New Law Being Proposed on the Federal Tender Contract System

A bill “about the federal contracting system for the purchases of goods, works and services”, intended to adjust the process of government purchases, has been accepted by the State Duma in its first reading.  The bill was being prepared for a year and a half, and the work on the document was accompanied by discussions between the federal antimonopolistic service, which initiated the current law 94-FZ, and the Ministry of Economic Development.  The reorganization of the system of government purchases will take about 5 years.  Former President Dmitry Medvedev proposed to reform this system in 2010 with the goal of combating corruption, which he said cost the state 1 trillion rubles a year ($30B). The federal antimonopoly service and the Ministry of Economic Development prepared the current version of the government purchase bill.  Two competing documents were being discussed for several months.  The ministry proposed the concept for this law developed by the highest Russian economic schools, while the antimonopoly service insisted on changes to the acting law 94-FZ on government purchases.

The active law uses only three methods of conducting purchases (auctions, electronic tenders and open requests for quotations).  The amended bill will introduce additional methods of purchasing.  For example, contractors will be selected with the aid of filtered preliminary qualifications. The criteria of these qualifications will not be arbitrary, the government will develop them.  In particular, the executor of government orders must have a minimum of five years experience  in their area.  Furthermore, participants must have at least one experience of fulfilling a similar contract with a cost of more than 20% the price of the contract in which they wants to compete.  Competitions with a limited quantity of participants for the purchases of complex goods and services will also be introduced.  Also a number of anti-dumping measures will be established, which will make it possible to file claims unjustifiably price-dumping.  If a potential participant in its proposal decreases the price by more than 25% of the initial price it will have to justifiably substantiate the reasons for this decrease.

The new version of the bill is ideologically different than the current one, recognizes Larissa Nekrasov, Department Director of Development at the Ministry of Economic Development. “The principal criterion of the selection of the best and most suitable suppliers in the current law 94-FZ is price.  But experience showed that this has not been the case.  The key principle which needs to be addressed is the united and transparent rules of the game as well as considering the entire variety of purchases for public needs.”   It is assumed that the new law will enter into force in 2013. More updates to come as they are made public.