Saltanat Seilbekova, Consultant of MinTax LLP, in her article considers important changes in the sphere of purchases that took place in 2019.

In the beginning of year 2019, some amendments and additions were introduced to RoK[1]legislation regulating the sphere of state purchases, purchases of Samruk Kazyna National Welfare Fund JSC[2] and purchases of subsurface users. This article addresses changes and additions in each sphere of purchases.

In particular, with effect from 1 January 2019, amendments and additions were made in the RoK Law on State Purchases[3] also in respect of purchases of quasi-public sector, which were aimed at improving state purchases and  legislative regulation of quasi-public sector purchases.

Taking into account the recent innovations in the Law on state purchases published on 19 April 2019, let us focus our attention on the most important changes.

To begin with, since 1 January 2019, services for the use (access) of the public procurement web portal are provided to potential suppliers for a fee. The price of services for using the web portal is set by a single operator in the sphere of public procurement in coordination with the authorized body. In this regard, access to the public procurement web portal will be provided to potential suppliers after concluding a relevant contract and payment for the services once a year. The table below presents the service fees and was approved by the Decision #15 of the Board of Directors of E-Finance Center JSC dated 29 December 2018 in coordination with the Ministry of Finance of the Republic of Kazakhstan.

 

Max. contract value	Rate in MRI	Rate in KZT
Up to KZT 1 million	1 MRI per year	KZT 2,525 per year
Up to KZT 10 million	10 MRI per year	KZT 25,250 per year
Up to KZT 100 million	20 MRI per year	KZT 50,500 per year
Up to KZT 1 milliard	60 MRI per year	KZT 151,500 per year
No limit	122 MRI per year	KZT 308,050 per year

 

Thus, each potential supplier can choose the appropriate tariff for him, taking into account the peculiarities of his participation in the purchases.

Minor changes relate to cases when collaterals for tender participation applications are returned. In particular, if a potential supplier withdraws his application before the deadline for submission of applications, the application’s collateral will be returned within three working days from the date of publishing the protocol of opening of potential suppliers’ applications. The procedure for the return of collaterals is similar to that in the case of signing a contract on public purchases and paying a collateral for the fulfilment of the contract. So, the deadlines for returning the collaterals have not changed, there are just minor changes in the conditions.

The methods for making payment of a collateral for the fulfillment of the contract have been changed. In addition to the usual methods of paying a collateral for the fulfilment of the contract, (e.g. a guarantee cash deposit, a bank guarantee) a new method was added such as presentation of the supplier’s civil liability insurance contract in accordance with sub-paragraph 3) of the second part of paragraph 11 of Article 43 of the Law on State Purchases.

Further, if previously potential suppliers participating in the tender had the opportunity to view applications of other potential suppliers from the moment of placement of the opening protocol, now this is only possible after three working days from the date of placement of the preliminary admission protocol. Perhaps this innovation is caused by the fact that potential suppliers whose applications have been rejected may supplement their applications based on applications of other suppliers, which is dishonest and can be interpreted as plagiarism. Indeed, it is not by chance that the deadline for bringing tender applications into conformity with the qualification requirements and requirements of the tender documentation coincides with the access time to review applications from other potential suppliers.

In addition, only potential suppliers who directly participate in the purchases can appeal against actions (inaction), decisions of the customer, organizer of public procurement, single organizer of public procurement, commissions, expert, single operator in the field of public procurement. In other words, complaints from potential suppliers who did not take part in the preliminary discussion of the tender documentation will not be considered, in order to avoid the tender breakdown.

The changes also affected customers, organizers of public purchases. In particular, a new paragraph was introduced for them to the Law on State Purchases, according to which, when reviewing tender applications for compliance of potential suppliers with qualification requirements and requirements of tender documentation, the tender committee, in accordance with paragraph 5 of Article 27 of the Law, has the right to request materials and explanations from potential suppliers in connection with their applications and relevant information from the corresponding individuals or legal entities, government agencies. This paragraph greatly simplifies the procedure for reviewing, evaluating and comparing tender applications, as well as allows to timely reveal unreliable information being presented by potential suppliers.

Considering the previous edition of the Law on State Purchases, according to the preliminary admission protocol, potential suppliers had the right to bring the tender participation application in line with the requirements of the tender documentation. However, now this right is not available for all potential suppliers. Thus, potential suppliers who violated the requirements of Article 6 of the Law on State Purchases, provided false information on qualification requirements and requirements of tender documentation, did not pay a collateral of the tender application or did not pay it in the amount specified by the Law, shall be restricted in the right to bring their tender applications in line with the qualification requirements and requirements of the tender documentation.

It is important to note that a condition was added according to which a potential supplier may not be allowed to participate in the tender in case of failure to provide information about the absence (presence) of tax arrears, arrears of obligatory pension charges, obligatory professional pension charges and social assessments obtained through the web portal after the date of announcement of the tender.

Furthermore, in case that an appropriate state revenue authority has any information on tax arrears and arrears of obligatory pension charges, obligatory professional pension charges and social assessments in an amount exceeding six-fold MRI[1], it shall also be a reason for rejecting the potential supplier’s tender application.

In turn, information on tax assessments will also affect the comparison of conditional prices if they are equal. Thus, the winner will be recognized a tender participant who has the biggest amount of taxes paid for the four years preceding the previous year, according to the data from the information systems of the state revenue authorities. These conditions regarding tax assessments can increase the inflow of taxes to the treasury and increase the level of social protection of citizens. It should be noted that potential suppliers can get information on tax arrears automatically via the public procurement web portal, and based on practical observations, the time for getting the information is approximately 5 to 15 minutes, which in no way complicates the process of preparing a tender application.

A dumping price was given a clear definition and measures to avoid dumping have been identified. Thus, according to paragraph 1 of Article 26 of the Law on State Purchases, the dumping price is the price offered by a tender participant, which is below the threshold determined by the rules of public procurement. Today, potential suppliers can specify a reduced price, provided that, in addition to the collateral for the contract fulfilment, the potential supplier pays an amount equal to the reduced amount from the minimum acceptable price that is not recognized as the dumping price. However, one must take into account the list of GWS[2] for which prices cannot be reduced intentionally. Thus, avoiding the dumping price will allow customers to select those potential suppliers who, in their opinion, are able to fulfill contractual obligations properly and efficiently, within the financial capabilities of the customer.

It is also important to note significant changes that are aimed at reducing purchases from a single source. Thus, the grounds on which it is possible to purchase from a single source were narrowed. Also, if public purchases through a tender were declared invalid, the customer is obliged to repeat the public purchases, which also reduces the possibility of a purchase from one source.

Moreover, the minimum amount of purchases from a single source has been increased from 100 MRI to 500 MRI (from KZT 252,500 to KZT 1,262,500). Also, it has now become possible to purchase from one source by directly concluding a contract if the total annual amount does not exceed KZT 1,262,500 (in 2019). It is important to note that this condition is valid only if works and services are purchased. As regards the purchases of goods, then given the changes, the customers now have the opportunity to indicate the brand names of the goods in their placed information, if the goods value does not exceed 1,000 MRI (KZT 2,525,000).

At the same time, the changes in the legislation on public procurement also affected the RoK Code “On Administrative Offenses” dated 5 July 2014 No. 235-V ZRK.  Thus, referring to Article 207 of the Law on State Purchases, administrative liability of officials is established for violation of the RoK legislation on public procurement. At that, the penalty imposed on officials varies from 10 MRI to 200 MRI (from KZT 25,250 to KZT 505,000).

Further, let us consider the changes that took place in the Procurement Rules[3], effective from 25 January and from 15 April 2019.

There are significant changes in the deadlines for such procedures as the placement of draft tender documentation which was reduced from 10 working days to 5 working days. The period for publishing comments to the draft tender documentation, as well as requests for clarification of the provisions of the draft tender documentation was reduced from 5 working days to 3 working days. The period for making decisions after the publication of the preliminary discussion of the tender documentation was reduced from 5 working days to 2 working days. The period for the placement of the approved tender documentation was reduced from 15 working days to 10 working days.

It is important to note that the period for concluding a procurement contract has also decreased. So, now the winner of the tender carried out by RFQ method must sign the draft purchase contract within 3 (three) working days from the date of receipt of the draft purchase contract signed by the customer. In this case, the contract for purchases by means of a tender or request for quotations shall be concluded within the time specified in the purchase results protocol, but not earlier than 5 (five) working days and not later than 10 (ten) working days from the date of signing the results protocol. Whereas, the single-source purchase contract is concluded within 10 (ten) working days from the date of the decision to make the purchase from a single source. Also, if previously the term for concluding a purchase contract with RoK non-residents could be extended by 10 (ten) calendar days, now this condition is completely excluded.

It is necessary to emphasize that the Board of Directors of the Fund decided to exclude paragraph 140 of the Procurement Rules, therefore the updated system no longer gives an opportunity to sign the contract by direct conclusion. The planning of single-source purchases by direct conclusion of a contract was excluded as well.

An important procedure for potential suppliers is comparing documents submitted as part of the application. The procedure for providing the customer with originals and/or notarized copies of the documents submitted to them as part of the application has not changed. But, the procedure for preparing a collation protocol has changed, it is now automatically generated directly in the system.

Changes were made to information contained in the announcement of purchase by quotation request method, according to which the announcement of purchase by quotation request method cannot contain a requirement to the potential suppliers to provide samples of goods to be purchased, except for cases specified by the Procurement Rules. While under the RoK legislation which regulates the sphere of public procurement, customers have the opportunity to specify the brand names of the goods in the posted information, if the goods value does not exceed 1,000 MRI (KZT 2,525,000).

Cases have been added, according to which the customer has the right to make purchases from a single source based on the decision of the head of the customer’s executive body or other person authorized by him. Also, the Procurement Rules restrict the ability of the director or trustee to personally dispose of the entity’s funds in big amounts. In other words, the customer who approved the decision to purchase from a single source based on the results of a failed purchase, according to sub-paragraph 1 of paragraph 137 and sub-paragraph 11 of paragraph 138 of the Procurement Rules, must obtain permission from the collegial body.

In conclusion, it remains to consider changes in the RoK legislation governing the purchases of subsurface users. As is known, the purchases of subsurface users are governed by the GWS Acquisition Rules for the extraction of solid minerals[4] and the GWS Acquisition Rules for the exploration or production of hydrocarbons, or the extraction of uranium[5].

As of today, Order of the RoK Minister of Industry and Infrastructure Development #209 dated 11 April 2019 amended the GWS Acquisition Rules for the extraction of solid minerals effective from 5 May 2019.

Thus, the stage of collateralizing a tender application when making a purchase by open tender has been excluded.

Further, there is an addition to the list of mandatory documents to be submitted as part of the application. The list of documents is presented in paragraph 41 of the GWS Acquisition Rules in conducting operations for the extraction of solid minerals.

Furthermore, a new condition was added to sub-paragraph 10 of paragraph 65 of the above Rules, according to which the tender committee rejects the tender application and does not allow the potential supplier to participate in an open tender. This provision is worded as follows: “a potential supplier (consortium participants) and (or) contractor engaged by him, and (or) their head, founders (shareholders), participants are included in the list of organizations and individuals involved in the financing of terrorism and extremism, in the manner prescribed by the legislation of the Republic of Kazakhstan”.

Also, it became possible to reject a tender application if the customer has information contained in official publicly accessible electronic information resources, the owners of which are authorized to place this information legally, according to which there is a valid court decision on corruption and (or) other criminal offenses relating to the potential supplier and (or) for which restrictive measures of a political and (or) economic nature have been imposed by any international and regional organizations to which RoK is a party and the countries legally and (or) factually recognized by the RoK.

Moreover, the GWS Acquisition Rules for the extraction of solid minerals were supplemented by paragraph 85 regarding the list of GWS purchased from a single source.

At the same time, the above Rules are supplemented with sub-paragraphs 10, 11, 12 in paragraph 122 in terms of amending the concluded contract for the purchase of GWS, subject to the invariability of quality and other conditions which were the basis for choosing the supplier.

Thus, the article presents significant changes in the RoK legislation governing public purchases, purchases of Samruk-Kazyna NWF JSC and purchases of subsoil users in 2019. The Law on State Purchases as well as the GWS Acquisition Rules for the extraction of solid minerals referred to in the article can be found on the official Internet resource of “Adilet” legal information system of regulatory legal acts of the Republic of Kazakhstan.  To view the GWS Procurement Rules of Samruk Kazyna National Welfare Fund JSC please visit the official web site of  Samruk Kazyna National Welfare Fund JSC.

[1] Monthly Reference Index established by RoK Law “On the Republic’s Budget” for a respective financial year.

[2] Goods, work and services.

[3] The Rules for the procurement of goods, works and services by Samruk-Kazyna National Welfare Fund Joint-Stock Company and organizations, fifty or more percent of voting shares (stakes) of which are directly or indirectly owned by Samruk-Kazyna JSC on the right of ownership or trust management (hereinafter – “Samruk-Kazyna Procurement Rules”) as amended and supplemented by the decision of in-person meeting of the Board of Directors of Samruk-Kazyna JSC #156 dated 13 December 2018.

[4] The Rules for the acquisition by subsoil users and their contractors of goods, works and services used in the extraction of solid minerals, approved by the Order of the Minister for Investment and Development of the Republic of Kazakhstan No. 355 dated May 21, 2018.

[5] The Rules for the acquisition by subsoil users and their contractors of goods, works and services used in the exploration or production of hydrocarbons and production of uranium, approved by the Order No. 196 of the Minister of Energy of the Republic of Kazakhstan dated May 18, 2018.