REGULATIONS ON PUBLIC PROCUREMENTS ARE GETTING STRICTER : A LOOK INTO THE NEW LAW'S KEY IMPLICATIONS

On July 14th, 2023, Azerbaijan's National Assembly rolled out the latest Law on Public Procurements, superseding the preceding legislation of the same title. Set to be effective from January 1st, 2024, it mandates all governmental and government-related entities (the “Procuring Entities”) as well as entrepreneurs with an interest in public tender participation, to align with its requirements after the aforementioned date.

This renewed legislative effort aims to refine the public procurement system, prioritizing transparency, effective oversight, and fostering a level playing field during tender procedures.

Here's a breakdown of the pivotal elements and some modifications introduced:

• Public Procurement Stages – The Law revises procedural stages for public procurements:

(i) Drafting and disclosing initial annual procurement plans with a deadline set for every October 25 - Once the annual state budget gets parliamentary approval, final plans with estimated fees for goods, works, and services for the next year must be publicized;

(ii) Formulation of procurement committees within the Procuring Entities;

(iii) Public declaration of supplier assessment criteria and the relevant documentation, if applicable;

(iv) Preparing the list of procurement conditions;

(v) Public disclosure for offer submissions;

(vi) Receiving and opening the offers;

(vii) Offer assessment;

(viii) Documentation of procurement results, pending validation from the State Service for Antimonopoly and Supervision of the Consumer Market of Azerbaijan (the “State Service”);

(ix) If a framework agreement is applied, its execution;

(x) Sending notification on the offer's endorsement and the procurement agreement to the winning supplier;

(xi) Suppliers are to sign the procurement contract and ensure the provision of performance and advance payment guarantees;

(xii) Conclusion of the procurement agreement by the Procuring Entity, commencing its effectual period;

(xiii) Compilation of a procurement report.

• Digitalization of the Procurement Procedures – Excluding tenders related to confidential matters, all procurements will be facilitated through the online public procurement platform;

• Supplier Sanctions – The Law brings consistency to the tender procedures by stipulating stricter measures for suppliers in breach. Suppliers exhibiting severe non-compliance, such as redundant offers for a procurement, unauthorized deals with other suppliers, or other breaches, risk a blacklist duration of up to three years, prohibiting their participation in public tenders;

• Restrictions on Foreign Suppliers – Prior to the public procurement processes, Procuring Entities can impose restrictions on suppliers from specific nations based on national security considerations or international obligations, especially targeting nations without diplomatic relations with Azerbaijan;

• Exemptions from the Law – The new law expands on its predecessor regarding procurements outside its jurisdiction. Exemptions encompass procuring goods, works, or services offered by a government entity or a natural monopolist, financial transactions like loans or currency acquisition, procuring notary services, defence and security-related procurements, and so on. Furthermore, the ceiling for unplanned procurements falling outside of the Law’s purview is set at AZN 10,000 (AZN 20,000 for premier government entities);

• Procurement Methods and Limitations – Public tenders exceeding AZN 100,000 will proceed via open or two-stage tendering. For lesser values, quotation requests are acceptable. However, certain methods like closed tender, single sourcing, or tenders involving framework agreements necessitate prior State Service approval;

• Conflict of Interest – The Law broadens scenarios considered conflict-ridden. Examples include intertwined ownerships among suppliers or family ties between a supplier and the head of the Procuring Entity;

• Video Recording of Meetings – No unofficial negotiation or meeting is permissible between the Procuring Entity and the suppliers. The meetings must be recorded on video and the Procuring Entity must keep such records for six months;

• Estimated fee – The Law’s transparency implications extend to procurement planning and estimated fees. All Procuring Entities will publish the estimated fees for their planned annual procurements along with the publication of annual procurement plans, allowing entrepreneurs to get familiar with such fees before tender submission;

• Waiting Period – To protect the interests of all suppliers, a five-day post-procurement waiting period is introduced, allowing suppliers to voice concerns and complaints regarding the results before the final procurement agreement is signed;

• Performance Guarantee – Procurement agreements worth AZN 30,000 or more will demand a 10% value performance guarantee. Micro and small businesses are exempt, requiring only 5% of the full contract value;

• Broadening the authorities of the State Service – Entrusted with robust powers, the State Service will monitor the entire procurement lifecycle, from planning to execution.

Entities and entrepreneurs must gear up to abide by these regulations, which encompasses document preparation, conformity assessments, and more.

VLM stands ready to offer its full legal assistance, ensuring you navigate public tenders seamlessly and remain compliant with the renewed legislation.

Note: The Brief above is merely for informatory purposes and does not, and is not intended to, constitute legal advice.