Death, Taxes, and Changes to the Procurement Law

Around this time last year, the year before that and the year before that, we published three articles about changes to the system of remedies under the Slovak procurement law. Old habits die hard, so not even a full year has gone by and the procurement rules have been amended again. This time over, it is a compromise between the Procurement Office and the Office of the Vice-Chairman of the Cabinet. While the latter aimed for a “revolution” in the procurement system, the former succeeded in conserving and even extending its powers. Granted, there is always room to improve the law, but constant changes mean that its users can hardly get used to it before it is tweaked at best, or totally changed at worst. Jokes aside, we can officially call this a yearly update. So, this is now 2021’s take on the effects of the “wannabe revolution” in procurement and the system of remedies.

Eradication of Speculative Challenges or an Attempt to Curtail Tenderers’ Rights

To eliminate the speculative behaviour of bidders, the lawmakers reintroduced a concept of “an apparently ungrounded challenge” which was already proposed in 2019 but did not make it into law because of a presidential veto. If an ungrounded challenge is filed, the remedy procedure will be stopped, and the authority and another entity hurt by such a challenge may claim damages from the challenger which shall also cover the costs of the procedure. This all seems fine on paper, but the definition of the speculative challenge contains too many unclear terms, and its very existence may lead to hesitation among tenderers to enforce their rights guaranteed by the European procurement regulation. Damages caused by ungrounded challenges may be theoretically massive, and it will be interesting to follow the practice of the regulator and the courts both in terms of what kind of line they will draw between a grounded and an ungrounded challenge and what sort of damages they will accept as enforceable based on the “abuse” of the remedy system.

Ban of Challenges Against Smaller Contracts

As if the concept of ungrounded challenges were not enough, the lawmakers decided to ban challenges against some smaller procedures altogether. When the law comes into effect, it will not be possible to challenge work contracts worth EUR 800.000 or less, and supply, service, and concession contracts with a value that does not exceed the thresholds set by European directives. It may not look like a big deal, but the overall amount of these contracts is huge and the impact on bidders trying to enforce their rights will be significant.

End of the Board and Strengthening of the President’s Position

The amendment cancels the appellate body of the Procurement Office. Although the board will remain in existence to decide on appeals related to procedures started before the new law comes into effect, it will be effectively dissolved in respect of the new contract award procedures. The decisions of the office will only be challengeable in court. The president of the office will be vested with the board’s previous competency to revoke the effective decisions of the office. While we have no ambition to comment on the political decision to change the balance of power, we are afraid that overlapping powers between the waning board and the president along with complicated intertemporal provisions could lead to a huge mess and confusion among the bidders and authorities alike.

More Powers to the Courts

Along with the courts effectively becoming appellate bodies deciding on challenges against the decisions of the office, they will get more powers to decide on the fate of contracts awarded in violation of the law. Such contracts may be upheld if there are overriding reasons of public interest. In addition, the courts may decide that a contract will only be voided going forward, not from the start, or that the contract will expire on a certain date set out by the court no more than 12 months from the court’s decision. Although aggrieved bidders may feel bitter about this, it seems very practical to balance the interests of hurt competitors and a public authority which cannot dump a key supplier overnight.

Overall Assessment

The number of changes introduced by the amendment is massive. It is hardly a revolution, but the impact on all procurement stakeholders will be significant. As always, we conclude that it remains to be seen how the new system will work, and, more than anything else, how long it will last. Nevertheless, our belief that stability would be better for everybody remains unshaken.

 


JUDr. Ján Azud
Partner
RUŽIČKA AND PARTNERS s. r. o.
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Changes to the System of Remedies under the Amendment to the Public Procurement Law