The Russian public procurement and corporate purchasing sectors underwent extensive legislative reforms in 2018, making the identification of primary developments a complex task. To assist market participants, BRACE Law Firm has prepared this comprehensive Digest of the most critical regulatory updates enacted in 2018 and those entering into force in 2019.

Chief among these reforms is the mandatory transition to electronic formats (digitalization) for most public procurement procedures, including open tenders, limited tenders, two-stage tenders, requests for quotations, and requests for proposals. While this transition represents a significant milestone toward enhancing public procurement transparency, it has simultaneously introduced practical implementation challenges for procuring entities. To support these transparency efforts, the "Independent Registrar" State Information System (SIS) is scheduled to launch on October 1, 2019. This system will monitor, track, and log the actions and omissions of procurement participants within the Unified Information System (UIS) and on Electronic Trading Platforms (ETPs), thereby securing verifiable evidence for regulatory compliance audits and enforcement actions. Although market participants still face numerous operational questions regarding how these mechanisms will function in practice, a clear trend toward heightened transactional transparency has emerged.

Complementing these shifts, effective March 1, 2019, federal procuring entities will expand their volume of purchasing conducted through the "Berezka" Unified Trade Aggregator. This adjustment underscores the growing reliance on this specialized marketplace for small-scale procurement.

To streamline bidder verification, the regulatory framework mandates that all procurement participants register with the UIS starting January 1, 2019. However, a transitional provision allows entities already accredited on electronic platforms prior to January 1, 2019, to submit bids and participate in digital procedures through December 31, 2019, without immediate UIS registration.

Bidders will also benefit from several structural improvements. Specifically, new rules taking effect July 1, 2019, allow for the proportional reduction of performance security upon partial contract execution. Furthermore, effective July 1, 2019, participants may once again utilize bank guarantees to satisfy bid security requirements.

At first glance, many of these statutory innovations appear designed to optimize the procurement ecosystem. However, certain modifications raise substantial compliance concerns. Ultimately, time will tell how effectively these 2018 reforms translate into everyday commercial practice.

1. Mandatory Digitalization of Most Procurement Procedures Effective January 1, 2019

Federal Law No. 504-FZ dated December 31, 2017, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Effective January 1, 2019, procuring entities must conduct all procurement procedures exclusively in electronic form. This digitization requirement governs open tenders, limited tenders, two-stage tenders, requests for quotations, and requests for proposals. Consequently, the law strictly prohibits the use of non-electronic formats for these procedures.

The statute provides narrow exceptions for the following procurement categories:

• Single-source procurement (contracting with a sole supplier, contractor, or service provider);

• Closed methods for selecting suppliers, contractors, or service providers;

• Procurement executed outside the Russian Federation to support the operations of state entities performing duties abroad;

• Requests for quotations launched to ensure the continuous operations of a procuring entity within a foreign territory;

• Requests for quotations organized to deliver emergency or urgent medical care (including specialized emergency services) or to maintain vital public utilities;

• Submission of applications for pre-qualification selections aimed at rendering humanitarian aid or mitigating the consequences of natural or man-made disasters;

• Requests for quotations initiated for humanitarian relief or disaster response operations;

• Procurements executed pursuant to specific decrees of the Government of the Russian Federation.

As a point of reference, utilizing electronic formats was optional for procuring entities starting July 1, 2018, but transitioned into a strict legal obligation on January 1, 2019.

To ensure full compliance with the digital environment, entities must align their procurement documentation—including commission establishment orders, contract service regulations, and related internal policies—with the current legislative framework.

2. Implementation of Mandatory Registration for Bidders in the UIS

Federal Law No. 504-FZ dated December 31, 2017, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Through December 31, 2019, inclusive, bidders who obtained accreditation on an electronic platform prior to January 1, 2019, and whose data is maintained in the Register, may continue to submit bids and participate in digital procedures. In these instances, the law does not require immediate registration within the UIS.

Suppliers holding valid ETP credentials retain the right to engage in procurement activities under the pre-existing framework until the end of 2019.

The registration of procurement participants in the UIS occurs electronically under a procedural framework established by the Government of the Russian Federation. Competent authorities automatically log the verified data and corporate documents of registered bidders into the Unified Register of Procurement Participants.

Concurrently, platform administrators are strictly prohibited from demanding supplementary documentation or information beyond the scope explicitly dictated by the Government of the Russian Federation.

The regulatory framework prohibits operators from levying registration fees in the UIS or charging for accreditation on electronic platforms.

3. Activation of the "Independent Registrar" State Information System Effective October 1, 2019

Federal Law No. 504-FZ dated December 31, 2017, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Government Decree No. 883 dated July 28, 2018, "On Approving the Rules for Real-Time Recording of Actions and Omissions of Contract System Participants within the Unified Information System and on Electronic Platforms"

The "Independent Registrar" SIS will monitor and record the actions and omissions of participants within the UIS and on ETPs. Specifically, it will:

• Monitor and archive operational performance data concerning the UIS and ETPs;

• Ensure the permanent logging of participant actions and omissions across ETP and UIS portals;

• Secure the storage of historical data regarding participant behavior and all generated procurement documentation.

The Government of the Russian Federation designates the specific federal executive body responsible for managing the SIS, prescribes system maintenance procedures, and outlines technical requirements for its interoperability with the UIS.

Regulators anticipate that the "Independent Registrar" system will significantly enhance marketplace transparency and curb statutory violations during competitive bidding processes.

Furthermore, the Rules for Real-Time Recording of Actions and Omissions enter into full force on October 1, 2019. This real-time logging relies on certified hardware and software solutions that fulfill stringent Russian information security standards, thereby guaranteeing complete data integrity.

4. Expansion of Federal Small-Scale Procurement via the "Berezka" Unified Trade Aggregator

Government Directive No. 824-r dated April 28, 2018, "On Establishing the Unified Trade Aggregator"

Effective March 1, 2019, most federal executive authorities and their subordinate state institutions must execute single-source procurements through the "Berezka" Unified Trade Aggregator (UTA). This mandate applies to low-value transactions or the acquisition of pharmaceuticals mandated by a formal medical commission decision:

• Transactions valued up to RUB 100,000;

• Transactions valued up to RUB 400,000 (pursuant to Clause 5, Part 1, Article 93 of Federal Law No. 44-FZ dated April 5, 2013, "On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs" [the Contract System Law]);

• Supply of pharmaceutical products dictated by the binding decision of a medical commission.

Conversely, the law exempts entities from using the UTA under the following conditions:

• The procurement takes place in a foreign country to fulfill the operational needs of state bodies active abroad;

• Natural persons render the underlying services outside of an official sole proprietorship registration;

• The procurement data involves classified state secrets;

• The required goods, works, or services are missing from the formal Procurement Classifier or the Catalog of Offers. Bidders may request the inclusion of new items in the Classifier pursuant to Clause 1, Section 7 of the UTA Regulations.

Federal executive authorities and their subordinate state institutions must utilize the UTA framework.

The legislature exempts agencies tasked with formulating and executing defense or national security policies, alongside procurement units serving the Presidential Administration and the Office of the Government of the Russian Federation, from this requirement.

Regional and municipal authorities retain full autonomy to determine whether or not to adopt the UTA system for local workflows.

Clause 3 of Section 7 of the UTA Regulations states that participating in UTA-driven procurement requires mandatory profile registration via the dedicated user dashboard. During this setup, the system automatically pulls and populates the majority of corporate records directly from the UIS to eliminate administrative duplication.

5. Mandatory Alignment of Corporate Procurement Regulations with Federal Law No. 223-FZ by January 1, 2019

Federal Law No. 505-FZ dated December 31, 2017, "On Amending Certain Legislative Acts of the Russian Federation"

Pursuant to Part 3 of Article 4 of Law No. 505-FZ:

1) Corporate entities must align their current procurement regulations with the revised mandates of Law No. 223-FZ, secure formal corporate approval, and publish them in the UIS no later than January 1, 2019;

2) Any procurement regulations that fail to conform to the Procurement Law for Corporate Entities (as amended by Law No. 505-FZ) will be legally deemed unpublished in the UIS after January 1, 2019.

Procurement procedures whose formal notices were published in the UIS prior to the publication of the newly aligned corporate regulations will conclude under the regulatory rules in effect on the original notice date.

6. Regulatory Guidance on Adjusting Contract Values Following the Value Added Tax (VAT) Rate Increase

Federal Law No. 303-FZ dated August 3, 2018, "On Amending Certain Legislative Acts of the Russian Federation on Taxes and Fees"

Clarification Letter of the Ministry of Finance of the Russian Federation No. 24-01-07/86352 dated November 29, 2018

Letter of the Ministry of Finance of the Russian Federation No. 24-03-07/80187 dated August 28, 2018, "Regarding the Modification of Contract Prices following the Value Added Tax Rate Increase"

Effective January 1, 2019, the standard VAT rate increased from 18% to 20%.

As a general rule, parties executing a public contract cannot modify its terms unless explicitly authorized by the Contract System Law.

According to the revised text of Clause 13, Article 34 of the Contract System Law, which entered into force on July 1, 2018, public contracts must include a mandatory clause requiring the procuring entity to reduce final payouts to corporate or natural persons (including registered sole proprietors) by the exact amount of taxes, fees, and mandatory charges linked to contract fulfillment, provided the procuring entity remains directly responsible under the Tax Code for remitting such payments to the state budget. Regardless of whether a contract specifies an 18% VAT rate, the procuring entity must process all payments after January 1, 2019, using the 20% rate. Simply updating the contractual terminology from "18% VAT" to "20% VAT" without upwardly revising the total contract price complies fully with procurement legislation.

Simultaneously, under the amended Contract System Law, if a contract was executed prior to January 1, 2019, the parties may mutually agree to increase the total price within the strict limits of the VAT difference for any goods, works, or services accepted after January 1, 2019. This dynamic temporary relief remains operational until October 1, 2019, provided the contract did not already anticipate the higher tax rate.

In its Letter No. 24-03-07/80187, the Ministry of Finance observed that the specific VAT rate does not constitute a negotiated contractual term requiring mutual consensus, nor does it represent an essential or core element of the agreement. Consequently, the tax rate does not form a material condition of a public contract and can be adjusted via a supplementary addendum without altering the overall contract price.

Contracts executed under the Corporate Procurement Law follow a different operational path. The Ministry of Finance clarifies that corporate buyers may renegotiate and revise overall contract pricing to reflect the VAT hike, provided their internal corporate procurement regulations do not expressly prohibit such adjustments.

Pursuant to Clarification Letter No. 24-01-07/86352, Part 5 of Article 4 of the Corporate Procurement Law stipulates that if any performance modification alters the pricing of goods, works, or services compared to the values logged in the final procurement protocol, the buyer must publish the revised information within the UIS.

Consequently, the Corporate Procurement Law contains no absolute prohibition against mid-performance pricing adjustments.

7. Implementation of Rules for Proportional Reductions in Performance Security Upon Partial Contract Execution

Federal Law No. 502-FZ dated December 27, 2018, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Where a public contract mandates phased performance alongside a performance security requirement, the underlying security value must decrease progressively as the supplier fulfills individual milestones.

To execute this reduction, the procuring entity transmits formal data detailing the supplier’s fulfillment of milestones—including verified delivery records and the valuation of completed works—for direct inclusion in the official contract register.

The system scales down the remaining collateral proportionally, matching the value of accepted and paid milestones within the contractually prescribed timelines.

However, this relief remains strictly conditional upon the supplier clearing all outstanding claims for liquidated damages, penalties, or fines issued by the procuring entity.

While the law allows for a downscaled collateral amount based on timely execution, it defines explicit grounds for withholding this reduction. For example, the procuring entity will deny a reduction if the total value of executed milestones falls short of an advanced payment or if the supplier fails to settle accrued contractual penalties.

If the contractor originally furnished a bank guarantee as collateral, the procuring entity may issue a partial waiver of its rights under that instrument.

These statutory mechanisms take effect on July 1, 2019, but parties may mutually agree to apply them retroactively to legacy contracts.

8. Statutory Caps Enacted on Transaction Fees Charged by Electronic Trading Platform Operators

Government Decree No. 564 dated May 10, 2018, "On the Collection of Fees by Operators of Electronic Platforms and Specialized Electronic Platforms during Electronic and Closed Electronic Procedures and the Establishment of Fee Limits"

Letter of the Ministry of Finance of the Russian Federation No. 24-06-08/79659 "On Executing Procurement Procedures in Electronic Form"

Operators of electronic platforms and specialized electronic platforms hold the legal right to assess a transaction fee against the winning bidder selected via digital or closed digital competitive procedures.

The regulation imposes the following strict statutory caps:

• 1% of the initial maximum contract price (IMCP), capped at an absolute maximum of RUB 5,000, exclusive of VAT;

• For contracts awarded under the small business or socially oriented non-profit set-aside frameworks (pursuant to Clause 1, Part 1, Article 30 of the Contract System Law), the fee cannot exceed 1% of the IMCP and carries an absolute cap of RUB 2,000.

In joint tenders or auctions, the platform operator assesses this fee only once against the final successful bidder, regardless of the number of individual contracts executed with separate procuring entities.

The Ministry of Finance notes that if an operator sets the participation fee for small businesses or socially oriented non-profit organizations at the statutory maximum of RUB 2,000, that sum must already include VAT. Decree No. 564 outlines specific limit structures: while standard procurements allow a RUB 5,000 cap exclusive of tax, the special set-aside threshold stands at a flat RUB 2,000 without tax exclusions. Consequently, the Ministry concludes that the RUB 2,000 figure acts as a gross limit inclusive of all applicable taxes.

Concurrently, platform operators must ensure their infrastructure natively supports digital signatures generated under the laws of the Republic of Belarus. This aligns with the Action Plan for the Mutual Recognition of Electronic Digital Signatures established across the Customs Union and Single Economic Space, approved by Eurasian Economic Commission Board Decision No. 144 dated August 23, 2012.

9. Mandatory Special Accounts Authorized for Bid Security and Elevated Compliance Standards for Guaranteeing Banks

Federal Law No. 504-FZ dated December 31, 2017, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Government Decree No. 440 dated April 12, 2018, "On Requirements for Banks Authorized to Issue Bank Guarantees for Bid Security and Contract Performance"

Bidders must deposit liquid funds intended for bid security into designated special accounts opened at pre-approved financial institutions. The Government of the Russian Federation maintains the official list of these authorized banks.

As confirmed by Ministry of Finance Letter No. 24-06-08/70718, binding operational agreements took effect on October 1, 2018, across all primary platform operators (including AGZRT, EETP, RAD, TEK-Torg, ETS, Sberbank-AST, RTS-tender, and ETP GPB) and the specialized platform operator AST GOZ.

Mandatory terms governing special account agreements, alongside guidelines for repurposing a bidder's existing corporate accounts into special accounts, entered into force on July 1, 2018. These protocols apply strictly to digital procedures initiated on the newly authorized platforms following their official launch date of October 1, 2018.

Furthermore, effective July 1, 2018, commercial banks issuing bank guarantees for bid security and contract performance must concurrently satisfy the following capitalization and rating thresholds:

• Maintenance of core capital funds totaling at least RUB 300 million, calculated via the formal methodology of the Central Bank of the Russian Federation as of the latest reporting date;

• Retention of a credit rating not lower than "BB-(RU)" on the national rating scale of the Analytical Credit Rating Agency (ACRA) and/or not lower than "ruBB-" on the national scale of the Expert RA Rating Agency.

10. Adjusted Thresholds for Mandatory Bid Security Under the Contract System Law

Government Decree No. 439 dated April 12, 2018, "On Approving the Initial (Maximum) Contract Price Threshold Above Which Procuring Entities Must Establish Bid Security Requirements for Tenders and Auctions"

Regulatory position of the Ministry of Finance, detailed in Clarification Letter No. 24-06-08/70718 dated October 2, 2018

Under Part 1 of Article 44 of the Contract System Law, a procuring entity must mandate bid security for tenders and auctions if the initial maximum contract price exceeds RUB 5 million, unless otherwise directed by the Government of the Russian Federation.

Implementing this statutory caveat, the target Government Decree establishes that a procuring entity must mandate bid security whenever the IMCP exceeds RUB 1 million.

As clarified by the Ministry of Finance in Letter No. 24-06-08/70718, if the IMCP remains at or below RUB 1 million, the procuring entity retains discretionary authority to request bid security. Conversely, exceeding this threshold transforms the request into a strict statutory obligation.

Additionally, the Ministry indicates that because requests for proposals (including electronic RFPs) typically follow failed tenders or auctions, it remains highly prudent and rational for procuring entities to mirror the original Article 44 security structures within the subsequent RFP framework.

11. Reintroduction of Bank Guarantees for Satisfying Bid Security Requirements in Digital Procedures

Federal Law No. 504-FZ dated December 31, 2017, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Starting July 1, 2019, public procurement participants (competing in digital open tenders, digital limited tenders, digital two-stage tenders, or electronic auctions) may once again submit bank guarantees to satisfy bid security mandates. Bidders must transmit the unique registry entry number of the guarantee to the platform operator simultaneously with their formal proposal submission.

The statute also governs contingency workflows if the guaranteeing bank suffers a license revocation. Specifically, the supplier must furnish alternative contract performance security within one month of receiving a formal notice from the procuring entity. Contracts must explicitly include this default provision. In such scenarios, the required replacement security amount may reflect a deduction for any milestones successfully completed and accepted to date.

12. Mandatory Contractual Frameworks for Calculating Sequential Payouts Following Advance Payments

Government Decree No. 1430 dated November 28, 2018, "On Amending the Regulations on Measures to Ensure the Execution of the Federal Budget"

Effective January 1, 2019, state procuring entities must embed specific payment calculation rules within any contract that features an advance payment mechanism. For a public contract lacking discrete performance milestones, the value of subsequent progress payments equals the difference between the gross value of verified, executed work and the total amount of the initial advance payment.

Where a public contract structures execution through clear milestones, subsequent payouts equal the product of the advance payment percentage and the verified value of the completed milestones.

13. Operational Adjustments to Public Procurement Frameworks for Small Businesses

Federal Law No. 504-FZ dated December 31, 2017, "On Amending the Federal Law 'On the Contract System in the Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs'"

Effective January 1, 2019, the legislature revised the accounting method for calculating mandatory procurement quotas from Small and Medium Enterprises (SMEs) and Socially Oriented Non-Profit Organizations (SONPOs). Crucially, the new framework allows procuring entities to include certain single-source contracts within their aggregate small-business quotas. This inclusion applies exclusively to single-source contracts executed because an initial competitive bidding procedure, originally set aside for SMEs and SONPOs, failed due to a lack of valid competing bids.

This legislative modification will enable state procuring entities to rapidly satisfy their mandatory annual SME and SONPO engagement quotas without encountering procedural bottlenecks.

14. Regulatory Restrictions Imposed on the Procurement of Telecommunication Devices

Government Decree No. 234 dated March 7, 2018, "On Amending Subclause 'a' of Clause 11 of the Additional Requirements for Computer Programs and Databases Maintained in the Unified Register of Russian Software"

This enactment requires that all cellular and mobile radio devices supplied under public procurement contracts operate natively under a certified operating system listed in the Unified Register of Russian Software.

15. Revised Procurement Protocols for Life Sciences: Polyvinyl Chloride Medical Devices

Government Decree No. 1590 dated December 19, 2018, "On Amending Government Decree No. 102 dated February 5, 2015"

Government Decree No. 1589 dated December 19, 2018, "On Amending Government Decree No. 967 dated August 14, 2017"

The regulatory updates abolished the pre-existing standalone registry of polyvinyl chloride (PVC) medical device suppliers within public procurement. This streamlining establishes clear procurement preferences for manufacturing operations achieving designated localization levels.

Furthermore, a procuring entity may reject bids offering foreign-manufactured PVC medical products only if it receives at least two competing proposals originating strictly from Eurasian Economic Union (EAEU) member states. These qualifying local bids must satisfy production localization criteria verified by the Chamber of Commerce and Industry of the Russian Federation and hold valid quality management certification under ISO 13485-2017 ("Medical devices — Quality management systems — Requirements for regulatory purposes").

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