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Public procurement

As part of the continuing changes in Bosnia and Herzegovina's (BiH) laws as it moves towards the EU, the parliament has adopted the Public Procurement Law (Procurement Act). The EU's Public Procurement Programme for Bosnia and Herzegovina assisted with implementing the new law, by preparing guidelines and organising seminars and programmes for the new officers of the Public Procurement Agency and Public Review Body. The Procurement Act is based on EU policies designed to ensure that public funds are used in the most cost-effective and transparent manner, and to ensure fair and active competition among potential suppliers; the Agency estimates that each year KM27 million ($21.2 million) is paid in bribes to public officials involved in public tenders.

The Procurement Act applies to the procurement of goods, services and works performed by any administrative authority (the Contracting Authority) at the national entity, cantonal, city or municipal level. It also applies to all public enterprises (for example, public water, electricity or gas distributors, public airports, railways and telecommunication networks). Concession contracts, contracts related to state secrets, defence contracts and certain real property transactions are exempt from the application of the Procurement Act.

In general, a public tender for awarding contracts is open to all entities, both domestic and foreign. However, foreign bidders face certain disadvantages for both procedural and substantive reasons. Procedurally, the Contracting Authorities are required to announce a public tender in foreign newspapers or the Agency website only when the contract value exceeds certain thresholds set out by the Procurement Act.

Substantively, the Procurement Act grants certain preferences to domestic entities. The Contracting Authorities must grant a price preference of 10% to certain domestic entities vis-à-vis a foreign bidder (that is, accept a price that is up to 10% lower) for public tenders during 2008. This preference applies only to entities established in accordance with Bosnian law (including domestic subsidiaries of foreign entities) and where (i) in the case of supply contracts, at least 50% of the goods supplied originate in BiH, or (ii) in other cases, at least 50% of the workers for execution of the contract are BiH citizens.

The Procurement Act provides for various types of procedures for awarding contracts:

  • Open procedures (most contracts would be awarded under this procedure).
  • Restricted procedures with pre-qualification, in the event of large and complex procurement and consultancy services.
  • Negotiated procedures, with publication of a procurement notice, in the case of works or services contracts where the nature of the works or services or the risks involved do not permit prior overall pricing.
  • Negotiated procedures without publication of a procurement notice, in cases of extreme urgency, or if a contract can be concluded only with particular suppliers.
  • Design contests.

Offers received by the Contracting Authorities will be evaluated on one of two methods: the most economically advantageous tender or lowest price only. The Contracting Authority shall set out in the tender documentation which method shall be used. When using the most economically advantageous tender method, the Contracting Authority shall specify the evaluation criteria on which the economic advantages of the tender will be measured and evaluated (for example, quality, price, technical merit, functional and environmental characteristics, running costs, cost-effectiveness, after-sales services and technical assistance, delivery date and delivery period or period of completion).

The contract must be awarded to the most qualified tenderer.

Any supplier with a legitimate interest in a specific public procurement contract has a right to raise a complaint against the procedure. The complaint must be filed with the Contracting Authority concerned and, if no satisfaction is obtained, to the Review Body. If it receives a complaint, the Review Body must cause the Contracting Authority to suspend the award procedure until the complaint has been settled.

Amar Bajramovic

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