Auction for Reducing the Starting Price in the Public Procurement System

An auction for reducing the starting price is one of the key competitive procedures of public procurement in the Republic of Uzbekistan. In accordance with the Law "On Public Procurement" (ZRU-684 of 22.04.2021), this mechanism represents electronic bidding in which the only criterion for determining the winner is the price.

This method is used to ensure transparency, efficiency, and savings of budgetary funds, as well as to stimulate competition among suppliers.

According to Article 4 of the Law, an auction for reducing the starting price is a competitive method of procurement on a special electronic platform, in which the winner is determined solely by the criterion of the lowest price.

Main Legal Framework

• Chapter 4 of the Law establishes the general requirements for procurement, including the principles of transparency, competition, and objectivity.
• Article 30 of the Law classifies the auction as one of the main types of competitive procedures, along with the tender, the electronic shop, and simplified procedures.

Goals and Objectives of the Procedure

• Cost reduction – identifying the lowest market price among the submitted offers.
• Enhancing competition – involving more suppliers due to ease of participation.
• Transparency – the process is conducted in an electronic system, eliminating subjective interference.
• Efficient use of funds – government customers obtain goods, works, or services at the optimal price.

Auction Procedure

1. Publication of announcement – the contracting authority publishes the procurement on the portal.
2. Participation of suppliers – accredited participants submit their offers.
3. Electronic bidding – participants lower the price relative to the starting one.
4. Determination of the winner – the system automatically records the participant who offered the lowest price.
5. Conclusion of the contract – a contract is signed with the winner, and the information is entered into the Unified Register of Contracts.

Advantages and Disadvantages of the Auction

Advantages:

• Maximum openness and absence of subjective influence.
• Savings of budgetary funds.
• Reduction of corruption risks.

Disadvantages:

• Risk of dumping (artificial underpricing followed by refusal to perform).
• Possible reduction in the quality of supplied goods/services.
• Limited applicability for complex and innovative projects, where price is not the main criterion.

Comparative Analysis

Indicator	Auction for Reducing Price	Tender	Electronic Shop
Winner’s criterion	Lowest price	Price + quality + deadlines	Lowest price (price request)
Organizational complexity	Medium	High	Low
Dumping risk	High	Medium	Medium
Applicability	Mass procurement of standard goods/services	Complex and costly procurements	Small-scale procurements

 

Order of Conducting an Auction for Reducing the Starting Price

Stage	Action	Responsible Entity	Result
1	Publication of announcement in the electronic system	Contracting authority	Procurement information available on the portal
2	Review of conditions and registration for participation	Participants	Admission to the auction
3	Determination of the starting price	Contracting authority (independently or via a specialized organization)	Initial lot price set
4	Submission of applications for participation	Participants	Applications received in the system
5	Conduct of electronic bidding (price reduction)	Participants via electronic platform	Automatic recording of offers
6	Determination of the winner (lowest price)	Electronic procurement system	System generates protocol and draft contract
7	Compliance check and absence of grounds for disqualification	Procurement commission / contracting authority	Legitimacy of winner confirmed
8	Acceptance of the winning offer	Contracting authority	Decision to conclude a contract
9	Signing of the contract	Contracting authority and winner	Contract enters into force
10	Entry into the Unified Register of Contracts	Authorized body / system	Contract becomes publicly available

 

Legal Restrictions on Auctions for Reducing the Starting Price

1. Procurement subject

The auction is applied only when the sole selection criterion is price.

If the goods or services have complex technical specifications, require evaluation of quality, reliability, or innovativeness — a tender or selection of the best offers is applied instead.

2. Dumping risk

The law prohibits submitting artificially low-priced offers followed by refusal to sign the contract.

Such participants may be entered into the Unified Register of Unscrupulous Contractors and deprived of the right to participate in public procurement for up to 2 years.

3. Affiliation of participants

Participants and their affiliated entities cannot participate in the same auction simultaneously.

Discovery of affiliation leads to disqualification.

4. Financial and legal restrictions

Suppliers are not allowed to participate if they:

4. • have overdue tax liabilities;
   • are subject to bankruptcy or insolvency proceedings;
   • are listed in the Register of Unscrupulous Contractors;
   • fail to meet qualification, technical, or commercial requirements of the procurement documentation.
5. Ban on negotiations

During the auction, any negotiations between the contracting authority and participants are prohibited until the winner is determined.

6. Funding restrictions

It is forbidden to conduct an auction without confirmed funding sources.

It is also not allowed to announce an auction for an amount exceeding the allocated funds.

7. Prohibition on splitting procurements

It is not allowed to artificially split one procurement object into several parts in order to avoid conducting a tender and replace it with an auction.

The auction for reducing the starting price is an effective tool for saving budgetary funds, but its use is limited:

• It is suitable for mass and standard goods/services where quality is the same for all participants.
• For complex procurements requiring evaluation of non-price factors, other procedures are applied.
• Strict mechanisms are provided to protect against dumping, affiliation, and corruption risks.

Thus, while this instrument is effective for procurement of mass goods and services, it should be combined with other forms of procurement (tenders, competitions, selection of best offers) to achieve a balance between cost savings and quality.