Law on State Procurement

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Article 1. Scope of Application of Law

1. This Law states the general legislativ e and economic principles governing State

2. The regulations determined by the presen t Law apply to any State procurements
except the State procurement related to State secrets as defined by the Georgian
Law “on State Secrets”.

3. Regulations for implementation of State procurement connected to State secrets
defined in the Georgia Law “on State Secrets” is developed by the
Security Council and approved by the President of Georgia.

Article 2. Purpose of the Law

1. The purpose of the Law is to:
a) provide rational and economical expe nditure of financial resources
allocated for State procurement;
b) develop sound competition between suppliers producing goods, works
and services meeting State needs;
c) provide just and non-discriminative a pproach towards participants of
procurement proceedings;
d) achieve transparency and publicity in the State procurement;
e) create a single, integrate procur ement system and promote public
confidence in the mentioned system.

Article 2. Definition of Concepts and Terms Used in the Law

1. “State procurement” – acquisition of a ny goods, works or services in order to
meet State needs and by utilizing funds from:

a) Georgian State budget and means consolidated in the State budget;

b) Budgets of the Abkhazian Autonom ous Republic and the Adjarian
Autonomous Republic;
c) Budgets of other Georgian territori al units determined by Georgian

2. “Procuring organization” – management bodies; management and self-governing
bodies; institutions and organizations funded from the corresponding budgets; and
other institutions and enterprises for which State and local budgets are
for acquisitions of goods, works or services ; of Georgia, Abkhazian and Adjarian
Autonomous Republic.

3. “Object of Procurement” – particular types of goods, works, and services
purchased by the procuring organization.

4. “Bidder” – any physical or legal body in Georgia or in foreign countries that
passed through the qualification procedure.

5. “Supplier” – any physical or legal body in Georgia or a foreign country that
concluded contract with a procuri ng organization on implementing State

6. For the purpose of the present Law, the term “construction works” means works
that are carried out for construction of an entity or its parts, as well as repair,
reconstruction, and rehabilitation of the entity (except design related

7. For the purpose of the present Law, the term “preference” means the acceptable
difference between the values of the bid submitted by the national bidder and that
of the foreign bidder in which case upon the evaluation by price factor the
preference will be given to the national bidder.

Article 4. Coordination of State Procurement Related Activity

1. State procurement related activity dete rmined by this law is coordinated by the
Georgian Ministry of Economy.

2. The Ministry of Economy within the limits of its competence :
a) elaborates and approves the by-laws ensuring the full enactment of the
present Law.
b) analysis the efficiency of the State procurement system and takes
measures for its improvement; periodically informs the President of
Georgia on State procurement relate d issues; in case of necessity
prepares proposals and submits them to the Georgian President to take a
c) carries out advisory activity concerning State procurement related issues; assists procuring organizations to co mply with the norms determined by
this Law and the by-laws; arranges seminars and meetings to improve the
qualification of the participants of State procurement proceedings and
ensures the publicity of the legislation regulating State procurement;

3. The functions, rights and obligations pr ovided by this Law will be exercised by
the State Procurement Department estab lished with the Ministry of Economy of

Georgia. The Head of Department is appointed and dismissed by the President of
Georgia at the proposal of the Ministry of Economy.

Article 5. Rights and Obligations of procuring organizations

1. A procuring organization is obliged:
a) to carry out State procurement in a rational manner within the limits of
the allocated assigned budget allocations and stemming from the
country’s interests and according to th e rules stated by this Law and the
b) to keep confidential the information provided by bidders to the procuring
organization before the contract on state procurement is signed.
c) submit to the Georgian Ministry of Economy reports on the realized State
procurements according the format and within the terms set forth by the
Article 24 of the present Law.
d) immediately submit to the Georgian State Department of Statistics
statistical reports on the realized St ate procurements according the format
developed and approved by the Georgian State Department of Statistics.
e) pay the supplier the cost of work s and/or services immediately upon
goods, works, and services are deliver ed, unless otherwise stated in the
f) in case if state procurement is cancel ed according to the Article 5 (2) (c)
implement this procurement only by resuming the terminated procedures.
g) in the cases provided by the Article 5 (2) (c) notify the Georgian
Ministry of Economy and parties participating in the procurement
process about its decision and the grounds for such a decision within the
3 (three) days upon the decision is made. Meanwhile, procuring
organization is not obliged to provide the participants of the procurement
process with the evidence or give the detailed information, that made
basis for the above mentioned decision, as well as reimburse the bidders’
costs related to the participation in the proceedings, except tender fee

2. A procuring organization has the right:
a) to select a supplier according to this Law and bylaws and conclude a
contract with the supplier;
b) to disqualify a person according this Law;
c) to terminate procurement proceedings at any time before a contract is
signed if such a decision stems from an objective necessity that is beyond
the control of the procuring organiza tion and can not be foreseen , also
based on state or public interests;
d) to supervise and exercise control over the fulfillment of the contract;
e) according to the effective legislation suspend or terminate the realization
of the contract if the supplier subm its false qualification documents, also
in other cases determined by the legislation.


Article 6. Methods of State Procurement

1. Methods of State procurement are as follows:
a) open tendering
b) closed tendering
c) single-source procurement

2. In cases justified by the present Law, open and close tenders can be carried put in
two stages.

3. Principles for the use of procurement me thods are determined by the present Law
and by-laws adopted by the Georgian Ministry of Economy;


Article 7. Basic Principles Govern ing the Choice of Type of Tender

1. Open tender is held in cases when the estimated value of the subject to
procurement exceeds the amount of ECU 30.000 equivalent in national currency,
while in the case of procurements of construction works – ECU 100.000
equivalent in national currency.

2. Closed tender is held in the cases wh en the estimated value of the subject to
procurement is less then the amount of ECU 30.000 equivalent (while in the case
of procurements of construction wo rks – ECU 100.000 equivalent) in national
currency, but exceeds the amount of ECU 10.000 equivalent (while in the case of
procurements of construction work s – ECU 50.000 equivalent) in national

Article 8. Grounds for Establishing and Functioning of Tender Committee

1. Both, open and closed tenders are held by Tender Committee which is established
by the Head of the procuring organization and consists of at least 5 members;

2. Head of procuring organizations and/or de puties, as well as heads of structural
sub-divisions of procuring organizations are appointed as members of Tender

3. It is prohibited for a close relative of the head of bidder (physical or legal body); a
founder or member of bidding organizati on that has a status of legal body and
exists as a Fund or a Union; or has a share in the bidder enterprise equity; to be a
member of the Tender Committee;

4. Pursuant to the decision of the Tender Committee, specialists from corresponding
fields and representatives of other treas ury organizations can be invited to the
Tender Committee as experts and consultants, with voting right;

5. The Tender Committee will be chaired by the head of the procuring organization
or the person appointed by him (her);

6. Pursuant to the order of the Head of the procuring organization with the purpose
of proving organizational-technical activitie s of the Tender Committee, there will
be established apparatus, manned by the staff members of the procuring
organization and headed by the Chairman of the Tender Committee;

7. The Tender Committee takes decisions by the simple majority of the Committee
members. The member of the Committee, th at disagrees with the decision of the
Committee has right to submit his own view-point, that should be attached to the
decision of the Tender Committee. In the case of equal votes, the Chairman has
the casting vote;

8. The minutes of meetings of the Tender Committee shall be signed by the
members of the Committee.

Article 9 Tender announcement

1. In an open tender the Tender Committee on the behalf of a procuring organization:
(a) shall make an announcement about the tender via the Mass Media,
defined in the by-laws;
(b) when the estimated value of the St ate procurement exceeds the amount of
ECU 300.000 equivalent in national currency, while in the case of the
construction work procurement – ECU 4.000.000 equivalent in national
currency notification shall be also pl aced in an wide-spread international
periodical or specialized printing organ, on one of the languages most
accepted in the international trade practices. The notification shall al
so be
sent to the foreign diplomatic and consular institutions based in Georgia;
(c) if necessary shall define additional means, other than the ones defined in the sub-unit (a) and sub-unit (b) of the Unit, for tender announcement

2. In the case of closed tender the procur ing organization sends to the bidders
selected in advance subject to this Law (no less than five bidders) an official
notification of holding the tender.

3. In the tender announcement there should be indicated:
(a) contact details of the procuring organization;
(b) the type, quality and quantity, the point and form of supply of the
procured goods; the essence and th e place of implementation of the
work or service to be implemented; all other details, that the procuring
organisation considers necessary as connected with the description of
the objects to be procured;
(c) the desire to supply of the goods, to implement the work, to render the
service to be procured, and the obligatory terms;
(d) criteria and rule for estimation of qualification data;
(e) the terms, place and language for submission of the qualification data;

(f) request for the documentation proving the qualification data;
(g) the rules, terms, place and language for submission of tender documents,
also payment rate for acceptance of tender documents.

4. The Tender Committee approves the tender announcement.

5. The Tender Committee publishes and, correspondingly distributes tender
announcements no later, than 15 calendar days before the collection of the
qualification data starts. In the case of closed tender the Tender Committee should
select the mean of distribution of te nder announcement, that will enable the
selected persons to receive the announcement in the shortest possible term.

6. The Tender Committee might amend the information mentioned in the
announcement, notice of which shall be made through mass media, the same way
the announcement had been published, and in the case of closed tender the notice
should be distributed to all the persons, whom the Committee addressed initially.

7. Amendment of the announcement and the publication (distribution) of these
amendments should occur no later, than 5 calendar days before end of the
submission term.

Article 10. Qualification data

1. The qualification data of the legal entitie s bidding for State procurements should
meet the following requirements:
(a) their property should not be a rrested; no bankruptcy or sanation
proceedings should be commenced against them, they should not be
under re-organisation or liquidation process;
(b) within the last 5 years period their heads should not had been sentenced or no criminal proceedings, connected with their duties at job, should be
instituted against them by the moment the State procurements start.

2. The qualification data of the physical person bidding for State procurements
should meet the following requirements:
(a) they should be capable of functioning;
(b) no bankruptcy proceedings should be commenced against them;
(c) within the last 5 years period thei r heads should not had been sentenced
for economic activities or activities connect ed with their duties at job, or
no criminal proceedings should be in stituted against them by the moment
the State procurements start;

3. In case if supply of goods, implementati on of works or rendering of service
subject to the legislation requires license , certificate or other types of permission,
the bidder for the State procurements should have such license, certificate or

4. In case if the documentation submitted by person as proof for the qualification
data is not valid or it does not meet th e qualification requirements, the procuring
organization can disqualify the person at any stage of procurement procedure,
before entering the agreement on State procurement.

5. The disqualified person can sue the decision on disqualification;

6. In case if the documentation reflecting th e qualification data is not correct or
complete, or if it contains any technical mistake the procuring organization gives
the bidder opportunity to correct the mistak e or inconsistency, or to fill in the
documentation with the necessary informa tion. The process of correction or filling
of the qualification documentation should be fulfilled before the end of the
qualification selection.

7. The detailed rule for estimation of qualification data is defined by by-law.

Article 11. Qualification selection

1. The purpose of the qualification selecti on is to define the list of bidders, by
comparing the submitted data with the qualification data.

2. The qualification selection should be ende d no later, than in 10 days after the
procedure for the submission of qualification data stops.

3. The results of the qualification selection shall be registered under the decision of
the Tender Committee and it will reflect the reasons and basis for disqualification
of corresponding person(s) and approves the list of bidders.

4. All the persons, that had submitted their qualification data on due time shall be informed about the decision of th e Tender Committee on the qualification
selection. In the case of disqualification th ey will also be informed about the basis
for disqualification. The Tender Committee should choose the most efficient and
quick way of delivery of the information.

Article 12. Tender documentation

1. The Tender Committee approves the te nder documentation before publication
(distribution) of the tender announcement.

2. After payment of the fees defined in this Article 19 of the Law, if there is such,
the Tender Committee is obliged to i ssue tender documentation upon the request
from the bidder.

3. The tender documentation should include:
(a) instructions for development of the bidders tender proposals;
(b) prioritized the procedures and criteria for estimation of the bidders’ proposals;
(c) the quantity of the goods to be procured, obligatory or desirable terms and place for supply of goods, implemen tation of work and rendering of
service, and other details, that the procurement organization will consider
important in connection with the object to be procured;
(d) full description of the technical and qualitative data of the object to be procured, including relevant technical specifications, plans, schemes and
sketches, also the reasonable alternative technical and qualitative

specifications to the object of procurement, if permitted by the procuring
(e) the necessary conditions for the agreement on State procurements, that are known to the procuring organizations in advance, including the
instructions for the form of the agreement;
(f) the methodology for calculation of th e price of tender proposal, also the
information weather the price should include other elements, besides the
goods, work or service (e.g. transportation, insurance, taxes, etc);
(g) instructions for the currency, th at the amount for the tender proposal
should be stated in;
(h) the term, place and language for submission of the tender proposal;
(i) description of the means and procedures for requirement of additional information or explanation, connect ed with the tender documentation by
the bidder. While in case of two-stage tender – also the opportunity to
hold direct negotiations with the bidders;
(j) the names and contact details of the officers of the Tender Committee
apparatus, that are entitled to have direct contact with the bidders and

provide them with the information and explanations on the procurement

4. The textual materials, specifications, plan s, schemes, sketches and other materials
used for the technical and qualitative parameters of the object to be procured
should correspond to the current standards of international and Georgian

standards, technical specifications, termi nology and conventional definitions. It is
forbidden to include the trademark, pate nt, model, source and producer in the
description of goods to be procured.

5. The Tender Committee, pursuant to the written request of bidder, or at its own discretion, shall explain or verify the information connected with the tender
documentation, which shall be attached to the tender documentation in the form of
appendices and shall be distributed to all the bidders 15 calendar days before the
end of submission of tender proposals. The appendices or verification should not
change the essence of the tender documentation.

Article 13 Preferences

In the case of participation of both local and foreign bidders 15 % preference is
granted in respect of the tender proposal pr ice, which should be submitted by the local

Article 14 Agreement on Intention

1. The procuring organization, prior to revi ew of tender proposals enters agreement
on intention with each bidder. Under the agreement:
(a) in case of winning the tender the bi dder undertakes the obligation to
enter agreement with the procur ing organization on goods supply or,
correspondingly implementation of work, or rendering services;
(b) except for the case envisaged in Artic le 5.2.(c) of the Law or the event
of disqualification, the procuring or ganization undertakes obligation to
enter agreement with the bidder on goods supply or, correspondingly

implementation of work, or rendering services in case of winning the
tender by the latter, on the terms defined in the tender proposal;

2. Agreement on intention shall include term of the agreement on State procurement,
the term of validity of the bidders te nder proposals, also the responsibilities of
parties in the event of default on th e liabilities assumed under the agreement on

3. The rules for definition of the form s of responsibility for breaching the form and
conditions of the agreement on intention are defined by by-laws.

Article 15. The procedure for submi ssion and review of tender proposals

1. Tender proposals are submitted to the Tende r Committee in sealed envelopes and
the envelopes are opened at a Tender Committee meeting upon the expiration of
their submission period and in the presence of the bidders. After opening the
envelopes the committee determines the deadline for the reviewing of received
proposals and taking a final decision.

2. Before the disclosure of the tender propos als bidders have right to withdraw or
change the tender proposal any time;

3. The Tender Committee only reviews the pr oposals of the bidders, which entered
the agreement, envisaged by the Article 14 of the Law with the procuring

4. Tender proposals are assessed in accordan ce with the criteria and priorities
defined in the tender documentation. In case if the tender proposal submitted by
bidder is not consistent with the re quirements of tender documentation, the
Tender Committee, at its own discretion, takes decision on disqualification.

5. The Tender Committee does not disqualify tender proposal, in case it includes
inconsistencies, that do not materially change or contradict the essence of the
requirements stated in the tender documen tation or correction of which does not
affect the essence of the tender documentation.

6. In the case defined in unit 5 of this Article the Tender Committee addresses the
corresponding bidder with the request to verify the tender proposal.

7. Tender winner is determined on the ba sis of written conclusions submitted by
Tender Committee members, in accordan ce with the estimation criteria and
prioritization stated in the tender documentation.

8. The conclusion of Tender Committee member there should indicate the name of
the preferred bidder, and also the basis and arguments for such preference.

9. The absolute majority of conclusions of Tender Committee members decide
winner. In the case of equal votes th e chairman of Tender Committee has the
casting vote.

10. The decision of Tender Committee, stated in unit 7 of the Article is registered in
minutes, with the conclusions of Committee members attached to it. Minutes
should include information on the persons participating in the review of tender
proposals, on bidders and also summary of t he submitted proposals.

11. Bidder can sue for any issues connected with the tender procedures.

Article 16. Signing a Letter of Agreement with the winner

1. Subject to the current law and on the basis of the agreement defined in the Article
14 of the law, as well as tender proposal conditions of the winner, agre
ement on
State procurement is made between procuring organization and the winner.
2. The conditions of agreement are defined by by-laws.

3. In the case of procurement of constr uction works no less, than 70 % of the
engineering-technical personnel and work ers involved in implementation of the
work should be citizens of Georgia.

4. In the case of disqualification of the winne r, or in case, if the winner refuses to
enter the agreement the Tender Commission addresses other bidders for
participation in the renewed review pro cess of tender proposals, and if necessary,
on prolongation of the term of the agreem ent on intention. In case, if non-of the
bidders express desire to participate in the renewed review process new tender is
Article 17. Re-announcement of tender

1. In case if no winner was declare pursuant to tender process and renewed review-
assessment of tender proposals, or despite tender announcement no tender
proposals had been submitted or non of the submitted proposals was consistent
with the conditions of Tender documentation, than Tender Committee elaborates
new tender documentation and announces new tender.

2. Subject to the unit 1 of the Article the procuring organization can chan
ge the
tender Committee, or appoint new members.

Article 18. Prohibition of negotiations with the bidders during the tender

Tender Committee is not entitled to negotiate with the persons desiring to take
part in tender and bidders, except of the event of two-stage tender.

Article 19. Tender fee

1. The following rates are set for tender fee in the case of State procurement from
the State budget resources of Georgia:

(a) in the case of open tender – ECU 200 equivalent in national currency.

(b) in the case of closed tender – ECU 50 equivalent in national currency

2. In the case of State procurement from Abkhazian, Adjarian or local budget
resources subject to the Law there can be set local tender fee, which sh
ould not
exceed the amount defined in the unit 1 of the Article.

Article 20. Candidate sel ection during closed tender

1. In the case defined in the Article 7.2 of the Law tender announcement will be sent
to the selected persons;

2. In the case of closed tender the number of the tender proposals to be reviewed
should not be lass, than three.

3. Besides the rules defined in the unit 1 a nd the unit 2 of the Article other rules
determined for open tender are also used for closed tender.

Article 21. Two-stage tender

1. Two-stage tender is held if:

(a) given the peculiarity of the object to be procured, it is impossible to
determine all the technical and economic conditions of the object in
advance and the procuring organizati on considers it necessary to hold
negotiation with bidders at the first tender stage, in order to determine
technical, economic and other aspects;
(b) the object of State procurement is consultancy, scientific research,
experimental, investigative or consultation-projecting works, and it is
impossible to determine their results and price in advance;

2. At the first stage of two-stage tender the bidders shall submit their free Initial
tender proposals, (“ initial tender proposal ’);

3. At the first stage Tender Committee can hold direct negotiations with bidders,
with the purpose to verify any issues of the initial tender proposal, as well as
define the final parameters for tender documentation;

4. Pursuant to review of the initial tende r proposal the Tender Committee determines
the final version of tender documentation, that shall be distributed among all the
bidders in case of payment of tender fee.

5. Besides the rules defined in the units 2,3 and 4 of the Article, the rules for one-
state tender are also applicable to the two-stage tender.


Article 22. The method of direct negotiation with a single person

1. The procuring organization may chose to use the method of holding direct
negotiations on State procurement with a single person, in case:
(a) the assumed price of the State procurement object does not exceed ECU
10.000 (while in the case of c onstruction works – ECU 50.000)
equivalent in national currency of Georgia;
(b) supply or implementation of the State procurement object is the
exclusive right of a single person;
(c) as a result of Force Majeure the State procurement can not be postponed;
(d) it is necessary to implement State procurement from the same supplier
with the purpose of further application and prevention of deterioration of
qualitative feature of goods, technology or equipment received from the
supplier, except for the case when the initial supply cost exceeds the
assumed amount of the State procurement to be implemented;

2. In the case of application of the method of holding direct negotiations on State
procurements the head of the procuri ng organization or the authorized person
appointed by him (her) subject to legislation.

3. The person, that has been approached in the case of application of the method of
holding direct negotiations should be meeti ng all the qualification data defined in
the Article 10 of the Law.

4. The procedure for the method of holding di rect negotiations with a single perons
is defined by Georgia Legislation.


Article 23. Review of the conditions of agreement on Implementation of State procurement

1. It is not permitted to change the cond itions of the agreement entered with the
supplier if it causes increase in the price of the agreement and adversely affects
the conditions of the agreement referring to the procuring organization, except for
the case envisaged by the Article 398 of the Civil Code;

2. The procedures and rules for review of the conditions of agreement on
implementation of State procurements ar e defined by the Georgian Legislation.


Article 24. State procurement account

1. The State procurement process is reflect ed in the State procurement account and
the rule for its elaboration and keeping is defined by the by-law, adopted by the
Ministry of Economy.

2. After tender is held minutes of Te nder Committee meeting, decisions taken,
conclusions of the experts and consultants participating in the tender, also other
documents defined in the by-law referred to in the unit 1 of the Article shou
ld be
attached to the account.

3. The State procurement accounts shall be s ubmitted to the Ministry of Economy of
Georgia within the following terms:
(a) in the case of tender no later, than 10 days after agreement is executed;
(b) in the case of holding negotiations w ith a single person, if the amount of
State procurements exceed ECU 10.000 equivalent in the national
currency-no later, than 10 days after agreement is executed;
(c) in the case the amount of State pr ocurements is less. than ECU 10.000
equivalent in the national currency- on quarterly basis, no later, than
10th day of the first month of the following quarter;

4. All the interested persons shall have access to the State procurement accounts if
requested, and their summary should be made public on regular basis through the
State procurement bulletins, founded by the Ministry of Economy of Georgia.


Article 25. Procurement rule for goods until January 1, 2000, subject to the
Presidential Ordinance #317, dated June 20 1997.

The Law is not applicable to the goods envisaged by the Ordinance of the

President of Georgia “ on Certain Urgent Measures for the Optimal Use of Budgetary
Appropriations for the Country’s Law Enfor cement Bodies and Some Urgent Measures
Fostering the Operation of Local Enterpri ses at a Maximum Capacity” dated June 20,


Article 26. Establishment of State Procurement Department and adoption of

1. The President of Georgia shall appoint the Chairman of the State Procurement
Department prior to June 1 1999.
2. The Ministry of Economy of Georgia sh all establish the State Procurement
Department prior to June 1, 1999.
3. The Ministry of Economy of Georgia sh all adopt the by-laws, necessary for
enactment of the Law prior to June 1, 1999.
4. The State Department of Statistics of Geor gia, in coordination with the Ministry
of Economy of Georgia shall approve the form of the account, defined in the
Article 5.1.(d) of the Law prior to June 1, 1999.
5. The expenses of the State Procurement De partment of the Ministry of Economy of
Georgia shall be included into the State budget of Georgia.

Article 27. Annulled by-laws

1. The Presidential Ordinance #612, dated October 28, 1998 shall be considered
invalid upon adoption of the Law.

2. Starting from June 1, 1999 the following shall be considered invalid:

(a) the decree of the Cabinet of Ministers of Georgia #264 “On Supplying
Production and Goods for the State Needs of the Georgian Republic”,
dated March 30, 1993;
(b) the Presidential decree # 244 “On Some Measures Ensuring Maximum
Efficiency of the Country’s Industrial Potential in Material and Technical
Support of Georgia’s Military Forces”, dated March 31, 1996;
(c) The Law of Georgia “on State Orde rs in the Construction Sector”

3. On January 1, 2000 the Ordinance of the Pr esident of Georgia “ on Certain Urgent
Measures for the Optimal Use of Budgeta ry Appropriations for the Country’s Law
Enforcement Bodies and Some Urgent Meas ures Fostering the Operation of Local
Enterprises at a Maximum Capacity” dated June 20, 1997 will become invalid;

Article 28. Enactment of the Law.

Article VII and VIII of this Law shall enter into force immediately upon
publication, while other articles only after July 1, 1999.