On September 21, a Russian delegation provided a briefing of the Russian Federation’s government procurement system at George Washington University Law School. This post outlines key elements of the Russian procurement regime.
When Russia applied for accession to the WTO Government Procurement Agreement (GPA) in August, it noted that it had “made great efforts to improve its governmental procurement system”, citing a new federal law “On the Contract System of the Federal and Municipal Procurement of Goods, Works and Services”, as a result of those efforts. In addition to this 2013 federal law, which applies to procurement at the federal, regional and local levels of government, the Russian delegation pointed to a second procurement regime: a 2011 federal law “On Goods, Works, Services Procurement by Certain Types of Legal Entities” applies to procurement by public corporations.
Slightly more than one-half (51%) of Russia’s procurement is conducted using electronic auctions; 18% is conducted through open tenders; and 22% is based on sole sourcing. Russia uses two types of open tendering: two-stage tendering and selective tendering. It also makes limited use of requests for quotation and requests for proposal. According to the Russian delegation, its country’s defense procurement is subject to the procurement law, but most of that procurement is closed.
Russia’s public procurement is advertised on its official website, zakupki.gov.ru. The website provides notices of procurement conducted by all three levels of governments. All procurement above $1800 in value must be advertised on the website. The Russian government publishes more than 3 million procurement notices annually, with a total value of more than 6.5 trillion rubles (approximately $100 billion). That procurement value is slightly less than one-third of the procurement that the European Union and the United States each covers under the GPA.
The Russian Federation applies Import substitution policies that restrict governmental purchases of imported goods, in a variety of circumstances, including the following:
- Russian procuring entities can purchase certain goods (food, office equipment, medicines and furniture) from a supplier offering imported goods only if, after adding 15% to its offered price, that supplier’s bid is the lowest.
- In the procurement of medicines, medical equipment, meat and rice, Russian procuring entities must reject bids offering imported goods if two bids include goods from a Eurasian Economic Union (EEU) country. The EEU is comprised of Armenia, Belarus, Kazakhstan, Kyrgyzstan and the Russian Federation.
- The Russian government is prohibited from buying imported goods for transportation, software, consumer goods and products for national defence and security.
Until Russia accedes to the GPA, it is not subject to any obligations to open its government procurement to foreign suppliers. However, once it joins the GPA, such import substitution policies could not be applied to procurement that it covers under the Agreement, as they would be inconsistent with the GPA’s national treatment obligation.
Even though Russia has not yet joined the GPA, the U.S. Trade Representative cited the import substitution policies in its 2016 trade barriers report, as impeding trade because they exclude U.S. suppliers “from a broad section of the Russian economy”.
Jean Heilman Grier
September 27, 2016