The adoption of the FPS will extend the law-making on government procurement

On April 5 the President of Russia signed a Federal Law "On the Federal Purchasing System" (FPS). The FPS must replace the long-suffering Federal Law No. 94 (FZ-94) which has been regulating government procurement since the mid-2000s.


The adoption of the FPS was given so much attention, that most unexpected conclusions about the effect of the replacement of FZ-94 with the FPS could be found in mass media and private discussions. Let me describe the principal opportunities and risks of such a replacement, without getting into specifics of each of these forecast assumptions.
  1. FZ-94 provided no regulation of the planning stage of government procurement. Numerous stories about government officials’ purchases of high-priced motorcars or other luxury assets were related to the fact that it was the customers themselves who assumed their needs. The FPS has a new chapter on planning which contains new regulations on validation and rationing of customers’ needs, making and publishing of procurement schedules. Experts welcomed this innovation.
  2. The FPS gives more freedom to the customers at the stage of placement. Выражается это в расширении a list of procurement procedures (a two-stage tender with prequalification, request for bids), as well as в появлении a breakthrough regulation on cost of ownership as criterion for the selection of bids, which was the principal matter of argument between the Ministry of Economic Development and Trade of Russia (which advocated the FPS) and the Federal Anti-Monopoly Service (FAS Russia) with the Ministry of Finance (which were against the FPS). Advocates of the FPS emphasize the fact that the FZ-94 is focused on price criterion for the selection of bids and creates damping risks during procurement of innovative and technology-intensive benefits (Article 10 of the FPS contains the innovation promotion principle). Opponents of the FPS refer to Rose-Ackerman, a well-known corruption researcher, who said that large freedom for the customer is exposed to high corruption risks.
  3. The FPS broadens the mandate to supervise government procurement. Apart from audit by the Accounts Chamber of the Russian Federation, government procurement will be  subject to monitoring and control. Monitoring means analytical support to government procurement, whereas control provides for the establishment of a fully-functional body authorized to give instructions on compliance with the procurement legislation. Perhaps, a major question relating to the FPS is who (MEDT, FAS Russia, Ministry of Finance?) will be in charge of control functions. 
Finally, it should be noted that the adoption of the FPS will extend the law-making on government procurement, because the Russian Government has been given a complete control of many significant regulations, namely validation and rationing of customers’ needs; cataloguing of goods, works, services; outlining terms and conditions and the procedure for application of the cost of ownership criterion; appointing authorized persons to be in charge of monitoring and control of government procurement. 

Belev S.G. – researcher, Budget Policy Department