The Regulation on Application of Industry Cooperation Projects

Author: Gaye Spolitis

Introduction
The Regulation on Application of Industry Cooperation Projects ("Regulation") entered into force through publication in the Official Gazette dated 17.02.2018 and numbered 30335. As indicated in the general preamble of the Public Procurement Law ("PPL"), the purpose of the PPL is to realize new practices regarding the works that require public expenditure and regulating tenders, and which are intended to generate income under separate laws in such a way so that the specific needs of the tenders are satisfied. The Regulation on Application of Industry Cooperation Projects is regulated in parallel with this purpose. The Regulation determines the rules and procedures that shall be applied to construction works and the purchase of goods and services that include industry cooperation applications that ensure innovation, naturalization and technology transfer pursuant to Public Tender Law numbered 4734. In this article, arrangements made under the Regulation shall be examined.

Industry Cooperation Projects

According to the definition made under subparagraph (p) of Article 3 of the Regulation, "industry cooperation project" explains a project that involves the purchase of goods/services or construction works of the administration, and which involves innovation, endenization, and/or technology transfer.

Fundamental Principles Regarding the Tender Process
Transparency, competition, equal treatment, reliability, confidentiality, public opinion scrutiny, fulfillment of needs in appropriate conditions and on time, as well as the effective use of resources are the rules for tenders that shall be made pursuant to the Regulation. Aside from the price, management and maintenance costs, productivity, quality, technical superiorities and Industry and Technology Participation ("ITP") obligations will also be assessed in tenders that are made within this scope. Furthermore, the Regulation stipulates that construction works, services and goods purchases shall not be considered together as tenders, unless they have an acceptable natural link amongst them.

Supply Group and ITP Group
The Regulation stipulates the principles regarding formation of the Supply Group and ITP Group, determination and submission of tender procedure, preparation of tender documents, tender commissions, preparation and presentation of offers, preparation of offer evaluation plans, opening of the offer file, opening and evaluation of offers, and the conclusion of supply and ITP contracts. In this regard, pursuant to the Regulation, the negotiations for the contract shall start with the bidder, if there is only one bidder or, with the first bidder, if there is more than one bidder. The supply tender commission shall pursue the Supply contract negotiations, whereas the ITP Commission pursues ITP contract negotiations. There shall be no increase in the bidder's price offer during contract negotiations.

Industry and Technology Participation Categories
The Regulation addresses ITP categories. Local contribution, technologic cooperation and exportation are stipulated under Category-A, Category-B and Category C, respectively.
In this respect, "local contribution" is defined as activities performed inside the country by domestic companies and institutions and establishments, under the procurement contract, under Category- A.
Under Category-B, "technologic cooperation" is defined as endorsements, such as infrastructure, hardware, software, service, information, document, education, intellectual and industrial property, certification and financial endorsements that shall be provided for research-development, design, production, software development, test and such studies/ activities that are to be realized by the domestic companies, institutions and establishments for the purpose of industrialization, endenization and commercialization in the areas determined by the Ministry, except for those that shall be conducted regarding Category-A activities under the procurement contract.
Under Category-C, "exportation" is defined as the exportation of goods, services or construction work procured under the procurement contract, or in areas that are determined by the Ministry.

Liability of Contractors and Credit Facilities
In addition, the Regulation encompasses provisions regarding the liability of contractors and credit facilities. According to the Regulation, contractors cannot place any financial burden on the administration or the ministry while fulfilling his obligations. General acceptance of ITP principles, and providing minimal ITP liability ratios determined regarding every category under ITP principles, is obligatory.
Under ITP contracts, the contractor submits a letter of guarantee that is in the ratio of 6% of the ITP liability, and which is valid for at least one year after the end of the period of the ITP liability, to the Ministry, under the ITP contract.
In the event of increase or decrease in the amount of the procurement contract for any reason, including price gap, the total liability of the contractor increases or decreases, proportionally.
In the event of complete cancellation of the procurement contract, the ITP liability of the contractor ends. In the event of partial cancellation of the procurement contract, the part of the ITP liability proportional to the cancelled section is deemed as invalid. In the event of cancellation, the situations where the ITP letter of guarantee shall be propounded are regulated under the ITP contract.
According to the Regulation, credit facilities shall be pursued under the conditions determined in the preliminary approval stage, and through using the index approved by the Ministry of Science, Industry and Technology, among the indexes indicated in the ITP index table.

Penalty Ratio
It is important to note that in the event that the obligations regarding Category-A, Category-B, Category-C, sub-industry business shares and small and medium-sized enterprises business shares are not fulfilled within the indicated time and conditions stipulated in the ITP contract, a penalty shall be applied, which amounts to 6% of the ITP obligation that remains unfulfilled.

Conclusion
The Regulation abrogated the Regulation on the Rules and Procedures of the Industry Cooperation Programme regarding purchase of Goods and Services pursuant to Article 3 sub-paragraph (u) of Public Tender Law numbered 4734, published in the Official Gazette dated 15.02.2015 and numbered 29268. However, the tenders, the announcement of which are made prior to the entry into force of the Regulation, shall be carried out according to the Regulation on the Procedures and Principles of Industry Cooperation Projects Regarding the Purchases of Goods and Services according to Subparagraph (u) of Article 3 of Public Procurement Law numbered 4734 that was in force on the announcement date of the tender. The Regulation that is summarized in this article has brought with it vital changes regarding the implementation of Industry Cooperation Projects.