While watching the cheerful vaudeville surrounding Right Cause (a Russian political party), we got a bit distracted from something no less important—possibly even more important: the draft law on the Federal Contract System. This is the very law that, if passed, will determine how 5 trillion rubles a year of our money allocated to government procurement is spent. The first attempt to push the FCS through was made in the spring, unsuccessfully. Many of you followed it. At times, it was even entertaining. A few episodes: I wrote a post that offended the Higher School of Economics and the Ministry of Economic Development They challenged me to a debate The debate took place, and far more people followed it than are usually involved in discussions like this (230,000 views of the full version on YouTube), which is good in itself. We should not overestimate the role of that debate in the fact that the FCS was temporarily beaten back, but it is a fact that public discussion of the issue—online and in the media—played an important part. So I suggest we not forget about this topic and keep a close eye on what is happening. Here is what is happening now.
The Ministry of Economic Development realized it could not force this through in one quick rush. They made some changes to the FCS draft law and put it up for public discussion. The first results of that discussion are summarized here. This time, the PR component is being used actively: FCS supporters from the Ministry of Economic Development and the Higher School of Economics are speaking up in support of the draft wherever they can. That is absolutely right. That is exactly how it should be done. We (from here on, I am writing on behalf of RosPil) fully accept those rules of the game. However, although the ministry is acting in a much more proper way procedurally than before, the substance of its proposal is just as unacceptable as it was previously. The adoption of the FCS will worsen the already bleak situation in government procurement; become a real gift to crooks rubbing their hands in anticipation of already announced mega-projects into which vast sums will be pumped; bring no additional efficiency whatsoever; remain driven, as before, by lobbying groups and by ministry officials themselves, who are eager to redistribute powers in their own favor; make all the declarations about proposed “public oversight measures” nothing but sheer duplicity, deception, and fiction. So that RosPil cannot be accused of blanket criticism, and since the ministry has announced the start of “public discussion,” we prepared a detailed and substantive analysis of the FCS draft law in the form of comments on it and officially submitted it to the ministry. Anyone interested can read it here. Let me lay out some of the key points from our document. Anyone can verify that they are accurate by reading the draft law: The draft law significantly expands the list of procurement methods. open tender; tender with limited participation; two-stage tender; electronic auction; request for quotations; request for proposals; etc. In most cases, the choice of procurement method is left to the discretion of the contracting authority; the draft law does not establish clear criteria for when one method or another should be used. For example, the contracting authority may use a two-stage tender procedure if it concludes that discussions with suppliers are needed to clarify certain characteristics of the procurement object (Article 51). These “discussions” are not regulated the way they should be. And we understand very well what “discussions” mean in the grim reality of Russian public procurement. Introducing the possibility of awarding contracts through a “tender with limited participation” will allow the contracting authority to weed out participants at the prequalification stage, before bidding even begins. This is simply the dream of our officials. They are constantly trying to do this already, and RosPil keeps catching them at it. The ministry is proposing to legalize this practice. The choice of this procurement method in each specific case remains with the contracting authority itself—Part 2 of Article 50 contains only a general recommendation on using this method and does not include strict criteria. The draft law introduces a “request for proposals”—a procurement method under which the contracting authority independently chooses the winner after negotiations. If the draft at least spelled out what those negotiations should look like, what rules should govern them, and what oversight there would be, then it could be discussed further. But none of that is there. At the same time, the choice of this procurement method is also left to the contracting authority’s discretion if “the procurement procedures previously conducted by the contracting authority were declared unsuccessful and the contracting authority reasonably concluded that repeating the procurement procedures would be impractical in view of the urgency of the procurement” (Article 74). The FCS draft law contains a large number of contradictory and ambiguous provisions. One example is Part 7 of Article 30 of the draft law. The contracting authority may remove a participant in procurement procedures from the relevant procurement procedure and from prequalification at any time before the contract is signed if it discovers that the participant provided, among other things, contradictory information regarding its qualifications. It is obvious that this clause makes it possible to kick out of a tender anyone they do not like. The draft law contains an unjustifiably narrow definition of a participant in procurement procedures: only persons who have submitted applications to participate in procurement procedures are recognized as such (Part 1 of Article 3). This definition breaks with established practice and significantly, unjustifiably narrows the rights of business entities compared with the existing provisions of Federal Law No. 94-FZ, under which any person could appeal violations of the law. For example, RosPil has reviewed plenty of cases where participants simply could not submit an application because the tender documentation did not specify the volume of work. Under the FCS rules, they will be unable both to submit an application and to file a complaint. Right now, any of us can file complaints, and RosPil makes use of that. If the FCS is adopted, that will be prohibited. It is clear that participants in public procurement are often simply afraid to complain—they do not want to damage their relations with officials. At the moment, they can tip off RosPil or submit a complaint themselves through a third party or organization. That possibility will be eliminated. The crooks will be able to breathe easy. There will be no complaints. The draft law contains a significant number of gaps precisely in the areas for which the FCS is supposedly being adopted (judging by the ministry’s rhetoric): there is no regulated procedure for monitoring whether state or municipal needs are properly justified; the text of the draft law does not make clear what the consequences are if those needs are improperly justified. Someone buys a gold bed. Fine, they buy it. Under the FCS, there is no way to punish them for their love of gold beds. The public oversight that ministry representatives talk about in every interview is a complete sham. Everything is built around some kind of public councils. Remember this, my friends: whenever an official talks about oversight through a “public council attached to something or other,” what they always mean is fraud. These public councils should be banned outright. They replace formal procedures with some kind of idiocy. The best illustration of such public councils is the Defense Ministry’s council and its former chairman, Nikita Mikhalkov (“give me a flashing blue light,” a jab at his reputation for privilege). Today you behave well—they include you on the council. Tomorrow they remove you: nothing personal, just “part of the rotation process.” Today you are a public organization; tomorrow the Justice Ministry—the same ministry whose tender you appealed—comes to inspect you, finds violations, and suddenly you are no longer a public organization. Today they include RosPil (which, by the way, is not a public organization) on a public council, and tomorrow they throw it out because Navalny is a political extremist and insulted Putin. We do not need any idiotic public councils as a handout to society. We do not want to sit on any councils. Give us a normal, formal right to file complaints, with a formal review procedure. Heard—decided. Complaint—response within the prescribed time limit. Disagree—go to court.
To sum up: The Ministry of Economic Development’s approach to discussing the FCS is correct and proper. The FCS is completely unacceptable and is unlikely to be improved through amendments. The FCS has nothing to do with the ideas being invoked to lobby for it. All the public activity around it is based on the assumption that no one will bother to read it—which is exactly what happens in practice. The adoption of the FCS will lead to a level of chaos and corruption that will make the current chaos and corruption look mild by comparison. The FCS contains almost no clear rules or procedures. Everything is vague and slippery. Everywhere there is that notorious “presumption of official good faith.” A paradise for people in offices. The public procurement system does need to be changed. The sensible way to do that is on the basis of the current Law No. 94-FZ, which is heavily criticized (by us as well), but which is at least built on sound principles and provides for formal procedures with formal accountability. The Federal Antimonopoly Service is now expected to publish its package of amendments to 94-FZ, and RosPil will submit its own proposals for amendments. I suggest everyone do the same. I urge everyone to take an active part in discussing the FCS and to work to prevent its adoption. We need to involve as many participants in the discussion as possible. It may be somewhat boring and, at times, tedious, but it is fundamentally important for all of us.