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Issues Of The Legal Regulation Of Energy Companies During Competitive Procurement
 
PIIS231243500022515-4-1
DOI10.18572/2410-4396-2020-3-108-112
Publication type Article
Status Published
Authors
Snezhana M. Saushkina 
Affiliation: Saint-Petersburg State Economic University (SPbSEU)
Address: Russian Federation, St. Petersburg
Journal nameEnergy law forum
EditionIssue 3
Pages108-112
Abstract

As per Federal Law No. 223-ФЗ “On the Procurement of Goods, Works, Services by Certain Types of Legal Entities” dated July 18, 2011, energy companies may conduct procurement in accordance with the Procurement Regulation approved by the Customer. This Regulation shall comply with the basic principles of procurement activities, such as equality and fairness. The Procurement Regulation shall not contain any provisions limiting access to the bidding procedures, inter alia, by establishing unreasonable requirements for the bidders. As per the Code of Administrative Offenses and Federal Law No. 135-ФЗ “On Competition Protection” dated July 26, 2006, any bidder is entitled to seek legal redress for the violation of its interests, if it believes that anti-competitive practices are being used. However, in consideration of such disputes, it is essential to balance the interests, so that, by observing the interests of the bidders, the customers could exercise their right to receive high-quality deliverables, as well as apply one of the statutory principles aimed at the implementation of measures necessary to cut the customer’s costs.

Keywordsenergy law, energy law subjects, legal status of energy companies as parties to procurement procedures, procurement regulation
Received06.08.2020
Publication date04.09.2020
Number of characters16518
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1 According to V.V. Romanova, the legal regulation of the balance of interests between parties to social relations in the energy sector is one of the main objectives of energy law and order as a necessary component of public law and order. She highlights that the effectiveness of energy law and order largely depends on the effectiveness of the system of the legal regulation of social relations in the key economy branch, elements of the legal regulation system, and their interrelation [1]. At the moment, balancing the interests of energy companies as parties to procurement procedures is problematic.
2 Article 3 of Federal Law No. 223-ФЗ “On the Procurement of Goods, Works, Services by Certain Types of Legal Entities” dated July 18, 2011 (hereinafter referred to as the “Federal Law on Procurement”) distinguishes the following types of competitive procedures:
3
  • Invitation to tender, namely: bidding conducted as an open tender, a closed tender, an e-tender,
  • Auction conducted as an open auction, a closed auction, an e-auction,
  • Request for proposal conducted as a closed request for proposal or an electronic request for proposal,
  • Request for quotation conducted as a closed request for quotation or an electronic request for quotation.
4 An energy company can also establish another method of procurement in its Procurement Regulation, provided that the requirements of Article 3 of the Federal Law on Procurement are met.
5 As aptly noted by I.G. Yakovleva, the term procurement is currently missing from the Federal Law on Procurement [2].
6 Federal Law No. 44-ФЗ “On the Contract System for the Procurement of Goods, Works, Services for State and Municipal Needs” dated April 5, 2013 defines the procurement as follows: “the procurement of goods, works, services for state or municipal needs means a set of activities performed by the customer as prescribed hereby in order to satisfy the state or municipal needs. The procurement begins with the selection of the supplier (contractor, provider) and ends with the fulfillment of their respective obligations by the parties to the contract. If, in accordance with this Federal Law, the publication of a procurement notice or the submission of an invitation to participate in supplier (contractor, provider) selection is omitted, the procurement begins with the execution of a contract and ends with the fulfillment of their respective obligations by the parties to the contract”.
7 Energy companies often encounter difficulties when trying to define the scope of procurement correctly without violating Federal Law No. 135-ФЗ “On Competition Protection” dated July 26, 2006, or restricting competition. For example, when a trade mark is referred to in the procurement scope description, the wording (or equivalent) shall be used, with some exceptions, including: the procurement of spare parts and consumables for the machines and equipment used by the customer in accordance with the technical documents on these machines and equipment. In this case, there are no problems with the procurement, as long as the power equipment in question is not obsolete or expired. The company may order the necessary quantity of spare parts from the manufacturer specified in the equipment data sheet.
8 But what if the equipment has expired or has been discontinued, and the company cannot afford to buy new and more advanced equipment? In this case, the Customer has to conduct a competitive bidding procedure for supply of consumables with specific characteristics. Equipment manufacturers are often willing to meet the company halfway and supply materials that are most compatible with the installed equipment, but single sourcing in this case is not permitted by law.
9 In this context, the anti-trust authorities will view a single-source procurement as restricting access to the market for potential bidders and the violation of the anti-trust laws, and with good reason. But is it fair to consider a detailed description of material characteristics to be a market restriction in this case? It seems reasonable that, to ensure safe operation, the customer practically cites the technical characteristics of the existing material, and these wordings can be construed as an attempt to describe the scope of procurement in a way that the goods could only be delivered by one supplier.
10 It can lead to court and antitrust litigation. Alleging that their rights to participate in the bidding procedure are infringed upon, participants state that their competitive bids shall be reviewed by the committee as the equipment they offer has more advanced characteristics. Supervising authorities generally side with the bidder notwithstanding the arguments that the materials may not be compatible with the installed equipment and will decrease its lifetime dramatically.
11 A similar problem occurs when the equipment to be procured has to be the same as that already installed. In this case, it is not procurement of spare parts as such, but purchase of an equivalent will disrupt the integrity of the process system, resulting in significant losses.

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1. Romanova V.V. Energy Law Order: Current State and Tasks / V.V. Romanova. Moscow : Yurist Publishing House, 2016. P. 255.
2. Yakovleva I.G. Request for Quotation and Request for Proposal as Procurements Methods : thesis of PhD (Law) / I.G. Yakovleva. Moscow, 2017. P. 189.
3. Shevchenko L.I. On Certain Theoretical and Practical Issues of the Protection of Rights of Energy Business Entities by Courts, Arbitration and Anti-Trust Authorities / L.I. Shevchenko / Energy Law Forum. 2019. No. 2. P. 29–37.
4. Romanova V.V. Energy Law Order: Current State and Tasks / V.V. Romanova. Moscow : Yurist Publishing House, 2016. P. 255.
5. A.G. Lisitsin-Svetlanov. Energy Law: Objectives of Further Development of the Sector / A.G. Lisitsin-Svetla- nov // Legal Regulation in the Spheres of Electric Power and Heat Supply : materials of an international scientific and practical conference (Moscow, December 13, 2013) : collection of scientific articles. Moscow : Yurist Publishing House, 2013. P. 10–15.

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