Public Procurement under State of Emergency

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18.03.2020 – Authors: Contracts (including Public Procurements) and M&A: Adriana Gaspar & Adina Chilim-Dumitriu

Following the COVID – 19 outbreak in Romania, the President of Romania issued the Decree no. 195/2020 (the “Decree”) for proclaiming a 30-day state of emergency effective 16 March 2020.

Among other rules impacting the day-to-day life and businesses, article 10 of the Decree has brought up an important derogation from the public procurement rules, allowing “central public authorities and legal entities where the state is a majority shareholder” to “directly purchase materials and equipment necessary for fighting the epidemic”.

Other provisions of the Decree complement the derogatory procurement rule stipulated in article 10 (with a direct impact on the public authorities’ conduct of their acquisitions of medical supplies and equipment, but also with regard to other acquisitions, such as consumables and fuels):

  • during the state of emergency, prices for medicines and medical equipment can be capped, up to the average price of the last 3 months before proclaiming of the state of emergency (article 15 of the Decree);
  • purchase prices for medicines used in treating COVID – 19 patients may exceed the maximum prices approved by the Ministry of Health (article 18 of the Decree);
  • endowment and consumption thresholds (applicable to public authorities, including health system) may be exceeded if due to the effects of the evolution of COVID – 19 and to protection and prevention measures (article 55 of the Decree).

There could be reasons to expect that, under state of emergency, the discretion offered to the public authorities is limited only by their professional judgement and ethics as regards the conditions of the acquisitions.  However, the state of emergency could hardly justify the abolition of public procurement principles, other than those and only to the extent delaying the acquisition of the supplies required to fight the pandemic.

Consequently, under the Decree public authorities may perform direct acquisitions, without conducting tenders pursuant to the publication of a tender notice in the Public Procurement Electronic System (Romanian: SEAP), irrespective of the contract value.

Nevertheless, irrespective of the wording, most likely this derogatory rule is of strict interpretation:

  • it will only apply to the procurement of materials and equipment necessary for fighting the epidemic; there is no definition of this concept, which is expected to bring up various questions and an inconsistent application by the public authorities, with potentially major practical impact (e.g. respiratory ventilators may be deemed to directly contribute to the fight against COVID – 19; it is uncertain whether medical equipment necessary to ensure medical care to patients whose pre-existing conditions have aggravated as a result of coronavirus infection would also be deemed as “necessary for fighting the epidemic”; the same is applicable regarding fuels and other consumables);
  • the direct acquisition should be performed with the strict observance of the requirements of Law no. 98/2016 on public procurement (“Law 98/2016”) and of Government Decision no. 395/2016 approving the implementing norms thereof (“GD 395/2016”) if specific to the direct acquisition;

Note: According to existing practice of the National Authority on Public Procurement (Romanian: ANAP), the direct acquisition is not per se a “procurement procedure”, therefore public authorities are not required to observe the various provisions of the Law 98/2016 and GD 395/2016, applicable to “procurement procedures”, but only those specifically addressing the direct acquisition

  • the following provisions should inter alia be deemed of interest to any public authority conducting a direct acquisition under the new derogatory rules, and to suppliers: (i) articles 58 et seq. of Law 98/2016 (conflict of interests); (ii) articles 2, 32 – 34 (award criteria), 43 – 46 (direct acquisition) of the GD 395/2016.

Therefore, unless and until demonstrated that a strict interpretation of the Decree defeats the purpose, in the current context, any direct acquisition of materials and equipment necessary for fighting the epidemic should be done by selecting suppliers’ best offers from the Public Procurement Electronic System.

If the Decree’s provisions are breached (e.g. by extending their application to other goods), sanctions ranging from administrative fines to criminal liability may be triggered. In addition, an action for nullification of the procurement contract may be brought by any interested party, based Law no. 101/2016 on remedies available in the context of the award of public procurement contracts, sectoral contracts and works and services concession contracts.

On a separate note, we are also expecting joint procurement of testing kits and respiratory ventilators to be launched by the Member States, pursuant to the recent announcement by the European Commission, to be carried out based on the Joint Procurement Agreement to Procure Medical Countermeasures and pursuant to Directive 2014/24/EU on public procurement.

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