Turkey: Last 20 Years Of Public Tender Legislation And Public Tender Law

Management of public sources has long been an issue of utmost importance due to the "public" character of these sources, growing susceptibility to irregularities and unfortunately corruption becoming widespread and being perceived as more normal and acceptable each and every day in Turkey. The delicacy of the issue obliged the authorities to adopt strict rules on public expenses and in this respect one of the milestones had been the legislation on state tenders, which paved the way for the Public Tender Law of 2002 ("Public Tender Law")1.

The State Tender Law No. 2886 ("State Tender Law") which was promulgated in 19832 was the legislation governing the principles to be applied to state tenders for about 20 years in Turkey. However, as time passed by, State Tender Law came under fire due to its narrow scope, lack of a self-governed mechanism to deal with tender related objections and disputes and inefficacy to prevent irregularities and corruption. As a result of the vulnerability of this legislation to respond to the growing public purchasing needs and increasing heavy criticism from international actors such as the IMF, World Bank and the European Commission, Turkey arrived to a halt where it was an obligation more than a promised objective to adopt a new, broader, more efficient and transparent legislation. In this context, the Public Tender Law was promulgated in 2002 and still it is valid as amended from time to time. The State Tender Law was not abrogated totally with the entry into force of the Public Tender Law and it is still applicable for transactions such as rent, barter or establishment of real rights other than ownership of public institutions which fall in the scope of the State Tender Law. However, good and service purchases and construction works of administrations and public institutions within the scope of the Public Tender Law are governed by this legislation and in such cases provisions of State Tender Law are inapplicable in line with Article 68 of the Public Tender Law.

In this article we will focus on the Public Tender Law and we will especially dwell on its exclusion and debarment provisions and the legal remedies against public tender decisions.

EXCLUSION AND DEBARMENT

Exclusions and debarments from tender procedures are governed by Articles 10, 11, 17, 58 and 59 of the Public Tender Law and also by Articles 20, 21, 22, 25, 26 and 27 of the Public Tender Contracts Law No. 4735 as long as contracts with the administration are concerned.

"Exclusion" and "debarment" are two different concepts under the Public Tender Law. Exclusion represents the condition where the bidder is excluded from a specific tender due to the reasons set forth in Article 10/4(e) of the Public Tender Law. These reasons include among others, the tenderer being bankrupt or wound-up or in a similar condition (in Turkey or if a foreign person or company is concerned, in its own country); being convicted of an offence concerning his professional conduct by a judgement of a competent court within five years preceding the date of the procurement proceedings (including foreign court judgements)3; participating in a tender although being declared as ineligible for participation in tenders in line with Article 11 of the Public Tender Law and being involved in prohibited conducts and actions laid down in Article 17 of the Public Tender Law.

Article 10/4(e) that envisages the exclusion criteria refers to Articles 11 and 17 of the Public Tender Law; therefore these articles should also be addressed while examining the concept of "exclusion" under the Public Tender Law.

By reference of Article 10/4(e) of the Public Tender Law, Article 11 of the same enumerates the persons who, directly or indirectly, in their own name/ on their own account or on behalf of others or as sub-contractors, cannot participate in the tender procedures as "those who have been temporarily or permanently prohibited from participating in public procurements pursuant to provisions of this Law or other laws; and those who have been convicted of the crimes under the scope of Prevention of Terrorism Law No:3713, dated 12.04.1991, or of organized crimes, or of crime of bribing public officials in their own country or in a foreign country"; who has been decided to have declared fraudulent bankruptcy; officers or board members of the contracting authority, people who are assigned with the tender transactions held by the contracting authority and their spouses, relatives up to third degree and marital relatives up to second degree, and foster children and adopters and their partnership and companies (except for joint stock companies where they are not a member of the board of directors or do not hold more than 10 % of the capital).

Article 17, referred to in Article 10/4(e) of the Public Tender Law as well, envisages prohibited acts or conducts as corruption in tender (or attempt to it) by means of fraudulent and corrupt acts; promises, threats, unlawful influence, undue interest, agreement, extortion, bribery or other actions; causing confusion among tenderers, preventing participation, offering agreement to tenderers or encouraging tenderers to accept such offers, conducting actions which may influence competition or tender decision; forging documents or securities or using/attempting to use them; bidding more than once in a tender except cases where alternative offers are allowed; participating in tender proceedings although being prohibited pursuant to Article 11 of the Public Tender Law.

Pursuant to the abovementioned articles of the Public Tender Law, it is seen that the tenderers who participate in tenders although being declared as ineligible, who conduct the prohibited acts or whose conditions correspond with the other criteria in Article 10/4(e) are excluded from the tenders that they participated. However, exclusion does not always trigger the concerned person or entity being "debarred" from participating in other tenders.

"Debarment" is regulated in Article 58 of the Public Tender Law and it represents the condition where the concerned real or legal person is debarred and prohibited for a specific or indefinite period4 of time from bidding in public tenders due to being involved in the acts and conducts specified in Article 17 of the Public Tender Law. Article 58 specifies that the period of debarment ruled as a result of conduct of the acts under Article 17 will be at least one year and up to two years depending on the nature of the prohibited conduct. In case the committed act constitutes an offense under the Turkish Criminal Law, according to Article 59/1 of the Public Tender Law, criminal proceedings are initiated and in case the tenderer is convicted, a debarment sentence for a period of between one and three years will also be applied (the decision will apply to tenders conducted by all governmental agencies and public institutions that are subject to the Public Tender Law). It should be borne in mind that such debarment sentence will be added to the debarment period ruled under Article 58 and will commence following the end of the debarment period that is decided under Article 58.

A crucial point to be noted is that the debarment decisions under Article 58 and 59 do not only have consequences over the tenderer. In line with Article 58/2 of the Public Tender Law, if the tenderer is a sole proprietorship, the debarment decision shall apply to all of the partners and if it is of shared capital, the debarment decision shall apply to the persons or entities having more than half of its capital. In addition, depending on the nature of the tenderer either a real or legal person, in case the tenderer is a partner in a different sole proprietorship, that proprietorship is also debarred and if the tenderer is a shareholder of more than half of the capital of another company, that company is debarred as well.

In light of the foregoing, it can be easily concluded that while exclusion is related only to the specific tender that the concerned bidder has been involved, debarment affects the bidding activities of the tenderer in general.

Debarment can be interpreted as a common way of sanction in Turkey. The charts below demonstrate the number of active debarments between the years 2007 and 2011 and common reasons for debarment between 2009 and 20115.

REMEDIES AGAINST PUBLIC TENDER DECISIONS

There are basically two different ways of challenging public tender decisions and one of these routes involves the obligatory application to the Public Tender Authority. Public Tender Authority is an autonomous public corporate entity founded by the Public Tender Law in 2002 in order to regulate and audit the tenders initiated by public institutions with regard to good and service purchases and construction works and to examine and conclude the related complaints.

Since the Public Tender Authority is not authorized, by law, to deal with the complaints against debarment decisions or cancellation of tender decisions which are not rendered upon complaint, applications against such decisions will be subject to the provisions of the Administrative Procedure Law numbered 2557 and the procedure will be as follows:

  • The relevant party may apply to the administration or ministry that rendered the debarment decision in the first place and request that it is reversed or amended in line with Article 11 of the Administrative Procedure Law;
  • Or the relevant party may directly file an administrative lawsuit against such decision within the scope of the Administrative Procedure Law.

According to Article 7 of the Administrative Procedure Law, the administrative lawsuit against these decisions must be filed within 60 days after the notification of such decision to the relevant party. However, the application filed within the scope of Article 11 of the Administrative Procedure Law ceases the lawsuit filing period. If an Article 11 application is made, the concerned administration or ministry is required to respond to the application in 60 days and if not, the application is deemed as rejected. In this respect, the period of 60 days for filing an administrative lawsuit will continue to elapse starting from the day on which the administration gives a response to the application or at the end of this 60 days if the administration does not respond.

Public tender decisions, other than the abovementioned decisions, which relate to the transactions and acts that occur during the tender process, such as a decision on exclusion or on not signing a tender contract, shall be subject to the complaint procedures before the Public Tender Authority before being brought to administrative courts within the scope of the procedure defined above for debarment decisions.

In line with Article 54/2 of the Public Tender Law, complaint to the tender authority and following that, complaint to the Public Tender Authority6 are obligatory administrative steps that must be exhausted before filing an administrative lawsuit. In line with Article 55/1 of the Public Tender Law, the period for filing a complaint to the administration is 10 days (apart from exceptions regulated for extraordinary circumstances) following the determination of the acts or actions that constitute the subject of the complaint and in any event before the signing of the tender contract. The administration is supposed to render a reasoned decision in 10 days as of the application and notify it in 3 days. According to Article 55/4 of the Public Tender Law, decisions of the administration given upon complaint may be brought to the Public Tender Authority in 10 days following the notification of such decision –in any case before the signing of the tender contract- and in 10 days following the end of the period envisaged for the administration to give a decision if the administration does not rule on the complaint at all.

Although complaint to the administration and complaint to the Public Tender Authority are not frequently resorted remedies due to the short time frames for application, restrictions on reasons for application and application fees which are not returned after the examination even if the application of the complainant is accepted, the applications filed before the Public Tender Authority increase year over year. The data in relation to applications are presented below for your information.

We are of the opinion that extension of application periods and broadening the scope of the examination authority may serve to a better regulated and audited public tender system and also to decrease the workload of administrative courts.

Number of Complaints Filed at the Public Tender Authority7

* The chart shows that there is a general tendency of increase in complaints filed at the Public Tender Authority apart from the exception of a reduction in the year 2009 when compared to 2008, which was the result of a legislative amendment increasing the application fees and decreasing the application period.

Number of Decisions of the Public Tender Authority Regarding Complaints Concerning Public Tender Procedures

* The chart shows a steady increase in the number of the decisions rendered by the Public Tender Authority with respect to complaints filed due to violation of the Public Tender Law and other relevant legislation; apart from the period between 2008 and 2009 which is due to the application fees and decrease of the application period.

Footnotes

1 Public Tender Law No. 4734 published in the Official Gazette dated 22 January 2002 and No. 24648

2 Published in the Official Gazette dated 10 September 1983 and No. 18161.

3 According to Public Procurement Authority decisions, the administration that opens the tender requests from the tenderer to submit the document showing that the tenderer –the Board of Directors' members for joint-stock companies and managers or all of the shareholders for limited liability companies- is not convicted of "an offence concerning his professional conduct by a judgement of a competent court within the five years preceding the date of the procurement proceedings"; if the tenderer is Turkish, the concerned document should be taken from units operating under Turkish Ministry of Justice and if the tenderer is a foreigner it should be taken from the authorized administration of the relevant country. In this respect, it is clear that the judgments of foreign courts will also be taken into consideration by the administrations opening tenders in Turkey if the concerned judgement was registered in the records of the relevant country.

4 According to Article 59/3 of the Public Tender Law, repeat offenders who/which are convicted more than once and companies with shared capital in which these persons directly own more than half of the capital, or sole proprietorships where these persons/entities are partners, will be prohibited from participation in public tenders for an indefinite period of time, by means of a court decision.

5 Source: the (Annual) Activity Reports of the Public Tender Authority dated 2007, 2008, 2009, 2010 and 2011.

6 According to the Public Tender Law, under some circumstances direct complaint application to the Public Tender Authority is possible. For example, tender cancellation decisions which are given upon complaint to administration or complaint to Public Tender Authority or applications regarding wrongful implementation of Public Tender Authority decisions can be directly brought before the Public Tender Authority for examination.

7 Source: the (Annual) Activity Reports of the Public Tender Authority dated 2007, 2008, 2009, 2010 and 2011.

8 665 out of the total number of 4,769 complaints/applications which have been filed at the Public Tender Authority are repetitive complaints/applications.

9 Please note that the repetitive application data is not available in Activity Reports after 2007.

10 897 of the total are final decisions and 700 of them are interim decisions.

11 1892 of the total are final decisions and 1148 of them interim decisions.

12 2469 of the total are final decisions and 1196 of them are interim decisions.

13 3229 of the total are final decisions and 1754 of them are interim decisions.

14 4462 of the total are final decisions and 2622 of them are interim decisions.

15 5276 of the total are final decisions and 3680 of them are interim decisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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