Lucubrate Magazine, Issue 33, July 20th, 2018

By Slavica Joković, Ph.D.,

This article analyzes the opening of the public procurement market in Serbia, with particular reference to the new Law on Public Procurement. It examines the legislative and institutional framework of public procurement, types of public procurement procedures and the main principles, especially principle of ensuring competition, the principle of transparency in public procurement procedure and principle of equality of bidders. It gives an overview of the public procurement market in Serbia with some statistical data of the Public Procurement Office. The paper finally notes strategic objectives of public procurement reform and priority areas of activities, according to the Public Procurement Development Strategy of the Republic of Serbia for the period 2014-2018.

The award of public procurement contracts by contracting authorities has to comply with the principles such as equal treatment, non-discrimination, and transparency. The Law on Public Procurement should be revised in order to comply with the new public procurement rules adopted pursuant to Directive 2014/24/EU and Directive 2014/25/EU. 

Legislative and Institutional Framework

The existing public procurement legislation provides the rules governing the procedure in the award of public procurement contracts. Public procurement in Serbia is governed by Public Procurement Law as well as by relevant bylaws.

The Law on Public Procurement (“Official Gazette of Republic of Serbia”, no. 124/2012, 14/2015 and 68/2015) regulates:

  • Procedures and techniques of public procurement;
  • Requirements and criteria for awarding a contract;
  • Procurement planning;
  • Collecting data and delivering reports in public procurement;
  • Protection of rights in public procurement procedures;
  • The Public Procurement Portal;
  • Measures against corruption and conflict of interest;
  • The integrity in public procurement.

The Law on Public Procurement regulates public procurement in the classical sector and utility sector (in the area of water management, energy, transport and postal services) as well as public procurement in defense and security sector).

It establishes competencies and methods of work of the Public Procurement Office and the Republic Commission for the Protection of Rights in Public Procurement Procedures.

The new Law on Public Procurement (“Official Gazette of Republic of Serbia”, no. 124/2012) was adopted in December 2012 (and entered into force in April 2013), in order to address previous failings in the legislative framework, to increase transparency in procurement and prevent or reduce malpractice and corruption.

The first Law on public procurement in Serbia dated July 2002. However, in order to approximate this Law with the EU legislation, after two years some amendments were done. Furthermore, in December 2008, a new public procurement Law was adopted and entered into force on 6 January  2009.

Institutional Framework of the public procurement system in the Republic of Serbia includes: Public Procurement Office and Republic Commission for Protection of  Rights in Public Procurement Procedures, as the main institutions, as well as other institutions relevant for the area of public procurement, such as: State Audit Institution, Commission for Protection of Competition and Anti-Corruption Agency.

The Public Procurement Office is the key institution in the public procurement system which monitors the application of the Law on Public Procurement and the conducting of public procurement procedures, with the power to indicate and to inform on concrete infringements.

Republic Commission for the Protection of Rights in Public Procurement Procedures decides on requests for the protection of rights and imposes fines to contracting authority and the responsible person therein.

Public Procurement Principles

According to the Law on Public Procurement, the main public procurement principles are as follows:

  • A principle of Efficiency and Cost Effectiveness[1];
  • A principle of Ensuring Competition[2];
  • A principle of Transparency in Public Procurement Procedure[3];
  • A principle of Equality of Bidders[4];
  • A principle of Environmental Protection and Ensuring Energy Efficiency[5].

Concerning the principle of equality of bidders, this Law stipulates that contracting authorities shall ensure equality of all bidders in all phases of public procurement procedure and may not impose conditions that would constitute national, territorial, subject-matter or personal discrimination among bidders.

Regarding the principle of ensuring competition, contracting authorities may not limit competition or prevent any bidder from participating in public procurement by unjustified use of the negotiated procedure or by using discriminatory requirements, technical specifications, and criteria. The Law on Public Procurement introduced certain new provisions aimed at increasing transparency in public procurement and thus preventing corruption, namely procurement plans and Procurement Portal. All public procurement notices exceeding 4,000€ and tender documentation must be published on the Procurement Portal, including all low-value contracts (as well as on contracting authorities’ websites). There are no additional requirements concerning eligibility of foreign subjects in public procurement procedures as compared to those applying to national bidders.

In addition, contracting authorities shall set requirements for participation in the procedure in such way so not to discriminate between bidders and to be logically related to the subject of public procurement.[6] The initial effects in practice of the new Public Procurement Law are encouraging, especially concerning the use of competitive procedures. The key challenge for strengthening transparency and fair competition as well as integrity in public procurement is the proper implementation in practice of the new regulatory framework.

Public Procurement Procedures

Several types of public procurement procedures, according to the Law on public procurement, are as follows:

1) open procedure;

2) a restricted procedure;

3) qualification procedure;

4) negotiated procedure with an invitation to bid;

5) negotiated procedure without an invitation to bid;

6) competitive dialogue;

7) design contest;

8) low-value public procurement procedure.

The new Law on Public procurement (2012) has introduced the new procurement procedures, such as competitive dialogue and qualification procedure. Concerning public procurement techniques, a framework agreement and a dynamic purchasing system have been introduced. Public procurement contracts are awarded in open or restrictive procedure, as a rule. Nevertheless, contracts may be awarded in other procedures, provided that the requirements prescribed by the Law on Public Procurement are met.


The Republic of Serbia is a democratic state of all of its citizens. Its history and achievements make it an integral part of modern civilization and the international community. The Republic of Serbia is divided into provinces, regions, administrative areas, the City of Belgrade, cities, and municipalities.

The ethnic composition of the population of the Republic of Serbia is very diverse. The majority of the population are Serbs, with another 21 ethnicities whose number is above 2,000. All citizens have equal rights and responsibilities and enjoy full ethnic equality. The population of Serbia is 7,186,862 (2011).


 

Overview of the public procurement market in Serbia

According to the statistical data provided in the report of the Public Procurement Office[7], the total value of concluded contracts in the first half of 2016 was about 1,1 billion EUR or 8,0% of GDP and the number of awarded contracts was 55.823. As the effect of implementing the new Law on Public Procurement, positive trends can be noted in relation to the use of competitive procedures. Namely, the share of open procedures in the structure of awarded contracts showed a significant upward trend, whereas the share of negotiated procedures without an invitation to bid showed a notable downward trend.

In the first half of 2016 when compared to the first half of 2015, the share of open procedures has increased from 89% to 93%.  In the same period, the share of low-value public procurement procedures has increased from 10% to 12%. According to the Law on Public Procurement, there is an advantage of 5% for domestic bidders and goods. It means that:

Where applying the criterion of economically most advantageous bid, and in situation with bids submitted by domestic and foreign bidders which provide services or perform works, contracting authority must select the bid of most advantageous domestic bidder, provided that the difference in the final sum of weighted points between most advantageous bid of the foreign bidder and most advantageous bid of the domestic bidder is not higher than 5 in favor of the bid of foreign bidder.

Where applying the criterion of economically most advantageous bid, and in situation with bids of bidders offering goods of domestic origin, and bids of bidders offering goods of foreign origin, as most advantageous bid contracting authority must select the bid of bidder offering goods of domestic origin, provided that the difference in the final sum of weighted points between most advantageous bid of the bidder offering goods of foreign origin and most advantageous bid of the bidder offering goods of domestic origin is not higher than 5 in favor of bid of the bidder offering goods of foreign origin.

Where applying the criterion of lowest offered price, and in a situation with bids of domestic and foreign bidders providing services or performing works, contracting authority must select the bid of a domestic bidder, provided that its price offered is not more than 5% higher compared to the lowest price offered by a foreign bidder.

Where applying the criterion of lowest offered price, and in situation with bids of bidders providing goods of domestic origin and bids of bidders providing goods of foreign origin, contracting authority must select the bid of bidder providing goods of domestic origin, provided that its price offered is not more than 5% higher compared to the lowest price offered by bidder providing goods of foreign origin.   [8]

Definition of a domestic bidder, pursuant to the Law on Public Procurement article 86 stipulates that it means:

  • a resident legal person, in terms of the law governing income taxes of legal persons or
  • resident natural person, in terms of the law governing income taxes of citizens.

According to the Law on Public Procurement article 86, the advantage for domestic bidders and goods, granted in public procurement procedures in which take part bidders from signatory states of the Central Europe Free Trade Agreement (CEFTA 2006) shall be applied in accordance with the provisions of that agreement. Furthermore, advantage for domestic bidders and goods, granted in public procurement procedures in which take part bidders from signatory states of the Stabilization and Association Agreement between the European Communities and their Member States, on one side, and the Republic of Serbia, on the other side, shall be applied in accordance with the provisions of that agreement.

Strategic objectives of public procurement reform

In accordance with the Public Procurement Development Strategy of the Republic of Serbia for the period 2014-2018[9], the strategic objectives of public procurement reform are as follows:

  • to reduce irregularities in the public procurement system;
  • to strengthen competition in the public procurement market;
  • to increase the cost-effectiveness and efficiency of public procurements;
  • to promote and encourage the environmental and social aspects as well as the participation of small and medium-sized enterprises and innovation in public procurements;
  • to fully harmonize Serbian legislation with the EU acquis in the field of public procurements and to fully implement it in practice.

This Strategy covers the priority areas such as improving the regulatory framework; strengthening the institutional framework; increasing the efficiency and sustainability of the public procurement system as well as eliminating irregularities in the public procurement system. Activities in the process of harmonization with acquis communautaire will be focused on specific issues concerning:

  • e-procurement;
  • defining and regulating of public procurement procedures in compliance with the provisions of the relevant Directives;
  • public procurement in the fields of water management, energy, transport and postal services;
  • public procurement in the field of defense and security,

In 2017, the Law on Public Procurement should be revised and modernized in order to ensure full harmonization with acquis communautaire.

Concluding Remarks

Public Procurement Development Strategy of the Republic of Serbia recognizes that a well regulated public procurement system ensures free competition between bidders, which allows contracting authorities to procure goods, services and works of the required quality under the most economically advantageous condition. Open and strong competition in public procurement along with higher transparency boosts the competitiveness of domestic companies, which is vital for faster economic development and employment growth.

The new Directive on public procurement (Directive 2014/24/EU)[10], recognizes that public procurement plays a key role in the Europe 2020 strategy for smart, sustainable and inclusive growth, as one of the market-based instruments, while ensuring the most efficient use of public funds. The new public procurement rules adopted pursuant to Directive 2014/24/EU and Directive 2014/25/EU[11] have introduced some substantive changes in order to increase the efficiency of public spending, facilitating, in particular, the participation of small and medium-sized enterprises in public procurement, and to enable better use of public procurement in support of common societal goals. According to the Public Procurement Development Strategy of the Republic of Serbia for the period 2014-2018, the Law on Public Procurement will be amended in 2017, in order to ensure full harmonization with new Directive 2014/24/EU and Directive 2014/25/EU.

 

References

[1] Law on Public Procurement Article 9

[2] Law on Public Procurement Article 10

[3] Law on Public Procurement Article 11

[4] Law on Public Procurement Article 12

[5] Law on Public Procurement Article 13

[6] Law on Public Procurement Article 76

[7] Public Procurement Office, Report on public procurement in Serbia in I-VI 2016 (www.ujn.gov.rs)

[8] Law on Public Procurement Article 86

[9] The Public Procurement Development Strategy in the Republic of Serbia for the period 2014-2018 („Official Gazette of RS“, no. 71/2011)

[10] DIRECTIVE 2014/24/EU OF THE  EUROPEAN  PARLIAMENT  AND OF THE COUNCIL of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 094 28.3.2014, p.65)

[11] DIRECTIVE 2014/25/EU OF THE EUROPEAN PARLIAMENT AND THE COUNCIL of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 094 28.3.2014, p.243)

 


Lucubrate Magazine, Issue 33, July 20th, 2018

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Slavica Joković
Slavica Joković

Slavica Joković, Doctor of Economics, Visiting Lecturer;
published 5 books

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