PUBLIC PROCUREMENT Adem KARABAYIR Deputy General Director Deputy General Director Ministry of Finance Ministry of Finance « The New Public Procurement Procedures and Instruments » 5-6 February 2008 Ankara

OVERVIEW  Historical evolution of Public Procurement  Reasons for the need to make regulations in the area of Public Procurement in 2000s  Basic features of Laws 4734 and 4735  Progress in the Public Procurement Chapter with the EU  Planned legal arrangements for a full compliance with the EU  Draft Law amending Laws 4734 and 4735

Historical evolution of Public Procurement-I Before the Republic  The first regulation in the area of public procurement was made during the Ottoman period with an Ordinance dated  An additional Ordinance was issued in  It was stipulated with the Decision adopted in 1921 that the needs of the central public institutions and their divisions in Istanbul as well as the military institutions in Istanbul exceeding 500 Lira shall be met through a Joint Procurement Commission within the Ministry of Finance.

Historical evolution of Public Procurement-II Before the State Procurement Law no 2886  Following the declaration of the Republic, with the adoption of Law on Auction, Competitive Tendering and Procurement on 22 April 1925, the legal framework was re-established and procedures for purchasing, selling, leasing, construction, repair, exploration, transportation, etc. activities of entities were regulated.  In order to make adjustments to new developments, amendments were made in this Law no: 661 in 1926, 1929 and  On 10 December 1934 this law was replaced by Law on Auction, Tendering and Procurement (Law no: 2490)

Historical evolution of Public Procurement-III Law on State Procurement (2886)  Due to the strict rules and formalities of Law 2490 and the failure of the amendments to bring solutions, it became necessary to draft a new law.  Therefore, on , State Procurement Law no:2886 was adopted as a basic regulation for the procurement and sales procedures of general and annex budget institutions (central government) and private provincial administrations and municipalities (local government). This law repealed the previous Law on Auction, Tendering and Procurement (no:2490).  State Procurement Law no: 2886 covered procurement, sales, services, construction, leasing, trade-in, establishment of incorporeal rights on property and transportation. Furthermore, this Law regulated both principles and procedures of procurement and the issues related to the contracts to be signed as a result of those procurements.

The reasons for the need to make regulations in the area of Public Procurement in early 2000s  Failure of State Procurement Law no:2886 to meet today’s changing needs,  Insufficiency of this Law to remove breakdowns in implementation,  The fact that it regulates activities which require public spending and activities which bring revenues to the State together,  To increase the accountability of the purchasing entities,  To establish a transparent and auditable public procurement system which is open to international competition,

The reasons for the need to make regulations in the area of Public Procurement in early 2000s  To establish a transparent procurement process by removing the interventions which disable efficiency,   To ensure that legislative alignment in the area of public procurement is completed in accordance with the Accession Partnership Document prepared by EC and the National Program of Turkey related to the Adoption of EU legislation,   To have parallel implementations with those of international organisations such as the World Bank and the United Nations, As a result of all of the above-mentioned reasons, an extensive and comprehensive reform was made and Public Procurement Law (4734) and Public Procurement Contracts Law (4735) were drafted and adopted on

PUBLIC PROCUREMENT LAW no: 4734 With the Public Procurement Law, following basic principles are aimed in the area of procurement:  transparency,  competition,  Equal treatment,  reliability,  timely meeting of the needs under appropriate conditions,  ensuring efficient use of resources in the widest way possible,  one single legal framework for the procurement activities of the public institutions and entities from any resource available for their use,

PUBLIC PROCUREMENT LAW no: 4734 PUBLIC PROCUREMENT LAW no: 4734 With the Public Procurement Law which aims at establishing a transparent, competitive and auditable public procurement system with efficient use of public resources,:  only the purchasing activities are covered,  The scope was extended in order to include the institutions which were previously excluded,  Environmental Impact Assessment Report (EIA) became an obligatory requirement to start the tender process.

PUBLIC PROCUREMENT LAW no: 4734  Estimated cost approach is introduced instead of estimated price.  Qualification criteria to participate in the procurement proceedings are regulated in detail (which did not exist in the previous Law) and the system of Contractor’s Carnet is removed from application.  Process of complaints is introduced.

CHANGES INTRODUCED BY PUBLIC PROCUREMENT LAW  Possibility to select the economically most advantageous tender,  Obligation of notification of the result of the tender,  Special provisions regarding the procurement of consultancy services,  Setting up of the Public Procurement Authority,  Publication of the Public Procurement Bulletin.

The Public Procurement Authority is established in accordance with Law no: Duties of PPA; Duties of PPA;  to evaluate and conclude any complaints claiming that the proceedings carried out by the contracting entity within the period from the commencement of the tender proceedings until the signing of the contract are in violation of Law 4734 and the related legislative provisions,  to prepare, develop and guide the implementation of all the legislation concerning Law 4734 and Public Procurement Contracts Law and the standard tender documents and contracts,  to provide training on procurement legislation, to provide national and international coordination, PUBLIC PROCUREMENT LAW no: 4734

 to gather information relating to the contracts and tender proceedings carried out as specified by the Authority, to compile and publish statistics relating to quantity, price and other issues,  to keep the records of those who are prohibited from participating in tenders,  to carry out research and development activities,  to regulate the principles and procedures with regard to tender notices, to publish Public Procurement Bulletin in printed or electronic media.

 This Law aims at combining the principles and procedures regarding the making and implementation of contracts under one legal act.  Four types of contracts were defined in accordance with the international norms: turn-key lump-sum contracts, lump-sum contracts, unit price contracts and mini-contracts. Necessary content of the contracts is also defined.  It is also stipulated that contract provisions cannot be amended and supplementary contracts cannot be made outside the scope of this Law.  The parties to the public contracts made under this Law shall enjoy equal rights and obligations in the implementation of the contract provisions. Tender documents and contract provisions cannot include clauses contrary to this principle. PUBLIC PROCUREMENT CONTRACTS LAW no: 4735

Progress in the Public Procurement Chapter with the EU  Decision No 1/95 of the EC-Turkey Association Council on implementing the final phase of the Customs Union was adopted on 22 December  On 1 January 1996, Customs Union process started between Turkey and the EU.  Helsinki Summit of December 1999 can be considered as the turning point of Turkey – EU relations. In the Summit, Turkey was given the candidate state statute, therefore it was confirmed that, along with the other candidate countries, Turkey will have equal participation to the system established within the framework of the new Enlargement Policy of the EU.  On December 2004, during the Brussels Summit of EU Council, a decision was given to open accession negotiations with Turkey and to officially start the screening process on 3 October 2005 which is the first stage of the negotiations.

Progress in the Public Procurement Chapter with the EU 1. Free movement of goods 19. Social policy and employment 2. Freedom of movement for workers 20. Enterprise and industrial policy 3. Right of establishment and freedom to provide services 21. Trans-European networks 4. Free movement of capital 22. Regional policy and coordination of structural instruments 5. Public procurement 23. Judiciary and fundamental rights 6. Company law 24. Justice, freedom and security 7. Intellectual property law 25. Science and research 8. Competition policy 26. Education and culture 9. Financial services 27. Environment 10. Information society and media 28. Consumer and health protection 11. Agriculture and rural development 29. Customs union 12. Food safety, veterinary and phytosanitary policy 30. External relations 13. Fisheries 31. Foreign, security and defence policy 14. Transport policy 32. Financial control 15. Energy 33. Financial and budgetary provisions 16. Taxation 34. Institutions 17. Economic and monetary policy 35. Other issues 18. Statistics

Progress in the Public Procurement Chapter with the EU  Introductory screening meeting was held in Brussels on 7 November  The second step of the screening process, the Detailed Screening Process, was held again in Brussels on 28 November  Opening benchmarks regarding this chapter were notified to our country on 17 May 2006 by a letter from the Austrian Presidency to EU Community.  On 16 June 2006, a meeting was held with the representatives from the Commission regarding the Opening Benchmarks and the Benchmarks were declared.

Progress in the Public Procurement Chapter with the EU Benchmark 1: In order to facilitate the legislative alignment process and the negotiations to be made in the area of public procurement, Turkey should guarantee that an institution/organisation is assigned for the pre-accession period to ensure coherent policies in all the areas of public procurement and to guide the general implementation, in other words, to guarantee a coherent implementation of the public procurement policies. Benchmark 2: First of all, Turkey should harmonise the scope of its legislation regarding entities and contracts with the scope of EC Directives 2004/17 and 2004/18 and should remove exceptions which are not in line with the Community legislation.

Progress in the Public Procurement Chapter with the EU Benchmark 3: A comprehensive strategy including the calendar and stages with regard to the full compliance of the public procurement legislation and the establishment of the necessary administrative capacity should be submitted to the Commission. This strategy shall cover: a)Transposing EC Directives related to public contracts and concessions into Turkish legislation by ensuring compliance with the legislative preparations on Public Private Partnerships, b)Alignment of the Complaint Review system parallel to the Directives, c)Strengthening the administrative capacity among institutions responsible for the review of complaints and implementing entities.

Progress in the Public Procurement Chapter with the EU d) Submission of an action plan aiming at removing the provisions in favour of domestic tenderers except for those related to the prices, which presents economical and statistical data, a list of existing direct or indirect measures in favour of domestic tenderers and the steps to be taken and the calendar for the removal of these measures.

Progress in the Public Procurement Chapter with the EU  Following the screening meetings in the area of Public Procurement, it was considered to be helpful to discuss the 3 draft laws prepared to regulate the public procurement area in line with the benchmarks with experts from related departments of EC to make sure that minimum alignment is ensured. Therefore, on 17 January 2007, experts from both parties gathered in Brussels to discuss on the drafts submitted to the Commission on 13 November  Commission experts stated that the works on draft laws were considered as a positive step however, their priorities were the alignment of the legislation in “scope, definitions and exceptions” and “preparation of a strategy paper” related to the issues mentioned in the opening benchmarks.

Progress in the Public Procurement Chapter with the EU  A draft “Strategy Paper” presenting the works to be done in order to prepare and adopt necessary legislation to transpose and implement EU Legislation in the area of Public Procurement and the steps to be taken for developing the administrative capacity was prepared by the Prime Ministry and sent to relevant institutions for their opinion.  A certain point has been reached in the Strategy Paper through cooperation with relevant institutions and this document will be handled as a priority.

PLANNED LEGAL ARRANGEMENTS FOR A FULL COMPLIANCE WITH THE EU and THEIR OBJECTIVES Following legal arrangements are planned to be realised by 31/12/2008:  “Law on the procurement procedures of entities and public undertakings operating in certain sectors” Objectives: It is aimed to regulate the procurement proceedings of the institutions and bodies operating in water, energy, transport and postal services sectors in line with the EU legislation, regardless of their legal status (public or private enterprise). Therefore, the institutions or bodies operating in these sectors will be subject to a more flexible regime than the classical public procurement rules.

PLANNED LEGAL ARRANGEMENTS FOR A FULL COMPLIANCE WITH THE EU and THEIR OBJECTIVES  “Law amending the Public Procurement Law and the Public Procurement Contracts Law” Objective: Filling in the gaps in our legislation and in practical implementations in line with EU Directives and other contemporary norms, and creating an alignment with the EU legislation in the scope and exceptions of our public procurement legislation.

PLANNED LEGAL ARRANGEMENTS FOR A FULL COMPLIANCE WITH THE EU and THEIR OBJECTIVES  “Law on concessions awarded for the performance of certain investments and services” Objective: A legal arrangement is aimed to be made related to the tendering procedures to be applied for awarding concessions. Within this regard, compliance will be ensured in concession contracts with EU norms and other contemporary norms. Objective: A legal arrangement is aimed to be made related to the tendering procedures to be applied for awarding concessions. Within this regard, compliance will be ensured in concession contracts with EU norms and other contemporary norms.  “Regulation on Procedures and Principles of Electronic Procurement” Objective: is to start the application of e-procurement which is regulated under Law  “Regulation on the implementation of the Law on the procurement procedures of entities and public undertakings operating in certain sectors”

Draft Law Amending Laws 4734 and 4735 This draft has recently been submitted to the Prime Ministry. It covers:  Arrangements related to the issues included in the Three Month Action Plan for 2007,  Some arrangements made to align with EU Directives,  Arrangements to improve the Complaints review system,  Arrangements to improve the purchasing system,  Arrangements related to the powers and duties of the Authority.

Draft Law Amending Laws 4734 and 4735 Changes planned to be introduced are:  Reduction of notice periods,  Extension of the application area of restricted procedure,  Determination of objective criteria by PPA regarding detection and investigation of abnormally low tenders and the obligation for the entities to follow these criteria,  Granting discretionary authority to entities to take into account both price elements and non-price elements in determining the economically most advantageous tender,

Draft Law Amending Laws 4734 and 4735  Use of more efficient and faster notification tools in order to prevent waste of time in notifications and notices,  Reception of tenders through electronic means by taking advantage of technological innovations when using systems such as dynamic purchase, framework agreements and electronic auction,  Realisation of the operations during the procurement proceedings with electronic means, establishment and operation of a Electronic Public Procurement Platform by the Authority and establishment of principles and procedures by the Authority regarding the use of electronic means in tender proceedings,

Draft Law Amending Laws 4734 and 4735  Extension of the list of the institutions which are allowed to make framework agreements,  Possibility for the entities to use framework agreements not only for the procurement of constantly needed supplies and services but also construction works,  Introduction of new procurement procedures such as dynamic purchase and electronic auction and establishment of procedures and principles by the Authority regarding the procurement of supplies through financial leasing.

Law Proposal on PPPs  The draft prepared by State Planning Organisation was revised on the basis of the opinions submitted by relevant institutions and its final version was sent to the Prime Ministry.

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