ijan

Belarus

Bosnia

& Herz

egov

inaGeo

giaKaz

akhs

tanMold

ova

Mongo

liaMon

teneg

roRus

siaTurk

eyTurk

menist

anUzb

ekist

anHun

gary

Albania

Bulgari

aCroa

tia

FYR Mac

edon

ia

Kyrgyz

Rep

ublic

Roman

iaSerb

ia

Slovak

Rep

ublic

Sloven

iaTaji

kistan

Ukraine

Poland

30

The EBRD PP Assessment: Efficiency of remedies in practice - PREDICTABILITY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Georgi

aKaz

akhs

tanBela

rusMon

golia

Bosnia

& Herz

egov

inaMon

teneg

roPola

ndRom

ania

Serbia

Albania

Armen

iaEsto

nia

FYR Mac

edon

iaHun

gary

Kyrgyz

Rep

ublic

Moldov

aRus

sia

Slovak

Rep

ublic

Tajikis

tanTurk

eyTurk

menist

anUkra

ineUzb

ekist

anAze

rbaija

nBulg

aria

Croatia

Latvi

aLit

huan

iaSlov

enia

31

The EBRD PP Assessment: Efficiency of remedies in practice - IMPARTIALITY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Kazak

hstan

FYR Mac

edon

ia

Kyrgyz

Republic

Montene

groSerb

iaTurke

y

Bosnia

& Herzeg

ovina

Moldova

Turkmen

istan

Albania

Armen

iaAze

rbaijan

Bulgari

aHun

garyMon

golia

Poland

Roman

ia

Slovak Rep

ublic

Tajikista

nUkra

ineUzb

ekista

nBela

rusCroa

tiaEsto

niaGeo

rgiaLa

tviaLit

huania

Russia

Slovenia

32

The EBRD PP Assessment: Efficiency of remedies in practice - CORRUPTION

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Azerba

ijan

FYR Mac

edon

ia

Kyrgyz

Rep

ublic

Mongo

liaRus

siaTaji

kistan

Armen

iaBela

rus

Bosnia

& H

erzeg

ovina

Moldov

aSerb

iaTurk

eyUkra

ineAlba

niaLit

huan

iaRom

ania

Slovak

Rep

ublic

Bulgari

aCroa

tiaEsto

niaGeo

rgia

Hunga

ryKaz

akhs

tanLa

tvia

Monten

egro

Poland

Sloven

iaTurk

menist

anUzb

ekist

an

33

The EBRD PP Assessment: Efficiency of remedies in practice - MARKET AWARENESS

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Albania

Bosnia

& Herz

egovi

na

FYR Mace

donia

Mongolia

Monten

egroPola

ndTurk

menista

nUzb

ekista

nBela

rusLa

tvia

Moldov

aRussi

aTaji

kistan

Ukraine

Armen

iaAze

rbaijan

Bulgari

aCroa

tiaEsto

niaGeo

rgia

Hungary

Kazakhs

tan

Kyrgyz

Republi

cLit

huania

RomaniaSerb

ia

Slovak R

epub

licSlov

eniaTurk

eyHung

ary

34

How to contact us

Eliza NiewiadomskaLegal Transition Programme – Public ProcurementOffice of the General CounselEuropean Bank for Reconstruction and DevelopmentOne Exchange SquareLondon EC2A 2JN, United KingdomNiewiade@ebrd.comTel: +44 20 7338 7190Fax: +44 20 7338 6150