Public Procurement & Government Contracts 2020

Last Updated April 06, 2020

Cyprus

Law and Practice

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Tassos Papadopoulos & Associates LLC has a wealth of experience and expertise in the handling of public procurement cases, including reviewing tender documents and drafting them on behalf of contracting authorities, advising economic operators in the early stages of tender submission and evaluation, and representing economic operators and Contracting Authorities before the Tenders Review Authority, the Committee for the exclusion of economic operators from tender procedures, the Administrative Court and the Appeal Court. The firm's clients include Contracting Authorities and tenderers from different industry sectors; ie, portal management, information technology, construction, medical equipment, pharmaceuticals, consulting services, public transport, waste management and sewerage systems. The team takes pride in its expertise in different aspects of public procurement law; eg, the technical and financial requirements of tender documents and eligibility criteria, the exclusion of economic operators, self-cleaning processes, and interim injunctions prohibiting the execution of contracts, as well as in its involvement in numerous landmark cases in the field of public procurement, many of which are of public interest; eg, major construction projects, major design-build-operate-transfer (DBOT) projects and public transport tender awards.

There are several pieces of legislation in place to safeguard the compliance of national legislation with the relevant European directives on public procurement law.

The Regulation of Procedures for the Award of Public Contracts and for Related Matters Law of 2016 (Law 73(I)/16) is the basic legislation governing the tender procedure regarding public contracts. This Law is based on EU Directive 2014/24 as amended.

The Regulation of Procedures for the Award of Public Contracts by Authorities acting in the Water, Energy, Transport and Postal Services Sectors and for Related Matters Law of 2016 (Law 140(I)/2016) is based on Directive 2014/25 as amended.

Law 173 (I)/2011 regulates the procedures for the award of specific public contracts in the defence and security sectors, in compliance with EU Directive 2009/81/EU.

Law 11/2017 regulates the procedures for the award of public concession contracts, in compliance with EU Directive 2014/23/EU.

The Recourse Procedure in the field of Public Contracts Law (Law 104 (I)/2010) regulates remedies and the functioning of the Tenders Review Authority (TRA) in compliance with Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007, amending Council Directives 89/665/EEC and 92/13/EEC regarding improving the effectiveness of review procedures concerning the award of public contracts.

There are also several pieces of subsidiary legislation regulating procurement procedures to be followed by specific contracting authorities (eg, the Cyprus Ports Authority, the Cyprus Electricity Authority, the Municipalities).

In addition, there are a number of pieces of subsidiary legislation in place that regulate public contracts, with the most important being the General Regulations for the Award of Public Supply Contracts, Public Works Contracts and Public Service Contracts (KDP 2001/2007), which regulate procedural matters and provide for the establishment and operation of the appropriate public bodies for handling public tenders; they also set the rules for the requirements and the procedure of tender invitation, the submission of tenders, the evaluation of tenders and tender awards.

K.D.P. 138/16 as amended is another significant piece of legislation, which regulates the management of the execution of public contracts, the establishment of several committees and the exclusion of economic operators from public contracts under certain circumstances.

Procurement regulation applies to all contracting authorities, which includes the state, local or rural authorities and public law organisations. All other entities are not considered to be contracting authorities, with the exception – under certain circumstances – of entities that have been awarded concession agreements.

The general rule is that all types of contracts that fall under specific minimum value thresholds are subject to procurement regulation. There are some exemptions, which in their clear majority coincide with the exemptions of the relevant European directives. The key exemptions are as follows.

  • Public contracts awarded and design contests organised pursuant to international rules.
  • Public service contracts for:
    1. the acquisition or rental of land, existing buildings or other immovable property, or concerning rights thereon;
    2. the acquisition, development, production or co-production of programme material intended for audio-visual media services or radio media services;
    3. arbitration and conciliation services;
    4. the majority of legal services;
    5. financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments;
    6. loans;
    7. employment contracts;
    8. civil defence, civil protection and danger prevention services that are provided by non-profit organisations or associations.

When the question of minimum threshold arises, there needs to be a differentiation between the types of contract. Review of the threshold values takes into consideration any review thereof by the Commission, according to Article 6 of Directive 2014/24/EU.

For the period 1 January 2018 to 31 December 2019, the main threshold rules were as follows.

  • Central government contracts – services and supply contracts of minimum EUR144,000 and works contracts of minimum EUR500,000.
  • Public sector (local or rural authorities and public law organisations) – services and supply contracts of minimum EUR221,000 and works contracts of minimum EUR500,000.
  • Contracting authorities of the central government or the public sector in general, acting in the public utility fields – services and supply contracts of minimum EUR443,000 and works contracts of minimum EUR500,000.
  • Concession contracts – services contracts of minimum EUR5,548,000 and works contracts of minimum EUR500,000.
  • Contracts in the defence and security fields – services and supply contracts of minimum EUR443,000 and works contracts of minimum EUR5,548,000.

Emphasis is to be put on the rule established by case law that even if a contract does not fall under the thresholds and the specific procurement legislation does not apply, the main principles governing public procurement procedures are to be complied with.

According to national legislation, there is no restriction on the jurisdiction of the economic operators, although practically there can be limitations in the tender notice. Nevertheless, in so far as they are covered by Annexes 1, 2, 3, 4 and 5 and the General Notes to the European Union’s Appendix I to the Agreement on Government Procurement (GPA) and by the other international agreements by which the Union is bound, contracting authorities shall treat the works, supplies, services and economic operators of the signatories to those agreements no less favourably than they would the works, supplies, services and economic operators of the Union, and exclusion of such economic operators on the grounds of their jurisdiction shall be deemed to infringe national legislation.

The key obligations of the contracting authorities boil down to safeguarding the fundamental principles of procurement law: equal treatment, transparency and fair competition.

Contracting authorities are obliged to treat economic operators equally and without discrimination, and to act in a transparent and proportionate manner.

There is an obligation not to design the procurement with the intention of excluding it from the scope of procurement legislation or of artificially narrowing competition, as competition is considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.

Contracting authorities are obliged to take appropriate measures to ensure that, in the performance of public contracts, economic operators comply with the applicable obligations in the fields of environmental, social and labour law established by Union law, national law or collective agreements, or by the international environmental, social and labour law provisions.

The general rule is that legislation mandates the prior advertisement of regulated contract award procedures. Under very specific circumstances, contracting authorities may award contracts by a negotiating procedure without prior advertisement.

The procedure must be advertised in an online portal for public contracts (www.eprocurement.gov.cy), in the Gazette and in the Official Gazette of the European Union.

The information that must be disclosed in the advertisement is as follows:

  • contact details of the contracting authority;
  • type of the contracting authority and the main activity thereof;
  • when applicable, clarification that the contracting authority is a central authority or another form of combined procedure;
  • Common Procurement Vocabulary (CPV) codes;
  • the address of the buyer profile;
  • the date of sending the notice to the buyer profile;
  • electronic address or website address where there will be free, immediate and full access to the tender documents;
  • a short description of the contract; and
  • other relevant information.

Before launching the contract award procedure, contracting authorities may conduct preliminary market consultations, with a view to preparing the procedure and informing economic operators of their procurement plans and requirements.

For this purpose, contracting authorities may seek or accept advice from independent experts, authorities or market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not infringe the principles of non-discrimination and transparency.

Legislation provides for different types of tender procedures: open or restricted procedures, innovation partnerships and – under specific circumstances – a competitive procedure with negotiation or a competitive dialogue. This is allowed when one or more of the following criteria apply:

  • the needs of the contracting authority cannot be met without the adaptation of readily available solutions;
  • the needs of the contracting authority include design or innovative solutions;
  • the contract cannot be awarded without prior negotiations because of specific circumstances related to the nature, complexity or legal and financial make-up, or because of the risks attaching to them; and
  • the technical specifications cannot be established with sufficient precision by the contracting authority with reference to a standard, European Technical Assessment, common technical specification or technical reference.

The conduct of negotiations is governed by specific restrictions, the most important of which are that the contracting authority specifies in the tender documents the minimum requirements that every tenderer must meet, and that an initial tender (which will be the basis of the negotiations to follow) can be submitted only by economic operators who have been invited by the contracting authority following the evaluation of the information submitted. The minimum requirements and the award criteria are not subject to negotiations. During the negotiations, the contracting authority is required to provide equal treatment to all tenderers. For this purpose, it will not be entitled to disclose information in a way that may constitute discrimination and preferential treatment. The contracting authority will not be entitled to disclose to the rest of the participants confidential information that has been forwarded by a candidate or a tenderer without his consent. Upon completion of the negotiations, the contracting authority will inform the rest of the tenderers accordingly, and will set a common deadline for the submission of potential new or revised tenders.

The legislation does not provide for any requirements regarding the choice between the open and the restricted procedure. In practice, the open procedure is the norm in Cyprus. The choice of a competitive procedure with negotiation or a competitive dialogue is subject to the fulfilment of certain conditions, the most important of which can be summarised as follows:

  • the needs of the contracting authority cannot be met without the adaptation of readily available solutions;
  • the needs of the contracting authority include design or innovative solutions;
  • the contract cannot be awarded without prior negotiations because of specific circumstances related to the nature, complexity or legal and financial make-up, or because of the risks attaching to them; and
  • the technical specifications cannot be established with sufficient precision by the contracting authority with reference to a standard, European Technical Assessment, common technical specification or technical reference.

The legislation imposes obligations regarding the timing of the publication of further clarifications on the tender documents, and the obligations vary according to the tender procedure selected.

The legislation regulates the minimum time limits for the receipt of expressions of interest or the submission of tenders, which vary according to the procedure selected.

In the open procedure, the general rule is that there must be a minimum time limit of 35 days from the tender notice.

In the restricted procedure, the general rule is that there must be a minimum time limit of 30 days from the tender notice, and then ten days from the invitation to tender.

In the competitive negotiated procedure and the competitive dialogue, the general rule is that there must be a minimum time limit of 30 days from the tender notice.

Under national legislation, the criteria that interested parties must meet in order to be eligible for participation in a public procurement procedure may relate only to three factors:

  • the ability of the economic operators to exercise their professional activity;
  • the financial adequacy; and
  • the technical and professional ability.

The criteria that the contracting authorities are permitted to set as prerequisites are limited only to those explicitly set in law.

In some procedures (ie, the restricted procedure, the competitive procedure with negotiation, the competitive dialogue and the innovation partnership), the contracting authorities may limit the number of suitable bidders to be invited to participate. The minimum number of bidders is five in the restricted procedure and three in the other procedures referred to above. In any case, the number of bidders must be adequate to ensure fair competition. The shortlist is determined by applying the award criteria set in the tender documents.

The award criterion is the most economically advantageous tender, which is identified based on the price or cost, using a cost-effectiveness approach such as life-cycle costing, and may include the best price-quality ratio, which shall be assessed based on criteria – including qualitative, environmental and/or social aspects – linked to the subject matter of the public contract in question.

Contracting authorities are obliged to disclose all the elements of the evaluation methodology on the basis of which bidders are evaluated and selected. Apart from the principle of transparency, which is of fundamental importance, the principle of fair trial imposes an obligation on the state in any court or administrative procedure to grant the applicants the right to inspect the administrative records and files relating to each specific case. This disclosure takes place only after the non-satisfied economic operator exercises his right to challenge the decision of the contracting authority.

In a restricted procedure, the contracting authority is obliged to notify the relevant economic operators as soon as the decision to reject their request is reached. The notification must be in writing and must incorporate the details of the decision, to enable the dissatisfied economic operators to exercise their rights to challenge the decision.

As soon as the decision is reached, the contracting authority has an obligation to notify bidders of the contract award decision. The notification must be in writing and must incorporate the details of the decision, to enable the dissatisfied economic operators to exercise their rights to challenge the decision.

According to national legislation, the general rule is that there is a standstill period for the execution of any decision of the contracting authority. The minimum standstill period for the conclusion of the contract awarded is a period of 15 days from the notification of the decision; if the decision has been challenged by a recourse submission before the Tenders Review Authority, the period is extended to the date of the decision of the Tenders Review Authority on the interim suspension procedure.

The body responsible for the review of the decisions issued by the contracting authority is the Tenders Review Authority established by law or the Administrative Court. It is possible for an economic operator to challenge the decision of the Tenders Review Authority by filing a recourse before the Administrative Court. The contracting authority does not have any remedy against the decision of the Tenders Review Authority.

The remedies granted by the Administrative Court are limited to the annulment of the challenged decision and the declaration thereof as null and void. In addition, under certain circumstances the Tenders Review Authority is empowered by law to declare a concluded contract as ineffective, or to declare specific terms as illegal at the early stage of the contract notice.

Regarding the Tenders Review Authority, the recourse has an automatic suspensive effect for the period until the Tenders Review Authority delivers its decision on the interim injunction. This period amounts to five working days from the day on which the recourse was notified to the contracting authority. The notification occurs within a period of two working days from the recourse submission. Upon recourse submission, the contracting authority will be requested to appear before the Tenders Review Authority and justify its opposition – if any – to the continuing of the suspension period.

Regarding the Administrative Court, recourse has no automatic suspensive effect. The applicant may file an application for the suspension of the decision. It must be noted that, while the applications for interim measures before the Tenders Review Authority have a success rate of approximately 75-85%, the success rate before the Supreme Court is significantly lower, and does not exceed 5-7%.

The decisions of the contracting authorities may be challenged by any party who has or had an interest in the specific tender award and who has suffered or is likely to suffer damage from any decision or act of the contracting authority prior to the contract signing, provided that there is an allegation of legislation infringement.

Recourse before the Tenders Review Authority needs to be filed within 15 calendar days (in some cases ten days) of the day on which the economic operator gained knowledge of the decision it wants to challenge. Recourse before the Administrative Court needs to be filed within 75 days of the day on which the economic operator gains knowledge.

A recourse before the Tenders Review Authority normally takes four to six months. A recourse before the Administrative Court takes much longer, up to two to three years. There are exceptional cases, which the parties agree to expedite.

The average number of procurement claims considered by the Tenders Review Authority in the past ten years is 80 recourses per year.

The costs for an application before the Tenders Review Authority differ according to the contract value, and range from EUR4,000 to EUR20,000. This does not include the legal fees.

The costs for an application before the Supreme Court are significantly lower, at approximately EUR300. This does not include the legal fees.

National legislation provides for the establishment of special committees to examine any proposals from the contracting authority to modify the contract. The main principles governing the modification procedures are that the financial and the physical contract object must not undergo a substantial deviation, and that the modification must be necessary and must not constitute a breach of the principles of equal treatment and non-discrimination amongst the economic operators, as well as the principle of transparency. The principle of proportionality is required to be safeguarded. If additional credit will be needed as a direct or indirect result of the contract modification, the contract co-ordinator is obliged to ensure that additional credits are indeed available. Certain rules apply relating to the value of the modification when compared with the value of the initial contract.

The legislation permits direct contract awards under specific circumstances, the most important of which are as follows.

  • Where no tenders, no suitable tenders, no requests to participate or no suitable requests to participate have been submitted following an open or a restricted procedure, provided that the initial conditions of the contract are not substantially altered and that a report is sent to the competent authority for public procurement.
  • Where the works, supplies or services can be supplied only by a particular economic operator for any of the following reasons:
    1. the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance;
    2. due to technical reasons, there is no competition; or
    3. the protection of exclusive rights, including intellectual property rights.
  • In so far as is strictly necessary, where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority.

Regarding public supply contracts, direct award may be used:

  • where the products involved are manufactured purely for the purpose of research, experimentation, study or development;
  • for additional deliveries by the original supplier that are intended either as a partial replacement of supplies or installations or as the extension of existing supplies or installations where a change of supplier would oblige the contracting authority to acquire supplies with different technical characteristics, which would result in incompatibility or disproportionate technical difficulties in operation and maintenance; the duration of such contracts as well as that of recurrent contracts shall not, as a general rule, exceed three years;
  • for supplies quoted and purchased on a commodity market; and
  • for the purchase of supplies or services on particularly advantageous terms, from either a supplier that is definitively winding up its business activities, or from the liquidator in an insolvency procedure, an arrangement with creditors, or a similar procedure under national laws or regulations.

There was a significant decision delivered by the Appeal Court in December 2019, which overruled an Administrative Court decision relating to the admissibility of Court recourses against the Tenders Review Authority, in cases where during the proceedings the Contracting Authority reached a new decision on the same tender award. According to the Appeal Court, the initial decision no longer exists, and judicial review can be exercised only on the last decision of the Contracting Authority.

Earlier last year, another significant decision was delivered by the Administrative Court that overruled the first decision delivered by the Committee for the exclusion of economic operators from tender procedures on the grounds of misconception with regard to the powers and obligations of the Committee.

As far as the author is aware, after last year’s amendments, no further legislative amendments are being considered.

Tassos Papadopoulos & Associates LLC

Jason Building
10 Iasonos Street
1082 Nicosia
Cyprus

+357 22 889999

+357 22 889988

info@tplaw.com.cy www.tplaw.com.cy
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Law and Practice

Author



Tassos Papadopoulos & Associates LLC has a wealth of experience and expertise in the handling of public procurement cases, including reviewing tender documents and drafting them on behalf of contracting authorities, advising economic operators in the early stages of tender submission and evaluation, and representing economic operators and Contracting Authorities before the Tenders Review Authority, the Committee for the exclusion of economic operators from tender procedures, the Administrative Court and the Appeal Court. The firm's clients include Contracting Authorities and tenderers from different industry sectors; ie, portal management, information technology, construction, medical equipment, pharmaceuticals, consulting services, public transport, waste management and sewerage systems. The team takes pride in its expertise in different aspects of public procurement law; eg, the technical and financial requirements of tender documents and eligibility criteria, the exclusion of economic operators, self-cleaning processes, and interim injunctions prohibiting the execution of contracts, as well as in its involvement in numerous landmark cases in the field of public procurement, many of which are of public interest; eg, major construction projects, major design-build-operate-transfer (DBOT) projects and public transport tender awards.

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