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Legal Alert 107

New Law Governs Contracts with the State – Law No. 182 of 2018

The new tenders and bids law of 2018 was put in place to cancel that of 1998 and govern business transactions that involve the state.

In light of recent events, the introduction of this law was a crucial step in ensuring the execution of safe and fair business transactions with the state. Previously, the state had faced problems in attempting to cancel tenders and bids that had already occurred. However, certain provisions of this law make it clear that such cancellation could not happen except in very specific circumstances.

The law first starts by defining a number of aims. Among these aims is the correct organization and execution of contracts in general, ensuring that they matters are as economically beneficial as possible. The law also aims to encourage relevant entities to constantly create new and innovative methods and solutions. Moreover, it clearly lays out that it attempts to create a good climate in which small and medium sized enterprises can grow.

To fulfill these aims, Articles 3-5 of the law create new authorities to oversee such tenders and bids, as well as handle any complaints rendered to them.

Moreover, Article 7 clarifies that any buying or leasing of real or personal property, as well as any contract for services, must generally be subject to a public tender. In exceptional cases, the relevant authority may instead allow the sale or contract to proceed through general practice, limited practice, private bidding, a local tender, a two-stage tender, or a direct agreement.

If an entity has no legal personality, it will also have to carry out any buying or leasing through a public tender, and exceptionally through a limited tender, a local tender, or a direct agreement.
Some of the methods above are new ways to carry out bids and tenders; such as the two-stage tender and the option of direct agreement.

Two-stage tenders can be used in cases which the authority finds the subject of the tender complicated or difficult to specify, allowing the parties to communicate with one another.

As for the direct agreement stipulated above, the law allows for entities to contract for goods or services without a tender or bid and through direct agreement in the following cases:
• If the matter is time-sensitive
• If only one entity is capable to provide the service
• If the service was previously carried out without a contract and the entities wish to continue working together contractually
• If the subject matter supports the political, social, and economic goals of the state
• In cases where there is no time to carry out official tender procedures

Direct agreement can then take place through the approval of the head of the authority so long as the value of the matter does not exceed EGP 1 million in the cases of buying or leasing, EGP 5 million in cases of contracting for services. However, if the matter exceeds EGP 10 million or EGP 20 million respectively, it would require the approval of the competent minister or governor.

Article 8-27 govern how an agreement is presented and then carried forward. While many of these rules are carried over from the new law, a few new ones include:
• Expedited measures for time-sensitive tenders or bids
• Warnings against meddling in a tender or bid by visiting the headquarters of the bidders
• Reducing the temporary insurance amount in tenders from 2% to 1.5%

Most importantly, the law then proceeds to go into a number of new measures prohibiting and allowing certain practices in order to make bids and tenders more efficient. For instance, article 33 warns entities against entering into more than one bid or tender. Article 35 further stipulates that if the prices in a bud or tender seem too low, authorities will step in to inspect the integrity of the matter. Furthermore, as mentioned above, the law tightly regulates the circumstances under which a tender or bid may be cancelled. Articles 37 and 38 explain that tenders can only be cancelled if any illegal acts are carried out, such as collusion between bidders, acts of corruption or monopolization, or mistakes in the rules of the bid or tender.

In more specific cases, a tender or bid will be cancelled if:
• After all bids are inspected, all are excluded except for one
• If the relevant authority finds faults in all the bids
• If the value of the smallest bid is too low

Such a decision to nullify a bid or tender must come from the relevant authority and must be clearly communicated to the bidders through both mail and e-mail. The parties can then, as per Article 39, present their complaints to the oversight authority.

All in all, the new law is one that was much needed in light of recent events, which had been reason for complaint by both individuals and business entities. The new law instead clarifies matters which had been previously unclear, such as the cancellation of a tender or bid, as well as introduces new and updated methods to carry out such transactions. Contracts which the state is a part of must be concluded fairly and in full transparency – and the new law ensures just that.

Written By

Maryam Iraq – Attorney At Law

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