DECISION No 2/2021 OF THE ASSOCIATION COMMITTEE IN TRADE CONFIGURATION

of 8 October 2021

on the positive assessment of Phase 1 as set out in Annex XVI-B to the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other part [2021/1887]

THE ASSOCIATION COMMITTEE IN TRADE CONFIGURATION,

Having regard to the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other part, and in particular Article 146 thereof,

Whereas:

(1)

The Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other part (the ‘Agreement’) was signed on 27 June 2014 and entered into force on 1 July 2016.

(2)

The Preamble to the Agreement recognises the commitment of Georgia to progressively approximating its legislation in the relevant sectors with that of the Union, in accordance with the Agreement and to implementing it effectively, thus contributing to providing the benefits of closer political association and economic integration of Georgia with the Union to all citizens of Georgia including the communities divided by conflict.

(3)

In accordance with Article 147 of the Agreement, the Parties to the Agreement agree that the effective and reciprocal opening of their respective markets is to be attained gradually and simultaneously.

(4)

Pursuant to Article 146 of the Agreement, Georgia is to ensure that its legislation on public procurement is gradually approximated to the Union’s public procurement acquis , and that approximation to the Union acquis is to be carried out in consecutive phases as set out in the schedule in Annex XVI-B to the Agreement.

(5)

In accordance with Article 146 of the Agreement, a decision by the Association Committee in Trade configuration is to be taken for each of the phases set out in Annex XVI-B to the Agreement on the basis of a positive assessment by that Committee.

(6)

Annex XVI-B to the Agreement lays down the requirements to be fulfilled by Georgia for the completion of Phase 1,

HAS ADOPTED THIS DECISION:

Article 1

A favourable opinion is given to the comprehensive roadmap approved by the Government of Georgia in Decree no 536 of 31 March 2016 of the Government of Georgia ‘Concerning the planned changes in the Public Procurement field envisaged in compliance with the obligations between Georgia and the EU within the scope of the Deep and Comprehensive Free Trade Area (DCFTA) Agreement’ as amended by Decrees no 154 of 22 January 2018 and no 974 of 12 June 2020 of the Government of Georgia.

Article 2

A positive assessment is given regarding the completion by Georgia of Phase 1 as set out in Annex XVI-B to the Agreement, based on the reasons provided in the Annex to this Decision.

Article 3

This decision has been established in the Bulgarian, Croatian, Czech, Danish, Dutch, English, Estonian, Finnish, French, German, Greek, Hungarian, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovenian, Spanish, Swedish and Georgian languages, each text being equally authentic.

Article 4

This Decision shall enter into force on the date of its adoption.

Done at Brussels, 8 October 2021,

For the Association Committee in Trade configuration

The Chair

Genadi ARVELADZE

The secretaries

Mariam GABUNIA

Rikke MENGEL-JØRGENSEN

ANNEX

In accordance with Annex XVI-B to the Agreement, referred to in its Chapter 8 on public procurement, the following requirements are to be met for the completion of Phase 1:

(1)

Implementation of the following provisions of the Agreement:

(a)

Article 143(2);

(b)

Article 144;

(2)

Agreement of the Reform Strategy set out in Article 145 of the Agreement.

Requirement (1)(a):

With regard to the first part of the first requirement, Article 143(2) of the Agreement provides that:

‘Georgia shall designate in particular:

(a)

an executive body at central government level tasked with guaranteeing a coherent policy and its implementation in all areas related to public procurement. That body shall facilitate and coordinate the implementation of this Chapter and guide the process of gradual approximation to the Union acquis , as set out in Annex XVI-B to the Agreement;

(b)

an impartial and independent body tasked with the review of decisions taken by contracting authorities or entities during the award of contracts. In this context, ‘independent’ means that that body shall be a public authority which is separate from all contracting entities and economic operators. There shall be a possibility to subject the decisions taken by this body to judicial review.’.

The requirement under Article 143(2)(a) of the Agreement was completed on 23 April 2014 by Decree no 306 of the Government of Georgia.

The central executive body at Georgian central government level tasked with guaranteeing a coherent policy and its implementation in all areas related to public procurement is the State Procurement Agency (SPA) of Georgia. The SPA is an independent legal entity under public law, authorised to ensure compliance with and fulfilment of the provisions of the Law on State Procurement (PPL).

The SPA was established by Decree no 223 of 5 June 2001 of the President of Georgia, which was based on the PPL adopted on 9 December 1998 by the Parliament of Georgia. The SPA later merged with the Georgian Competition Agency (GCA). After signing of the Agreement, in order to fully meet its requirements, the SPA and GCA have been divided into two separate institutions. Accordingly, the current status of the SPA was determined by Decree no 306 of 23 April 2014 of the Government of Georgia.

The activities of the SPA are governed by the Constitution of Georgia, international agreements including the Agreement, Georgian law and the Statute of the SPA. State control over the activities of the SPA is implemented by the Government of Georgia. The Government of Georgia also approves the SPA’s structure and Statute.

The chairperson of the SPA is appointed and removed by the Prime Minister of Georgia.

The staff of the SPA is recruited and promoted in accordance with the Georgian Labour Code. The total number of permanent staff is currently 123, and 22 employees are hired on a limited period contract basis which seems adequate given the functions the SPA currently performs.

The SPA has built a strong reputation within the Georgian government administration, as well as among International Financial Institutions, the donor community and international stakeholders, for exercising its duties and responsibilities in an efficient and effective manner. The SPA plays a central role in facilitating and coordinating the implementation of obligations under the Agreement, and guides the process of gradual approximation to the Union acquis , as set out in Annex XVI-B to the Agreement. The SPA has the capacity to effectively support the development of the public procurement system (including the legal landscape and whole economic system) in Georgia.

The range of functions that Georgian law confers to the SPA covers the general requirements recommended in international practice for such institutions in order to support the improvement of the legal framework and to strengthen the operational capacity at the level of contracting authorities and economic operators. Regulatory function, monitoring function, help-desk and training functions are adequately exercised by the SPA.

The additional functions of the SPA are the following:

—

to monitor the public procurement process;

—

to prepare and issue subordinate normative acts to govern the public procurement process;

—

to study and analyse the situation in the procurement system based on the reports received from contracting authorities and to submit proposals to the Government of Georgia to make relevant decisions;

—

to prepare standard and special training programmes and methodological tools, and to hold seminars and training for central and local self-government authorities, mass media representatives and other interested persons;

—

to create, update and supervise a unified procurement database;

—

to provide advisory services to contracting authorities;

—

to support the introduction of modern information and communication technologies in the procurement system;

—

to support the functioning of the Unified Electronic System of Public Procurement and to ensure electronic document flow during procurement proceedings;

—

to consider disputes arising during procurements;

—

to supervise the lawfulness of procurement procedures and to determine the policy for regulating procurement proceedings;

—

to maintain the Black List and White List;

—

to identify and/or integrate a procurement object into the classification system;

—

to conduct consolidated tenders for certain procurement objects;

—

to prepare an annual report on its activities and submit it to the Government of Georgia by 15 May of each year and to publish that report on the SPA’s website.

The requirement under Article 143(2)(b) of the Agreement was completed on 2 July 2020 by the Law of Georgia no 6730.

By the Law of Georgia no 6730, the former review body ‘Dispute Resolution Council’ (formal translation from Georgian) was abolished and a new independent and impartial public body was established. The newly established administrative body will function as a review body concerning complaints regarding public procurement, public private partnerships and concession activities. The amendments made by the Law of Georgia no 6730 also applied to issues related to awarding contracts through ‘simplified’ (direct, single-source) procurement, e.g. to the procedure of seeking approval of the State Procurement Agency for carrying out public procurement transactions through ‘simplified’ procurement upon ‘urgent necessity’.

The provisions of the Law of Georgia no 6730 provide for appropriate guarantees related to independence and impartiality as required by Article 143(2)(b) of the Agreement.

Requirement (1)(b):

With regard to the second part of the first requirement, according to Article 144 of the Agreement the Parties shall comply with a set of basic standards for the award of all contracts as stipulated in paragraphs 2 to 15 of that Article on publication, award of contracts and judicial protection. Those basic standards derive directly from the rules and principles of public procurement, as regulated in the Union public procurement acquis , including the principles of non-discrimination, equal treatment, transparency and proportionality.

These principles have been incorporated into Georgian public procurement rules with the introduction of an e-procurement system in 2010 and the adoption of amendments to the PPL by the Law of Georgia no 617 of 6 April 2017.

In 2010, Georgia introduced an e-procurement system by creating the so-called ‘GE-GP’ – the Georgian ‘Unified Electronic System of Public Procurement’. Since the introduction of the e-procurement system, 100 % of public procurement in Georgia is conducted via e-procurement, which ensures transparency and stimulates competition. Transparency of the e-procurement system fully complies with Union requirements of publication principles, as all information on tender notices and contract awards are fully transparent without any restrictions.

In order to meet some of the other basic standards of Article 144 of the Agreement and to address the non-compliance of the PPL, the SPA prepared draft amendments to the PPL. The Government of Georgia approved the proposed amendments in December 2016 and subsequently forwarded them to the Parliament of Georgia. Those amendments were adopted by the Parliament of Georgia on 6 April 2017 by the Law of Georgia no 617. The amendments concerned the following key directions: (a) basic principles; (b) technical specifications; and (c) time limits.

(a)

The amendment to the PPL concerned Article 2(c) and Article 13 of the PPL in order to introduce the principles of equal treatment and proportionality, which were not explicitly mentioned.

(b)

The amendment to the PPL concerned Article 12-1(6) of the PPL in order to introduce the use of general descriptions of performance, technical and/or functional criteria for defining the characteristics of the works, supplies or services required. Pursuant to the new provision, contracting authorities will be able to draw up specifications on the basis of performance, technical and/or functional criteria, thus allowing the submission of tenders that reflect the diversity of technical solutions in the marketplace. It was specified that preference is to be given to the performance and functional criteria when drawing up the tender requirements.

(c)

The amendment introduced reasonable time frames for the calls for tender and for familiarisation with the terms of tender.

Those amendments to the PPL entered into force on 19 July 2017. New amendments have also increased time limits for submission of tenders below the Union thresholds. Currently time limits for each type of procedure, under and above Union thresholds, are as follows:

Requirement (2):

With regard to the second requirement of Phase I as set out in Annex XVI-B to the Agreement, the approval of a roadmap as set out in Article 145 of the Agreement is necessary. Article 145(1) of the Agreement provides that, prior to the commencement of gradual approximation, Georgia is to submit to the Association Committee in Trade configuration a comprehensive roadmap for the implementation of Chapter 8 of Title IV of the Agreement with time schedules and milestones. That roadmap, which according to the Agreement is to comply with the phases and time schedules set out in Annex XVI-B, is to include all reforms in terms of approximation to the Union acquis and institutional capacity building.

On 31 March 2016, the Government of Georgia approved the roadmap through Decree no 536 ‘Concerning the planned changes in the Public Procurement field envisaged in compliance with the obligations between Georgia and the EU within the scope of the Deep and Comprehensive Free Trade Area (DCFTA) Agreement’. That Decree was amended by Decrees no 154 of 22 January 2018 and no 974 of 12 June 2020 of the Government of Georgia.

The roadmap includes all reforms in terms of approximation to the Union acquis and institutional capacity building and complies with the phases and time schedules set out in Annex XVI-B to the Agreement in accordance with Article 145 of the Agreement.