The law of the Republic of Azerbaijan "On Public Procurement"

 

The new law “On Public Procurement” was adopted On July 14 2023. For the purposes of this article, we refer to it as Public Procurement Law of Azerbaijan 2024 or simply as "the Law". The newest law of public procurement in Azerbaijan, guided by the principles of efficient and economical use of financial resources, implementation of procurement on the basis of transparency, openness, fairness and competitiveness, came into force on January 1 2024.

 

The following differences exist between the “old” and “new” Law  of Azerbaijan on Public Procurement of the same name:

 

Scope of the law

 

The new law does not apply to the procurement of the following goods, works or services:

• goods, works or services provided only by the state body (institution) or natural monopoly subjects and whose prices (tariffs) are regulated (determined) by the state;
• receiving loans;
• securities, checks and foreign currency and related services;
• Goods, works or services within the framework of relations regulated by the Law of the Republic of Azerbaijan "On Public-Private Partnership";
• notarial actions performed by notaries;
• directing (placing) funds of extra-budgetary state funds to investment, as well as services related to the purchase, sale, exchange, storage, placement and (or) management of investment assets;
• goods, works or services purchased at the expense of other financial resources by the body (institution) determined by the by commercial legal entities whose supervisory board (board of directors) is approved by the body (institution) determined by the President of the Republic of Azerbaijan or approved by the agreement with body (institution) determined by the President (with the exception of funds of the state budget of the Republic of Azerbaijan and the budget of the Nakhchivan Autonomous Republic, including funds of special purpose budget funds, budget loans, subsidies, loans obtained with state guarantees, state grants, aid, funds of extra-budgetary state funds)
• goods, works or services purchased for defense or state security needs;
• procurements that are not included in the procurement plan of the procuring entity for the current year and have a total value of up to 10,000 (ten thousand) manats within one budget year (up to 20,000 (twenty thousand) manats in relation to higher, 1st and 2nd category state bodies, as well as procuring entities that are not financed from the state budget as of January 1 of the current year).

In the new law, it is noted that procurement at the expense of funds provided by international organizations should be carried out in the manner agreed upon in the agreement, if a separate rule is stipulated in the agreement concluded with these organizations.

 

Procedure for procurement

 

One of the main innovations in the law is that, public procurement must be carried out only through the unified internet portal of public procurement. However, procurements involving confidential information and procedures related to these procurements must be carried out on paper.

 

Change in the volume of the subject of procurement

 

According to the Public Procurement Law of Azerbaijan 2024, if the procurement contract is specified in a set of conditions in advance by the procurement commission until it is signed by the winning supplier, the volume (amount) of the procurement subject may be reduced-increased by up to 10 percent with the consent of the supervisory authority, provided that the price and characteristics (indicators) of each unit of the procurement subject are not changed, as well as not exceeding the expected price (in the previous law, this amount was 15%).

 

Framework agreement

 

A framework agreement is an agreement concluded between the procuring entity and two or more suppliers that meet the requirements, defining the conditions for the procurement of the relevant procurement subject during one budget year, which is required periodically or repeatedly, and at the same time, the volume and total price of which cannot be fully determined in advance.

 

The framework agreement is concluded in written form and the agreement contains at least the following:

• validity period of the framework agreement;
• fixed price of one unit of the subject of procurement;
• discount applied to the price of one unit according to the volume of the subject of procurement;
• procurement conditions to be determined or clarified based on the request for proposals, as well as the method, place, deadline and time of submission of final proposals;
• requirements for the procurement contract to be concluded on the result of the procurement;
• the maximum amount of the framework agreement;
• Other requirements determined by law and framework agreement.

 

The procuring organization may conclude a framework agreement by applying open tender or request for quotations methods for the purpose of providing periodic or recurring maintenance services to vehicles, machines, machines, equipment, techniques and installations (including the provision of goods that are an integral part of those services) ( in this case, the approval of the supervisory authority is required).

 

In cases where the procurement will result in the conclusion of a framework agreement, the following are included in the general conditions:

• information about concluding a framework agreement with suppliers;
• minimum and maximum number of suppliers to be concluded framework agreement;
• the form and terms of the framework agreement.

 

The procurement is carried out in two stages, applying the framework agreement.

 

In the first stage, the procurement commission conducts procurement by applying open tender or request for quotations methods in the manner established by Azerbaijan's Public Procurement Law 2024 and concludes a framework agreement with suppliers who meet the requirements until 3 (three) working days before the expiration of the validity period of the proposals. A concluded framework agreement is valid for one budget year and does not create an obligation for the procuring organization to place an order.

 

In the second stage, the procurement commission procures the subject of procurement using one of the following methods as the demand arises:

1. by choosing the supplier who submitted the lowest price offer or the most efficient offer in accordance with this Law based on the initial offer of the suppliers with whom the framework agreement was concluded;
2. by sending a request for a proposal, choosing the supplier that submits the lowest price proposal or the most efficient proposal in accordance with this Law based on the final proposal of the suppliers with whom the framework agreement is concluded.

 

The procurement commission sends the request for proposals specified in case 2 to all suppliers with whom the framework agreement has been concluded. The deadline for submission of the final proposal in accordance with the request for proposals is determined by the framework agreement.

 

On the basis of the framework agreement, a protocol is drawn up on the result of each procurement according to the demand and sent to the supervisory authority for information within 1 (one) working day.

In both cases listed above, a simple procurement contract is concluded with the selected supplier for the period specified in the framework agreement. The model form of the framework agreement, the request for proposals and the said procurement contract will be determined by the Ministry of Justice.

 

Supervisory Authority

 

State control in the field of procurement in the Republic of Azerbaijan is carried out by the Ministry of Economy of the Republic of Azerbaijan through the Antimonopoly and Consumer Market Control State Service and has the following powers:

• to request documents (data) related to the procurement procedure from procuring entities and suppliers;
• in case of doubts regarding the estimated price specified in the procurement plan, to apply to the procuring entities for its clarification, and and to demand their elimination if deviations are detected in the procurement plan;
• participate as an observer in the meetings of procurement commissions;
• conduct an investigation related to procurements and, depending on the result, take measures in accordance with Law;
• to give consent to increase or decrease the volume (quantity) of the subject of procurement up to 10 percent;
• to make a decision on whether to approve the decisions (protocols) of procurement commissions in the cases provided for in this Law;
• prepare the annual report on procurements and post it on the portal;
• to keep registers of procuring entities, procurement contracts and invalid suppliers in the manner determined by the Cabinet of Ministers, and to make a decision on the period of stay of invalid suppliers in that register.

 

The Public Procurement Law of Azerbaijan 2024 also includes the concept of invalid supplier. Thus, suppliers are considered invalid suppliers by reasoned decision of the supervisory authority upon the reasoned application of the procuring entity in the following cases:

• avoidance from execution of the procurement contract;
• when he refuses to conclude a procurement contrcat in 3 (three) or more procurements within 1 (one) calendar year;
• when the supplier submits more than one offer or participates in more than one offer;
• when any deal related to that procurement is carried out between several suppliers during the procurement (including when a deal aimed at increasing the price is carried out);
• when the supplier commits actions (inaction) contrary to the requirements of the Law at any stage of procurement, including providing false documents and (or) information;
• when the supplier has a legal, financial or organizational dependence on the procuring entity or the procuring entity and the supplier are on the same entity;
• when one of the suppliers is the beneficial owner of the other, or when at least two of the suppliers are under the control of the same beneficial owner;
• when one of the suppliers is a member and (or) participant of the management body of the other, or when the member and (or) participant of the management body of at least two of the suppliers is the same person;
• when a physical or legal person acting as a supplier in procurement is related to the head of the procuring organization according to Article 49-1 of the Civil Code of the Republic of Azerbaijan.

When the above-mentioned cases are detected by the supervisory authority, the suppliers are considered invalid suppliers by the reasoned decision of the supervisory authority, they are included in the register of invalid suppliers, and information about this is posted on the portal.

Depending on the severity of the violation and whether the supplier has previously committed such a violation, the period of his stay in the register of invalid suppliers is determined by the supervisory authority. In any case, this period cannot exceed 3 (three) years, and suppliers are not allowed to participate in procurement during that period.

 

Amount of advance payment

 

In the previous procurement legislation, the amount of advance payment that the procuring entity could pay to the successful consignor (contractor) for the performance of the procurement contract was limited to 30% of the total cost of the procurement contract. In the new law, this amount is set up to 50% in relation to micro and small business entities.

 

Recording of meetings

 

Meetings between the procuring entity and all suppliers who have paid the participation fee are conducted under the control of video surveillance devices. The video recorded by those video surveillance devices is kept by the procuring entity for at least 6 (six) months and is presented within 3 (three) working days based on the application of the supervisory authority. Also, the results of the held meeting are formalized with a protocol. The protocol is sent to all suppliers who have paid the participation fee in order to be considered and posted on the portal on the same day.

 

Procurement stages

 

If in the previous law procurement was defined as a simple procedure consisting of 3 stages, in the new Law on Public Procurement a total of 13 procurement stages were defined (the stages existing in the previous law were differentiated).

1. preparing the procurement plan and determining the estimated price;
2. formation of the procurement commission;
3. when the procedure for preliminary determination of suppliers' compliance is carried out, preparation of a set of documents on compliance and issuing a related announcement (sending an invitation);
4. preparation of a general conditions;
5. issuing an announcement about attracting proposals (sending an invitation);
6. acceptance and opening of offers;
7. evaluation of proposals;
8. submission to the supervispry body for the preparation and approval of the final protocol on the results of the procurement;
9. when the framework agreement is applied, conclusion of the framework agreement;
10. submission of the notice of acceptance of the offer and the proecurement contract for signing to the supplier;
11. signing of the proecurement contract by the supplier, providing the performance security and (or) advance security required by this Law to the procuring entity;
12. signing of the proecurement contract by the procuring organization and entry into force of the procurement contract;
13. preparing a report on the procurement.

 

Right to appeal

 

In the Public Procurement Law of Azerbaijan 2024, the range of cases in which a complaint cannot be filed has been specified more specifically, and the supplier's right to file a complaint in case of non-delivery of an order by the procuring entity under the framework agreement has not been taken into account as a subject of complaint.

 

Procurement methods

 

The new law defines 5 different procurement methods: open tendering, two-stage tendering, closed tendering, request for quotations and single source procurement methods. Unlike the previous law, the new law does not envisage the use of limited participation tenders and request for proposals methods in public procurement.

 

Request for quotations

 

According to the new law, the request for quotations is applied when the estimated price is less than 100,000 manats. However, depending on the estimated price, the quotation request method is conducted among the following suppliers and only their offers are evaluated:

• when the estimated price is up to 30,000 manats - suppliers who are micro and small business entities;
• when the estimated price is from 30,000 manat to 100,000 manat - suppliers who are micro, small and medium enterprises.

 

Submission of documents and information

 

In the new law, another provision has been added for more prompt collection of necessary documents and information. Thus, when it is possible to obtain documents or information for participation in public procurements from the relevant government body (institution) through the Electronic Government Information System, those documents or information will not be required from the supplier. In cases where it is not possible to obtain those documents or information through the Electronic Government Information System, their submission will be requested from the relevant state body (institution) with the consent of the supplier, or will be provided by the supplier.

 

Language of documentation in procurement

 

In the previous law, it was stipulated that the set of documents for determining qualification suitability, the set of general conditions of the tender, the documents for the involvement of proposals, offers and quotations should be drawn up in the state language of the Republic of Azerbaijan, and if necessary, those documents should be translated into one of the languages widely used in international trade. However, no rules were defined regarding the conflict between the main document and its translation.

According to the Azerbaijan's Public Procurement Law of 2024, in this case, if there is a conflict between procurement documents, priority will be given to documents drawn up in the official language of the Republic of Azerbaijan. Additionally, it is noted that documents (information) by non-resident suppliers may be submitted in that foreign language if provided for in the set of compliance documents and set of conditions.

 

Formation of the procuring commission

 

According to the previous law, if the estimated price of the subject of the tender is higher than 5 billion manats, and in the case of organizations financed from the budget, 1.5 billion manats or the equivalent amount in free currency, the tender commission should include their representatives with the power of attorney of the relevant executive authorities. This requirement has been canceled in the new law.

 

Security reuqirement

 

According to the new law, the bid security is determined by the procurement commission in the amount of 1-3 percent of the estimated price. In the previous law, this volume was only 1%.

Also, in the old law, performance security was not required in connection with the procurement contract whose price was less than the manat equivalent of 100,000 US dollars during the open tender. In the new law, performance security is not required for procurement contracts with a total amount of less than 30,000 mamats regardless of the procurement method used.

The amount of the performance guarantee was usually set at 2-5 percent of the total amount of the procurement contract in the previous law. In the new law, the volume is defined as 10 percent. In relation to micro and small business subjects, this amount is defined as 5 percent.

 

Periods

 

Announcement periods

In the previous law, it was stated that the announcement of holding an open tender must be made at least 30 banking days before the opening of tender envelopes, and at least 20 banking days before the second time, in the state newspapers of the republic and internationally distributed media, as well as on the official website. When the open tendering was conducted through electronic procurement, these periods were defined as 20 banking days and 10 banking days, respectively.

In the new law, this period changes in proportion to the probable price in both open and closed tenders. Estimated price:

• 15 (fifteen) working days if it is up to 1,000,000 manats
• 20 (twenty) working days if it is from 1,000,000 manat to 10,000,000 manat
• 30 (thirty) working days in case of 10,000,000 manat and more;

In the previous law, the initial period for the announcement of the two-stage tendering was defined as at least 60 banking days, and for the second time at least 40 banking days. According to the new law, the announcement period for the two-stage tendering method (in relation to the proposals of the first stage) is defined as 40 (forty) working days, and at least 20 (twenty) working days for the second stage.

 

Period of not being a member of the procurement commission

 

If the procurement commission violates the requirements of the Law “On Public Procurement” and normative legal acts derived from this Law, suppliers can apply to the supervisory authority. If the supervisory authority confirms the violation of normative legal acts during the organization and conduct of the procurement, the results of the procurement are canceled and the procuring entity conducts a new procurement in that case. In this case, the chairman and other members of the procurement commission will be deprived of the right to be the chairman or member of any procurement commission for 5 (five) years, except for the commission members who gave a special opinion different from the adopted decision. Previously, this period was defined as 3 (three) years.

 

Time period for filing a complaint

Both the previous and the new law established the right of excluded or non-participating suppliers to file a complaint with the procuring organization within 15 (fifteen) business days from the day they knew or should have known that their rights were violated before the procurement agreement entered into force.

 

While in the previous law, the period for considering a complaint is 20 bank days, and in the case of mandatory participation of micro, small and medium-sized business entities in state procurement, it is defined as 10 bank days, according to the new law, the procuring entity examines the submitted complaint within 10 (ten) working days and makes an appropriate decision and sends it to the complaining supplier within 1 (one) working day from the day of adoption of that decision.