Turkey: New Amendment To The Public Procurement Law And Public Procurement Contracts Law

Last Updated: 5 March 2019
Article by Döne Yalçın and Duygu Ozturk

The Law on Amendments to Tax Laws and Other Laws and Statutory Decrees was published in the Official Gazette numbered 7161 ("Law No. 7161") on 18 January 2019. The amendments contained in Law No. 7161 are mostly intended to regulate tax laws and law on financial stability and certain regulations. In addition to these amendments, Law No. 7161 introduced significant amendments to the Public Procurement Law numbered 4734 ("Law No. 4734") and Public Procurement Contracts Law numbered 4735 ("Law No. 4735").

Key amendments to Law No. 4734

First, Law No. 7161 adds more exceptions to the application area of Law No. 4734. Pursuant to Law No. 7161, for institutions that are covered by Law No. 4734 the following areas are now exempt from it:

  1. purchases of tea and tea products from the General Directorate of Tea Establishments,
  2. purchases of goods and services in the International Health Services Company's field of activity, and
  3. purchases of goods and services to be made by the responsible administration for execution of international organizations and meetings determined by the President of the Republic of Turkey.

Pursuant to Article 30 of Law No. 7161, in Article 10 (Rules on Qualification) of Law No. 4734, the phrase under the subparagraph 3 of article 10.1.(a) is to be changed from 'or documents indicating the volume of the work being carried out and completed by the tenderer' to 'or the documents indicating the turnover of the work subject to the tender'. This amendment will come into force on 18 May 2019.

Another amendment brought by Law No. 7161, from 18 March 2020, in order to participate in a tender, legal entities, which are established or participated in by the owners of the document that is obtained through completion of work, management and auditing, should have more than half of the shares of the legal entity for at least one year, and during this period, they should be authorised to represent and manage the public procurement agreements to be made according to Law No. 4734, and they are required to fulfil aforesaid conditions in every tender and maintain these until the end of guarantee period.

Furthermore, as of 18 March 2020, the Public Procurement Authority will be authorized to impose restrictions on the total amount of business experience certificates to be issued in line with the work carried out under the public procurement contract and the persons to whom the certificate to be issued. Again, as of 18 March 2020 except for documents issued for work performed by institutions that lie within the scope of Law No. 4734 among the documents drawn up for the works performed abroad, only work completion certificates can be used by the certificate holders and the group of companies or similar partnerships in which they are involved. Additionally, the Public Procurement Authority will also be authorized to determine the procedures and principles for using the mentioned documents in a group of companies or a similar partnership. Moreover, starting from 18 March 2020, if a tender is submitted by a joint venture, a certificate holder who uses work completion certificates obtained from works performed abroad will be required to provide a provisional bond and a performance bond in the proportion to its shares in the joint venture.

Key amendments to Law No. 4735

Law No. 7161 has introduced a provisional article to Law No. 4735. Provisional Article 4 under the title "Liquidation or transfer of contracts" provides an exit for public procurement contractors by allowing them either to terminate and liquidate the public procurement contract or to assign the public procurement contract due to an unexpected increase in the price of manufacturing inputs. In addition, public procurement contracts executed before 31 August 2018 in line with the Law No. 4734 and which were still in force when Law No. 7161 came into effect, could be terminated and liquidated or assigned due to unexpected increases in the price of manufacturing inputs provided that the public procurement contractor applies in writing to the relevant administration within 60 days of the date of entry into force of the aforementioned provisional article. The application is subject to the relevant administration's approval following receipt of an opinion from the Ministry of Treasury and Finance.

If the public procurement contract is assigned, the tender conditions required in the first tender must be complied with during the assignment; however, any restrictions and sanctions arising from the assignment or the termination will not apply. If an assignment of the public procurement contract or a share transfer made between the shareholders of a joint venture leads to the public procurement contract, it is not subject to the tender conditions required in the first tender. The guarantee provided either by the public procurement contractor whose public procurement contract is terminated or the person who assigned the public procurement contract will be returned to the respective provider.

Finally, when the public procurement contract is terminated or assigned under Provisional Article 4, the public procurement contractor cannot make any claim against the relevant administration except for the manufacturing carried out up to the date of the termination or the assignment.

Please kindly note that the amendments introduced by the Law No. 7161 are not limited to the above-mentioned amendments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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