THE NEW LEGISLATIVE PACKAGE ON PUBLIC PROCUREMENT, CONCESSIONS FOR WORKS AND CONCESSIONS FOR SERVICES

THE NEW LEGISLATIVE PACKAGE ON PUBLIC PROCUREMENT, CONCESSIONS FOR WORKS AND CONCESSIONS FOR SERVICES 26 May 2016 The adoption by the European Union of Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC and of Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services and repealing Directive 2004/17/EC ( Directives ) initiated an extensive reform of the public procurement sector, works concessions and service concessions in Romania. The Romanian legislature has chosen to implement the new Directives through a legislative package that includes four new laws: (i) (ii) (iii) (iv) Law no. 98/2016 on public procurement; Law no. 99/2016 on sector procurement; Law no. 100/2016 on works concessions and services concessions; and Law no. 101/2016 regarding remedies and appeals concerning the award of public procurement contracts and concession agreements and for the organization and functioning of the National Council for Solving Complaints. The legislative package implements the new Directives and repeals Government Emergency Ordinance no. 34/2006 on the award of public procurement contracts, works concession contracts and service concession contracts. The four laws were published in the Official Gazette of Romania on 23 May 2016 and shall enter into force within 3 days from their publication. Here is a brief presentation of some of their most important provisions. Note: Nothing in this document shall be construed as a legal opinion. Legal advice is recommended before initiating any step relying on this document. For a detailed presentation, tailored to the needs of your organization, please contact the Peli Filip team: Alexandru Goșa Senior lawyer +40 733 551 077 Alexandru.Gosa@PeliFilip.com Alina Stancu Bîrsan Partner +40 733 551 017 Alina.Stancu_Birsan@pelifilip.com 1 of 10

I. LAW ON (CLASSIC) PUBLIC PROCUREMENT 1. Scope The new law on (classic) public procurement governs all procedures for the award of public contracts, framework agreements and organizing requests for solutions that are not included in the scope of the law on sector procurement, as well as aspects related to the execution of public procurement contracts. The Law applies to procurement procedures carried out by the contracting authorities (public authorities and institutions, public law bodies, associations comprising at least a contracting authority). However, the law does not apply to sector contracts awarded by contracting authorities, that are obliged to apply the law on sector procurement. Award procedures regulated by law apply when the estimated value net of VAT of contracts/framework agreements exceeds the following thresholds: RON 23,227,215 for works contracts/framework agreements; RON 600,129 for products and services contracts/framework agreements; RON 3,334,050 for services contracts/framework agreements which have as object certain social services and other specific services provided in Annex. 2 to the law. A novelty as compared to the previous regulation is the introduction of a simplified procedure, which will be applicable to contracts/ framework agreements/requests for solutions whose estimated value is below the thresholds above. Contracting authorities have the right to directly purchase works whose estimated value net of VAT is less than RON 441,730, namely products or services whose estimated value net of VAT is less than RON 132,519. 2. The main issues of novelty 2.1. Preparation of the procedure A new phase was introduced, of market consultation, further to which the contracting authority informs and consults with the economic operators, their representative organizations, independent experts or public authority experts on the preparation of the acquisition and the organization and conduct of the award procedure; To facilitate SME participation in tenders, the contracting authority will be required to justify its decision not to award the contract per lots. Moreover, the procedure regulates the possibility of limiting the number of lots that can be awarded to one bidder; 2.2. Implementation of the procedure The minimum durations of award procedures have been reduced. For example, the minimum time limit for the submission of bids in the case of open tenders is 35 days, and may be reduced to up to 15 days; The law regulates the possibility for participants to initially submit a European Single Procurement Document ( ESPD ) in electronic format, consisting of an updated selfdeclaration of the economic operator on the inexistence of a case of exclusion and the fulfilment of the capacity and selection criteria, while, typically, only the bidder ranked first would be requested the documents proving that the requirements in the procurement documents have been met; 2 of 10

It is mandatory to use electronic means throughout the procedure, for any communication, request, information, notice or other similar documents provided by law; The law provides for the possibility of economic operators to become certified, if they choose a certification system and their inclusion on official lists of approved economic operators. The registration on the official lists or the possession of a certificate is a presumption that the requirements of the qualification and selection requirements in the official list or certificate have been met; 2.3. New award procedures The law introduces a simplified procedure, applicable to procurements whose estimated value is below the general thresholds established by law. The minimum terms for the submission of bids are 15 days for works contracts, 10 days for products or services contracts and 6 days for less complex products contracts. If the contracting authority decides to request qualification and selection criteria, such criteria may only concern the grounds for exclusion, the ability to perform professional activities and the similar experience; A new award procedure has been regulated - the partnership for innovation - which may be employed whenever the contracting authority identifies the need for the development and further acquisition of an innovative product, service or works, provided that its needs cannot be satisfied using the solutions existing on the market; 2.4. Qualification and selection of bidders New situations have been regulated for the exclusion from the procedure, and also circumstances which prevent the application of the exclusion. Cases for exclusion include: the economic operator is undergoing an insolvency or liquidation procedure, is under judicial supervision or it has ceased its activity; the economic operator has committed serious professional misconduct which puts in question his integrity and the contracting authority can prove this by any means appropriate; the contracting authority has sufficient reasonable evidence/specific information to believe that the economic operator has concluded agreements with other economic operators aimed at distorting competition within or in connection with the proceedings; Situations of exclusion shall also apply to the proposed subcontractors and third-party supporters. If such a situation applies, the subcontractor or third party concerned will be replaced once; The proposed subcontractor can only be replaced once, when it is unable to prove that it has the technical and professional capacity required to perform the portion of the contract that it is to fulfil effectively; 2.5. Award of the contract The contract shall be awarded to the bidder who has submitted the most advantageous bid in economic terms. The criteria to determine the most advantageous bid in economic terms are: lowest price; 3 of 10

lowest cost; best price-quality ratio; best cost-quality ratio; The lowest price and the lowest cost will not be used as criteria for awarding contracts having as their object intellectual services and involving highly complex activities, nor for contracts relating to projects for trans-european transport infrastructure and county roads; In the case of best price-quality ratio and best cost-quality ratio, the evaluation factors that can be analysed include the staff proposed, the after-sales service, the technical support and supply conditions, marketing and marketing terms. 2.6. Performance of the contract The contracting authority will be able to make direct payments to subcontractors for the portion of the contract fulfilled by them, if the nature of the contract allows it and the subcontractors have opted for this matter; The law explicitly provides for the cases where a public procurement contract may be modified during its performance, without organizing a new award procedure. Such situations, expressly provided by law, include the following: changes, whatever their nature, are not substantial; procurement documents include a precise and unequivocal revision clause (including price revision clauses or other options); the following conditions are all met: (i) additional products, services or works need to be purchased from the initial contractor, (ii) it is impossible to change the contractor and (iii) increases in contract price do not exceed 50% of the initial contract value; the following conditions are all met: (i) the change has become necessary due to unforeseen circumstances, (ii) the change does not affect the general nature of the contract and (iii) increases in contract price do not exceed 50% of the initial contract value; the initial contractor is replaced, either further to a revision clause or further to an option set out by the contracting authority, or as a result of an universal succession or of a succession with universal title in a reorganization procedure, by a different economic operator who meets the initially established qualification and selection criteria. 4 of 10

II. LAW ON SECTOR PROCUREMENT 1. Scope The new law on sector procurement is applicable to contracting entities operating in the sectors of gas and heat, electricity, water, transport services, ports and airports, postal services, as well as in the field of oil and gas extraction and exploration and the extraction of coal or other solid fuels. Unlike the previous regulation, postal services exclude electronic mail services, financialpostal services, philatelic services and logistics services. Contracting entities are contracting authorities for the purpose of the (classic) public procurement law, public undertakings and private companies operating based on special or exclusive rights granted by a competent authority, provided that they perform a relevant activity. Procedures for the award of sector contracts by contracting entities apply whenever the estimated value of the contract, without VAT, exceeds the following thresholds: RON 23,227,215 for sector works contracts; RON 1,858,177 for products and services sector contracts or for requests for solutions; RON 4,445,400 for services sector contracts which have as object certain social services and other specific services provided in Annex. 2 to the law. The simplified procedure, applicable when the estimated contract value, without VAT, is lower than the thresholds above, is regulated similarly to the (classic) public procurement law, but its application is only mandatory for contracting entities which are contracting authorities for the purpose of the (classic) public procurement law or which are public undertakings. The other contracting entities may conduct their own procedures for awarding contracts, in line with the general principles provided by law. Contracting entities have the right to directly purchase works whose estimated value net of VAT is less than RON 441,730, namely products or services whose estimated value net of VAT is less than RON 132,519. 2. The main issues of novelty As a rule, the novelty issues mentioned in relation to the (classic) public procurement law are also applicable to the law on sector contracts. The latter, however, also includes provisions meant to make procurement procedures more flexible for the contracting entities, other than contracting authorities, or, as the case may be, than public undertakings. The main such matters of novelty include the following: Contracting entities other than contracting authorities and public undertakings may determine their own procedure for awarding contracts whose value is below the thresholds prescribed by law and mentioned above; Contracting entities other than contracting authorities and public undertakings can establish their own rules to avoid conflict of interest, other than those prescribed by law and respecting the general principles laid down by law; Flexible use of the framework agreement, whose regulation is brief, the law making reference to the implementation norms. The maximum duration of the framework agreement is eight years, unlike in the (classic) public procurement law which provides a maximum duration of four years; 5 of 10

The qualification and selection criteria provided by law ought to be mandatory only for contracting entities which are contracting authorities, other contracting entities being entitled to establish their own criteria for qualification and selection. However, following unclear changes occurred during the legislative process, this difference seems to have faded in the adopted version of the law. 6 of 10

III. LAW ON WORKS AND SERVICES CONCESSIONS 1. Scope The law is applicable to contracting entities, defined as contracting authorities, public undertakings and other legal entities operating under special or exclusive rights granted for the pursuit of the relevant activities defined in Annex no. 2 to the law. In order to define its scope, the law states that a concession contract necessarily entails the transfer to the economic operator of a significant part of the risk of exploitation of the works or services covered by the concession. If in any long-term project it is intended that an economic operator involved in various phases of the project bears risks that are traditionally borne by the contracting authority or entity, a substantiation study will be conducted, and if, as a result of the study, the risk is not transferred to the economic operator, the contract in question shall be considered a public procurement contract or a sector contract, as appropriate, not a concession contract. Award procedures laid down by the law apply to works and services concessions whose value, net of VAT, is more than RON 23,227,215. For works and services concessions whose value is below this threshold, simplified procedures will apply, to be established by the implementation norms of the law. 2. The main issues of novelty The maximum duration of the concession shall not exceed the time reasonably necessary for the concessionaire to recover their initial investments and the costs incurred in connection with the performance of the contract, and to obtain a reasonable profit; The value of the concession, to be estimated before the award procedure, is the total turnover of the concessionaire generated during the performance of the concession contract, net of VAT. This assessment should follow objective methods specified in the award documentation; Two award procedures have been regulated: open tender - with a possibility to organize a negotiation stage; competitive dialogue; Whichever the procedure chose, the award criteria and minimum requirements cannot be changed during negotiations; The qualification and selection criteria shall refer to the grounds for exclusion and the capacity of bidders. The grounds for exclusion are generally regulated similarly to the (classic) public procurement law and are mandatory only for contracting entities that are contracting authorities, while being optional for other contracting entities; The single award criterion is the most advantageous bid in economic terms. In its determination, objective criteria shall be taken into account, such as the degree of risk undertaken by the concessionaire, the level of payments made by the contracting entity, the level of usage rates, performance indicators and others; In what regards the performance of the concession contract, the possibility of changes is generally regulated similarly to the (classic) public procurement law. The same 7 of 10

applies to the regulation of direct payments to subcontractors, or replacement of subcontractors or third party supporters when there are grounds for exclusion. 8 of 10

IV. THE LAW REGARDING REMEDIES AND APPEALS 1. Scope The law regulates the procedure for the settlement of disputes related to the award of public procurement contracts, sector contracts and concession contracts. Also, the law covers the role, tasks and the organization and functioning of the National Council for Solving Complaints ( CNSC ). Following the legislative technique of the Remedies Directives (Directive 89/665/EEC, Directive 92/13/EEC and Directive 2007/66/EEC), the Romanian legislature divides remedies that may be exercised into pre-contractual remedies and post-contractual remedies. Pre-contractual remedies include interim measures, mandatory observance of the statutory period of waiting for the conclusion of the contract and the suspension of the contracting authority s possibility to conclude the contract pending the resolution of the appeal by the CNSC or in the first court, to prevent the conclusion of the contract. Post-contractual remedies refer to the procedures applicable for the nullity of a contract and for awarding compensation to the party affected by the conclusion of a contract in violation of the award rules. The scope of the law excludes remedies regarding direct purchases or purchases made by any other entities than contracting authorities/entities. Such purchases are governed by the rules of common law. 2. The main issues of novelty 2.1. Mandatory prior procedure The law introduced the mandatory procedure of prior notice, in which the economic operator needs to request the contracting authority to remove any irregularities, before filing an appeal. The prior notice shall be sent five or ten days (depending on the estimated value of the contract) from the acknowledgement of the act subject to the appeal. Following the prior notice, the contracting authority shall be able to revoke the act subject to the appeal or take any other remedial action deemed useful; The submission of a prior notice shall result in the suspension of the right to terminate the contract, under the penalty of absolute nullity thereof; CNSC is entitled to formulate the plea of inadmissibility ex officio for failure to observe the prior notice procedure; The contracting authority has three days to respond whether or not it indents to take remedial action and seven days to actually implement the proposed measures; 2.2. Proceedings before the CNSC The five or ten days (depending on the estimated value of the contract) are kept for a challenge to be submitted, but such term begins to run as of the date the contracting authority answers or ought to have answered the prior notice; The law no longer requires a good conduct security to be established when submitting a challenge, whichever the chosen procedural approach (either settlement by administrative-jurisdictional procedures or settlement in court); Interested economic operators shall be entitled to intervene in the proceedings within 10 days from the date they have acknowledged the existence of the proceedings; 9 of 10

The law allows the contracting authority to cancel the entire award procedure whenever CNSC orders the change/removal of technical specifications from the tender specifications or other documents issued in relation to the award procedure, unless other remedial actions are available and if a different measure would affect the principles laid down in the procurement and concession legislation; 2.3. Procedure in court Complaints against the CNSC decision are subject to a stamp duty determined based on the estimated value of the contract, amounting to half the tax to be paid for the challenge in court. Non-monetary claims will be charged with RON 450. Special provisions have been introduced to ensure the celerity of proceedings in court, such as the inapplicability of provisions regarding the verification and regularization of the claim in the case of a challenge in court, or the fact that the first hearing is to be set within no longer than 20 days from the date the challenge has been filed, and further hearings shall not exceed 15 days; terms for submitting the statement of defence and response to the statement of defence have also been shortened; The request to suspend the award procedure and/or the performance of the contract, made in the appeal procedure, is subject to the prior submission of a bail amounting to 2% of the estimated value of the contract, however not exceeding a maximum bail expressly regulated depending on the estimated value of the contract; Regarding the professionalization of the activity of settlement of disputes, the law provides for the establishment of specialized public procurement panels within the relevant sections of Tribunals and Courts of Appeal; 2.4. Conclusion of the contract and post-contractual remedies In case of disputes before courts or the CNSC, the contracting authority shall be entitled to conclude the contract only after the acknowledgement of the CNSC decision or of the decision of the first court of law, as the case may be, under the penalty of absolute nullity; Any interested person will be able to request the court to find the absolute nullity of a public procurement contract, of a sector or concession contract or of addenda thereto, concluded in violation of the requirements provided by law, and to restore the previous situation; Cases when the court can find the nullity of a contract have been exhaustively provided by law. As compared to the previous regulation, new cases have been provided where the contract may be annulled, including: the contract or addendum was concluded in less favourable conditions than the ones provided in the technical and financial proposals which represented the winning bid; non-compliance with the qualification and selection criteria which represented the basis for awarding the winning bid, which resulted in the alteration of the outcome of the procedure, by cancelling or reducing competitive advantages; the contract was concluded before receiving the decision for settlement of the challenge by CNSC or by the court, as the case may be; As an exception, the court is entitled to maintain the effects of the contract and order alternative penalties. 10 of 10