10 December 2011 Written by  Wondwossen Wakene

Modalities of Formation

Modalities of Formation

Administrative contracts should be concluded following the formality requirements that the law prescribes. Such a provision is available under the General contracts part of the law. This being the rule, some administrative contracts need additional modalities of formation. Accordingly, we have instances when administrative contracts are concluded following a procedure of tender.

As art 3147(1) makes it clear by utilizing “may be…” it is optional that such a procedure is followed. To show the possibility however the law reads “Administrative contracts (may be) concluded by the procedure of allocation by tender” (emphasis)

Once however we are channeled to make an administrative contract by the procedure of allocation by tender, we will act to the contrary i.e. fail short of allocating by tender, “… under pain of nullity.”

The natural questions will be “Why are we channeled as such And when are we channeled?”

To begin with the second, we are forced to conclude an administrative contract by allocation “… whe never the law imposes such obligation”. Let us consider the full text of Art 3147(2). “(Administrative contracts) shall be concluded by (the procedure of allocation by tender)…, whenever the law imposes such obligation.”

Hence once the law dictates us to conclude an administrative contract by the procedure of allocation by tender we have to do it in that way the consequence of not following the diction being nullity.

Among other things the law prescribes to meet the objectives of transparency and taking into account, the sensitivity of the obligation. Thus tender minimizes potential dealings between administrative officials and the other contracting party. And secondly because after all the contract is to be concluded to provide the best for the public, the procedure of tender aims at selecting the best contracting party in terms of reasonable price and modest quality.

By taking these rationales into account the law prescribes adherence to the procedure with the procedure under Art.3148-3169. To this end, administrative contracts that should be made by the procedure of allocation are governed by Articles 3148-3169.

If the contract is to be concluded after allocation, Art.3148 tells us that “the allocation shall be notified to the public in the manner prescribed by administrative regulations or in default… in the manner which appears the most appropriate”.

The law, in this case, is concerned not only with the publicity issue but even with the mechanism of attaining this publicity. The normal way of publicity is through electronic media and printing media. Sometimes administrative agencies will tell the public through electronic media to read and consider a given series of a newspaper usually to better comprehend with the content of the notice.

The minimum threshold of the content of the notice of allocation is available under Art. 3149 fashioned in a mandatory spirit but effectuates in an optional manner i.e. what happens if the notice fails to include one of the lists under Art.3149?

Though the law is silent on this issue, the publication of those issues under Art.3149 limits the prerogatives of administrative agencies from arbitrarily modifying the specifications. (See Art.3150 cum Art 3149) Mind you specifications can still be modified by a new publication (Art.3150). So, isn’t this tantamount to saying “do not modify the old specification with a new one but only the new with a new one?”

One other issue worth noting is the status of this publication under Art. 3148. Should we consider it as an offer or as a declaration of intention? Note that an offer has a quite different legal consequence from a declaration of intention. See for example Art.1690 and 1687 on this issue.

After administrative agencies declare their intention by notifying the public about the allocation, “The contractors or suppliers who intend to present themselves as tenderers shall deposit in the place indicated and within the time specified by the specifications (a declaration of their intention) to tender and their tender.”  (Art.3153).

“The declaration of intention (offer) to tender shall indicate the name, first name, qualifications and address of the candidate.” (Art.3154 (1)]

“The [tender] shall contain an offer of the price and the undertakings of the candidate” [Art. 3155(1)]

Thee above provisions show us the need to comply with formality requirements on the event of declaring our intention. Because they are about declaration of intention, we should not think of the formation of an administrative contract at this level. What else should we consider?

As to Art.3159, for example, “The office of allocations shall firstly take cognizance of the declarations of intention to tender.” To verify whether these have been regularly deposited and whether the tenderer fulfill the conditions required for admission to the allocation. “This verification is not to determine the successful tenderer. Rather it is to determine admission to the allocation”.

A provisional successful tenderer is the one who makes the “most advantageous tender for the administrative authorities (Art 3164 (1). Among other things the most advantageous tender is determined by the offered price. To this end Article 3164(2) reads “for this purpose, the office shall take into account the price offered and all the modalities of the tender in conformity with the specifications”.

Even the designation of a provisional successful tenderer does not imply the conclusion of an administrative contract.

For that matter the office (of allocation) need not designate any provisional successful tenderer where regulations of the allocation prescribe that the administrative authorities do not intend to negotiate beyond a certain price. (Art 3165(1)).

On the advent of approval, the contract shall be concluded. Art. 3168 says the successful tenderer will no more be qualified as a provisional but a permanent successful tenderer.

This being one aspect of forming administrative contracts as governed by the civil code, we have other modalities of forming administrative contracts under proclamation No 430/2005. We will briefly consider the procedures under this proclamation.

1.3.3 Process of Forming Administrative Contracts under the Proclamation

Under private contracts, parties have at every liberty to choose their would be contracting party. This being not the case under administrative contracts the manner of selecting the prospective contracting party will have in view such considerations as ensuring the economic and efficient use of public fund and making public procurement in a manner which is fair, transparent and non discriminatory (Preamble of Proclamation No.430/2005).

Administrative contracts, therefore, have this view in advance thereby limiting contracting parties’ from freely picking up their prospective counter parts.

To begin with our discussion, it is good to first understand what procurement is per proclamation No 430/2005. Accordingly, “procurement” is to be understood as “the purchasing, hiring or obtaining by any other contractual means goods, works and services.” [Art.2 (e) of the proclamation]

We should therefore understand procurement in a wider sense to include not only purchasing but also hiring and any other contractual means enabling the acquisition of goods, works and services.

If this is procurement, what are the means of procurement? The rule here is “open bidding”. That is why Art. 25(1) prescribes “[e]except as otherwise provided in this proclamation, the procuring entity shall [use] open bidding as the preferred procedure of procurement.”

The otherwise provisions of the proclamation are enumerated under Art 25(2) of the same. Next to this, upon delimiting the scope of application of the proclamation, Art.3.(2) takes into account another consideration that authorizes the use of a different procedure of procurement. This is obviously true in purchase of goods, services or works that involves “national security or defense”. But should all procurements that involve the above entities be undertaken following a different procedure than open bidding?

At least six modalities of procurement including open bidding are recognized by the proclamation. These are available under Articles 25-30. They are:

  1. Open bidding
  2. Restricted tendering
  3. Direct procurement
  4. Request for quotations
  5. Two-staged bidding.
  6. Request for proposals.

  1. Open bidding:

This is the rule under the proclamation. The first thing that comes to mind when thinking of open bidding is advertisement. Art.31 (1) prescribes the modality of advertisement. Thus, “invitation to bid shall be advertised in at least one national newspaper of general circulation. Additionally, the procedures under articles 32-42 should be complied with.

Generally the bidding will be considered as open because it is advertised as such by allowing a great number of bidders to competitively participate. Briefly, there are five steps here:

  1. Preparation of bid (Art.33)
  2. Invitation for bid (Art.32)
  3. Advertisement (Art 31. Cum 35)
  4. Submission and receipt of bids (Art.37 cum Art 36)
  5. Opening of bids, examination & evaluation of bids (Arts 38-39)

  1. 2. Restricted tendering

This is possible after following the conditions under Art 26(1). When “the good, works or services… are available only from a limited number of suppliers” or when the time and cost of bidding is disproportionate to the value of the things to be procured, the mode of procurement will be restricted tendering.

The procedures to be followed under restricted tendering are those listed under open tendering except for the modifications introduced under Art.44.Some of them include:

    1. Invitation to bid is addressed to the few who have already agreed to bid
    2. Bid security is optional in the sense that it is the procuring entity which determines whether to pose the request or not.

Even though the number of people who participate in the bidding are less than those we already have in open bidding, non-discrimination and fairness are the rules of the game. Procuring entities are expected to render equal treatment to those who participate in the bidding. They should also provide equal opportunity to those in the suppliers list.

  1. Direct Procurement:-

Generally speaking, the rule in the procurement proclamation is open bidding. However, under clearly enumerated cases direct procurement is envisaged as a possibility. Direct procurement in a way should not be used to avoid possible competition among bidders nor should it be used to discriminate among them. Taking this as background, the proclamation enumerates the possible conditions that warrant the use of direct procurement as one means of procurement. Some of the conditions listed under Art.27 include:

  1. Absence of competition because of technical reasons,
  2. Provision of supplies for replacement, as extension for existing supplies or when procurement from another supplier forces the procuring entity to procure equipment or service not meeting requirements of interchangeability
  3. When additional works which were not included in the initial contract have,  through unforeseeable circumstances, become necessary since the separation of the additional works from the initial contract would be difficult for technical and economic reasons
  4. Determination by the head of the procuring entity that the need is pressing  and of emergency and delay will result in serious problem and injurious to the performance of the procuring entity

Do you have anything to say with regard to the list that we have under Art.27? Is the list exhaustive? Why? Why not?

Last modified on Wednesday, 02 May 2012 13:05