New government procurement regulations promote value for public money

In January 2023, the National Unity Government issued Decree No 12 of 2023 on Organizing Governmental Procurement (the “Procurement Regulation”). The Procurement Regulation was enacted to promote the principle of best value for public funds throughout government procurement by maintaining an appropriate balance between quality and cost when awarding tenders.

APPLICABILITY OF THE REGULATIONS

Except to private companies that are interested in bidding for and winning governmental procurement contracts, the Procurement Regulation does not otherwise apply to private entities owned by Libyans or foreign investors such as joint ventures companies, branches of foreign companies’, or any other commercial companies. Further, the Procurement Regulation does not apply to private entities which contract with government entities in relation to Chapter III of the State Annual Budget. Chapter III provides public expenditure for development and reconstruction projects and programs, such as infrastructure, construction and other project works.

The Procurement Regulation applies only to procurement committees of state entities and administrative entities (the “Entity”) and similar in relation to government procurement contracts funded by Chapter I and Chapter II of the State Budget. Chapter I of the State Annual Budget relates to expenditure on public salaries, and Chapter II relates to public expenditure on government operating costs, such as the purchase of vehicles, equipment, stationary and similar. 

Chapter I and Chapter II expenditure represent major annual costs for the State. Prior to the issuance of the Procurement Regulation, there existed no regulation governing how the Entity organised their procurement and expenditure. The recent Procurement Regulation put into place aims to optimise value for public money spent, thereby encouraging transparency, competitiveness and combatting corruption in the spending of the Entity.

MECHANISMS FOR GOVERNMENTAL PROCUREMENT

The Procurement Regulation provides that each Entity must establish a committee (“Procurement Committee”). Members of the Procurement Committee of each Entity must be appointment by the head of that Entity. The Procurement Committee will then coordinate expenditure and procure goods and services in accordance with the Procurement Regulation either through a limited or general tender, or by way of direct award. The Procurement Regulation caps expenditure by way of direct award to approximately LYD 200,000 per annum for each Entity subject to senior approval.

The Procurement Regulation requires creation of an online Governmental Procurement Platform (the “Platform”) to publish tenders and provide service providers with an equal opportunity to participate in tenders and submit their offers through the Platform. Following submission of offers, the Procurement Committee must only select the best offer that economically, efficiently and effectively meets the relevant Entity’s requirements. Essentially, the Procurement Committee must ensure that the principle of best value for public money is achieved.

Private companies, whether owned by Libyan or foreign investors, that are interested in bidding for and winning governmental procurement contracts must ensure they understand the Procurement Regulation and adhere to its requirements. Failure to do so may disqualify tenders and may result in the suspension and/or termination of any resultant contracts particularly if State oversight bodies become involved, such as the Audit Bureau or Administrative Supervision Authority.

CONCLUSION

The Procurement Regulation is a significant step forward in Libyan government’s nascent attempts to reduce corruption and enhance transparency and the best use of public money. We are looking forward to seeing the impact of this Regulation on future government budgets and spending. 

Our team at Eltumi & Co specialise in energy and infrastructure projects. We track developments in these sectors in order to provide commercial legal support to businesses operating in the sector. Follow our LinkedIn page for ongoing updates and insight.