Public procurement principles and procedures are regulated in Republic of Bulgaria by the Public Procurement Act2 (2016 PPA) and the Rules for implementation of the Public Procurement Act.3 The 2016 PPA implements the provisions of the 2014 Public Contracts Directive, 2014 Utilities Contracts Directive and the Defence and Security Procurement Directive.
The works and services concessions are regulated by the Concessions Act,4 in force as of 3 January 2018, which implements the provisions of 2014 Concession Contracts Directive.
In addition, the case law of the Bulgarian Commission for Protection of Competition (CPC), the Supreme Administrative Court (SAC) and the Court of Justice of the European Union applies.
The general principles of public procurement regulated by the 2016 PPA are equality and non-discrimination; free and fair competition; proportionality; publicity and transparency, as well as efficiency of funds spending that are in compliance with the EU legislation and the Bulgarian Constitution. To the extent that public procurement contracts are awarded under administrative procedures, the principles of legality, sequence, promptness, foreseeability and procedural economy of the administrative process as also applicable.
The Bulgarian independent body implementing the state policy in the field of public procurement is the Public Procurement Agency (the Agency). The Agency is also responsible for keeping and developing the Public Procurement Register (PPR) and for ensuring the application of best European practices in public procurement. The Agency also has competence for performance of ex ante control over public procurement contracts.
The competent judicial review bodies of the decisions of the public procurement competent authorities or entities are the CPC and the SAC as final instance.
II YEAR IN REVIEW
A new set of legislation changes was introduced in 2018 to facilitate the implementation of a centralised electronic web-based platform to provide a basis for 'e-Procurement'. A single national electronic web-based platform – Centralised Automated Information System Electronic Public Procurement (CAIS EPP) – is implemented by the Agency as the platform to enable submitting bids electronically, introducing purely electronic communication during the procurement process and awarding public procurement contracts.
III SCOPE OF PROCUREMENT REGULATION
i Regulated authorities
The regulated authorities covered by the 2016 PPA are divided into two categories – public and sectoral.
The public contracting authorities include bodies, governed by public law: administrative structures of the executive power on central level; judicial bodies; state commissions; agencies; executive agencies; the Bulgarian National Bank; the National Assembly; the President; the Ombudsman; governors and mayors; representatives of bodies governed by public law; state or municipality – owned healthcare institutions (where 50 per cent of their revenue originates from the state or municipal budget and the national health insurance fund's budget); persons in charge of central purchasing bodies, established to meet the contracting authorities' needs; and associations of contracting authorities.
Within the utilities sector, three groups of contracting entities are regulated by law: entities representing public undertakings engaging in a utility activity; entities carrying out utility activities on the basis of special or exclusive rights (electricity, natural gas, water supply, transport and post services, exploitation of geographical area); and heads of central purchasing bodies, established to meet contracting entities' needs.5
The Bulgarian law recognises the figure of the ad hoc contracting authorities. Those are not covered by public procurement rules per se unless the contract they assign is more than 50 per cent directly financed by public funds and is related to: (1) public works with forecast value, larger, or equal to 10 million levs; or (2) services, related to these public works, where their forecast value is larger or equal to 430,000 levs.
ii Regulated contracts
Three categories of public procurement contracts are regulated by the 2016 PPA depending on their object: supply, service and works contracts.
The threshold values of public procurement under the 2016 PPA depending on the types of contracting authorities, procedures and thresholds are provided in the table below. Defence and security contracts are subject to specific thresholds.
|Works*||Supplies*||Services*||Social services*||PP type*|
|Official Journal publication|
|Classic authorities||≥ 10 million||≥ 280,000||≥ 280,000||≥ 1 million||Open procedure;
Restricted procedure; Competitive procedure with negotiation;
Negotiation w/t publication
|Utilities entities||≥ 10 million||≥ 860,000||≥ 860,000||≥ 1.5 million||Open procedure;
Negotiation with and w/t publication of call for competition;
|Defence and security authorities||≥ 10 million||≥ 280,000 (specific supplies)
≥ 430,000 (other supplies);
≥ 860,000 (for military or sensitive equipment)
860,000 (services, related to military or sensitive equipment or specific military or purposes services or sensitive services)
|≥ 1 million||Restricted procedure;
Negotiation with or w/t publication of contract notice;
|No Official Journal publication|
|All CAs||270,000 – 10 million||70,000 – up to the threshold applicable to the respective contracting authority above||Public competition**
|50,000 – 270,000||30,000 – 70,000||N/A||Prior notice or call for invitation|
|> 50,000||> 30,000||> 70,000||Direct awarding|
* In lev. 1 lev = approximately €0.51; VAT excluded.
** Not applicable to defence and security authorities.
Contracting authorities and entities are free to apply restricted procedure and competitive dialogue. Open procedure is also applicable to utilities entities and classic authorities, save for the those operating in the fields of defence and security.
Different types of negotiated procedures are envisaged for the contracting authorities and contracting entities.
The public competition and direct negotiation are procedures applicable only for contracts below the EU thresholds. Under the direct negotiation procedure, the contracting authority conducts negotiations with one or more preselected persons to determine the terms and conditions of the public contract. It is applicable only if the indicative value of the public contract is under the thresholds and only if specific circumstances exhaustively listed in the law are in place (e.g., extreme urgency, failed procurement and IP rights; competition is absent for technical reasons or protection of exclusive rights, including intellectual property rights).
The Concessions Act sets forth specific rules and provisions applicable for awarding concession contracts. Three types of concessions are regulated, depending on the subject of the concession agreement: concession for works; for services; and for use of public state or municipal property. Concessions for extraction and use of natural resources, are excluded from the scope of the Concessions Act and are regulated under the Natural Resources Act.6
The Concessions Act sets a similar approach to the 2016 PPA – for values over the 2014 Concession Directive threshold (currently €5,548,000), the law provides the choice between an open or a competitive procedure, and a competitive dialogue depending on the complexity of the concession. In concessions without transnational interest, including works and service concessions below the EU threshold and the concessions for use, the concessionaires are selected only through open procedure.
The 2016 PPA allows various exemptions for contracts. The procurement regulations shall not apply, for instance, to: land, buildings or other immovables acquisition or lease agreements; arbitration and conciliation services; certain international contracts; central bank services and certain financial services; in-house procurement; certain legal services; certain broadcasting services; notarial services; loan including bank loan agreements; and employment agreements.
The 2016 PPA also does not apply to some contracts concluded by certain public authorities, for example, those concluded by the National Health Insurance Fund for purchases and negotiating discounts in sales of medical products, medical devices or devices and equipment for people with disabilities.
Exemptions are also reserved to the utilities sector, such as specific contracts awarded for purposes of resale or lease to third parties; water supplies by utility entity; energy supplies if those are performed by fixed network operators or public suppliers.
Transfer of a public contract to a different supplier is generally not permitted unless: (1) it has been envisaged in the tender documentation and the award contract by way of clear, precise and unambiguous clauses, related to the emergence of concrete conditions; and (2) in the event of universal or partial transformation by the initial contractor where the following conditions are met cumulatively for the replacing contractor: (a) he or she meets the established selection criteria under the tender procedure at stake; and (b) the transfer would not bring any other significant changes in the public contract and does not aim circumvention of the law.
IV SPECIAL CONTRACTUAL FORMS
i Framework agreements and central purchasing
Framework agreements are not widely used by contracting authorities and are scarcely used by the utility entities in Bulgaria. Most of these contracts are concluded by the centralised purchasing bodies in cases where regular and uniform purchases are required. Framework agreements can be concluded between one or more contracting authorities on one side and one or more entities on the other. The maximum term of the framework agreement for classic contracting authorities is four years, and for utilities, eight years.
Central purchasing is possible under the 2016 PPA. It allows contracting authorities and entities to call a centralised purchaser to purchase and conclude a procurement contract for works, supplies or services to the benefit of the contracting authorities or entities. The contracting authorities may acquire works, supplies and services through public procurements, awarded by the centralised purchaser using dynamic system for purchases, or framework agreement, signed by this purchaser.7
Bulgarian public procurement law also regulates the following specific techniques and instruments: dynamic purchasing systems; electronic auctions and; electronic catalogues.
ii Joint ventures
Public–public joint ventures in the form of 'in-house' contracting have become more common in Bulgaria in the recent years. The in-house exemption from the public procurement rules applies, however, if the following conditions are met: (1) the contracting authority exercises control over the undertaking in similar manner to its own departments (i.e., it has decisive influence on the strategic objectives and important decisions of the controlled company); (2) over 80 per cent of the undertaking's activities consist of performing tasks entrusted to it by the contracting authority, its departments or other legal entities controlled by the contracting authority; and (3) there is no direct private participation in the capital of the controlled undertaking.
There are no specific provisions requiring a procurement procedure under the 2016 PPA to set up a public–private partnership.
The Concessions Act envisages the possibility for the grantor to decide that a concession contract is awarded to a public–private partnership, in which case the private partner will be selected by conducting a procedure under the Concessions Act. The public–private company will be formed for a period until the termination of the concession contract and will be in the form of a capital company. By law, the public–private company will be managed by the private partner where the public partner will participate in the management. The public partner will have a blocking right over, inter alia, proposed capital increases or decreases; and transactions disposing of property contributed by the public partner as a non-cash asset in the company. The private partner shares joint liability with the public–private company for the performance of the concession contract.
V THE BIDDING PROCESS
Information on public procurement procedures and concluded contracts has to be published in: (1) the EU Official Journal for procurements with value equal or above the certain thresholds; (2) the PPR;8 and (3) the buyer's profile. In addition, contracting authorities and entities can announce publicly by notice the public contracts they intend to award throughout the next 12 months.
Based on the forecast amount of the public contract, the public contracts are awarded through: (1) a procedure for the award of a public contract; (2) collecting proposals with an advertisement or an invitation to certain persons; or (3) directly, without applying a public procurement procedure (only if the relevant conditions allowing direct awarding are met).
The 2016 PPA defines 13 types of procedure for public contracts awarding. Generally, the open procedure and the restricted procedure can be chosen regularly, while other procedures can be applied only subject to existence of certain conditions. Competitive dialogue is a procedure that can be used both by classic and defence and security contracting authorities as well as sectoral entities.
Some procedures are specifically envisaged to be used only by contracting authorities (e.g., competitive procedure with negotiation), while others are reserved specifically for the utility contracting entities (e.g., negotiations without preliminary call for competition).
Under the 2016 PPA, awarding authorities are allowed to use electronic auctions and electronic catalogues. Electronic auctions are possible under the open or restricted procedure, competitive procedure with negotiation, negotiation procedure with prior call for competition, public competition and public call for invitation, as well as in awarding public contracts in a dynamic purchasing system (DPS).
Electronic auctions are not applicable for service contracts and public construction contracts, those related to intellectual activity, including construction design activities, and those that cannot be evaluated automatically by electronic means.
The DPS is applied for commonly used purchases, the basic characteristics of which satisfy the contracting authority's requirements.
Electronic catalogues are usually used along with framework agreement and dynamic purchasing system.
Design contests are used usually in spatial planning, architecture, engineering activities and data processing, by way of which the contracting authority acquires a plan or design after selection held by an independent jury. These procedures can be conducted with or without prizes or payments to participants. The contests are followed by a negotiated procedure to award the public contract.
iii Amending bids
Generally, the participants are allowed to modify their bids freely (including with respect to the bid consortium members and subcontractors) prior to the expiry of the term for submission of the bids. Upon the submission of the bids, amendments thereof would be admissible in certain cases only taking into account also the type of procurement procedure.
In open or restricted procedures, participants are generally not allowed to change bids upon submission. This change would be possible only if during its review of compliance with the selection criteria (qualitative selection), the contracting authority or entity: (1) established omission, ambiguity or non-compliance with the selection criteria envisaged in the tender documentation; and (2) has provided an additional term to the participant to remedy the discrepancy. Change of bids at a stage of a public procurement procedure where those were already assessed should not be permissible.
i Qualification to bid
The choice of participants is based on whether they meet all requirements set by law and in the tender documentation that are related to the applicable: (1) grounds for exclusion from participation; and (2) selection criteria related to the economic operator's suitability to pursue the specific professional activity; economic and financial standing; and technical and professional ability.
The grounds for exclusion from participation require mandatory or potential exclusion from participation and other grounds for exclusion.
Disqualification from participation is mandatory if: (1) the participant has been convicted by an effective sentence; (2) the participant has unpaid tax or social security obligations to the state or the municipality;9 (3) the participant has submitted documentation with incorrect data to certify lack of grounds for exclusion or compliance with the procurement selection criteria; or has not submitted the required information for lack of grounds for exclusion or compliance with the selection criteria; (4) it has been established by way of enforceable penal ruling or court decision that upon performing a public procurement contract that the participant has infringed certain obligations under the Bulgarian Labour Code; (5) there is a conflict of interest for the participant that cannot be eliminated; (6) a breach of the equal treatment principle has been established as a result of the participant taking part in the market consultations or drawing up the tender documentation.
Specific grounds for exclusion applicable in the defence and security public procurements would be a case where it has been established by the national security agencies that the participant is not reliable, and there is a risk for national security.
Pending insolvency or liquidation procedure against the participant or disqualification from practising of a specific profession or activity is an optional ground for exclusion. Potential but not mandatory grounds for exclusions are also cases, where the participant has entered into an agreement with the aim of distortion of competition, which has been established by a competent authority or entity; or has been proved guilty of non-performance of a public procurement or concession for construction or service that led to its early termination, payment of compensations or other similar sanctions (except where the non-fulfilment affects less than 50 per cent of the value of the contract).
Specific grounds for exclusion are also cases where the participant does not meet the rules and requirements of the environmental, social and labour law.
To be qualified to bid, the participants must prove their suitability, technical and professional ability and economic and financial standing. To prove suitability to pursue a specific professional activity, contracting authorities or entities may require participants to be enrolled in one of the professional or trade registers. The requirement to be enrolled in a professional or a trade register should originate from the subject matter of the public contract (e.g., works contracts, provision of services related to design and engineering, etc.).
To ensure that participants possess the necessary economic and financial capacity to perform the contract, contracting authorities and entities may require certain minimum yearly turnover (including a certain minimum turnover in the area covered by the respective contract) and may require that economic operators to provide information on their annual accounts. The rule is that the required general turnover (calculated on the basis of yearly turnovers) of the tenderer or candidate may not exceed two times the estimated contract value. Requirements related to economic and financial standing may also include appropriate level of professional risk indemnity insurance.
To examine whether the participants possess the necessary human and technical resources and experience to perform the public contract, contracting authorities or entities may impose requirements related to, among other things: (1) previous implementation of similar or identical projects by subject matter; (2) having at their disposal equipment, means and personnel required for the execution of the public procurement; and (3) compliance with relevant quality assurance and environmental protection standards. They may not include as part of the selection criteria requirements that are limited only to the implementation of public procurement contracts and may not set up requirements related to a specific number of contracts fulfilled with a defined subject matter.
In the defence and security area, competent authorities may apply the following additional selection criteria to participants, among others: (1) description of the technical equipment, materials, means, number of employees and know-how that the participant has to fulfil the procurement in order to meet the eventual increasing of the needs of the contracting authority in the event of crisis; or (2) confirmation for granted access to classified information in the meaning of the Protection of Classified Information Act,10 including for the possibility for processing, storage and provision of this information at the certain level of protection.
ii Conflicts of interest
By 2016 PPA rules, the existence of a conflict of interest of a participant with respect to the contracting authority that cannot be removed represents grounds for mandatory exclusion from participation in the procedure.
iii Foreign suppliers
Suppliers that do not originate from the EU may also participate in procurement procedures should they comply fully with the conditions and requirements of the tender documentation including, inter alia, the minimum eligibility and qualification criteria. Establishment of a local branch or subsidiary is in principle not a precondition to participate.
In utilities procurements, the contracting entity can eliminate a bid for supplies if the share of the products of origin from third countries, with which the EU or Bulgaria has not signed a multilateral or bilateral agreement, providing comparative or effective access, exceeds 50 per cent of the total value of the products included in it.
i Evaluating tenders
Public procurement tenders in Bulgaria are evaluated on the basis of the most economically advantageous tender that can be defined on the basis of one of the following evaluation criteria: (1) the lowest price; (2) the cost level while accounting the cost effectiveness, including the costs for the whole life cycle; or (3) the optimal ratio quality-price, which shall be evaluated on the basis of the price or the level of costs, as well as of indicators, including quality, ecological and social aspects, related to the procurement subject matter.
The evaluation criteria also may refer to technical parameters, accessibility, social, aesthetic and functional characteristics, environmental and social characteristics or innovative techniques and conditions, after-sales services and technical assistance, delivery date and delivery period or period of completion.
The contracting authority is required to notify the methodology for the complex assessment and the way of defining the evaluation of every indicator in the tender documentation. The way has to allow, among other things, the technical proposals to be compared and evaluated objectively and provide for the participants sufficient information about the rules that will be applied in defining the evaluation in every indicator.
According to the Concession Act, the offers are evaluated based on objective criteria, the assessment of which could allow the contracting authority to determine the economically most advantageous offer under the best ratio quality-price.
ii National interest and public policy considerations
In principle, domestic suppliers may not be favoured for reasons of national interest. For military procurement, the contracting authority may set additional conditions; however, none of the above could be related to the inclusion of a local content.
Any inclusion of a requirement related to the nationality of participants would be considered a breach of principle for non-discrimination and ground for cancellation of the decision of the contracting authority.
Bulgarian law also does not require appointment of a local agent or intermediary by a non-Bulgarian bidder for the purposes of participation in a public procurement. In practice, it is not uncommon for non-Bulgarian entities to appoint a local representative to represent them before the contracting authority for the purposes of tendering and contracting. An authorised representative could be either an individual or a legal entity.
According to the 2016 PPA, the contracting authorities or entities are entitled to set additional requirements for the performance of contracts. Conditions for performance of the contract could relate to employment of long-term jobseekers or young persons in the course of the performance of the contract.
VIII INFORMATION FLOW
By law, contracting authorities and entities are obliged to assure fair and transparent award procedures in accordance with equal treatment and non-discrimination principles. During the procurement process, participants may ask the contracting authority or entity for clarification on the information provided in the tender documentation. The latter is obliged to respond to such requests and to distribute the replies to all participants should the request has been made not later than 10 days before the deadline for bidding. The information flow is required to be performed only by electronic means.
Information, the publication of which is prohibited or contradicts to the public interest, as well as information that a participant has marked as confidential as technical or trade secret, would prevent a contracting authority or entity from communicating publicly.
Unsuccessful participants must be notified by the contracting authority or entity.
The 2016 PPA provides for a 14-day standstill period as of notification of the contract award decision to the participants. The contracting authority or entity may sign a public contract before the expiry of the standstill period only if the procedure allowed only one participant to be invited, or the selected contractor was the only interested participant and there were no others, or the contract is signed on the basis of a framework agreement with one participant.
The contract may only be concluded after the entry into force of all the decisions in the procedure, unless a preliminary enforcement has been granted or in the event of force majeure.
IX CHALLENGING AWARDS
The contracting authority or entity's decisions may be appealed within 10 days of publication or receipt of the said decision before the CPC. The CPC decisions are subject to review by the SAC as a final instance.
A specific case of appeal may be set out where a notification for contracting authority's violation in the conduct of a procurement procedure prior to the conclusion of a contract is sent by the European Commission to the Agency. In this case, if it considers that the alleged violation results from an act of the contracting authority, the Agency is entitled to file an appeal against that authority with the CPC.
Generally, appeals against contracting authority's decisions (unless a contract award decision has been appealed) do not suspend the procurement procedure, except for cases where an interim measure 'suspending the procedure' has been requested and granted. Should the contract award decision be appealed, to suspend the procurement procedure the contracting authority or entity may request the CPC to grant provisional enforcement of the contract award decision.
The suspending of the procedure may be imposed by CPC subject to assessment of the possible harm that imposition of this measure may cause to third parties interests, including the public interest and interests related to defence and security. The assessment is made on the basis of the statements on the appeal, the opinion of the contracting authority and the attached evidence from the parties. The CPC decides on the interim measure request within seven days of the initiation of the proceeding. The CPC decision on the interim measure is subject to appeal before the SAC within three days of the notification to the parties, and the court will rule on the appeal within 14 days. The appeal of the interim measures imposed or CPC refusal to impose these does not suspend the pending appealing proceedings before the CPC.
The 2016 PPA provides for short deadlines for review of the public procurement appeals. The CPC is obliged to make a decision within 15 days of the initiation of the proceedings, except in cases related to procurements with values above the thresholds established in the EU Directives, for which the deadline is one month. The decision, together with its motivation, must be prepared and announced within the seven days after it has been pronounced.
The decision of the CPC can be appealed before the SAC within 14 days of its notification to the parties. By law, SAC has to issue its ruling within one month, and it is final.
ii Grounds for challenge
All actions or omissions of the contracting authority or entity that prevent participation in procurement procedures are appealable. In particular this includes: (1) the decision for opening a public procurement; (2) the decisions for disqualification of tenderers in the restricted and negotiated procedures and the competitive dialogue; (3) the contract award decision; and (4) the decision for termination of procedure.
Challenges of public procurements are quite frequent in Bulgaria. The CPC publishes regular statistics about the submitted appeals under the PPA in its annual reports.11 According to these statistics, between 2015 and 2017, the number of submitted appeals increased from 914 in 2015 to 1,322 in 2017. The main reasons for the extensive increase of the appeals was considered both (1) the low thresholds of statutory fees for appeal and (2) the option for appellants to temporarily suspend the procedure until the appeal is completed with a final judicial act.
With the latest amendments in the 2016 PPA, the appealing fees amounts were changed. Currently, they are fixed and depend on the forecast amount of the public procurement contract. The fees are as follows: (1) for procurements up to 1 million levs – 850 levs; (2) for procurements valued from 1 million levs to 5 million levs – 1700 levs; and (3) for procurements above 5 million levs – 4500 levs. Cassation appeal fees before the SAC are in the amount equal to half of the above fees.
The PPA provides for legal protection in cases where a contract has been awarded without any procurement procedure (if this was mandatory) or in breach of law provisions. A claim seeking the annulment of a procurement contract may be submitted by any person having a legitimate interest, in accordance with the general civil procedure rules, within two months of the contract announcement in the PPR or of becoming aware thereof, but in any case not later than one year after contract conclusion.
If the contract is annulled, each of the parties must return to the other party everything received from that party or, if this is impossible, its money equivalent.
A 10 per cent sanction could be applied to the contracting authority or entity in the event that preliminary enforcement of an appealed decision has been granted but it has been found by the CPC that the appealed decision violated the law, leading to affecting the possibility for the appellant to participate in the procedure or to be awarded the public contract. If the violation did not affect the appellant's right to participate in the procedure or be awarded the public contract, the sanction imposed to the contracting authority would be in the amount of 3 per cent.
In the event that there is an enforceable CPC decision imposing a sanction of 10 per cent or 3 per cent of the contract value on the contracting authority, depending on the type of violation beforehand, no annulment of the public contract will be proclaimed.
As of 1 November 2019, in Bulgaria all public procurement contracts including those under a DPS, framework agreements and the qualification system are to be carried out only by electronic means through a centralised electronic platform. The centralised platform should serve contracting authorities and entities throughout the entire e-tendering process.
The implementation of the platform will take place in two stages. As a first stage, the platform will allow electronic opening of procedures and receipt and opening of electronic applications to participate and bids, as well as electronic communication in the course of the contracts award. It will be fully completed with all functionality by the end of 2020, and as from 1 January 2021 the platform will allow also bids assessment, conclusion of public contracts and electronic contract payments. Once the platform starts to operate at full capacity, this will also reflect the terms for submission of bids; those will be shortened by five days.
Derogation from the mandatory requirement for electronic public procurement is possible for the public contracts in defence and security should the latter be related to classified information.
1 Katerina Novakova is a senior associate and Radoslav Mikov is a partner at Wolf Theiss.
2 Published in State Gazette No. 13/2016.
3 Published in State Gazette No. 28/2016.
4 Published in State Gazette No. 96/2017.
5 Article 5(4) of the 2016 PPA.
6 Published in State Gazette No. 23/1999.
7 For example, in health care the central purchasing entity is the Ministry of Health Care and its main task is to perform public procurements for medical products supplies and to conclude public framework agreements on behalf of health care institutions.
9 Unless those do not exceed 50,000 levs – this requirement is applicable as from 1 March 2019.
10 'Classified information' within the meaning of Article 1(3) of the Protection of Classified Information Act (PCIA), published in State Gazette No. 30/2006 as amended from time to time, is any information representing state or official secret, as well as foreign classified information. State secret is information, the non-authorised access to which could endanger or impede national security, external policy or constitutional order protection national interests (Article 25 of the PCIA). Official secret is information that has been established or stored by the state or local authorities that is not state secret, but non-authorised access could have a negative effect on the state interests or could impede other legitimate interest (Article 26(1) of the PCIA).