Member Article

The new Slovenian Public Procurement Act, the ZJN-3 ("Procurement Act"), enters into force on 1 April 2016. After a long period of dual regulation of the general and utility areas of public procurement, the new Procurement Act unifies both areas in a single act, thus invalidating the existing Public Procurement Act - ZJN-2, and the Act Regulating Public Procurement in Water, Energy, Transport and Postal Services - ZJNVETPS. All public procurement procedures which commenced before 1 April 2016 will be concluded in accordance with the previously valid acts.

Enhancing Transparency and Simplifying Procedures

The main reason behind the adoption of the new Procurement Act is the implementation of Directive 2014/24/EU and Directive 2014/25/EU which are reforming the public procurement system at a European level. With the new directives and their implementation in national legal systems, legislators are pursuing greater transparency, limitation of corruption, promotion of innovative solutions and participation of small and medium enterprises, as well as promotion of green public procurements. The ambit of the European legislator was mainly to achieve greater flexibility of the procedures and to simplify complex procedures, as well as to open national markets to foreign enterprises. One of the best possibilities for achieving this is the gradual introduction of electronic public procurement.

The Slovenian legislator has commenced the reform systematically and has executed a thorough analysis of the public procurement market in Slovenia. The most important implications, which also facilitate comparison between different EU member states, are that a) the average duration of the most commonly used procurement procedure - i.e. open procedure - is 202,8 days, b) the most common reason for the unsuccessful completion of a procedure, which happens in 78,76% of cases, is the incomplete tender submission, and c) that the contractual value of all awarded contracts, without VAT, was almost EUR three billion. In comparison to previous years an uptrend of volume in procurement value has been noticed.

New Legislative Solutions

The most important new legislative solutions offer a simplified procedure for the contracting authorities due to several new procedures that are now available, improving the thresholds for small value procurements and shortening the deadlines for the submission of tenders. Simplifications were also sought for tenderers. From now on, tenderers will be able to use a single European form for establishing grounds for exclusion, i.e. ESPD. The maximum yearly turnover which may be requested by the contracting authority is also limited, which will probably enhance competition in the relevant markets.

On the other hand, the Procurement Act provides for several new grounds for exclusion with special emphasis on social procurements via social clauses, and gives absolute priority to certain tenderers in reserved contracting cases. To facilitate transparency, the publication of some recording contracts - those contracts that are below the threshold for public procurement - is now mandatory. Contract award decisions will also be published.

The new Procurement Act further invokes the most economically advantageous tender criterion, which is based on lifetime costs and price. However, this does not mean (except in some cases) that the criteria cannot solely take into account the lowest price, but it does put a priority emphasis on the relationship between price and quality. Another important change is in relation to mandatory direct payments to subcontractors, as well as additionally flexible regulation of utilities, which relate water, energy, transport and the postal sector.

Fundamental Concepts and Principles

The new Procurement Act departs from the existing definition of an 'incomplete tender', and rather defines an 'admissible tender'. An admissible tender eliminates grounds for exclusion, fulfils all relevant conditions, and is technically appropriate and timely. It is also absent of proven cartel agreements and corruption and offers prices that are not abnormally low or exceeding the guaranteed funds. It is evident that emphasis has been put on the prohibition of anticompetitive practices, which will be determined in a specific procedure before the Slovenian Competition Protection Agency, if the contracting authority has any suspicions.

The new Procurement Act also abandons the concept of a formally incomplete tender, which in practice enabled wide supplementing of a submitted tender. The only remaining concept will be the allowed supplementing and changing of the tenders, which is under contracting authority's control, since the contracting authority itself may request a supplement, correction, change or clarification of the tender. The definition of issues which may be supplemented and/or changed is narrower than it was in the previous act.

Even though the fundamental principles remain practically the same, the new Procurement Act did widen the social clause which provides that the tenderers have to fulfil all applicable obligations in respect to environmental, social and employment law. In practical implementation this means that the wider clause will be an essential element of each contract, meaning that rescission of contract will be possible only upon a breach of the clause. Non-compliance with the social clause also presents grounds for exclusion. Furthermore, tenderers will have to provide evidence of regular payment of tax obligations and social contributions with the relevant national tax forms.

Thresholds for Public Procurements

The new Procurement Act shall be applied to those procurements where the estimated value, without VAT, is equal or higher than the following values:

• 20.000 EUR for public supply and service contracts (50.000 EUR for utility);
• 40.000 EUR for construction contracts (100.000 EUR for utility);
• 750.000 EUR for social and other specific services contracts (1.000.000 EUR for utility).

Public contracts that exceed the above-mentioned thresholds, will necessitate the publication of a contract notice on the national public procurement portal. If the contract value exceeds European thresholds, which are relatively higher than national ones, publication in the Supplement of the Official Journal of the EU is also mandatory.

For public contracts where the estimated value is lower than the respective threshold (i.e. recording contracts), the only obligation of the contracting authority is to observe the principles of economy, efficiency, effectiveness and transparency. In cases where the recording contract value exceeds EUR 10,000 without VAT, the contracting authority is also obliged to publish a list of all such contracts concluded in the previous year.

The new Procurement Act also defines several exceptions where the Procurement Act will not be used. In general, the exceptions relate to urgent contracts, specific legal and financial services, in-house contracts and public-public relationships, in accordance with ECJ case law.

New Old Procedures

The most commonly used procedure in practice, i.e. the open procedure, has not been significantly changed. The most relevant change mainly applies to shorter minimum deadlines for the submission of tenders, which is now 35 days, except in exceptional circumstances where the deadline may be shortened to 15 days.

Even though the restricted procedure is - in terms of terminology - a new procedure, it is basically the same as the previously existing procedure with a prior establishment of competence. The Procurement Act provides for several other procedures such as competitive dialogue, competitive procedure with negotiations, negotiated procedure with prior publication of a contract notice, negotiated procedure without prior publication of a contract notice and a new procedure for small value contracts.

Changes in the Execution of the Procedure

The new Procurement Act eases the preparatory stage of the public procurement procedure by enabling prior cooperation with candidates or tenderers. In such cases the contracting authority has to take certain steps in order to prevent anticompetitive practices.

In the decision stage of the procedure, an important new change is that when a decision is published on the national web portal for public procurement, it is deemed served to all tenderers. In practice this means that service for all tenderers will be unified, which will impact the deadlines for the filing a review claim. In addition, the Procurement Act does not provide for requests for additional explanations anymore, meaning that deadline extension for filing a review claim on this basis will no longer be possible.

The tender review process, where other tenderers review competing tenders after the decision had been made, has been vitally changed by the introduction of greater restrictions to the potential detriment of tenderers. The review of other tenders is still possible, however, two different situations have to be distinguished. When the contracting authority performed a full check of all tenders regarding their admissibility, then the review of other tenders may be granted only to those who submitted an admissible tender. However, if the contracting authority decides to perform a full check of only the most economically advantageous tenders, then it is obliged to enable review to all tenderers who request it. The request for review has to be submitted within three working days (in procedures for small value contracts – within two working days) and the contracting authority has to facilitate the review within three working days (or two working days for small value contracts) following the receipt of the request.

New Regime for Subcontractors

If the tenderer intends to perform the task with subcontractors, each subcontractor and the parts they will undertake must be included in the tender. The tenderer will also have to include their contact information and legal representatives, completed ESPD forms of subcontractors, as well as the subcontractors' request for direct payments. An important improvement is that the tenderer is required to undergo the same procedure if the subcontractor is changed during contract execution.

In accordance with the new regime, there is no automatic mandatory direct payment to subcontractors. Such obligation will only exist if the subcontractor requests direct payment. If direct payment is not mandatory in a specific case, then the contracting authority will have to request that the tenderer submits a subcontractor's statement of payment receipt. Such statement must be provided within 60 days from payment of the final invoice, otherwise the tenderer will be liable for a misdemeanour.

If the contracting authority establishes, during the tender check process, that grounds for exclusion exist with a subcontractor, then the contracting authority must request from the tenderer that it submits an official change in subcontractors.

Additional Exclusion and Selection Criteria

The majority of exclusion and selection criteria has remained the same, however, the new Procurement Act applies different terminology to the processes and also distinguishes between mandatory and optional exclusion and selection criteria, meaning that the contracting authority may opt to consider optional criteria regardless of their inclusion in the tender documentation. Many grounds for exclusion are not necessary with regards to utility area.

Grounds for exclusion are as follows:

• criminal record,
• nonfulfillment of tax conditions,
• negative references record,
• being twice fined for a misdemeanour related to the payment of work,
• failing to comply with obligations relating to social clause,
• insolvency proceedings,
• serious professional misconduct,
• an agreement restricting competition,
• conflict of interest,
• involvement in prior stages of the procedure (in some cases),
• shortcomings in the execution of other public contracts,
• providing serious misleading information, or
• attempting to unduly influence the contracting authority.

Even if certain conditions are relatively strict, the Procurement Act provides for a corrective mechanism where the tenderer has an option to provide evidence that it has taken sufficient measures to ensure its reliability.

Outlook

It will be shown in practice whether the legislature has achieved the desired simplifications of the procedure, however, it is questionable whether this extensive reform will benefit tenderers. Changes regarding some crucial concepts and some legal vacuums which will have to be solved by the National Review Commission imply that it will not. However, it should be noted that a reform regarding legal protection in public procurement procedures is expected in late autumn 2016. In addition to this reform, both tenderers and contracting authorities will have to pay considerable attention to the fact that the legislator expects to fully introduce the system of electronic procurement by April 2017.