"Long deadlines, endless appeals, insufficient transparency," the President of the Republic of Kazakhstan described the current public procurement system. In his 2023 message, Kassym-Jomart Tokayev paid special attention to this area and instructed the government to develop a completely new law public procurement.

Currently, the Law of the Republic of Kazakhstan "On Public Procurement", adopted in 2015, is in force in Kazakhstan. But tomorrow, on April 3, 2024, an updated bill will be released for the first reading of the Mazhilis of the Parliament of the Republic of Kazakhstan.

There are enough reasons to create a new law "from scratch". The population in all regions regularly raises questions about the long-term construction of schools, hospitals, roads associated with protracted competitive public procurement procedures and litigation around them. Therefore, the new draft law should remove excessive regulation of procurement procedures and simplify the procedures for challenging the results of tenders. To shift the priority when choosing a supplier of goods and services from minimum cost to quality, introducing so-called non-price criteria. Establish public control over the process...

And most importantly: now the winner of the competition is determined by the competition commission. The procedure is opaque, often fraught with corruption risks. About the proposed novels to the Zakon edition.Ruslan Kozhasbayev, deputy of the Mazhilis, head of the working group on the draft law, told kz.

Kazakhstan will create a rating of potential suppliers

A fundamentally important point is that purchases are proposed to be carried out among potential suppliers included in the corresponding rating. Why is the rating of potential suppliers being implemented? It is assumed that the novel will increase the transparency of the procedure. How will it work?

In short, the goal is to switch to the automatic selection of suppliers in public procurement, with a combination of price and quality criteria. What does it mean?

There is such a procurement method as a competition using a "rating-point system", which determines and selects a supplier automatically, without the participation of, let's say, the human factor. The goal is to improve quality, for which non–price criteria are used. Which ones?

The rating of potential suppliers is created by awarding them points. What are the data related to qualifications, financial stability, judicial and credit history, business reputation, etc. used for? In general, that's what determines the quality. And it is the accrued points, and not just the lowest price, that play a crucial role in choosing a supplier.

In the Republic of Kazakhstan, you can already see how it works. Public procurement in three types of activities has already been switched to automatic mode: design, construction and technical supervision. As such, there is no competition commission upon receipt of the application. The web portal automatically compares data on potential suppliers based on various databases of government agencies.

"For example, company A. and company B. have submitted applications, and the system automatically processes both applicants, up to the payment of taxes and the availability of real estate. And then, based on the analysis, determines the winner. Moreover, her decision is not discussed and is not appealed: it's final."Ruslan Kozhasbayev

With the adoption of the law, this system will be extended to other types of procurement. Of course, the exclusion of the human factor will also reduce corruption risks.

Public control of public procurement in the Republic of Kazakhstan

One of the important drawbacks of the current law "On Public Procurement" is the lack of public control over the conclusion and execution of relevant contracts. As a result, it comes to the point of absurdity: acts are signed on the construction of a school, which in practice simply does not exist. The new version proposes to introduce public monitoring of public procurement into the process. What will he be like? How is the novel related to the adoption of the Law of the Republic of Kazakhstan "On Public Control" in autumn 2023?

As the name suggests, the implemented public monitoring of public procurement in the Republic of Kazakhstan is directly related to the law "On Public Control". The law was adopted on October 2, 2023, but will be put into effect on April 4, 2024. Its main purpose is to analyze and evaluate acts and decisions of state bodies and institutions (and not only) for compliance with public interests.

It is obvious that the public procurement procedure falls within the scope of public control. But the existing legislation on public procurement does not say anything about it. Therefore, the new version of the draft law "On Public Procurement" establishes (in article в article andatory conduct of public control in the form of monitoring. What does it mean?

In the form of monitoring, this means "by collecting, summarizing and analyzing information." This includes both the posting of work schedules in public access on the public procurement web portal, with confirmation of reports on their execution (including using photo and video recordings), and direct verification by subjects of control over the execution of public procurement contracts. And if necessary, then "with a visit to the territory and premises of the object of public control(paragraphparagraphticle 12 of the Law of the Republic of Kazakhstan

"I think this will make it impossible to sign acts on ghost objects within the framework of public procurement, which exist only on paper."Ruslan Kozhasbayev

When it is possible to become a supplier of public procurement in the Republic of Kazakhstan without a competition

The bill pays a lot of attention to improving public procurement from a single source. What specific situations are we talking about? Why is this so important?

This is done in order to simplify and speed up. For example, for the sake of efficiency, rural akimats will be allowed to make purchases without conducting competitive procedures (from a single source) in the amount of up to 3 thousand MCI.

In principle, there was such a norm before. But with a lot of conditions. And before you could fulfill them, you had to meet them, as they say, go through seven circles of hell. That is, for example, a boiler or a tractor broke down in the middle of winter, and they only managed to buy a new one in compliance with all procedures by spring.

"Of course, the population was outraged: why is there no heat, why is the snow not being removed? That's why we simplify it for efficiency. Up to 3 thousand. MCI, I repeat, purchases can be made immediately, without competition, from a single source. Or perhaps – the deputies proposed this norm, already discussing the bill in the working group – and up to 4 thousand MCI. Let's see."Ruslan Kozhasbayev

Another example of improving this kind of public procurement is to prevent emergencies. In the current law, it is possible to carry out public procurement without holding a competition to eliminate emergencies. When houses have already been demolished by floods, for example. The draft law under discussion adds such a basis as emergency prevention.

Or another point: if there is no actual alternative, then a single application can be recognized as meeting the qualification requirements. Now this is impossible, they are waiting for at least one more participant, and without waiting, the competition is canceled, but why?! Suppose, in some rural district, only one company actually produces any product. So why not give her the opportunity to realize herself? This is the norm we are also introducing now.

List of public procurement from small and medium-sized businesses

After all, this can also be considered in the context of the state's assistance to the development of entrepreneurship. Moreover, the draft law states the need to define a list of relevant goods, works and services that would be purchased from small and medium-sized businesses. Also to help domestic entrepreneurship. What kind of list is this, and what specific positions can you expect to see in it?

Yes, one of the principles of public procurement is to provide support to domestic producers (to the extent that this does not contradict international treaties ratified by the Republic of Kazakhstan).

The draft law does propose the introduction of a List of goods, works, and services, the purchases of which will be carried out among small and medium-sized businesses (in the order and volumes approved by the authorized body).

But it is too early to talk about specific positions. First we need to pass a law. And then the Ministry of Finance will approve the list for its execution.

Sustainable public procurement in Kazakhstan

Which business entities will still receive additional support as a result of the adoption of the law "On Public Procurement" in the new edition? In particular, what is the significance of the introduction of the institute of "sustainable public procurement"? What are the economic and social aspects here?

What are "sustainable public procurement"? The draft law (paragraph 26cle 3) provides such a definition:

"Sustainable public procurement is the purchase by customers of goods, works, and services in order to ensure optimal and efficient use of budget funds throughout their life cycle, as well as to achieve social, economic, and environmental aspects of development."

For example. Public procurement for persons with disabilities and other socially vulnerable categories of citizens is, of course, the state's support for such persons. Here is the achievement of the social aspect.

The so–called green purchases: the purchase of more environmentally friendly goods, environmental protection, renewable energy sources, minimum emissions and recycling - achieving an environmental aspect.

The economic aspect is the choice of a supplier based on the criterion of the entire cost of the life cycle, innovation, the same support for SMEs.

That is, these aspects are also non-price criteria for choosing (and extremely important) a supplier, as we discussed at the beginning.

Why is this kind of public procurement called sustainable? Because they take into account the requirements of sustainable development of the state.

Support for domestic manufacturers

Does the new law respond to the instruction of the President of the Republic of Kazakhstan to support domestic producers, which was announced in the last Message and at an expanded government meeting in February?

Yes, as you know, the head of state instructed to increase the share of offtake contracts with domestic manufacturers to 10% of the total volume of purchases at least. Or up to 2 trillion tenge annually. The working group is currently working on these issues.

Firstly, in order to support domestic producers, it is proposed to define offtake contracts as the basis for public procurement in a single-source manner. The amendments are mainly aimed at additional support for domestic producers in the manufacturing industry.

At the same time, the work on concluding such contracts, competitive procedures and monitoring of execution will remain in the area of responsibility and regulation of the Ministry of Industry, as well as the quasi-public sector. This is enshrined in the laws "On Industrial Policy" and "On procurement of certain subjects of the quasi-public sector."

Appeal against the results of public procurement and liability for violations

What novelties are proposed regarding liability for violations in the field of public procurement? It is also appropriate to learn about the innovations regarding the procedure for appealing the results of public procurement.

The current legislation already provides for the responsibility of organizers and customers of public procurement (Article the Administrative Code). As for the liability of suppliers, it is limited to the inclusion in the register of unscrupulous participants and penalties.

However, the analysis shows that these measures are not enough. Therefore, the draft law provides for the responsibility of suppliers: in order to prevent deadlines, quality reduction, etc., in general, for improper fulfillment of obligations.

In addition, the responsibility of the organizers and customers is being strengthened. Thus, for violations in the field of public procurement in the Code of Administrative Offenses, it is proposed:

-establishment of administrative responsibility of the procurement organizer (for failure to return or untimely appeal to the court with a claim for recognition of suppliers as unscrupulous participants in public procurement in case of providing false information) – a fine of 30 MCI, in case of repetition – 60 MCI;

-addition of the grounds for bringing the customer's officials to administrative responsibility (for failure to submit or late submission to the authorized body of information about the supplier's evasion from concluding the contract by failing to ensure the execution of the contract) – a fine of 30 MCI, in case of repetition – 60 MCI.

As for the consideration of complaints, it is planned to introduce a new mechanism. As well as rethinking the role of the supervisory authority. What is the situation now?

Today, the duration of the competition without appeal is about two months. If there are complaints and lawsuits, contests are delayed from six months to several years.

For example, suppliers who have not been identified as winners file complaints about the results of purchases. Complaints are reviewed by the Internal State Audit Committee of the Ministry of Finance and its regional departments. At the same time, the auditors have the right to review the results of the purchases.

"And look at what the process turns out to be. Complaints are first dealt with locally. Then, if the business does not agree with the decision of the local departments, it applies to the central committee. And only then there is an opportunity to go to court. Can you imagine how long it will take to reach the court?" Ruslan Kozhasbayev

It is clear that in such situations there are corruption risks.

So, it is proposed to simplify the appeal procedure. Namely, it is proposed to exclude the right to cancel the results of purchases by the authorized body. And in order to avoid delaying procurement procedures, the function of reviewing the results should be transferred to the procurement organizer. And already on this basis, create complaints commissions with the participation of a higher authority, control bodies and representatives of the National Chamber of Entrepreneurs.

At the same time, the right to appeal the results will be granted exclusively for purchases, the winners of which are determined by the competition commission. This approach meets the requirements of the Administrative Procedural Code of the Republic of Kazakhstan, and also significantly reduces corruption risks.

What other novelties are proposed?

It is proposed to limit subcontracting to 30% of the total amount of work. Whereas in the current law, it is allowed to transfer no more than 50%. These standards are still under discussion by the working group.

Another comprehensive measure that is still being discussed is the introduction of EPC contracts. These are complex turnkey construction works for the construction of the facility and its commissioning.

At the same time, it is assumed that the terms of preparatory procedures for concluding EPC contracts should be short, which will significantly increase the efficiency of akimats in the implementation of priority and urgent projects. If all these norms are approved, we will be able to obtain legislative guarantees of high-quality fulfillment of obligations under public procurement contracts, which are currently required by the country's leadership and the Kazakhstanis themselves.