SmartTender Lawyers

In this material, prepared based on the webinar of SmartTender lawyers dated June 24, 2021, we suggest that you familiarize yourself with examples of public procurement appeals that are related to the customer's decision to cancel the tender.

According to the Law "On Public Procurement" (hereinafter — the Law), there are 4 grounds on which the customer can cancel the tender or declare the auction invalid:

1. Reducing procurement costs.
2. No further need for the purchase of goods, works, or services.
3. The impossibility of eliminating violations resulting from violations of legislation in the field of public procurement.
4. The force majeure circumstances.

Total Stats

During the year of the new version of the Law, as of June 24, 377 complaints about the cancellation of the procurement procedure were considered, and the total percentage of satisfaction on them was 87%. Given that the average rate of positive decisions on all complaints received by the AMCU is 68-70%.

Roughly speaking, only 13 out of 100 trades are legally canceled by the organizers. From this, we can conclude that customers should carefully justify the reasons for canceling the tender, according to the procurement regulations.

The percentage of satisfied complaints on each of the grounds as of June 24 was as follows:

1. The impossibility of eliminating violations – 92%.
2. No further need – 90%.
3. Reducing procurement costs – 68%. Such cases are not easy to dispute, so the refusal rate for them is quite high.

Over the past year, customers have used the force majeure circumstances basis only a few times, which indicates a low level of demand for it. Therefore, we will not consider it in the article.

SmartTender Lawyers

Cancellation of the Purchase Due to the Impossibility of Eliminating Violations

Decision No. 8918-р/пк-пз dated 04/23/2021

In procurement UA-2021-01-21-005575-b, the customer canceled the bidding at the stage when the winner had already been selected. According to the terms of the tender documents, the participants were supposed to use the QES to sign their proposals, but the winner applied the AES. At first, the customer did not pay attention to this point, and only at the stage "Proposals considered" learned that the AES cannot be considered an analog of the QES. He decided to cancel the procedure, arguing that the customer cannot reconsider his decision on the possibility of rejecting the winner's proposal, except for the cases specified in clause 3 of part 1 of Art. 31 of the Law. That is, in the opinion of the customer, he does not have the right to “roll back” to the stage of evaluating proposals and reconsider his decision, and therefore must cancel the bidding.

The participant selected as the winner decided to appeal the cancellation of the procedure, but chose a not entirely correct strategy: in the text of the complaint, he agreed that the customer had no right to revise the decision. Although he had no legal grounds at all to cancel the purchase for this reason – the AMCU repeatedly said in its decisions that the law does not prohibit the customer from reconsidering his decision.

Consequently, both legally and technically, the customer has the opportunity to "roll back" from the "Proposals considered" stage to the "Qualification" stage. Since the organizer did not prove and did not documentary confirm the legality of the cancellation of the tender, the AMCU Board satisfied the complaint and obliged him to restore the procurement procedure.

Cancellation of Purchase Due to Lack of Further Demand

Decision No. 9843-р/пк-пз dated 05/05/2021

Juices were purchased in procurement UA-2021-01-15-000307-b. In response to the complaint filed with the AMCU, the customer argued for the cancellation of the auction with the following facts:

- the term of the procedure was delayed due to several appeals, and there is no longer a need for such volumes of goods;
- due to the strengthening of quarantine measures, students were transferred to distance learning, and the vacation period was extended, respectively, the demand decreased;
- during the appeal, a negotiated procurement procedure was carried out by 20%;
- it became necessary to change the packaging of juices from glass containers to tetrapak.

This is a very interesting point. The organizer cancels the purchase due to lack of demand, but at the same time says that he needs to reduce the volume of the purchase. Accordingly, the need has not disappeared, its volumes have simply changed. What prevents the customer from agreeing with the winner, and then signing an additional agreement for a smaller volume, proportionally reducing the purchase price? Such arguments work well for the AMCU, and therefore such complaints are always satisfied.

So it happened in this case: the AMCU Board satisfied the complaint since the customer did not prove and did not document the legality of the cancellation of the procurement procedure.

That is why we emphasize: if the customer plans to cancel the bidding, he needs to approach the selection of arguments very carefully, otherwise, the AMCU will oblige him to cancel the protocol on the cancellation of the procurement procedure.

Cancellation of Purchase Due to Cost Cuts

Decision No. 9848-р/пк-пз dated 05/05/2021

In the procurement of tires and axles for wheelsets UA-2021-02-11-005870-c, the customer formed a protocol on the cancellation of tenders based on cost reduction, where he referred to the number and date of the Decision of the City Council session published on the Internet. In response, the participant filed a complaint and noted that the customer did not provide the text of the Decision, therefore, did not document in any way the legality of the choice of such a basis for canceling the bidding.

When considering the complaint, the customer argued for his actions:

- submitted the text of the Decision for consideration by the AMCU Board;
- added in the comments that the Decision is public and published on the website of the city council, and confirmed this by linking to it on the Internet;
- stated that, according to the decision, the allocation of funds from the local budget for the purchase of tires and axles is reduced and in 2021 is not provided;
- provided a copy of a memo from the director of the production on the need to send part of the funds for the purchase of other parts and materials for tramcars.

The customer treated the provision of arguments very responsibly, due to which the AMCU Board rejected the complaint and recognized the decision to cancel the tender lawful.

In our opinion, this example is almost a reference one that should be applied by every organizer, proving the legitimacy of the choice of grounds for canceling the auction. But for suppliers, this is a reminder that the customer, in response to a complaint, can always get a trump card out of his sleeve, which will not leave any room for maneuvering in the appeal.

Therefore, be careful when preparing for an appeal and it is better to first consult with SmartTender lawyers regarding its appropriateness. This will help you formulate your complaint as accurately as possible and save your funds.

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