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THE PROPOSED AMENDMENT TO THE PUBLIC PROCUREMENT LAW OF MONGOLIA HAS BEEN DISCUSSED BY THE PARLIAMENT

5/9/2022

As part of the implementation of Parliament Resolution No. 106 of 2021, the “New Revival Policy” was adopted to accelerate economic recovery amid the pandemic. In addition, an amendment to the Public Procurement Law of Mongolia has been drafted with the support of the “Strengthening Fiscal and Financial Stability Project.”

The primary purposes are to minimize economic operators’ costs related to their participation in public procurement procedures, give additional preference to goods and products of small and medium enterprises, and ensure effectiveness and clarity of the contract award, execution, and implementation procedures. 

The Parliament has discussed the draft law proposing the following significant changes on 14 April 2022: 

  • The contract price of civil works being funded by the state budget may be modified once if the relevant procurement budget is so adjusted by law;
  • The state-owned enterprises would not be obligated to adhere to the Public Procurement Law only if and when they would finance less than 30 percent of the development projects under the auspices of the New Revival Policy;
  • Contract performance guarantee amounts will be decreased to 3 percent from the currently effective 5 percent of contract price amount;
  • Bid guarantee amounts will be decreased to 0.5 percent from the currently effective 2 percent of procurement budget;
  • Current contract conditions setting retainment amount of 5-10 percent of the construction contracts will be replaced with up to 5 percent of the contract price;
  • The payment retainment period will be shortened to 1 year from the currently effective period of up to 4 years; and
  • Contracting authorities will be obligated to award contracts within 15 business days after the bid opening date.

The expected adoption of the amendment law can bring positive effects to all stakeholders to public procurement procedures, such as (i) minimizing financial burdens and increasing cash flows of the economic operators participating in bidding procedures, (ii) introducing a new procedure “competitive dialogue” whereby competition between the bidders capable of carrying out development projects in Mongolia and (iii) shorten the timeframes for bid evaluation and contract execution. 

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