Skip to Content

Bakytzhan Sagintayev: New changes in public procurement legislation will contribute to improving business climate in country

by January 22, 2019 Legal

According to the Ministry of Finance, the total volume of public procurement and procurement of the quasi-public sector in 2018 amounted to 9.2 trillion tenge. Among them: government procurement for 3.6 trillion tenge, Samruk-Kazyna Fund � about 5 trillion tenge and other national companies � about 600 billion tenge. Thus, the volume of public procurement and procurement of the quasi-state sector in 2018, compared with the figures for 2017, increased by 3.4%.

In order to improve the scope of public procurement and procurement in the quasi-public sector, Dec. 26, 2018, the Head of State signed the Law On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Public Procurement and Procurement in the Quasi-Public Sector, which was enacted Jan. 1, 2019. To enforce the law the Ministry of Finance amended the Rules for Public Procurement.

According to the Minister of Finance, in accordance with the amendments to the law and new amendments to the rules, the web portal of public procurement has been finalized. Thus, from Jan. 1, 2019, all government purchases are made on the web portal in accordance with new amendments to the public procurement legislation.

In general, the innovations of the law can be divided into 3 blocks.

First � Simplification of Public Procurement Procedures.

The threshold amount of purchases from one source for work and services is increased from 100 MCI to 500 MCI. This greatly simplifies the purchase of minor works and services. Basically, this rule will affect customers with small budgets (kindergartens, schools, clinics, hospitals, cultural centers, boarding schools, nursing homes), Smailov said.

At the same time, according to the law, this provision will be valid until 2021, for the period of formation of skills of workers of rural akimats for public procurement. Also in the procurement method of requesting price offers customers are given the right to specify in the documentation for the brand names of goods. This will allow you to buy better products.

Second � Training of Potential Suppliers.

A new qualification requirement is being established in the form of financial stability of a potential supplier. It will be determined by such parameters as paid taxes, availability of current and fixed assets, wage fund. This information will be extracted automatically from the information systems of the State Revenue Committee. It will also allow increasing tax revenues, Smailov noted.

The law is aimed at the widespread use of procurement through a contest using prequalification. To this end, the Ministry of Finance has introduced the competence to determine the procurement method, which will allow procurement in the construction sector to be carried out only through a competitive process with prequalification.

Such an approach will accelerate and improve the quality of construction, since only qualified and reputable suppliers will participate in the procurement.

It also introduces the compulsory payment of the application and the execution of the procurement contract by way of a request for price offers. Previously, the request for quotations was made without any financial obligations (this led to the avoidance of the conclusion of the contract due to the insolvency of potential suppliers).

In order to reduce the facts of unjustified appeal of procurement, the law establishes the following norms:

1) potential suppliers who have not submitted security for the application are prohibited to view documents of other participants;

2) complaints of potential suppliers to the requirements of tender documentation that did not participate in its preliminary discussion are not subject to consideration;

3) complaints from third parties who did not participate in the procurement do not suspend the conclusion of the contract.

In addition, a clear concept of dumping price and its avoidance are given. Thus, the following thresholds are set in the Rules for Government Procurement, below which the price reduction is not allowed:

for construction and assembly work, the threshold is set at 10%;

on the design of a feasibility study, design and estimate documentation in the amount of 15%;

for technical supervision services in the amount of 15%.

In the conditions of establishing thresholds below which a price reduction is not allowed, all bidders in order to win the competitions will reduce prices to permissible thresholds. This will lead to equality of price proposals, taking into account the use of conditional discounts. In this regard, the Rules have established that, with equal conditional prices, priority will be given to companies with more work experience and a larger amount of paid taxes. It should be noted that the criterion for choosing a supplier for the amount of taxes paid is introduced for the first time.

We believe that such a criterion for choosing a supplier with equal conditional prices is fair and will encourage entrepreneurs to pay taxes in good faith. Also, it will not allow winning the competition to companies that transfer all volumes to the subcontract. Thereby they do not pay taxes, do not develop and do not equip their material and technical base. Previously, if the conditional prices were equal, the potential supplier was declared the winner, whose application was received earlier than the bids of other procurement participants. At the same time, this approach to choosing a supplier was prone to corruption, and there was a risk of collusion between the customer and the potential supplier, explained Smailov.

Third � Reducing the Share of Purchases from one Source.

Out of 53 reasons for procurement, 5 cases are excluded from one source. In order to reduce purchases from one source, the obligation of customers to repeat purchases if they are declared invalid is established. This will reduce purchases from one source, Smailov said. It also establishes a ban on the involvement of subcontractors by Enbek enterprises in the penitentiary system as part of single-source procurement.

In addition, the law provides rules to support domestic producers in accordance with international practice.

Thus, by analogy with the Russian Federation, a list of cases is established by law in which the Government has the right to establish exemptions from the national regime. The competence of the Ministry of Finance to establish additional requirements for potential suppliers is consolidated. For example, requirements such as availability of a production base in the area of work, local labor resources, etc. will be established.

Meanwhile, the law provides for the following norms for the procurement of a quasi-state sector:

1. establishes the administrative responsibility of employees of the quasi-state sector for violations of the procurement rules;

2. procurement of quasi-state sector should be conducted in electronic format;

3. Competence of the Ministry of Finance was introduced to approve unified procurement rules for subjects of the quasi-state sector, with the exception of the Samruk-Kazyna Fund.

At the same time, the Rules of Samruk-Kazyna will be approved by the decision of the Board of Directors of the Fund in coordination with the Ministry of Finance.

It should be noted that the aforementioned norms of the law on procurement issues of the quasi-state sector come into effect on Jan. 1, 2020. As Smailov emphasized, this is due to the need to develop by-laws and their technical implementation.

As part of the centralization of public procurement, for the Unified Procurement Organizers at the republican, regional and district levels, the Ministry of Finance approved the corresponding lists of goods, works and services. The order of the Ministry of Finance to approve the lists is effective from March 1, 2019.

Chairman of the Atameken National Chamber of Entrepreneurs Ablay Myrzakhmetov also spoke during the meeting. According to him, the law on issues of public procurement and procurement of the quasi-state sector will have a positive impact on the protection of the rights of domestic entrepreneurs and the improvement of their qualifications. In turn, Managing Director � Head of the Secretariat of Samruk-Kazyna Sovereign Wealth Fund Alisher Pirmetov reported on the work carried out to improve the procurement system in 2018. Thus, new measures to support domestic processing industries were developed, purchases inside the Fund were optimized, reduced timing of procurement, improved the process of prequalification, introduced a new electronic platform for procurement.

Following the consideration of the issue, Prime Minister Bakytzhan Sagintayev noted that a lot of work had been done in this direction. Amendments have been made to address key issues in public procurement that may contribute to improving the business climate in the country. In this regard, all state bodies, regional akimats should take measures to comply with the requirements of supporting domestic producers in specifying national standards, and prevent the growth of purchases from a single source. The Ministry of Finance is entrusted with conducting large-scale advocacy work on this Law and adopting the necessary by-laws.

Source: The Prime Minister of Kazakhstan