Cutting the Red Tape on Public Tenders as Emergency Measures Triggered Due to COVID-19

The global spread of COVID-19 (coronavirus) continues to send ripples down supply chains and add pressure to already stretched public resources. The outbreak is considered a global threat as the World Health Organization characterized the situation as a pandemic on March 11, 2020. Escalating measures such as travel bans, quarantines and curfews have been imposed on a number of countries around the world in an attempt to control the spread of the infection.

The outbreak is also triggering emergency provisions embedded in well-established legal frameworks. The Public Tender Contracts Law No. 4735 (“Public Tender Contracts Law“), the Public Tender Law No. 4734 (“Public Tender Law“) and the Turkish Petroleum Law No. 6491 include specific references to outbreaks of infectious diseases, among others, for force majeure or changes in procedure.

1. What does COVID-19 mean for public tenders?

The public tender framework is built to meet the demands of public procurement. Under normal circumstances, much of the public procurement is done through open tenders and direct procurement.

• Open tenders, as regulated under the Public Tender Law, are complicated and thoroughly regulated processes that impose time consuming safeguards such as tender announcements, seeking bonds from participants, awarding tenders, and executing the contract between the procurement authority and the winning tenderer. Open tender processes are frequently appealed and put to judicial review throughout the process, which may lead to tenders being cancelled. The process can take months.
• On the other hand, direct procurement, as regulated under Article 22 of Public Tender Law, is a simplified procurement process. Direct procurement is available in only pre-described circumstances including but not limited to (i) the purchase of emergency, patient specific or perishable medical consumables or supplies; and (ii) the rent or purchase of real estate per a public entity’s needs. The procurement is expedited since the procurement authority is not obligated to prepare tender documents, make an announcement, and setup a tender committee. In some cases, it is even possible not to have technical specifications document or execute a written contract at the end of the procurement. This process can be completed within days as opposed to months.

Under the emergency circumstances of COVID-19, a public procurement method called “bargaining tender”, regulated under Article 21 of the Public Procurement Law, is available to address the outbreak. This method is frequently used by public authorities to address urgent procurements. However, the emergency of COVID-19 activates Article 21(b) of the Public Procurement Law, which is reserved for infectious disease outbreaks when the time is of the essence for the completion of the procurement. Accordingly, public authorities can use this tool when the procurement is (i) related to the emergency of the infectious disease; and (ii) the procurement should be completed as soon as possible. The benefits of this emergency method is summarized in the chart below.

2.What does COVID-19 mean for public contracts?

Tender contracts between public procurement authorities and private entities are governed by the Public Tender Contracts Law. Article 10 of the Public Tender Contracts Law provides that the outbreak of infectious diseases is a force majeure, and Article 7 of the same law provides that force majeure provisions should be provided in any tender agreements entered between public authorities and private entities.

The spread of COVID-19 is disrupting supply chains and frustrating the performance of contractual obligations due to financial turmoil or limited resources. However, force majeure is reviewed on a case by case review of the circumstances applicable to the specific contract. Accordingly, the existence of a pandemic does not automatically result in a force majeure for public contracts. Article 10 of Public Tender Contracts Law categorizes an outbreak event as force majeure when:

• the event is not caused by the contractor’s fault;
• the event should be able to prevent the performance of the contract; and
• the contractor should be unable to remove the effects of the event.

Most importantly, Article 10 of the Public Tender Contracts Law state that the contractor should apply to the relevant public authority within 20 days once the force majeure event occurs. For the sake of this notification, a general declaration of a pandemic would not be adequate on its own, as the event should be directly related to the performance of the contract.

Conclusion

New tender options are becoming available for public authorities to expedite the purchasing process. Bargaining tenders may not be announced if they are related to the outbreak. Accordingly, it would be helpful to communicate with public procurement authorities since only invited companies can submit bids to these bargaining tenders.

Similarly, it would be a useful approach to review public contracts, if there are any, to check for force majeure clauses. Going forward, it is advisable to have a clear map of contractual obligations on ongoing public contracts to ensure that the correct actions are taken.

[1] Some bargaining tenders require an announcement. Bargaining tenders made according to Article 21(b) of Public Tender Law No. 4734 do not require a tender announcement. Instead, three companies are invited to submit their bids and eligibility documents.

[2] Not required when the performance of the tender has been completed between the period when the procurement authority invites the winning tenderer to contract, i.e. approximately 13 days once the tender has been completed.

[3] Not required when the performance of the tender has been completed between the period when the procurement authority invites the winning tenderer to contract, i.e. approximately 13 days once the tender has been completed.