Russia Amends Procurement Legislation

Federal Law of 11 June 2022 No. 160-FZ “On Amendments to Article 3 of the Federal Law “On Procurement of Goods, Works, Services by Certain Kinds of Legal Persons” and the Federal Law “On Contracting System in the Area of Procurement of Goods, Works, Services for State and Municipal Needs” was adopted in compliance with subparagraphs “a” and “b” of paragraph 15 of the National Plan for Combating Corruption 2018 to 2020 adopted by Decree of the President of the Russian Federation of 29 June 2018 No. 378 concerning conflicts of interest in procurement. It makes the following amendments to the procurement legislation:

1. Definition of a “conflict of interest” and “personal interest”

The most notable novelty is the change of the notion of a “conflict of interest” in the context of procurement in line with Federal Law of 5 April 2013 No. 44-FZ “On Contracting System in the Area of Procurement of Goods, Works, Services for State and Municipal Needs” (hereinafter, Federal Law No. 44-FZ). As per the amendments that enter into force on 1 January 2023, a conflict of interest between a bidder and the customer in procurement is a situation, where:

an official of the customer (the head of the customer, a member of the procurement commission, the head of the contracting service of the customer and the contractual manager)
his/her spouse, a close ascendant or descendant relative, siblings and half-siblings (having the same father or mother as the customer), and an individual adopted by an official of the customer or his/her adopter

a natural person (also registered as individual entrepreneur) participating in procurement;
the head, the sole executive body, a member of the collective executive body, the founder, a member of the collective body of the unitary organisation participating in procurement;
the sole executive body, a member of the collective executive body, a member of the collective executive body of the corporate legal person, a natural person owning directly or indirectly (through a legal person or several legal persons) over ten per cent of voting shares of the economic company or share exceeding ten per cent of the charter (aggregated) capital of the economic association or company participating in procurement.

Additionally, the legal act stipulates that the term “personal interest” defined by Federal Law of 25 December 2008 No. 273-FZ “On Combating Corruption” (hereinafter, Federal Law No. 273-FZ) is employed for the purposes of Federal Law No. 44-FZ.

2. Obligation to adopt measures for preventing and managing conflicts of interest

The Law also makes amendments to Federal Law No. 44-FZ and Federal Law of 18 July 2011 No. 223-FZ “On Procurement of Goods, Works, Services by Certain Kinds of Legal Persons” (hereinafter, Federal Law No. 223-FZ), which introduce the obligation to adopt measures for preventing and managing conflicts of interest in line with Federal Law No. 273-FZ for:

the head of the customer;
a member of the procurement commission;
the head and an employee of the procurement service and the contractual manager (in the event that the procurement procedure is carried out under Federal Law No. 44-FZ).

Moreover, a member of the procurement commission is obliged to immediately report that he/she is in a conflict-of-interest situation to the customer, who decided to establish the commission; the latter should, on its side, exclude this individual from participating in the examination of the procurement materials.

3. Composition of procurement commissions

The Law provides clarifications on the list of individuals who cannot be included in procurement commissions in order to prevent conflicts of interest.

In particular, as regards procurement in line with Federal Law No. 44-FZ the list includes:

natural persons who have been engaged as experts in expert assessment of the tender announcement, tender documentation and bids;
natural persons having personal interest in the outcome of the tender procedure (the definition of the contractor), including natural persons who have bided to participate in the selection of the supplier (contractor) and have labour relations with the organisations or natural persons who have made such bids, or are the heads of the organisations that have bided to participate in the selection of the supplier (contractor);
natural persons who are participants (shareholders) of the organisations that have bided for the tender, members of their governing bodies, creditors of bidders;
officials of supervisory bodies exercising direct supervision in procurement.

As for the procurement procedures conducted in line with Federal Law No. 223-FZ, procurement commissions cannot include the natural persons having personal interest in the outcome of the tender (definition of the supplier (contractor) in competitive procurement) and the natural persons who are participants (shareholders) of the organisations bidding for the tender, members of their governing bodies, creditors of bidders and other natural persons in the cases defined by the procurement regulations.