Presentation_Public Procurement in International Construction and Infrastructure Projects

FIDIC Conditions of Contract in the
Context of Harmonization of Public
Procurement System in Ukraine with
EU Standards
1
SVITLANA TEUSH, PhD

USE OF FIDIC CONTRACTS AND THE INDUSTRY
CONTEXT: What Stays As Previously
 Limited use and awareness of FIDIC forms of contract,
primarily, in IFI-funded projects. Mainly, Red Book and Yellow
Book are used
 No dedicated laws or clarifications, case-law on the use of
FIDIC
 No translations or ready texts available in Ukrainian
 Engineer’s role and functions are not quite understood
2

CONTEXT: What Stays As Previously. - Cntd.
 Practical difficulties during implementation (contract
administration and discipline, audits, claims settlement, etc.)
 Public budget constrains, public employer’s prejudice:
 Narrow interpretation of law and contract
 Resistance to contract adjustments, waiver of Contractor
claims
 Demanding extra safeguards
 Reducing the Engineer’s authority −> e.g., by way of validation
of determinations and variations by the Employer’s decisions
and/or contract addenda
3

CONTEXT: What Stays As Previously. - Cntd.
 On the positive side:
• Narrow interference with General Conditions of Contract through
Special Conditions of Contract
• No derogative or prohibitive rules set by law with a direct
reference to FIDIC
• Prevalence of international agreements
and of IFI’s procurement rules and procedures - where
loans are provided by IFIs (e.g., World Bank, EBRD, EIB)
4

CONTEXT: What Is Improving
 A longer term view is taken by the industry: efforts to
consolidate, match international standards and qualifications,
search for international opportunities
 A progress in the industry self-awareness and self-governance
 Certification powers delegated from the ministry to self-
governing bodies
 Deregulation; liberalization of construction laws; city-planning
reform
 Promotion of energy efficiency and sustainability initiatives
 Paper files are replaced by e-registers, open up to public
 DABs evolve
5

CONTEXT: What Is Improving. – Cntd.
 Anti-corruption initiatives less space for abusive
creativity, such as:
- Discriminatory/ambiguous description of the subject matter
of the contract
- Package coupling
- Bidder-tailored qualification and selection criteria
- Qualification or discrimination criteria and requirements? –
e.g.: Experience in analogous projects, availability of
manufacturing facilities, producer warranties, etc.
- Distortive or abusing post-award contract amends, etc.
6

CONTEXT: What Is Improving. – Cntd.
APPROXIMATION TO EUROPEAN STANDARDS
AND BEST PRACTICES
27.06.2014 – Association Agreement (AA) was signed by EU and
Ukraine. Provisional application of some chapters.
On 1.01. 2016 - DCFTA (free trade agreement) was enacted
Gradual alignment and implementation, set phases and indicative
time schedules, ample international support:
- 6 months – for implementation roadmap, compliance with Directive’s
principles and terms, institutional reform
- Up to 8 years – for the completion of approximation and reforms
NB: Reference is made to the “old” (!) Directive 2004/18/EC
7

THE NEW LAW ON PUBLIC PROCUREMENT IN
UKRAINE New Public Procurement Law adopted on 25.12.2015
 Cancellation of discriminatory/ protectionist criteria for bidders
(e.g., availability of own manufacturing facilities in Ukraine’s
territory)
 Activation of application for tender results’ review and
streamlining approaches by review bodies
 Reduction of procedures – open tender, competitive dialogue,
negotiation procedure
TYPE OF
PROCUREMENT
Supply of goods and
service contracts
Work contracts
THRESHOLDS UAH 200, 000
(ca. EUR 7,000)
UAH 1,500 million
(ca. EUR 50,000)
8

THE NEW LAW ON PUBLIC PROCUREMENT IN UKRAINE. -
Cntd. Mandatory system of E -procurEmENt is to be implemented
in stages
 Presently – prozorro e-system, testing mode, price-only
bids
 Mandatory e-procurement:
- Since 1.04.2016 – by сentral authorities and monopolies
- Since 1.08.2016 – by all contracting authorities
 E-procurement platform to be further integrated with e-data on
annual procurement plans, public funds’ spending and other
public registers
 Notices to be published in EU (after 2017), after implementation
of the common procurement vocabulary (CPV)
9

PUBLIC PROCUREMENT IN UKRAINE:
Is It All About the Price?
 mEAt (most economically advantageous tender)
- is the award criteria set by law
 LowEst pricE - as form of MEAT –
works for steadily established markets where procurement is
not based on technical assignment (design or other input
data)
 No direct provision in law for:
QBs - (quality based selection), BVp (best value procurement)
10

PUBLIC PROCUREMENT IN UKRAINE:
Is It All About the Price? - Cntd.
 Price component still dominates:
“Weighting” (a share) of the price should not be less than:
70% - under the new law, except for the competitive dialogue
(50% – under the old law, for all cases)
 Selection criteria other than price – narrower wording
compared to the Directive: payment terms, timing, warranty,
maintenance costs, transfer of know-how, capacity building
 A comprehensive notion was mentioned in the draft bill: Entire
life-cycle costs, but then deleted
11

CERTAIN EUROPEAN PRACTICES NOT ESTABLISHED (SO
FAR)
 Abnormally low tenders are not regulated
BUT: Collusion (leading to the distortion of tender results) may be
inferred. Collusion, if established, may lead to tender cancellation,
liability, negative projection on future bids
 No provision for substantial amendments or established thresholds
 No self-declaration/ESPD
 No automatic disqualification of contractors based on the history of
past performance, etc.
 Lack of proper grounds for contract modification post-award
 Ukraine’s PP Law and practices are still far from what is
contemplated by the Directive and other acquis
12

CONTRACT MODIFICATION POST AWARD
Amendment of Essential Terms of a Procurement Contract
A New Procurement Procedure
EXCEPTIONS:
Decrease in the procurement volume
Change in the cost of unit not >10% - in the case of market
fluctuations, without increasing the total contract amount
Improvement in the procured quality without increasing the
contract amount
Agreed decrease of the contract amount without changing
quantity (volume) or quality of goods, works or services
13

CONTRACT MODIFICATION POST AWARD. – Cntd.
EXCEPTIONS − 2:
A change in the price or other contract terms due to changes
in tax/duties
Amendments due to the changes of the consumer index,
exchange rate, stock market rate, regulated tariff, etc. – if an
adjustment mechanism is expressly set by contract
Extension of the contact term - where there are documented
objective circumstances (e.g., majeure, lack of financing) -
without increasing the contract amount
14

CONTRACT MODIFICATION POST AWARD. – Cntd.
 Unlike the Directive - Ukraine’s PP law makes no direct
provision for contract modification due to:
- succession/ replacement of the contractor
- substantial changes - material difference, unforeseeability
- expediency, reasonability, convenience reasons or avoidance
of duplication (e.g., for additional works)
 Exhaustive list of grounds for modification is set by law.
Revision clauses of a contract are supplementary
15

IS IT TIME NOW IN UKRAINE FOR INDUCING
FIDIC’S BEST PRACTICES, INCL. IN PROCUREMENT?
 Market is being opened up and approximated to international
standards, competition is growing
 New PP law and implementation practices are being introduced, closer
aligned to EU acquis; still much remains to be done
 Quality and life-cycle criteria come to increasingly matter
 A longer-term evaluation approaches are considered, incl. with regard
to involved sustainability and efficiency effects
 Industry self-governance strengthens and getting institutionalized,
engineering and construction companies are set to become
competitive internationally
 More infrastructure and energy projects are internationally funded in
Ukraine, quality engineering support is in a growing demand
16

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Thank you for your attention!
Looking forward to our future cooperation!

Presentation_Public Procurement in International Construction and Infrastructure Projects

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