Amendments In Kazakhstan's Public Procurement Legislation

On 01 January 2025, new public procurement legislation came into effect:

• The Law of the Republic of Kazakhstan dated 01 July 2024 No. 106-VIII "On Public Procurement" (hereinafter referred to as the "Law"); and
• The Order of the Minister of Finance of the Republic of Kazakhstan dated 09 October 2024 No. 687 "On Approval of the Rules for Public Procurement" (hereinafter referred to as the "Rules").

These reforms are expected to address longstanding issues in the procurement system, such as excessive procedural timelines, frequent appeals, lack of transparency, and inefficiencies in budget spending.

Normally, the public procurement process generally involves:

1. Planning procurement activities;
2. Selecting a supplier and concluding a contract;
3. Executing the contract.

The new legislation aims to streamline tender procedures, improve the quality of procured goods, works, and services, and enhance support for domestic producers. It introduces a quality-first approach over price-driven procurement and mandates that all state and quasi-state organisations use a unified procurement platform.

Below is a summary of key changes in the public procurement system.

1. Shortened Procurement Timelines

The duration of procurement procedures has been significantly reduced:

• Discussion of tender documentation – reduced from 5 to 2 working days;
• Submission of applications – shortened from 15 to 5 working days;
• Review of applications and announcement of results – cut from 10 to 3 working days.

2. New Criteria for Declaring a Tender Valid

Under the revised rules, a tender will be considered valid even if only one bid meets the qualification requirements. Previously, tenders were annulled if fewer than two bids were received. This change is particularly relevant in regions where the number of suppliers is limited.

3. Removal of Preliminary Application Screening

Starting in 2025, preliminary admission procedures for supplier applications have been eliminated. Previously, this step allowed suppliers to correct errors in their applications to avoid unfair disqualification. Removing this stage may increase corruption risks, as appeals are reviewed by the same entity that made the initial decision. Additionally, the likelihood of higher procurement costs due to rejected competitive offers has increased.

To mitigate negative consequences, additional oversight mechanisms should be implemented to ensure transparency and fairness in procurement procedures.

4. Expansion of Direct Procurement Cases

The new law broadens the circumstances under which procurement from a single source is allowed. New grounds include:

• Offtake contracts – long-term agreements with domestic producers that facilitate advance production planning;
• Procurement for emergency prevention – previously, direct procurement was only allowed for disaster relief; now, it is permitted for prevention as well;
• Low-value procurement – purchasing thresholds without a competitive tender have been set at 100 Monthly Calculation Indices (MCI)¹ for goods and 500 MCI for works/services;
• Rural administration procurement – the threshold for direct procurement by rural akimats has increased from 3,000 to 4,000 MCI.

5. Priority for Small and Medium-Sized Enterprises (SMEs) and Domestic Suppliers

Procurement contracts valued up to 50,000 MCI will prioritise SMEs.

Additionally, the preference for domestic suppliers remains in place. Exemptions from the national treatment principle on the public procurement web portal allow for the prioritisation of Kazakhstani suppliers.

6. Restrictions on State and Quasi-State Entities in Procurement

To promote fair competition, bids from state and quasi-state entities will be automatically rejected by the web portal if there are at least two private-sector bidders.

Further, the calculation of conditional discounts has been revised:
● The territorial preference coefficient has increased from 1% to 2%.
● Negative discount values have risen from 0.1% to 0.2%.

If at least two private-sector bidders participate, bids from state and quasi-state entities will be automatically disqualified.

7. Public Monitoring of Construction Projects

To enhance transparency, construction schedules and contract execution reports will now be publicly accessible, allowing public oversight of infrastructure projects.

8. Implementation of "Turnkey" Construction Contracts

EPC contracts (Engineering, Procurement, Construction) have been introduced, enabling contractors to manage projects comprehensively, from design and procurement to construction and commissioning. Additionally, subcontracting is now capped at 30% (previously 50%).

9. New Appeals Process

Complaints will now be reviewed directly by the procuring entity, expediting dispute resolution. However, in tenders utilising an automated rating and scoring system, pre-litigation appeals will not be permitted, which may lead to an increase in court cases.

10. Automated Supplier Evaluation System

New registers will track potential suppliers and their work experience.
A supplier rating system will be introduced based on:
● Qualifications,
● Financial stability,
● Litigation history, and
● Other relevant indicators.

While the final decision will generally remain with the tender committee, in some sectors (e.g., construction, design, and technical supervision), winners will be determined automatically.

In this regard, we additionally remind that the public procurement qualification participation requirements for suppliers and subcontractors must meet the qualification criteria outlined in Article 11 of the Law, include:

• Legal capacity (for legal entities) and civil capacity (for individuals);
• No pending bankruptcy or liquidation proceedings;
• Sufficient material, labour, and financial resources to fulfil contractual obligations, with no overdue wage payments;
• For works and services procurement, the procuring entity may require suppliers to have material and labour resources registered within the administrative-territorial unit where the contract is to be executed. Non-resident suppliers must provide equivalent documents to demonstrate compliance with qualification requirements.
• Proven relevant work experience;
• Financial stability and no outstanding tax liabilities exceeding six times the MCI set for the respective financial year.

Financial stability is assessed automatically via the web portal, using data on income, taxes paid, fixed assets, and payroll. Additional financial stability criteria may apply to tax-exempt entities.

The combination of financial stability indicators is not allowed, except for fixed assets and payroll funds, which may be aggregated under the condition that the primary business activity of the merged legal entities has remained consistent for the past three consecutive years within the same sector of the national classification of economic activities.

Footnote

1 As of 3 March 2025, 1 MCI is KZT 3932, which is approximately USD 8.

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.