On challenging the notification of the elimination of violations identified by the results of desk control
No.6001-23-00-6ap/239 dated 07/20/2023
Plaintiff: SMZ LLP
Respondent: Russian State Institution "Department of Internal State Audit"
Interested parties: LLP "G", State Institution "Department of Economics and Finance" (hereinafter referred to as the Organizer), State Institution "Department of Passenger Transport and Highways" (hereinafter referred to as the Customer).
Subject of dispute: on challenging the notification on the elimination of violations identified by the results of desk control dated May 24, 2022 No. 631010000-4-6/7-173238 (hereinafter referred to as the notification)
Review of the cassation appeal of the person concerned
PLOT: The organizer held a competition No. 7222542-1 "Average repair of roads of the streets of the left bank of the city of Semey" in the amount of 1 billion tenge. On April 28, 2022, the Organizer summed up the results, a protocol on the results No. 7222542-OK1 was formed, SMZ LLP was recognized as the winner0, LLP "G" was recognized as a potential supplier who took the second place.
Based on the complaint of LLP "G", the Department carried out desk control of public procurement for the above-mentioned tender.
According to the results of the desk inspection on May 24, 2022, the DVGA sent a notification to the Organizer of the competition.
According to the Notice, the following violations were identified: - the plaintiff's stated work experience in "asphalting" is not average or major repairs or reconstruction, therefore, the specified experience for 2015, 2016 and 2019 was not subject to accounting.
Accordingly, the Organizer made an incorrect calculation of the conditional discount based on the criterion of the Partnership's work experience (instead of the conditional discount for work experience of 9.9%, 5.2% should have been applied).
Judicial acts:
1st instance: the claim is satisfied. The notification was deemed illegal and cancelled.
Appeal: the decision remains unchanged.
Cassation: judicial acts are cancelled, the claim is denied.
Conclusions: The local courts, recognizing the contested notification as illegal, indicated that the Department violated the administrative procedure during the desk control.
In violation of the requirements of part 1 of Article 73 of the CPC, the administrative body did not hold a hearing and did not provide an opportunity for the participant in the administrative procedure to express his position on the preliminary decision on the administrative case, which the participant in the administrative procedure should have been notified in advance.
The judicial board does not agree with these conclusions of the local courts due to the following. According to parts 1 and 2 of Article 84 of the CPC, violation of the legislation of the Republic of Kazakhstan on administrative procedures is the basis for declaring an administrative act illegal if such violation led or could lead to the adoption of an incorrect administrative act.
An essentially correct administrative act cannot be declared illegal on formal grounds alone. According to the tender documentation dated March 25, 2022, the subject of public procurement is the work on the average repair of the streets of the left bank of the city of Semey.
According to subparagraph 21) of Article 7 of the Law of the Republic of Kazakhstan "On Highways" (hereinafter referred to as the Law): "a street (carriageway of a street) is a highway within the boundaries of populated areas."
By virtue of paragraph 275 of the Rules for Public Procurement (in force at the time of purchase), if the subject of the tender is an average repair of a highway, then the experience of construction, reconstruction, and highways is taken into account. In accordance with subparagraph 8) of Article 1 of the Law, the average repair of a highway is a complex of works related to the restoration of the original operational qualities of a highway and road structures.
According to subparagraph 5) of Article 1 of the Law, highway repair is a complex of works aimed at preventing and eliminating defects, as well as restoring and improving the transport and operational qualities of a highway, including current, medium and major repairs.
The types of work are provided for in the approved order of the Minister of Transport and Communications of the Republic of Kazakhstan dated January 24, 2014 No. 56 "Classification of types of work performed during maintenance, current, medium and major repairs of public roads".
Taking into account the above-mentioned provisions of the law, as well as the letter of explanation from the Committee of Highways, the appeal commission, having considered the objections of the Organizer, came to the correct conclusion that the Partnership's stated experience in "asphalting" for 2015, 2016, 2019 is not subject to accounting, since there is no information in the acceptance certificates of completed works confirming the implementation of works similar to the one being purchased.
In these circumstances, the judicial board concluded that the contested notification of the desk control was lawful and justified, issued within the limits of its competence, taking into account the violations identified, which the courts had not given a proper legal assessment.
The formal violations of the notification procedure committed by the defendant do not entail its illegality, as they do not affect the essence of the violations identified, given that the opportunity to raise objections has been realized for both the organizer of the competition and the potential supplier during the pre-trial appeal of the notification and during the consideration of the case in court.
Whereas mistakes made during the consideration of the case by the courts, on the contrary, can lead to more serious consequences, namely, the execution of a contract worth over a billion tenge by a supplier who does not have proper work experience.
In accordance with the requirements of article 4 of the Law of the Republic of Kazakhstan "On Public Procurement", public procurement is based on the principles of: optimal and efficient spending of money used for public procurement; providing potential suppliers with equal opportunities to participate in the public procurement procedure, except in cases provided for by this Law; prevention of corruption.
By virtue of the provisions of Article 7 of the CPC, an administrative body or official carries out administrative procedures within its competence and in accordance with the Constitution of the Republic of Kazakhstan, this Code and other regulatory legal acts of the Republic of Kazakhstan.
When considering and resolving administrative cases, the court must strictly comply with the requirements of the Constitution of the Republic of Kazakhstan, constitutional laws, this Code, and other regulatory legal acts subject to the application of international treaties of the Republic of Kazakhstan.
In accordance with part 4 of Article 6 of the CPC, violation of the principles of administrative procedures and administrative proceedings, depending on its nature and materiality, entails the recognition of administrative acts, administrative actions (inaction) as illegal, as well as the cancellation of judicial acts.
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