You will be redirected to the website of our parent company, Schönherr Rechtsanwälte GmbH : www.schoenherr.eu
Although Croatia’s procurement market is now open to EU companies bidding for contracts in Croatia, foreign bidders still struggle to win public tenders in the country. What lessons can be learned from the mishaps of the past?
A growing number of foreign EU bidders have taken part in public procurement tenders in Croatia over the past two years. This is not surprising, since Croatia’s two-year-old EU membership has led to an increased number of EU-funded infrastructure projects. These projects, mostly aimed at improving the railways and treating of waste and waste water, are subject to a tendering process when procuring goods, services and works.
Given the high value of the contracts involved, the State Commission for Supervision of Public Procurement Procedures1 (Državna komisija za kontrolu postupaka javne nabave) (“DKOM”) is reviewing a large number of tenders for the award of such contracts. A recent DKOM report on the most frequent reasons for appeals and established irregularities in appeal procedures (“DKOM Report”)2 has revealed some interesting truths about the activities of contracting authorities and bidders related to EU-funded public procurements in 2014.
As in many other CEE countries, the Croatian public procurement legal framework is extremely complex and has been subject to frequent changes over the years driven by the need to align the Public Procurement Act3 (Zakon o javnoj nabavi) and accompanying regulations with older EU directives (2004/17/EC and 2004/18/EC) and newer public procurement-specific directives (2014/24/EU and 2014/25/EU).
In theory, foreign bidders face the same issues and potential difficulties with public procurement procedures as domestic firms. In practice they often face unique challenges. It should be noted that about 22 % of appeals before the DKOM are rejected on the grounds of inadmissibility or irregularity or lacking any sufficient legal interest. Foreign bidders are not entirely familiar with the particularities of Croatian public procurement rules and supporting review procedures. For instance, all decisions reached by the DKOM during the appeal procedure are made available on-line (but only in Croatian), making it much more difficult for foreign bidders to take DKOM’s recent decisions into account when preparing their bids.
In addition, foreign bidders without legal representation in Croatia need to know that lodging of appeals before DKOM by non-resident bidders requires the appointment of an authorised receiving agent for all correspondence regarding the appeal procedure. If the bidder fails to comply with this particular requirement, appeals will be rejected.
Furthermore, DKOM’s track record shows three types of errors most frequently made by bidders: Firstly, bidders do not exercise their right to ask for additional information and clarification of tender documents from contracting authorities prior to bid submission. Secondly, bidders frequently fail to comply with conditions and specifications set out in tender documents (eg, errors with regard to proof of the economic operators’ financial, professional and technical capacity, technical specifications, catalogues, translations, etc). Finally, bidders often commit formal errors relating to bid documents, leading to rejection of bids (eg, the format and signing of bid documents, bid documents are not properly combined, there are errors in page numbering, and so on).
On the basis of these findings, we can recommend several ways to make bids in Croatia more effective. As highlighted in the DKOM report, tender documents for large infrastructure projects are extremely complex, and are sometimes unclear. Preparation of bids is time-consuming, so instructions provided in tender documents should be carefully and expertly examined without any delay. Clarifications and amendments to tender documents should be considered and made in writing before the expiration of the specified time period.
In addition, bidders should be aware that, in principle each stage of the procedure can be appealed before the DKOM (but strict time limits must be observed). Any tenderer who fails to file an appeal of a specific stage of a public procurement procedure at the appropriate time will not be entitled to challenge that respective stage later.
Finally, all offers must be submitted electronically as of 1 January 2016 for high value tenders (ie, for contract values above the EU thresholds), and as of 1 July 2016 for low value tenders (ie, contract values below the EU thresholds). In order to ensure that the new EU directives are effectively introduced into Croatian law by March 2016, as required, further amendments of the Croatian public procurement legislation will be announced soon, which are expected to simplify and eliminate a number of legal and practical deficiencies that remain in the current legal framework.
In principle, foreign bidders face the same issues and potential difficulties as domestic firms in dealing with public procurement. The Croatian public procurement legal framework is extremely complex and has been subject to constant change over the past years. Further alignment with the new EU public procurement directives required to be met by March 2016, should focus on removing legal and practical deficiencies in the current legal framework.
author: Petra Šantić