Public procurement reform in Morocco: a protectionist turning point?
According to the hard-hitting headlines in the economic press, which have been ongoing since the publication of Decree No. 2.22.431 of 8 March 2023 on public procurement, a protectionist turning point took place at the beginning of 2023, with the the overhaul of the regulatory framework for public procurement in Morocco.
Is the new decree, which will comes into force on 1st September 2023, such bad news for foreign companies wishing to bid on Moroccan tenders?
1. National preference is not new
In Decree No. 2-12-349 of 20 March 2013, the last major text adopted in the field of public procurement, which has been repealed by the new decree, article 155 provided that the public purchaser could, under certain conditions, increase prices offered by foreign companies bidding for works and related study contracts, by no more 15%.
A further step was then taken with Decree No. 2-19-69 of 24 May 2019, which amended the Decree of 20 March 2013, and made national preference mandatory.
2. The new decree strengthens national preference mechanisms
2.1. The system for increasing the amount of bids has been transformed by the reform
Firstly, article 147 of the new decree broadens the scope of application of the national preference: "When competitors that are not established in Morocco bid for works, supply or service contracts, preference shall be given, in the evaluation of financial bids, to bids submitted by competitors established in Morocco, subject to compliance with commitments made under international agreements duly ratified by the Kingdom of Morocco".
The system no longer concerns only works contracts and related studies, but now includes supply and service contracts.
Secondly, the new decree complicates the system of bid mark-ups, in the light of the methodology for evaluating financial bids that it also introduces.
In order to understand the new functioning of the national preference, it should be borne in mind that the decree, in its article 44, institutes a mechanism known as the "reference price".
The best offer is the one that is closest to the default reference price. If there are no offers below the reference price, the best offer is the one that is closest by excess to this price.
Article 147 of the new decree links the national preference system with the reference price mechanism of article 44:
" (…) the amount of the financial offer submitted by the competitor not established in Morocco is :
- reduced by a percentage fixed at fifteen percent (15%), when the amount of this offer is the closest by default to the reference price and there are offers submitted by competitors established in Morocco that are lower than this reference price;
- increased by a percentage fixed at fifteen percent (15%), when the amount of this offer is the closest by excess to the reference price, in case of absence of offer lower than this reference price;
- increased by a percentage fixed at fifteen percent (15%), when the amount of this offer is the closest by default to the reference price, in the event that the offers submitted by competitors established in Morocco are higher than this reference price".
As regards service contracts relating to studies, the amount of the financial bid submitted by the competitor (not established in Morocco) shall be increased by a percentage fixed at 15%.
2.2. The new decree allows for national tendering
The call for tenders is said to be "national" when only "competitors established in Morocco" are allowed to participate (article 19).
However, the use of national tendering is subject to conditions:
- in the case of a works contract, the estimated value of the contract must be equal to or less than MAD 10 million excluding tax;
- in the case of a supply and service contract, the estimated amount of the contract must be less than MAD 1 million excluding tax.
2.3. The reform also aims to promote the local economy by favouring small and medium-sized Moroccan companies
The project owner is required to reserve a percentage of 30% of the estimated value of the contract(s) that it intends to enter into, for each budget year, for very small, small and medium-sized enterprises established in Morocco, cooperatives, unions of cooperatives and self-employed entrepreneurs (article 148).
