Recommendations by the Union of Informed Citizens on amendments in the public procurement legislation

The Union of Informed Citizens is actively involved in the reform processes in the field of public procurement. After studying current regulations and the issues arising in their application, the Organization has developed and submitted a number of recommendations to the RA Ministry of Finance, the Urban Development Committee, and the Ministry of Territorial Administration and Infrastructure. These recommendations aim to increase transparency in the procurement process, reduce the risks of abuse, and ensure effective public oversight.

The recommendations concern both legislative regulations on procurement and practical issues that directly affect citizens’ quality of life, the efficient use of public funds, and accountability.

Issue: Even after the delivery and acceptance process has taken place, and although the procured goods/services/works are still under warranty, the contracting authority often refuses to allow observers to visit or examine the achieved result.
Since the achieved result during the warranty period is also included in the list subject to oversight under Government Decision No. 526-N, we recommend informing state and municipal bodies, through an official circular, of the inadmissibility of unjustified obstruction of observers’ visits.

The issue has been resolved.

1․ Issue: The procedure for allocating grants to legal entities has transparency problems. We often encounter grants allocated by state bodies that are not substantiated in any way. The scope of services is frequently inflated, and in some cases, the salaries of the grantee’s employees account for up to 90 percent of the grant. On the other hand, it is unclear how the grantee is selected: are there other organizations willing to provide the same service at a lower cost and higher quality, or not?

We recommend introducing amendments to Government Decision No. 1937-N of December 24, 2003 on Approving the Procedure for Allocating Subsidies and Grants to Legal Entities from the State Budget of the Republic of Armenia, which would make the grant allocation process more transparent, ensure the publication of all submitted applications, and simplify oversight mechanisms. We are ready to cooperate in implementing amendments to the grant allocation procedure.

2․ Issue: Article 34(5) of the RA Law on Procurement was repealed in 2022. However, Article 34(6), which refers to Article 34(5), remains in force. Moreover, Article 34(7) also refers to Article 34(6).

We recommend introducing amendments to Article 34(6) to define sufficient conditions for bid evaluation.

3․ Issue: Article 5.1(5) of the Law on Procurement sets deadlines for submitting applications to participate in the oversight process, according to which the period is defined by the notice of the concluded contract and must not be less than three calendar days. However, through the amendment made on May 23, 2024 to Government Decision No. 526-N of May 4, 2017, this limitation has essentially been removed.

We recommend amending the Law to remove the regulation on oversight deadlines and instead include a reference to the relevant Government decision.

4․ Issue: Non-procurement expenditures are carried out in accordance with Government Decision No. 706-N of June 15, 2018, and are aimed at repaying debts arising from obligations undertaken during the execution of previous years’ budgets. In other words, these expenditures already exist at the time of approving the next year’s budget; however, no line in the budget includes any reference to non-procurement expenditures.

We recommend including payments made as non-procurement expenditures in future annual budgets.

5․ Issue: The request-for-quotation procedure is considered a competitive procurement procedure. However, it is often observed that only one participant takes part in tenders announced under this procedure and consequently becomes the winner. In some cases, the participant is affiliated with an official of the contracting authority. This is particularly evident when examining tenders announced by municipal bodies under the request-for-quotation procedure.

We recommend establishing a minimum number of participants for the request-for-quotation procedure, upon meeting which the tender would be considered valid.

6․ Issue: According to Article 5.1(4) of the Law on Procurement, public oversight is mandatory for contracts exceeding the value of the procurement baseline unit. However, in law enforcement practice, this provision is interpreted by contracting authorities as a prohibition against participating in the oversight of procurements that do not exceed the baseline unit.

We recommend removing this wording from the Law in order to avoid misinterpretations and unnecessary obstacles.

7․ Issue: In cases of centralized procurement, beneficiaries are often unaware of oversight activities and sometimes prevent observers from participating in the delivery and acceptance process. For example, the supply of food to kindergartens in Yerevan was delegated to a single participant; however, many kindergarten directors did not allow participation in the food acceptance process as they were not informed about the observers’ visit, had not received the order from the Head of the General Education Department of the Yerevan Municipality, and informing them about the Government decision yielded no result.

Recommendation: Since the written request to conduct oversight is submitted to the contracting authority, we propose establishing communication mechanisms between the contracting authority and beneficiaries to ensure that all beneficiaries are informed of the application/request. This would eliminate the need to contact the contracting authority each time to notify the beneficiary enabling observers to participate in the process.

8․ Issue: Previously, in electronic auction procurements, not only the winner but also the second-ranked participant was determined. However, this created a problem: one of two affiliated companies would submit a bid as soon as the auction started, after which the other participant would immediately offer a price significantly below the cost price. As a result, other participants had no real opportunity to engage in the auction. The next day, the “winning” company would fail to submit the required documents, and the contract would be concluded with the other affiliated company. In effect, the electronic auction outcome was predetermined by bad-faith participants.

To address this issue, amendments were made to the auction procedure, removing the provision on determining a second-ranked participant. Under the new rules, if a contract is not concluded with the winning participant, the procedure shall be deemed failed. However, this has also created difficulties for contracting authorities: the receipt of procurement results is unnecessarily delayed, as each time a contract is not concluded with the winning participant, they are forced to announce a new tender.

During preliminary discussions, several possible solutions were proposed. One option was to limit the amount of each bid increment. That is, an auction participant would not be allowed to offer a price more than 5 percent lower than the previous final bid.

However, this option also carries risks. If two affiliated companies participate in the same tender and each makes a 5 percent reduction, a good-faith participant would be forced to offer a price at least 11 percent lower than their previous bid, which may fall below cost price. As a result, the good-faith participant loses the auction, while the affiliated companies are able to sabotage the tender and render it failed.

For this reason, we recommend that after determining the winning participant, the other participants be given the opportunity to submit a final bid that must be higher than the winning participant’s bid and lower than the bid immediately preceding it. In case of impossibility to conclude a contract with the winning participant, a contract offer shall then be made to the participant submitting the next lowest bid.

9․ Issue: Several observations and proposals were made regarding the draft amendments to the Law on Procurement published on the Unified Website for the Publication of Draft Legal Acts, which, in our view, would help improve procurement legislation and limit abuses and undue procurement processes.

In particular, in Article 6(3)(b) of the draft, we recommend replacing the words “and has not paid the bid security amount within the period specified in the invitation” with the words “or has not paid the bid security amount within the period specified in the invitation.” Otherwise, the current wording implies that suppliers are deprived of the right to participate in procurement only if they are simultaneously deprived of the right to conclude a contract and have not paid the bid security within the specified period. That is, after these amendments, both conditions would need to be present at the same time, otherwise the supplier would not be deprived of the right to participate. In our view, this is problematic, and a participant should be deprived of the right to participate in the procurement process if either of these conditions is breached.

9.1 Prequalification, qualification, and evaluation of bids:
Article 3 provides that the composition of the competent subdivision or the management of the contracting authority in the commission cannot be appealed.

This restriction may later become problematic, as it excludes from the outset the possibility that the management of the contracting authority’s subdivision may be affiliated with one of the participants.

We recommend not restricting the possibility of appealing the composition of the responsible subdivision or the management of the contracting authority in the commission. Although theoretically the head of the contracting authority should not be affiliated with a participant in the procurement process, in practice this is possible. Even if such affiliation cannot be determined through official sources, another participant may be able to prove it, which would constitute grounds for appeal.

Article 12: The preferred language of the bid and the contract may be set as English.
We propose removing this provision, since the official language of the Republic of Armenia is Armenian; therefore, the preferred language of the contract should also be Armenian.

Article 17: This article regulates single-source procurements, including cases where “the procurement is based on copyright and related rights.”

Recommendation: Organization of events is very often carried out under this clause as a single-source procurement. It is necessary to clarify that events not directly related to the exercise of copyright cannot be included under this clause. For example, if a municipality organizes a cultural event involving singers, the presence of the singers cannot in any way be considered the copyright or exclusive right of the organizing company; therefore, the procurement cannot be conducted from a single source on that basis.

The same article has removed the previous provision allowing the contracting authority to carry out a single-source procurement if it did not exceed 10 percent of the total value of the original contract.
We recommend retaining the currently applicable regulation to prevent potential abuses.

10․ Issue: The contracting authority accepts the procurement outcome on the basis of a written positive opinion issued by the representative(s) of the competent subdivision drafting the procurement request. The act of delivery and acceptance is published. However, there are cases where the procured goods/works/services do not meet the conditions defined in the procurement request, yet the delivery and acceptance process has taken place and the supplier has been paid for a substandard result. Although in some types of procurement the acts of delivery and acceptance are published on the https://www.armeps.am/ppcm/public/contracts platform, it is not known who issued the positive opinion.

We recommend that, along with the publication of the act of delivery and acceptance on the https://www.armeps.am/ppcm/public/contracts platform, the publication of the positive opinion also be made mandatory. This would serve as an additional mechanism to ensure that the employee of the competent subdivision who drafted the procurement request exercises greater care regarding the achieved result and issues a negative opinion for outcomes that do not comply with the request, since it would become clear to anyone reviewing the procurement process—without the need for additional inquiries—which specific expert issued a positive opinion for a low-quality or non-compliant result․

11․ Issue: In procurement processes related to construction works, cases have been identified* where the construction company and the company conducting technical supervision are affiliated. For example, a company owned by a son carries out technical supervision of construction works performed by the father’s company.

This raises serious concerns from the perspective of quality control of the works performed, and it is highly likely that works of inadequate quality will be accepted by the contracting authority. Moreover, if a company seeking to conduct technical supervision knows that it will be supervising a relative’s work, it has an incentive to offer a low price in order to secure the supervision contract, issue a positive opinion, and thereby enable its relative to make profit.

Since there are currently no restrictions in the Law on Procurement in this regard, we recommend prohibiting the participation of affiliated companies in the same procurement process related to construction works.

https://infocom.am/10015022/
https://infocom.am/10016346

12․ Issue: There is no specifically defined deadline for road markings on roads undergoing asphalt patching, major overhaul, or new construction. The only deadline set is the overall duration of the construction works.

In some cases, after laying the surface of asphalt on one section of a road, the contractor moves on to asphalt other sections, while the first section remains without road markings for weeks or even months. For example, in 2025, asphalt patching works were carried out on the Yerevan–Sevan section of the M-4 highway. The works were performed in segments: the surface of asphalt was milled on one section, then a new layer was laid, after which the contractor moved on to another section, and so on. However, throughout the repair of the second, third, and other sections, the first section remained without road markings—not for days or weeks, but for months. As a result, a significantly busy highway lacked road markings for months, which poses serious risks to traffic safety.

According to a letter received in 2024 from the Ministry of Territorial Administration and Infrastructure, there are no established norms regarding deadlines for applying road markings. However, specialists believe that after laying the asphalt surface, 15–20 days are needed to ensure that the paint used for road markings does not absorb into the asphalt and lose its qualities.

In contrast, in practice there are cases where road markings are applied immediately after the asphalt surface is laid. For example, Yerevan Municipality carried out road markings on Hrachya Kochar Street just a few days after asphalt paving (admittedly, only the blue markings designated for paid parking), but in any case, the unwritten 15–20 day waiting period was not observed. Moreover, the blue markings on that street have remained intact to this day.

Considering the above, we recommend amending Government Decision No. 113-N of January 10, 2008, on Approving the Requirements for Road Markings and the Rules for Their Application…” and clearly defining the maximum number of days after laying the asphalt surface within which the contractor is obligated to complete road markings. We propose setting the maximum deadline at 7 days within residential areas and 10 days outside residential areas for each paved section.

13․ Issue: In contracts for patching or overhaul, the deadlines for completing the works are often so long that beneficiary residents may live for months with demolished streets, wastewater, and impassable roads.

For example, a municipality may commission patching or overhaul works for four streets at once, setting a completion deadline of 270 days. As a result, the contractor may demolish all the specified streets within a week and leave them in that condition for months. Only close to the contractual deadline does the contractor resume work and complete the projects within the set timeframe (sometimes even with delays), while residents endure inconvenience, damaged vehicles, and a deterioration in their quality of life throughout the entire period.

An example is the contract signed on October 9, 2024, between the Vagharshapat Municipality and “LEV-SHIN” LLC, under which the company undertook to carry out overhaul works on V. Teryan Street, St. M. Khorenatsi Street, A. Manukyan 1st District (three streets), as well as the courtyards and courtyard roads of the Charents District buildings in the city of Etchmiatdzin within 250 calendar days. However, after the works began, beneficiary residents lived for months amid demolished streets and dust.

We recommend dividing the works into sections depending on their type and scope and setting concise and specific deadlines for the complete construction of each section (including laying the asphalt surface, applying road markings, and furnishing). In this specific example, a separate deadline should be set for each street so that they are not all demolished at once and left in that condition. Instead, one section should be demolished, fully completed, restored with the surface, marked, and furnished before moving on to the next section.

Through such regulation, residents would not be forced to live for months amid demolished streets and dust or suffer material and psychological harm.

This would also enable the contracting authority to terminate the contract earlier with a contractor performing inadequately and announce a new tender, thereby saving the time it would otherwise have been forced to wait until the full contractual period expired.

Thank you for your attention and cooperation.