The law which governs public procurement procedures in Serbia is the Law on Public Procurements (“Official Gazette of the Republic of Serbia”, nos. 124/2012, 14/2015 and 68/2015) (“Procurement Law”). It entered into force on 6 January 2013 and its last amendments were adopted in August 2015.
The Procurement Law governs all relevant issues relating to the realization of public procurement procedures in Serbia. It prescribes, amongst other, detailed rules on the types of these procedures, as well as on their course and awarding of a procurement contract to a winning bidder.
Under the law, the Public Procurements Administration (in Serbian, Uprava za javne nabavke) (“Administration”) is the special organization competent for, amongst other, monitoring the implementation of the Procurement Law and supervising the conduct of public procurement procedures by procuring entities.
Procuring entities are the entities which are generally obliged to conduct a public procurement procedure whenever they need to obtain any goods, services and/or work from third persons.
Under the Procurement Law, the following entities are regarded as procuring entities:
These entities are not obliged to conduct procurements under the Procurement Law only in the exceptional cases explicitly governed by the law (so-called procurements exempt from the law). For example, if they acquire or lease real estate, or if they need certain types of legal services, or when procurements are funded entirely by international organizations or international financial institutions (in which case they are conducted pursuant to the rules of such international organizations or international financial institutions), etc. Although in these exceptional cases procurements do not need to be conducted in accordance with the Procurement Law, general principles envisaged by the law (such as ensuring competition, equal treatment of bidders, etc.) have to be observed.
Types of public procurement procedures
The Procurement Law introduces a variety of these procedures’ types, whereas open and restricted procedures are the standard types. These procedures are open for participation by all interested persons, but restricted procedure is divided into two phases: (1) in the first phase, a procuring entity invites all interested persons to submit applications and recognizes qualification to those applicants which fulfil previously determined conditions, and (2) in the second phase, a procuring entity invites only those applicants to which it recognized qualification to submit bids.
Subject to fulfilment of special conditions envisaged by the Procurement Law, public procurements can also be realized through one of the following types of procedures:
Additionally, special forms of public procurement procedure are framework agreement (concluded between one procuring entity and one or more bidders) and dynamic procurement system (established by a procuring entity using only electronic means and applying, in general, the rules for open procedure, whereas these electronic means have to be widely accessible to interested parties and may not result in the limiting of competition).
The Procurement Law also prescribes special rules for conducting public procurement procedures in the fields of water management, energy, transport and postal services, and defense and security, as well as with respect to public procurements for eliminating consequences of natural and technical-technological disasters - accidents.
Course of public procurement procedure and awarding of procurement contract
In general, a public procurement procedure is consisted of the following phases to be conducted prior to and upon awarding of a procurement contract:
If a procuring entity chose the criterion of economically most advantageous bid, offered price is only one of the elements for the submitted bids' evaluation. Other possible elements are, for example, delivery term, after-sale service and technical assistance, warranty period, obligations concerning spare parts, technical, technological and environmental advantages, number and quality of engaged staff, functional characteristics, etc. Each of the elements has a certain number of “points” assigned to them by a procuring entity in the tender documentation, whereas the total sum of these points should be 100. All the elements have to be logically related to the subject of a particular public procurement and must not be discriminatory;
Amendments and annulment of awarded and concluded procurement contract
A procuring entity is entitled to amend an awarded and concluded procurement contract.
More precisely, a procuring entity may increase the size of the procurement subject (although it cannot alter the procurement subject itself). In general, the limit for the contract value's increase is 5% of the total value of the originally awarded contract, whereas the total value of a particular increase may not exceed RSD 5 million (i.e. approx. EUR 40,943). The precondition for this increase is that such option is clearly and precisely defined in both the tender documentation and particular procurement contract.
A procuring entity may also allow change in price and other essential contractual elements due to objective reasons. These reasons have to be clearly and precisely defined in the tender documentation and particular procurement contract, or set forth by special regulations.
In the above cases, a procuring entity has to pass a decision on modifying the contract and to publish this decision on the Portal within three (3) days from the day of its passing, as well as to submit a report on this matter to the Administration and to the State Audit Institution (in Serbian, Državna revizorska institucija).
Further, the Procurement Law also governs the cases when a procurement contract is considered null and void (e.g. when a contract was concluded without previously conducted public procurement procedure although such procedure had to be conducted) and the cases when this contract can be annulled (e.g. when a contract was concluded upon conducted bargaining procedure without publication of an invitation for submitting bids although no statutory conditions for this type of procedure were fulfilled and a procuring entity did not publish either notification of commencing the procedure or decision on the agreement's award). The state authority competent for such annulment is the Republic Commission for Protection of Rights in Public Procurement Procedures (in Serbian, Republička komisija za zaštitu prava u postupcima javnih nabavki).
The privatization of the companies in Serbia is prescribed by the Law on Privatization. Privatization is regulated in more detailed manner by certain Government decrees:
In the privatization proceedings, the relevant authorities are:
The buyer in the privatization may be a domestic or foreign legal entity or natural person. On the other hand, the buyer of the agricultural land may only be a domestic legal entity or natural person. It should be noted that potential buyers or strategic investors may join together in order to purchase a company under privatization or form a strategic partnership i.e. to make the consortium. In such case, the buyers or strategic investors need to authorize a single person to represent them.
The privatization of the company may be performed through different privatization models. The Law on Privatization provides four models of privatization:
Depending on the privatization model, the privatization method will be determined. If the privatization is going to be conducted as the strategic partnership, the privatization process will be performed through the public collection of bids. On the other hand, in the event of the sale of the capital or assets there will be also the public collection of bids but with public auction after the mentioned collection is finished. In most cases, the model is determined by the Ministry, save for the certain situations in which this falls in the competence of the Government. It should be noted that strategic partnership can be implemented: as a (i) joint venture, by establishing a new company; or (ii) capital increase in the company under privatization.
The Government can determine the measures for preparation and relief of liabilities of the company under the privatization which may include:
These measures may only be determined in the event of the privatization models sale of the capital or strategic partnership by recapitalization of the company under privatization. The Government may determine these measures if the company under privatization meets at least one of the following criteria: (i) strategic importance for the region; (ii) size of assets; (iii) number of employees; (iv) amount of income earned from the registered prevailing activity; and (v) market potential. In addition, it should be noted that the funds for repairing the damage caused to the environment by the company under privatization prior to the conclusion of contract on sale or contract on capital increase will be provided from the budget of Serbia.
The privatization procedure will be considered effected if a contract on sale of the capital has been concluded and if all conditions for the transfer of capital ownership required by the contract (e.g. payment of purchase price, delivery of bank guarantee, registration of change of ownership in the competent register) are fulfilled, or if the program for the sale of the assets has been realized.
Contracts in the event of the sale of the capital or assets are adhesion contracts. Buyer’s obligations under this contracts usually last for two years. Contrary, if the privatization is conducted through strategic partnership model, contractual obligations of the strategic investor, as well as terms, manner and legal consequences of the contract termination will be mutually agreed between the parties and regulated under the strategic partnership contract. In both cases, the Ministry is entitled to control the fulfilment of the contractual obligations.
Also, before the conclusion of the contracts, the Ministry will obtain an opinion from the competent anti-money laundering authority regarding the absence of the obstacles for the conclusion of the contract on the side of the buyer or strategic investor.
Public-private partnerships are regulated by the Law on Public-Private Partnerships and Concessions (Republic of Srpska Official Gazette Nos 88/2011, 15/2016 and 104/2016; the “PPP Law”), which was adopted in late 2011, with the aim to regulate both concessions and public-private partnerships under a single legislative framework.
While prior to adoption of the PPP Law concessions were regulated by the Law on Concessions (which has in the meantime been replaced by the Law on PPP), only upon the adoption of the PPP Law the term “public-private partnership” was introduced into Serbian legislation, and state and local authorities became for the first time able to tend to their infrastructural and other public needs by resorting to a public-private partnership model.
Public-private partnerships and concessions
Under the PPP Law, a public-private partnership is determined as a long-term cooperation between the public and a private partner, for the purpose of securing financing, development, reconstruction, management or maintenance of infrastructural or other facilities of public interest, and providing services of public significance.
The public-private partnership may be implemented based on the two models:
The public-private partnership may be a partnership with or without elements of concession.
A concession itself is defined by the PPP Law as a public-private partnership (contractual or institutional) in which the commercial exploitation of a natural resource (or the resource in general use that is public property / property of a public body), or conducting an activity of general interest, is delegated to a private partner. A private partner in return pays a concession fee, and assumes the risk related to the commercial use of the subject matter of concession.
The PPP Law gives a non-exclusive list of areas in which a concession may be granted: exploring and exploitation of mineral resources, energy, harbors, public roads, airports, communal services, health services, tourism etc.
Setting up a public-private partnership and concession
A public-private partnership agreement without elements of concession is awarded through the public procurement procedure, prescribed under the Public Procurement Law (Republic of Srpska Official Gazette Nos 124/2012, 14/2015 and 68/2015; herein: the “Public Procurement Law”), while a concession is awarded through the procedure determined by the Law on PPP. Exceptionally, the concession related to public works or public services (whereby compensation for public works / provision of public services is right of their commercial exploitation) is also awarded through the public procurement procedure.
The realization of the public-private partnership, without elements of a concession, may be initiated by a competent public body. A public body is defined as:
A public body submits a proposal of the public-private partnership project without elements of a concession for approval to the Government of the Republic, the Government of an autonomous province, or to the assembly of a local self-governance, depending on whether the public partner should be the Republic, an autonomous province, or a municipality / city (or a public body subordinated to one of these entities).
The concession is granted by:
(In cases when a concession is granted by a public enterprise or a legal entity from points 4) and 5) above, the act by which the concession is awarded is being passed by the authority from points 1) to 3) above, which is competent for mentioned public enterprise / legal entity.)
An agreement on public-private partnership, or a concession, will be awarded based on one of the following criteria:
Before the approval of a project of the public-private partnership, or a concession by a competent authority, the Commission for Public-Private Partnership (herein: the Commission) gives its opinion on the project and whether it is suitable to be implemented as the private-public partnership or concession.
If the public partner is the Republic, or a public body subordinated to it, and if estimated value of the project / concession is above EUR 50 million, before the Commission issues its opinion, it has to obtain the opinion of the Ministry of Finance.
Lastly, a procedure for realization of a public-private partnership, with or without elements of concession, may also be initiated by a public body upon the proposal of an interested party. The party who proposed initiation of the procedure may participated in it, except if its role in preparation of the procedure is such that it has competition advantage over other candidates, which may not be neutralized even by sharing all relevant information with them.
A private partner may be any person, natural or legal, resident or non-resident, or a group of persons. As a rule, a public-private partnership is realised by a special purpose vehicle established for this purpose.
A consortium may apply for awarding of the public-private partnership, unless a public body conducting the award procedure does not decide otherwise, due to objective reasons. Also, if not decided differently by a relevant public body, at least one member of a consortium has to be unlimitedly responsible for the consortium’s obligations.
Provided that a public partner envisages it in tender documentation or allows it afterwards, a private partner may perform part of its undertakings by engaging sub-contractors. The sub-contractor has to meet all conditions required by under tender documentation and needed for performance of undertakings contracted to him. In this case, the private partner is fully responsible for acts of its sub-contractor, as if they were performed by himself.
Term of the public-private partnership
A public-private partnership may be established for the period between five and 50 years. The term of the public-private partnership may not be extended, save as for the case in which a private partner was prevented from fulfilling its undertakings, but the partnership can be renewed, subject to nominating of a private partner in line with the PPP Law.
An agreement on public-private partnership can be financed by a private partner through a combination of direct investments in capital or through lending, including the structured or project financing, provided by international financial institutions, banks, or other third parties.
With prior consent from the public partner, and subject to the PPP Law and the legislation regulating public ownership, the private partner may allocate, mortgage, or pledge any of its rights and obligations from the agreement with the public partner, or other assets related to the project, in favor of the financier, with the aim of securing payment of any receivables related to the construction and financing /refinancing of project.
Upon request from the financier and private partner, the public partner may provide certain reasonably required securities or assume certain responsibilities that are necessary for the private partner in relation to its obligations under the public-private partnership, providing that such requirements do not distort the allocation of project risks defined in the public-private agreement.