Doing Business: Procurement

State Procurement

The State Procurement Act has special regulation on the procurement of goods, work and services by Kazakhstan’s state agencies, state enterprises and private legal entities, where the state owns at least 50% of shares (participatory interests) and their affiliates. By amendments to the State Procurement Act dated 20 November 2008, the application of this act was expressly excluded the national management holding companies, national holding companies, national management companies, national companies and their affiliates.

The general requirement for a state procurement is to carry out the tender. A special commission formed by the purchaser is responsible for organizing tenders. The tender process consists of a few stages (including publication of the tender announcement and a review of the bids) and is completed with the formation of a state procurement contract with the winner of the tender. Kazakhstan’s companies have priority over foreign companies in the tender participation.

The Financial Control Committee of the Ministry of Finance is the authorized body in the sphere of state procurement. Among other functions, this Committee maintains entities register that must comply with state procurement rules.

Procurement in Subsoil Use
Companies which are engaged in oil and gas and mining activities have similar restrictions in respect to the purchase of goods, works and services. Subsoil use companies, in particular must conduct a public tender, in order to purchase goods, works and services which are necessary for their operations, except where the goods and services are produced only by one supplier. Also Procurement Rules allow purchases to be made without a tender. Generally, the subsoil users are obliged to engage, in connection with their subsoil use operations, Kazakhstan’s companies that produce goods and services in Kazakhstan and use at least 95% of the local labor force where the goods and services produced by Kazakhstan’s companies are comparable by quality, price and standards, with similar goods and services provided by foreign companies.

Procurement Rules Applicable to Natural Monopolies
Entities operating within a natural monopoly must comply with special procurement rules. The Natural Monopolies Act says that natural monopolies must carry out open tenders related to the buying goods, work and services at expenses that are included in the prices (or maximum levels of prices), or tariff estimates for regulated services. Other methods of goods’ procurement, services and work (e.g., purchase from one source) may be used by Natural monopolies only if such possibility is directly provided by the act.
 

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