The Verkhovna Rada of Ukraine has passed a new version of the Law “On public procurement” (Draft Law No. 11520) that stipulates a comprehensive update of the procurement system considering European standards and postwar recovery needs.

The document will be one of the key European integration instruments and simultaneously, a part of changes that adapt Ukraine to implementing large infrastructure projects and handling international funding.

The new law broadens the range of procurement tools and introduces new mechanisms to work with complex projects including, in particular, framework agreements, dynamic procurement systems, competitive dialog, innovative partnership, and other approaches already being applied in Europe.

Let us go into more detail about the public procurement innovations related to construction and primarily, construction engineering, and start with terminology.

• The new law does not contain the traditional concept of “construction-supporting services” and clearly and unambiguously refers all procurement subjects to “services” except for goods and works.

It is crucial to understand the nature of engineering consulting services correctly as it is no construction work contract whose output is delivered to the client at the end, but a service agreement subject to which the services are consumed during their provision and have no measurable output. This is a basis for approaches to concluding and delivering the contract and effecting the payments for intellectual services.

Referring to the consulting engineer’s services as “works” in the currently valid law still did not change the result of their provision or cancel the legal nature of the concluded contract agreement. Hopefully, the new law will put a period to this debate.

• The new law pays significant attention to the term “works” and construction contract.

Article 1 states that “works are the result of construction or engineering and installation work that is sufficient to fulfill an economic or technical function.” In terms of a legislative term, it is quite a broad interpretation, so it may be the reason why is it further clarified:

– the construction contract’s scope includes the work execution or execution of work and elaboration of design documentation. As we can see, it is still possible to organize the construction under the “design-build” model;

– the definition of “public contract” details that the construction contract means the contract whose scope includes one of the following:

1. a) execution or design and execution of work related to at least one of activities mentioned in the appendix to this Law;
2. b) execution or design and execution of other work whose output is construction of new facilities, reconstruction, rehabilitation, or restoration of the existing facilities;
3. c) creation by any means of a construction facility that meets the requirements set by the client that exercises a decisive influence on the type or design of such a facility.

– appendix to the new law lists the types of work that can be the subject of procurement by the classes and codes according to the Single Procurement Directory.

• A new thing in public procurement in construction is the design competition – a separate procedure to select the best architectural planning, technical, engineering, and artistic design offer in the field of urban development, architecture, visual art, and territory development planning.

Design competitions can be held as open contests or restricted participation competitions based on evaluation results on the basis of the criteria and methodology established by the competition’s documents, including the jury rating. Extending this procedure to engineering services (the word “engineering” is included in the definition) needs additional study and the procedure itself, described in Chapter III of the new law, needs profound research.

• Application of non-price criteria for procurements based on the best price and quality ratio is legislated in more detail:

– the law stipulates that the Government shall approve the methodology of using the tender evaluation criteria if non-price criteria are applied;

– it states that the criteria are deemed linked to the procurement subject if their application ensures extra advantage (benefit) by specific indicators, features, or conditions set by the client;

– until 31.12.2027, the price criterion’s percentage remains limited, i.e. 70% for open biddings and dynamic procurement system and 40% for other types of procurement procedures. It is not yet clear how the share of non-price criteria will be calculated after that date.

• At first sight, there are more possibilities to amend the concluded contracts (Article 56 of the new law). For example, the contract can be amended without holding any new procurement procedure in the event an additional scope of work or services needs to be obtained from the same economic operator amounting up to 50% of the initial contract price.
• It is allowed for associations of economic operators to go bidding without establishing a legal entity. The current law envisages such an opportunity only for associations of non-resident legal entities. And now it is even possible to have an association of natural persons, sole traders, and legal entities (both residents and non-residents) on the basis of an agreement of intent, letter of intent, or other document stipulating an intention to make a joint activity contract aimed at participating in a specific procurement.

An economic entity can take part in a competitive procurement independently or as part of only one association, while the client is not allowed to demand that the association has a specific organizational and legal form to submit its tender.

In general, the project implementation system in Ukraine is gradually shifting from simple procedures to a much more complex administration model integrated in international approaches and requirements.

As a matter of fact, recovery needs not only financing or individual decisions, but an ability to work with complex projects as a holistic system. Thus, the consulting engineer’s role is gaining importance, and new legislation requires professional engineering consultancy in construction projects, including the stage of procurement.

As a reference: the new law is currently being prepared for submission to the President of Ukraine. If signed, it takes effect on the day following the publication date and is enacted nine months after taking effect.