On 19 July 2021, the Public Procurement Law, which Parliament had passed on June 30 without much debate over its content, was published. This law is one of the main laws demanded internationally, particularly in the context of the negotiations with the International Monetary Fund. Over the past decades, public procurements have been a key gateway for corruption in Lebanon because of a lack of competition and transparency, as the Legal Agenda explained in a previous article.[1] This issue contributed to the country’s ranking of 149 of 180 in terms of public sector corruption per the Corruption Perception Index. The bill adopted, which was originally submitted by MPs Michel Moussa and Yassine Jaber on 6 November 2019, was based on a new vision for a public procurement system developed by the Institut des Finances Basil Fuleihan. In this vision, procurements occur in a decentralized manner, but a central authority regulates them in accordance with general uniform principles and exercises oversight over them.

 

This article discusses this law’s positives and negatives and its suitability for Lebanon’s situation. It also addresses the challenge to the law’s constitutionality filed by Strong Lebanon bloc MPs on August 12 and the decision that the Constitutional Council reached on September 15.

 

A New Vision for How Public Procurements Should Occur

 

Adopting Decentralized Decision-Making as the Administrations Are Best Poised to Assess Their Needs

 

The new Public Procurement Law, which will enter effect twelve months after its publication, settles the means for making public procurements. It defines the procuring party or contracting authority and assigns it the powers needed to conduct procurement procedures. The latter include developing mechanisms to study, assess, and analyze its procurement needs, developing clear mechanisms for preparing market studies, and preparing and making available tender documents.[2] Hence, unlike the previous law, which entrusted the centralized Tenders Board with conducting open tendering for all state administrations, the new law enshrines decentralized procurement. While the choice of decentralization is not inherently positive or negative, its success presupposes the existence of effective centralized oversight and the proper application of legal controls. These factors depend not only on the law’s content but also on developments occurring in the structure of the state and its institutions, particularly the judiciary.

 

Adopting Centralized Regulation and Oversight

 

To counterbalance the decentralization of public procurement, the legislators sought to strengthen centralized oversight. This they did by replacing the Tenders Board with the Public Procurement Commission (PPC) and attempting to shield it from interference by making it an independent administrative commission that enjoys legal personhood and financial and administrative independence and is subject to no supervision, not even administrative. Hence, the law establishes the fourth independent commission of this kind (the others being the National Human Rights Commission, the National Commission for the Missing and Forcibly Disappeared, and the National Anti-Corruption Commission). This commission regulates, supervises, and monitors public procurement; develops its procedures, systems, and performance; coordinates between the various procuring parties; and provides technical support. Its most influential powers include:

• Compiling the annual procurement plans received from the purchasing parties in a standard format it issues, categorizing them, and duly publishing them on a central online platform.
• Preparing lists of public employees qualified to participate in tender committees, excluding any who have faced disciplinary action or prosecution. Procuring parties must form their committees only from people who appear on these lists.[3]
• Challenging decisions concerning the procurement process.

 

Unifying Public Procurement Principles

 

To ensure that public procurement is practiced soundly, the new law attempts to establish general, uniform standards that increase the effectiveness of public procurement. The most prominent of these standards are comprehensiveness, transparency, competition, integrity, and sustainability and development policy.

 

Comprehensiveness: Subjecting All Transactions to the Public Procurement Law

 

The new law stipulates that it encompasses all public sector transactions, which the rationale defined as its comprehensive quality. This amendment is a positive step as it unifies the legal framework for public procurements, which previously encompassed only transactions by public administrations of the state and not transactions by other public law persons or companies they own. The importance of this quality is evident from the fact that until the new law enters into effect, the two state-owned mobile service companies remain free from any public regulation on the basis that they are not public administrations of the state.

 

However, we must criticize Article 3, which excepts from the law’s provisions any procurement that aims to grant any obligation or concession to exploit the state’s natural resources or a service of public utility or any monopoly, except in connection with the procedures that occur before the concession or monopoly is granted. While excepting the granting of concessions is understandable, as under Article 89 of the Constitution it must occur via a law, the reason for excepting procurements after a concession is granted is not.

 

The Rule That Public Procurement Occurs via Open Tendering

 

Article 42 of the law stipulates that public procurement be conducted through open tendering except in specific cases mentioned in Article 41, wherein it may occur via other means (two-stage tendering, soliciting quotes, soliciting proposals for consultative services, mutual agreement, and purchase by invoice).[4] Because the Public Accounting Law already stipulated the principle of conducting procurements via open tendering (as Tenders Board President Jean Ellieh has mentioned in many of his submitted opinions),[5] the new development is not the principal’s declaration but its expansion to encompass the vast majority of public sector transactions by virtue of the law’s aforementioned comprehensiveness.

 

The law subjects the cases that allow recourse to mutual agreement, particularly the case of agreements related to security, to other controls. It requires that such agreements must be approved by the Council of Ministers based on a proposal by the relevant minister. On the other hand, the law fails to impose ceilings on procurements by mutual agreement even though this form has been abused specifically to evade open tendering. When open tendering is infeasible, the law also requires the procuring party to issue a frank, explained decision that will, along with an explanation of the reasons and circumstances, be added to a record stipulated in Article 9. However, this addition remains pointless in the case of confidential transactions, wherein the agreement and its rationale remain secret.

 

Competition

 

While the law requires that competition be maximized if open tendering is infeasible, the concept of competition continues to lack a clear definition in Lebanese law because of Parliament’s failure to finish the bill on competition. The absence of a definition and examples could lead to judicial chaos and discretionary handling of cases concerning procurements.

 

Transparency

 

Article 109 attempts to maximize transparency. It requires the procuring party to publish its plans and the details of their implementation, including the progress of procurements, the measures for sourcing and contracting them, the results of their delivery and execution, and their final value. Data about public procurement at all levels must be collected in a central database maintained by the PPC as part of its online platform. Information about public purchases must be made freely available on the platform. Only information considered confidential under Article 6 may go unpublished (an issue we shall return to below when presenting the law’s dangers and negatives).

 

During a workshop held by the Institut des Finances Basil Fuleihan, the Legal Agenda and other civil society organizations criticized the absence of a record showing the beneficial owners of every company, which would help to expose conflicts of interests and violations. Despite rampant corruption, this proposal fell on deaf ears.

 

Integrity

 

Unlike the previous principles, the law established a mechanism for defining integrity and identifying the honest practices required under Article 110. This it did by giving examples of dishonest practices such as employees’ disclosure or use of information obtained in the course of their work to benefit third parties, which would contravene the principle of fair and equal treatment. The law also requires that employees abide by a code of conduct and training prepared by the PPC, which will define integrity,[6] and that the procuring parties exclude anyone who violates its contents from participating in any procurement processes. It also imposes criminal punishments consisting of imprisonment and fines on people who disclose or use information they obtain in the course of their job.

 

Sustainability and Development Policy

 

The law’s rationale recognizes the importance of conducting public procurements in harmony with development policies and sustainable development requirements, and in accordance with best practices adopted around the world. Such practices include incentivizing small and medium-sized enterprises to enter the public procurement market, encouraging local production, competition, and innovation, reducing environmental impact, and achieving the socioeconomic goals stipulated in international agreements in accordance with national priority. The law thereby aims to strike a balance between these potential benefits and obtaining the best value for public money. In this context, and given the concessions this law grants to small and medium-sized enterprises, emphasis should be placed on recording beneficial owners and creating a definition or framework for the concept of sustainability.

 

The Dangers and Gaps in the New Vision

Though the new vision is significant, its success in curbing corruption and rationalizing public spending is threatened by two key factors. The first is the broad scope of confidentiality, which contradicts the principle of transparency and limits the effectiveness of oversight in this regard. The second is the latitude left to the executive authority to influence the performance of institutions established to implement this law via the contest over appointments, which are usually subject to quota-sharing (i.e. the same sectarian and political formula currently used to divvy up public procurements), and via the institutional dysfunction in both the public administrations and the judiciary.

 

Confidentiality That Erodes the Principle of Transparency

 

After enshrining the principle of transparency, the new law allows five types of information to be kept confidential. One of these exceptions – namely information whose publication could threaten the state’s main security interests – is normal. The others – which cover information whose disclosure violates the law, impedes its implementation, compromises bidders’ legitimate business interests, or impedes fair competition – afford broad latitude to limit transparency.

 

Given the adoption of the transparency principle, it is surprising to find talk of “information whose disclosure violates the law or impedes its implementation” without any precise definition of such information or even any examples of it. The law thereby opens the door for the bodies applying it or people involved in public procurement to claim that information not explicitly excluded from publication cannot be published. This contradicts the declaration of the transparency principle, which implies that all information concerning public procurement should be published except when explicitly and unambiguously excluded by the law. Indeed, publishing such information is necessary to ensure the law’s application. Information whose publication impedes fair competition remains similarly undefined. Hence, that exception, too, conflicts with the principle of transparency, which is critical to ensuring competition.

 

While protecting trade secrets is important in procurements, they too should be defined narrowly so that the concept is not used to expand the scope of confidentiality, especially in countries with high rates of corruption like Lebanon. Exacerbating this exception, the legislators used the term “commercial interests” instead of “trade secrets”, thereby opening the door for the law to be interpreted broadly. From this angle, they seem more concerned with bidders’ interests than the state’s interests.

 

Article 6, which enumerates the cases of confidentiality, mitigates these exceptions by authorizing the competent courts to disclose confidential information. However, the key difficulty here is learning of these procurements in the first place, especially when the entire contract is labeled confidential.

 

Public Procurement Governance Subject to Quota-Sharing and Contingent on Reforming the Administrative and Judicial Institutions?

 

Alongside the State Council and Court of Accounts, the law adds two commissions to the system of public procurement governance, namely the PPC and the Objections Commission (OC). It also abolishes the Tenders Board and incorporates its staff into the PPC, appointing the president of the former the president of the latter. Though the new commissions are important, a question mark remains over their ability to escape the political domination and quota-sharing prevalent in the public sector, which is essential to the success of their centralized oversight and hence the achievement of the law’s stated objectives. The legal text reflects an obvious effort to develop the mechanism for appointing the members of these two commissions to avert quota-sharing, but the risk still stands. This is especially true in the wake of the Constitutional Council’s issuance of Decision no. 5 of 2021 on September 17, which undermines many of the safeguards surrounding the appointments, as explained below.

 

How Were Safeguards of the PPC’s Independence Curtailed?

 

The new law introduced three safeguards of the PPC’s independence:

• The appointment of President of the Tenders Board Jean Ellieh as president of the PPC after the former’s staff is incorporated into the latter. This appointment constituted a safeguard because Ellieh is recognized for his integrity.
• The procedures for appointing the PPC’s president and four members. The law stipulates that the files of the candidates for these positions shall be scored by a committee composed of the presidents of the National Anti-Corruption Commission, the Court of Accounts, the Civil Service Board, and Central Inspection, i.e. the main oversight authorities. To reinforce this safeguard, Article 78 stipulates that the prime minister shall propose, to the Council of Ministers, the names of those who passed the Civil Service Board’s interviews for every position in order of score. This suggests that the selection of the candidates based on the highest score is done at the level of the aforementioned committee and that the power of the prime minister and Council of Ministers is therefore limited.
• The controls to prevent the arbitrary removal of the PPC’s president and members.

 

While these safeguards were already limited given the quota-sharing that occurs in the appointment of the aforementioned oversight authority presidents, the Constitutional Council’s decision reduced them in a manner that increases the risk of quota-sharing. It did so in two ways.

 

Firstly, it deemed that the text is unclear:

 

“The phrasing of Paragraph J (ya’) of Article 78 is ambiguous and creates confusion over whether the prime minister refers all the names of the passing candidates and proposes those acceptable for each position ordered by score or refers only the names of those he proposes. This ambiguity must be eliminated to entrench the interpretation that the prime minister refers all the passing candidates and proposes those of them acceptable for each position in order of score, pursuant to the principle of interpretative reservations”.

 

 The Constitutional Council thereby replaced the restricted power of the Council of Ministers to appoint the highest-ranked candidates with the power to appoint any candidate who passed the interviews, which provides latitude for bargaining and quota-sharing.

 

Secondly, it deemed the appointment of the president of the Tenders Board as president of the PPC to be a temporary measure. In other words, the Council of Ministers may replace Ellieh when appointing the PPC’s other members. This decision followed a challenge to the law’s constitutionality arguing that Ellieh’s appointment under Article 88 conflicts with Article 65 of the Constitution, which vest the Council of Ministers with the power to appoint public servants of the first class or equivalent. Rather than annulling the appointment, the Constitutional Council once again opted to interpret the text in a manner it deems consistent with the Constitution. It held that the appointment is a temporary appointment whose only justification is to ensure the continuity of public service until the process of appointing a new president is completed. The Constitutional Council thereby abolished the other two safeguards, namely the appointment of someone of recognized integrity as the PPC’s president and the inability of the Council of Ministers to remove this figure without a legally established justification.

 

How Were the Safeguards of the OC’s Independence Curtailed?

 

What happened to PPC also happened to the OC. While the law subjected the appointment of the latter’s members to the same mechanisms set for appointments to the former, the Constitutional Council’s decision once again held that the Council of Ministers has the latitude to appoint any of the successful candidates rather than only those with the highest scores. In this regard, the risk of quota-sharing is increased by the OC’s significant powers to settle disputes and complaints. Hence, it should enjoy guarantees of independence, as the Constitutional Council stressed, but these guarantees were significantly curtailed by its decision.

 

Absent Reforms to the Administrations and Judicial Institutions

 

Finally, the success of the new vision depends on two complementary factors: the triumph of good faith and competence in the procuring administrations, which must conduct procurement procedures themselves on the basis that they are the parties most familiar with their own needs, and the strength of the oversight and judicial system and its ability to address abuse and violations in public procurement. Unfortunately, the absence of both factors in the current Lebanese system could harm the law’s chances of being applied properly. Most of the procuring administrations need deep reforms to put public interest before private interests, and the same goes for the Court of Accounts and State Council. The Legal Agenda documented their many major problems in a special issue.[7] Under such circumstances, it may have been better for the PPC to centralize public procurements, or at least those of high value, until the Lebanese state achieves its administrative and judicial reforms. Effectuating this vision in the absence of such reforms is a risky venture that could diminish the benefits sought from the law. Let’s keep watching.

 

This article is an edited translation from Arabic.

 

Keywords: Lebanon, Public Procurement, Public Procurement Commission, Public Procurement Law, Corruption, Open tendering

 

[1] Shehrazade Yara El-Hajjar and Imad Sayegh, “al-Shira’ al-‘Amm fi Lubnan: Inhiraf al-Qanun fi Sabil Nasf al-Munafasa”, The Legal Agenda, 6 May 2021.

[2] Article 102 of the Public Procurement Law.

[3] Ibid., Articles 100 and 101.

[4] The details of these means are defined. Ibid., Articles 43 to 48.

[5] Article 121 of the Public Accounting Law.

[6] Article 110 of the Public Procurement Law.

[7] Man Yahmi al-Dawla wa-Man Yudafi’u ‘anha?, issue 65,The Legal Agenda–Lebanon, June 2020.