The Impact of Changes in Legislation on Competition in Public Procurement

This article analyzes the most significant changes in Federal Law No. 44-FZ “On the Contract System for the Procurement of Goods, Works, and Services for State and Municipal Needs” over the past ten years and the risks they pose to the public procurement system. An analysis of consolidated procurement monitoring reports since 2019 reveals some unfavorable trends in public procurement including: a 40% increase in the number of unsuccessful tenders even though their total value remained steady (which indicates that tenders from small and medium-size suppliers became less competitive); 29% fewer tenders submitted on average at the same time as expenditures were cut in half and 70% more contracts were terminated even as their value increased by 40%. These trends were even worse for the construction sector. This indicates a correlation between the legislative revisions and decreasing competition in public procurement; however, demonstrating a causal relationship would require an analysis of non-legislative factors that might influence competition, which is beyond the scope of this article. Steps recommended to increase competition in tenders are: easing restrictions on participation of foreign manufacturers in procurement; reintroducing electronic auctions for construction projects; reducing the qualifications required for construction contractors under contracts worth up to 500 million rubles; prohibiting executive bodies from providing additional justifications for procurement from a single supplier or arbitrarily increasing contractual payments while the contracts are still being executed; and rejecting single contracts that cover both design and construction.

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