THE COUNCIL OF MINISTER HEREBY RULES AS FOLLOWS:

STATE GAZETTE Council of Ministers Issue: 75, dated: 27.8.2013 Official section / COUNCIL OF MINISTERS page 3 Decree No 180 of 22 August 2013 on the adoption of Ordinance pursuant to Article 13, par. 3 of the Public Procurement Act (PPA) establishing the criteria and procedure for determination of essential national interests in the field of security and defence within the meaning of Article 346 of the Treaty on the Functioning of the European Union (TFEU) and the procedure for contract conclusion DECREE No 180 of 22 AUGUST 2013 on the adoption of Ordinance pursuant to Article 13, par. 3 of the Public Procurement Act (PPA) establishing the criteria and procedure for determination of essential national interests in the field of security and defence within the meaning of Article 346 of the Treaty on the Functioning of the European Union (TFEU) and the procedure for contract conclusion THE COUNCIL OF MINISTER HEREBY RULES AS FOLLOWS: Sole Article. The Ordinance pursuant to Article 13, par. 3 of the Public Procurement Act (PPA) establishing the criteria and procedure for determination of essential national interests in the field of security and defence within the meaning of Article 346 of the Treaty on the Functioning of the European Union (TFEU) and the procedure for contract conclusion shall be hereby adopted. Final provision Sole paragraph. The Ordinance on the Award of Special-Purpose Public Procurements, adopted by means of Council of Ministers Decree No 233/2004 (Promulgated in State Gazette issue 80/2004, amended and supplemented, SG issue 78/2005, issue 7/2007, issue 83/2008, issue 93/2009, issues 49/2010 and 86/2010 and issues 12/2011 and 22/2011) shall be repealed. For the Prime Minister: Zinaida Zlatanova For the Chief Secretary of the Council of Ministers: Nina Stavreva ORDINANCE pursuant to Article 13, par. 3 of the Public Procurement Act (PPA) establishing the criteria and procedure for determination of essential national interests in the field of security and defence within the meaning of Article 346 of the Treaty on the Functioning of the European Union (TFEU) and the procedure for contract conclusion Section I General Provisions Article 1. The present Ordinance shall regulate: 1. the criteria and procedure for the determination of the existence of essential national interests in the field of security and defence within the meaning of Article 346 of the Treaty on the Functioning of the European Union (TFEU); 1

2. the award procedure for investment projects for the acquisition and/or modernisation of armaments, machinery and equipment for the needs of the armed forces in the cases referred to in Article 13(1), item 6 of the Public Procurement Act (PPA); 3. the terms and procedure for the conclusion of compensatory (offset) agreements in the cases set out in Article 13(1), item 2 of PPA. Section II Criteria and procedures for determination of the existence of essential national interests in the field of national security and defence within the meaning of Article 346 TFEU Article 2. (1) Essential national interests in the field of national security and defence are set out in the Constitution, the relevant laws and the National Security Strategy of the Republic of Bulgaria. (2) The particular significance of an interest under par. 1 and the presence of a risk of threat to such interest is a prerequisite for the designation thereof as an interest within the meaning of Article 346 TFEU. Article 3. The existence of a national interest of particular significance pursuant to Article 2(2) shall be assessed on a case-by-case basis where the need arises for the conclusion of a contract the subject matter of which is regulated by Article 3(2) of the Public Procurement Act. Article 4. The assessment for a national interest of particular significance pursuant to Article 13 (1), item 2 of PPA and the necessity for protection of such interest upon conclusion of a contract with subject matter pursuant to Article 3(2) of PPA, shall be made on the basis of the following criteria: 1. the presence of a connection between the relevant interest under Article 2(2) and the contract; 2. the necessity to supply classified information due to award of the specific contract, the disclosure of which is contrary to the interest under Article 2(2); 3. the impossibility to ensure full protection of the interest under Article 2(2) by means of PPA procedures. Article 5. (1) The assessment under Article 4 shall be carried out by the Council of Ministers, upon proposal by the Contracting Authority. (2) Where the Contracting Authority establishes that all criteria under Article 4 are in place, the Contracting Authority shall submit to the Council of Ministers a draft decision, supported by a report justifying the existence of an essential national interest in accordance with Article 2(2) and the necessity for its protection. (3) The report under Article 2 must contain a justification under all criteria listed in Article 4 and cannot be motivated by economic interests alone. Article 6. (1) The assessment on the presence of a national interest of particular significance in the cases under Article 346, 1 (b) TFEU shall be carried out by the Council of Ministers on the basis of a report submitted by the Contracting Authority. (2) The report under par. 1 must contain a justification for the criteria listed in Article 4, items 1 and 3, and must demonstrate that the proposed measures will not alter the conditions of competition on the internal EU market regarding products which are not intended for specifically military purposes. (3) The report under par. 1 cannot be motivated solely on the grounds of economic interests. Article 7. Following decision by the Council of Ministers, the Contracting Authority may proceed with contract conclusion. Section III Procedure for the award of investment projects for the acquisition and/or modernisation of armaments, machinery and equipment for the needs of the armed forces in the cases set out in Article 13(1), item 6 of PPA 2

Article 8. (1) Implementation of investment projects for the acquisition and/or modernisation of armaments, machinery and equipment for the needs of the armed forces in the cases set out in Article 13(1), item 6 of PPA shall be carried out on the basis of a contract concluded pursuant to the International Treaties Act of the Republic of Bulgaria. (2) Where the investment project for which the contract under par. 1 is to be concluded involves investment costs for acquisition and/or modernisation of armaments, machinery and equipment at a value equal to or exceeding BGN 50 million, the draft contract shall be submitted by the importer for review by the Council of Ministers provided that the competent authority has adopted a decision pursuant to Article 16, item 7а or Article 22(2), item 11a of the Defence and Armed Forces Act of the Republic of Bulgaria. Section IV Terms and provisions for the conclusion of compensatory (offset) agreements in the cases referred to in Article 13(1), item 2 of PPA Article 9. (1) Compensatory (offset) agreements can be concluded in connection with a contract under Article 13(1), item 2 of PPA, where there is a need for implementation of activities directly or indirectly related to the subject matter of the contract, which aim to preserve and/or develop existing or to create new capabilities required for the protection of a national interest of particular significance pursuant to Article 2. (2) The assessment under par. 1 regarding the existence of a national interest of particular significance pursuant to Article 2 shall be carried out by the Council of Ministers on the basis of a report by the Contracting authority, party to the contract referred to in Article 13(1), item 2 of PPA and the Minister of Economy and Energy. (3) The compensatory (offset) agreement shall be negotiated simultaneously with or following conclusion of the contract under Article 13(1), item 2 of PPA. Article 10. The subject matter of such compensatory (offset) agreement can be: 1. co-production or licensed production; 2. technology transfer; 3. training and qualification; 4. investments and other activities directly or indirectly related to the subject matter of the contract. Article 11. (1) The value of the compensatory (offset) agreement shall be agreed between the parties. (2) The subject matter, accounting and approval of offset projects, implementation deadlines, performance guarantees, liabilities, offset receivers and other provisions shall be negotiated by the parties. Article 12. The Contracting authority under a contract pursuant to Article 13(1), item 2 of PPA and the Minister of Economy and Energy shall, following the relevant decision of the Council of Ministers referred to in Article 9(2), prepare a proposal on the main parameters of the compensatory (offset) agreement, containing projects and estimated implementation deadlines and may include possible offset receivers. Article 13. (1) The contracting authority under a contract pursuant to Article 13(1), item 2 of PPA shall appoint a designated work group to carry out the negotiations for the conclusion of a compensatory (offset) agreement. (2) The work group shall include representatives of the Ministry of Economy and Energy. Where necessary, representatives of other departments and security services may also be involved. (3) The work group referred to in Article 1 shall negotiate and determine the different provisions of the compensatory (offset) agreement on the basis of the proposal referred to in Article 12 and shall take minutes on its activities. Article 14. The compensatory (offset) agreement shall contain: 1. parties, date and place of signing of the agreement; 3

2. subject matter of the compensatory (offset) agreement; 3. value of the compensatory (offset) agreement; 4. programme, time limit and schedule of implementation of compensatory (offset) obligations; 5. reporting methods and acceptance of performance of the compensatory (offset) obligation; 6. type and amount of the performance guarantee for the compensatory (offset) obligations, where such is negotiated; 7. offset receivers in the performance of compensatory (offset) obligations; 8. liability in the event of non-performance of the compensatory (offset) obligation. Article 15. (1) The compensatory (offset) agreement shall be signed by the Contracting authority under the contract pursuant to Article 13(1), item 2 of PPA and the Minister of Economy and Energy on the one hand and by the Contractor, on the other. (2) The Contracting authority in a contract under Article 13(1), item 2 of PPA and the Minister of Economy and Energy may, at any time, request from the Contractor and the offset receiver, information on the performance of compensatory (offset) obligations and may inspect the relevant financial and trade information certifying performance. (3) The Contracting authority and the Minister of Economy and Energy shall notify, on an annual basis, by means of a report, the Council of Ministers on the performance of the contract under Article 13(1), item 2 of PPA and the compensatory (offset) agreement. Article 16. (1) The Contractor shall sign a contract with the offset receiver where the latter is different from the Contracting authority under a contract pursuant to Article 13(1), item 2 of PPA and the Minister of Economy and Energy, on the basis of the compensatory (offset) agreement. (2) Upon request, the Contractor shall supply information regarding the contract under par. 1 to the Contracting authority under the contract pursuant to Article 13(1), item 2 of PPA and to the Minister of Economy and Energy. Supplementary provisions 1. Within the meaning of this Ordinance: 1. Contracting Authority" shall be the person defined as Contracting Authority in the Public Procurement Act. 2. Classified information shall be classified information as defined by the Classified Information Protection Act. 3. Compensatory (offset) agreements" shall be the agreements defined in item 11, 1 of the Supplementary Provisions of PPA. 4. Contractor under a compensatory (offset) agreement shall be the Contractor under a contract awarded pursuant to Article 13(1), item 2 of PPA, who undertakes to carry out specific activities related directly or indirectly to the subject matter of the contract, aimed to protect and/or develop existing or to create new capabilities, required for the protection of essential national interests in the field of security and defence. 5. Offset receiver shall be the person benefiting from the performance of compensatory (offset) obligations who can be: а) A Bulgarian natural or legal person; b) Bulgarian scientific and educational institutions; c) Bulgarian budgetary institutions and organisations. 4

Final Provision 2. The present Ordinance shall be adopted on the grounds of Article 13(3) of the Public Procurement Act. 5