It is expected that public procurement will become more flexible and simpler as a result of the adoption of the new Public Procurement Law, in effect as from 1 May 2006. By adopting the Public Procurement Law, Latvia has implemented the directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts. The Public Procurement Law has replaced the Law on Procurement for State and Municipal Needs, effective as from 1 January 2002.
The overall goals of the Public Procurement Law are simplification, modernisation and flexibility of public procurement in order to ensure that the procurement rules are effective, user-friendly, provide the right set-up for getting value for money and ensure fair and equal competition. It is likely that this has been achieved by greater clarity of the law, introduction of new procurement mechanisms and enhanced transparency. While the effectiveness of the new law will need to be tested in practice, it has at least made a good effort to render the procurement procedure less cumbersome and bureaucratic.
A much disputed novelty introduced by the Public Procurement Law is the increased threshold amounts for public contracts. While previously the public procurement rules applied to any contracts in excess of 1000 lats, the Public Procurement Law has increased that threshold up to 10 000 lats. Any contracts below that threshold will however be subject to publication of an informative notification on the contracting authority’s website or in the local newspaper as well as to certain rules approved by the Cabinet of Ministers.
The list of the new procurement mechanisms introduced by the Public Procurement Law includes framework agreements, i.e., agreements with the purpose to establish the terms governing contracts to be awarded during a given period. While the use of framework agreements was permitted already under the Law on Procurement for State and Municipal Needs, that law failed to provide a detailed regulation of the application of the framework agreements. The law leaves room for the contracting authorities to choose whether to involve one or more companies in the framework agreement and whether to settle everything from the outset or to reopen competition when there is a need for specific contract.
The Public Procurement Law also approves the use of central purchasing. By enabling the supplies and services to be acquired through a central purchasing body, the central purchasing allows the contracting authorities to gather their administrative resources and to profit by large scale contracts. A pilot project of the centralised purchasing was launched in Latvia already before the adoption of the Public Procurement Law with the purpose to test the pros and cons of such procurement method. The approval of the use of central purchasing by the Public Procurement Law suggests that central purchasing will most probably become more widely employed.
Another new procurement mechanism introduced by the Public Procurement Law is electronic reverse auctions. The contracting authorities are allowed to decide that, after an initial full evaluation of the tenders, the award of a public contract be preceded by an electronic auction. The use of electronic auction is however allowed only when the contract specifications can be established with precision. In case the auction is based on the price, the prices proposed by the participants of the auction are revised downwards. The information regarding the tenderers’ relative rankings and, if the contracting authority so decides, also information concerning the other prices or values submitted and the number of participants in each phase of auction, is available to the tenderers. In the light of it, the use of electronic auctions is likely to increase transparency and facilitate the getting the best value for money.
The dynamic purchasing systems is another novelty. The method is defined as "a completely electronic process for making commonly used purchases, the characteristics of which, as generally available on the market, meet the requirements of the contracting authority, which is limited in duration and open throughout its validity to any economic operator which satisfies the selection criteria and has submitted an indicative tender that complies with the specification". The dynamic purchasing systems will ensure that the contracting authorities are able to process information relating to a large number of companies and the companies can easily find information relating to procurements.
As part of promotion of e-procurement, the law allows the contracting authority to decide to use electronic means of communication. The use of electronic communication is however currently impossible due to the fact that the implementation of electronic signature has not yet been fully accomplished.
By introducing a list of example criteria for the award of contracts where the award is made to the most economically advantageous tender, the Public Procurement Law aims to encourage the contracting authorities to take into account a wide range of issues rather than base the award on the lowest price only. However, the introduction of the average amount of social security insurance payments as one of the criteria may not be in line with Article 53 of the directive 2004/18/EC, as that Article requires that the criteria be linked to the subject-matter of the public contract in question.
The Law on Procurement for the Needs of Public Utilities Providers, implementing the directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 co-ordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors, will continue to provide a parallel set of procurement rules in respect of public utilities providers operating in the water, energy, transport and postal services sectors.
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