Flash info Algeria | Sonatrach: the new directive R17

The directive A-408 (R16) dated on 8th April 2010 related to the award of equipment, works, supply and assembly of fitting, physically quantifiable services, studies and consultant services has just been amended by the directive A-408 5 (R17) dated on 16th January 2011.

These amendments are further to the adoption of the presidential decree n° 10-236 on 7th October 2010 which has sensibly modified the regulation of the public works contracts (hereinafter, “Code”; cf. our flash on 3 December 2010). It is suitable to remind that the objective of the R16, as drafted, was to comply with the internal rules of the previous code of the public works contracts¹ (decree 02-250 on 24th July 2002). The new directive adapts the rules to the innovations introduced by the Code of 2010.

It is important to specify that the process of adoption and validation by Sonatrach of the Code has not been completed yet. Indeed, are still waiting for the setting-up and the validation by the Council of State holdings of a plan of external control of the contracts (by application of Article 2 of the Code).

In the meantime, and until 31st March 2011 (deadline), the provisions related to the external control of the R16 will continue to be applied.

The main provisions of the new directive are the followings:

1. Redefinition of the cases of the procedure of negotiated contract

The R17 repeats the provisions of Articles 43 and 44 of the Code, redefining the cases which would authorize the recourse to the negotiated contracts (derogation proceedings to the principle of invitation to tenders).

Concerning the simple negotiated contract 

• Introduction of the case of the promotion of the national production tool. The recourse to this exceptional procurement way is subject to the previous agreement of Sonatrach’s board of directors. Previously, negotiated contracts were exclusively limited to the case of development of the production tool intra-group that Sonatrach held by majority or entirely.
• Limitation of the simple negotiated contracts in the field of studies, services and counsel to the only case of promotion of the intra-group formation.

Concerning the negotiated contract after consultation

The R16 limited the negotiated contract after consultation to the only case of unsuccessful invitation to tenders, without define this case.

Henceforth, it is specified that these proceedings are applied in the following cases:

• When the invitation to competitors is unsuccessful.

The invitation to tenders is considered as unsuccessful when only one tender is received or if, after evaluation of the received tenders, only one is technically pre-qualified. Moreover, it is clearly mentioned that the cases of cancellation of any proceeding of procurement or the fact that the amounts of tenders been excessive does not constitute a case of unsuccessful. Then the authority contracting has to relaunch the proceeding.

• For the contract of studies, supplies any specific services that the nature does not require recourse to invitation to tenders, and for the work contracts directly related to national authorities of State sovereignty. 
  It is important to note that the recourse to this proceeding “has to be done on the basis of a file of invitation to tenders subject, previous the launch of the consultation to the visa of the relevant work contract committee”.
• For the operations realized within the frame of the Government cooperation strategy or bilateral agreements of conceding financing, debt conversions in development or gifts, when the said financing agreements provide it. The contracting authority can then limit the consultation of the only enterprises of the country concerned for the one case, or the silent partner countries for the other cases. 

2. Application of the 25% preference margin

The R17 repeats literally the provisions of Article 23 of the Code providing for a preference margin of a 25% rate, “is granted for the products made in Algeria and/or for the companies incorporated in Algeria, whom the share capital is held by majority of residing nationals, for all kinds of work contracts.

The granting of the margin is subject, in the case where the tenderer is a group composed by companies incorporated in Algeria, as defined to the previous paragraph, and foreign companies, to the justification of shares held by the company incorporated in Algeria and the foreign company, concerning the tasks to realize and their amounts.

The file of the invitation to tenders has to mention clearly the preference granted and the method of evaluation and comparison of the tenders which will be followed to apply the said preference”. 

3. Transposition of the provisions of the Code related to the amendments

Article 3 of the R17 repeats the provisions of Articles 102 to 106 of the Code. 
The main points to remember are:

- The conclusion of an amendment and its submission to the relevant work contract committee out of the contractual delays is possible in the following cases :

• “when the amendment as it is defined in Article 13.1 (of the Code) is without any financial effect and provides for the introduction and/or the modification of one or several contractual clauses other than those related to the execution delays;
• When the exceptional and unpredictable reasons independent of the will of the two parties involving the substantial breach of the economic balance of the contract and/or the change of the initial contractual delay;
• When, exceptionally, the amendment subject is to close definitely the contract”. 

-  The amendment is not subject to the previous exam of the external control organs when “its subject does not modify the denomination of the contracting parties, the technical and financial guarantees, the contractual delay, and when its amount or the cumulated amount of the different amendments, increasing or decreasing, does not exceed :

• 20% of the initial amount of the contract, for the contracts related to the competence of the work contract committee of the contracting authority;
• 10% of the initial amount of the contract, for the contracts related to the competence of the work contract national committee”. 

4. Obligation of a partnership for the tender to the international invitation to tender

The new paragraph 10 bis added to the R16 includes the provisions of Article 24 of the Code. To remind, it specifies the obligation within the international invitation to tenders, for foreign tenders, to invest within a partnership in the same field, with a company incorporated in Algeria, whom the share capital is held by a majority of nationals residents.

Note that the said paragraph does not repeat the paragraph of Article 24 of the Code which provides for a file of invitation to tenders has to include a not restrictive list of companies, capable of conclude a partnership with the foreign tender.

Beyond the aspects purely legal, we kindly think that the deadlock of this condition could conduct in practice to a moderate application of the provisions of Article 24 of the Code.