PUBLIC PROCUREMENT

                             Adem KARABAYIR
                           Deputy General Director
                            Ministry of Finance

« The New Public Procurement Procedures and Instruments »
5-6 February 2008 Ankara

   Historical evolution of Public Procurement

   Reasons for the need to make regulations in the area of Public
    Procurement in 2000s

   Basic features of Laws 4734 and 4735

   Progress in the Public Procurement Chapter with the EU

   Planned legal arrangements for a full compliance with the EU

   Draft Law amending Laws 4734 and 4735
Historical evolution of Public Procurement-I
             Before the Republic

    The first regulation in the area of public procurement was made
     during the Ottoman period with an Ordinance dated 1857.

    An additional Ordinance was issued in 1914.

    It was stipulated with the Decision adopted in 1921 that the needs
     of the central public institutions and their divisions in Istanbul as
     well as the military institutions in Istanbul exceeding 500 Lira shall
     be met through a Joint Procurement Commission within the Ministry
     of Finance.
Historical evolution of Public Procurement-II
Before the State Procurement Law no 2886

   Following the declaration of the Republic, with the adoption of Law
    on Auction, Competitive Tendering and Procurement on 22 April
    1925, the legal framework was re-established and procedures for
    purchasing, selling, leasing, construction, repair, exploration,
    transportation, etc. activities of entities were regulated.

   In order to make adjustments to new developments, amendments
    were made in this Law no: 661 in 1926, 1929 and 1933.

   On 10 December 1934 this law was replaced by Law on Auction,
    Tendering and Procurement (Law no: 2490)
Historical evolution of Public Procurement-III
     Law on State Procurement (2886)

    Due to the strict rules and formalities of Law 2490 and the failure
     of the amendments to bring solutions, it became necessary to
     draft a new law.

    Therefore, on 01.01.1984, State Procurement Law no:2886 was
     adopted as a basic regulation for the procurement and sales
     procedures of general and annex budget institutions (central
     government) and private provincial administrations and
     municipalities (local government). This law repealed the previous
     Law on Auction, Tendering and Procurement (no:2490).

    State Procurement Law no: 2886 covered procurement, sales,
     services, construction, leasing, trade-in, establishment of
     incorporeal rights on property and transportation. Furthermore,
     this Law regulated both principles and procedures of procurement
     and the issues related to the contracts to be signed as a result of
     those procurements.
      The reasons for the need to make
       regulations in the area of Public
         Procurement in early 2000s

    Failure of State Procurement Law no:2886 to meet today’s
    changing needs,

   Insufficiency of this Law to remove breakdowns in implementation,

   The fact that it regulates activities which require public spending
    and activities which bring revenues to the State together,

   To increase the accountability of the purchasing entities,

   To establish a transparent and auditable public procurement system
    which is open to international competition,
      The reasons for the need to make
       regulations in the area of Public
         Procurement in early 2000s

   To establish a transparent procurement process by removing the
    interventions which disable efficiency,

   To ensure that legislative alignment in the area of public
    procurement is completed in accordance with the Accession
    Partnership Document prepared by EC and the National Program
    of Turkey related to the Adoption of EU legislation,

   To have parallel implementations with those of international
    organisations such as the World Bank and the United Nations,

     As a result of all of the above-mentioned reasons, an extensive
    and comprehensive reform was made and Public Procurement Law
    (4734) and Public Procurement Contracts Law (4735) were
    drafted and adopted on 01.01.2003.

 With the Public Procurement Law, following basic principles are
    aimed in the area of procurement:

    transparency,
    competition,
    Equal treatment,
    reliability,
    timely meeting of the needs under appropriate conditions,
    ensuring efficient use of resources in the widest way possible,
    one single legal framework for the procurement activities of the
     public institutions and entities from any resource available for
     their use,

    With the Public Procurement Law which aims at establishing a
    transparent, competitive and auditable public procurement system
    with efficient use of public resources,:

   only the purchasing activities are covered,

   The scope was extended in order to include the institutions which
    were previously excluded,

   Environmental Impact Assessment Report (EIA) became an
    obligatory requirement to start the tender process.

   Estimated cost approach is introduced instead of estimated price.

   Qualification criteria to participate in the procurement proceedings
    are regulated in detail (which did not exist in the previous Law)
    and the system of Contractor’s Carnet is removed from

   Process of complaints is introduced.
   Possibility to select the economically most advantageous tender,

   Obligation of notification of the result of the tender,

   Special provisions regarding the procurement of consultancy

   Setting up of the Public Procurement Authority,

   Publication of the Public Procurement Bulletin.

    The Public Procurement Authority is established in accordance
    with Law no: 4734.

    Duties of PPA;

   to evaluate and conclude any complaints claiming that the
    proceedings carried out by the contracting entity within the
    period from the commencement of the tender proceedings until
    the signing of the contract are in violation of Law 4734 and the
    related legislative provisions ,

   to prepare, develop and guide the implementation of all the
    legislation concerning Law 4734 and Public Procurement
    Contracts Law and the standard tender documents and

   to provide training on procurement legislation, to provide
    national and international coordination,

   to gather information relating to the contracts and tender
    proceedings carried out as specified by the Authority, to
    compile and publish statistics relating to quantity, price and
    other issues,

   to keep the records of those who are prohibited from
    participating in tenders,

   to carry out research and development activities,

   to regulate the principles and procedures with regard to
    tender notices, to publish Public Procurement Bulletin in
    printed or electronic media.
                PUBLIC PROCUREMENT
               CONTRACTS LAW no: 4735

   This Law aims at combining the principles and procedures regarding the
    making and implementation of contracts under one legal act.

   Four types of contracts were defined in accordance with the international
    norms: turn-key lump-sum contracts, lump-sum contracts, unit price
    contracts and mini-contracts. Necessary content of the contracts is also

   It is also stipulated that contract provisions cannot be amended and
    supplementary contracts cannot be made outside the scope of this Law.

   The parties to the public contracts made under this Law shall enjoy equal
    rights and obligations in the implementation of the contract provisions.
    Tender documents and contract provisions cannot include clauses contrary
    to this principle.
Progress in the Public Procurement
       Chapter with the EU
Decision No 1/95 of the EC-Turkey Association Council on
implementing the final phase of the Customs Union was adopted on 22
December 1995.

On 1 January 1996, Customs Union process started between Turkey
and the EU.

Helsinki Summit of December 1999 can be considered as the turning
point of Turkey – EU relations. In the Summit, Turkey was given the
candidate state statute, therefore it was confirmed that, along with the
other candidate countries, Turkey will have equal participation to the
system established within the framework of the new Enlargement
Policy of the EU.

On 16-17 December 2004, during the Brussels Summit of EU
Council, a decision was given to open accession negotiations with
Turkey and to officially start the screening process on 3 October 2005
which is the first stage of the negotiations.
 Progress in the Public Procurement Chapter with
                        the EU
1. Free movement of goods                  19. Social policy and employment
2. Freedom of movement for workers         20. Enterprise and industrial policy
3. Right of establishment and freedom to   21. Trans-European networks
provide services
4. Free movement of capital                22. Regional policy and coordination of
                                           structural instruments
5. Public procurement                      23. Judiciary and fundamental rights
6. Company law                             24. Justice, freedom and security
7. Intellectual property law               25. Science and research
8. Competition policy                      26. Education and culture
9. Financial services                      27. Environment
10. Information society and media          28. Consumer and health protection
11. Agriculture and rural development      29. Customs union
12. Food safety, veterinary and            30. External relations
phytosanitary policy
13. Fisheries                              31. Foreign, security and defence policy
14. Transport policy                       32. Financial control
15. Energy                                 33. Financial and budgetary provisions
16. Taxation                               34. Institutions
17. Economic and monetary policy           35. Other issues
18. Statistics
    Progress in the Public Procurement
             Chapter with the EU
    Introductory screening meeting was held in Brussels on 7
     November 2005.

    The second step of the screening process, the Detailed
     Screening Process, was held again in Brussels on 28
     November 2005.

    Opening benchmarks regarding this chapter were notified
     to our country on 17 May 2006 by a letter from the
     Austrian Presidency to EU Community.

    On 16 June 2006, a meeting was held with the
     representatives from the Commission regarding the
     Opening Benchmarks and the Benchmarks were declared.
     Progress in the Public Procurement
            Chapter with the EU
Benchmark 1: In order to facilitate the legislative alignment process
and the negotiations to be made in the area of public procurement,
Turkey should guarantee that an institution/organisation is assigned for
the pre-accession period to ensure coherent policies in all the areas of
public procurement and to guide the general implementation, in other
words, to guarantee a coherent implementation of the public
procurement policies.

Benchmark 2: First of all, Turkey should harmonise the scope of its
legislation regarding entities and contracts with the scope of EC
Directives 2004/17 and 2004/18 and should remove exceptions which
are not in line with the Community legislation.
      Progress in the Public Procurement
             Chapter with the EU

Benchmark 3: A comprehensive strategy including the calendar and
  stages with regard to the full compliance of the public procurement
  legislation and the establishment of the necessary administrative
  capacity should be submitted to the Commission. This strategy shall

a) Transposing EC Directives related to public contracts and concessions
   into Turkish legislation by ensuring compliance with the legislative
   preparations on Public Private Partnerships,

b) Alignment of the Complaint Review system parallel to the Directives,

c) Strengthening the administrative capacity among institutions responsible
   for the review of complaints and implementing entities.
    Progress in the Public Procurement
           Chapter with the EU

d) Submission of an action plan aiming at removing the provisions in
   favour of domestic tenderers except for those related to the
   prices, which presents economical and statistical data, a list of
   existing direct or indirect measures in favour of domestic
   tenderers and the steps to be taken and the calendar for the
   removal of these measures.
     Progress in the Public Procurement
            Chapter with the EU
   Following the screening meetings in the area of
    Public Procurement, it was considered to be helpful
    to discuss the 3 draft laws prepared to regulate
    the public procurement area in line with the
    benchmarks      with    experts    from     related
    departments of EC to make sure that minimum
    alignment is ensured. Therefore, on 17 January
    2007, experts from both parties gathered in
    Brussels to discuss on the drafts submitted to the
    Commission on 13 November 2006.

   Commission experts stated that the works on draft
    laws were considered as a positive step however,
    their priorities were the alignment of the
    legislation in “scope, definitions and exceptions”
    and “preparation of a strategy paper” related to
    the issues mentioned in the opening benchmarks.
    Progress in the Public Procurement
           Chapter with the EU
   A draft “Strategy Paper” presenting the works to be done
    in order to prepare and adopt necessary legislation to
    transpose and implement EU Legislation in the area of
    Public Procurement and the steps to be taken for
    developing the administrative capacity was prepared by
    the Prime Ministry and sent to relevant institutions for
    their opinion.

   A certain point has been reached in the Strategy Paper
    through cooperation with relevant institutions and this
    document will be handled as a priority.

    Following legal arrangements are planned to be realised by

    “Law on the procurement procedures of entities and public
    undertakings operating in certain sectors”

    Objectives: It is aimed to regulate the procurement
    proceedings of the institutions and bodies operating in
    water, energy, transport and postal services sectors in line
    with the EU legislation, regardless of their legal status
    (public or private enterprise). Therefore, the institutions or
    bodies operating in these sectors will be subject to a more
    flexible regime than the classical public procurement rules.

   “Law amending the Public Procurement Law and the Public
    Procurement Contracts Law”

    Objective: Filling in the gaps in our legislation and in practical
    implementations in line with EU Directives and other
    contemporary norms, and creating an alignment with the EU
    legislation in the scope and exceptions of our public procurement

    “Law on concessions awarded for the performance of certain investments
     and services”

    Objective: A legal arrangement is aimed to be made related to the
    tendering procedures to be applied for awarding concessions. Within this
    regard, compliance will be ensured in concession contracts with EU norms
    and other contemporary norms.

    “Regulation on Procedures and Principles of Electronic Procurement”

     Objective: is to start the application of e-procurement which is regulated
     under Law 4734.

    “Regulation on the implementation of the Law on the procurement
     procedures of entities and public undertakings operating in certain
    Draft Law Amending Laws 4734 and
This draft has recently been submitted to the Prime Ministry. It covers:

   Arrangements related to the issues included in the Three Month
    Action Plan for 2007,

   Some arrangements made to align with EU Directives,

   Arrangements to improve the Complaints review system,

   Arrangements to improve the purchasing system,

   Arrangements related to the powers and duties of the Authority.
     Draft Law Amending Laws 4734 and
Changes planned to be introduced are:

   Reduction of notice periods,

   Extension of the application area of restricted procedure,

   Determination of objective criteria by PPA regarding detection and
    investigation of abnormally low tenders and the obligation for the
    entities to follow these criteria,

   Granting discretionary authority to entities to take into account
    both price elements and non-price elements in determining the
    economically most advantageous tender,
    Draft Law Amending Laws 4734 and
   Use of more efficient and faster notification tools in order to
    prevent waste of time in notifications and notices,

   Reception of tenders through electronic means by taking
    advantage of technological innovations when using systems such
    as dynamic purchase, framework agreements and electronic

   Realisation of the operations during the procurement proceedings
    with electronic means, establishment and operation of a Electronic
    Public Procurement Platform by the Authority and establishment
    of principles and procedures by the Authority regarding the use of
    electronic means in tender proceedings,
    Draft Law Amending Laws 4734 and
   Extension of the list of the institutions which are allowed to make
    framework agreements,

   Possibility for the entities to use framework agreements not only
    for the procurement of constantly needed supplies and services
    but also construction works,

   Introduction of new procurement procedures such as dynamic
    purchase and electronic auction and establishment of procedures
    and principles by the Authority regarding the procurement of
    supplies through financial leasing.
                 Law Proposal on PPPs

   The draft prepared by State Planning Organisation was revised on
    the basis of the opinions submitted by relevant institutions and its
    final version was sent to the Prime Ministry.
Thank you…

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