Public Procurement through Direct Contracts

Procurement through direct contracts represents a special type of public procurement, in which a state customer enters into a contract with a supplier without conducting competitive procedures. This mechanism is provided for by the Law of the Republic of Uzbekistan “On Public Procurement” (Law No. ZRU-684 of 22.04.2021) and is aimed at ensuring flexibility and efficiency in meeting the needs of state bodies and organizations.

According to Article 30 of the Law, one of the types of procurement procedures is public procurement carried out through direct contracts. The application of this mechanism is regulated by the law and subordinate acts, which establish:

• conditions under which direct contracts may be concluded;
• financial limits or circumstances that exclude the use of competitive methods;
• the procedure for reporting and monitoring concluded contracts.

Main Purpose of Procurement through Direct Contracts

• Prompt fulfillment of state needs when long-term competitive procedures are impossible.
• Minimization of risks of disruption of state programs and projects.
• Saving time and administrative resources for low-value procurements or in cases of special necessity.

Advantages

• Speed and simplicity – direct contracts reduce the time required to prepare and conduct procurement procedures.
• Flexibility – the ability to quickly respond to urgent needs.
• Lower transaction costs – no expenses for organizing tenders or other competitive procedures.

Risks and Disadvantages

• Limitation of competition – the absence of competition reduces the likelihood of achieving the best conditions.
• Corruption risks – direct contracts are more vulnerable to conflicts of interest and abuse.
• Transparency issues – additional monitoring and reporting mechanisms are required.

Restrictions on Application

The law prohibits the use of direct contracts when:

• procurement can be conducted competitively without prejudice to deadlines and quality;
• there are no exceptional circumstances (e.g., threats to life and health, defense and security needs, emergency response);
• the procurement amount exceeds established financial limits;
• artificial splitting of procurement is carried out to avoid competitive procedures.

Control and Reporting

All concluded direct contracts are subject to:

• registration in the Unified Register of Contracts maintained by the authorized body;
• publication on a special information portal to ensure transparency and public oversight;
• financial control by the treasury during payment processing.

Characteristics of Procurement through Direct Contracts

Block	Content	Examples and Explanations
Conditions of application	• Urgent need (emergency, threat to life and health, disaster response); • Defense, security, and protection of state interests; • Small-value procurements (when competitive procedures are impractical); • Sole supplier (no alternatives on the market).	Urgent procurement of medicines for hospitals; purchase of unique equipment from the only manufacturer.
Restrictions	• Prohibited without justified exceptional grounds; • Artificial splitting of procurements to avoid tenders is not allowed; • Exceeding cost limits excludes the possibility of using direct contracts; • Cannot be used for regular procurements subject to competition.	Splitting a large equipment purchase into small parts to bypass tender requirements is a violation.
Control mechanisms	• Mandatory registration in the Unified Register of Contracts; • Publication of contract information on a special information portal; • Treasury financial control (payment impossible without registration); • Monitoring by the authorized procurement body.	If a contract is not included in the register, the treasury will not process the payment.
Risks	• Increased corruption risks (choosing “preferred” suppliers); • Lack of competition may lead to inflated prices; • Limited process transparency; • Risk of lower quality of goods, works, services.	Procurement at inflated prices from an affiliated company.
Advantages	• Promptness and speed of conclusion; • Minimization of administrative costs; • Flexibility in meeting urgent needs; • Ensuring continuity of state programs and projects.	Quick purchase of fuel to maintain life-supporting facilities in emergency conditions.

 

Procedure for Concluding Direct Contracts

1. Justification of necessity

• The state customer must prepare a justification for choosing a non-competitive procurement method.
• Grounds: urgency (emergency, accident), defense and security, low value, sole supplier.
• The justification must be documented (e.g., memorandum, management decision) to prevent unlawful selection.

2. Confirmation of funding sources

• A direct contract may only be concluded with confirmed sources of funds.
• The customer verifies the availability of financing (budget, grant, targeted fund, etc.).
• Without this, conclusion of the contract is prohibited (Art. 46 – prohibition of procurement without funding sources).

3. Selection of contractor

• The customer determines the contractor based on market analysis, exclusivity, or urgency.
• Mandatory checks:
  • absence from the Unified Register of Unreliable Suppliers;
  • possession of necessary licenses, permits, and resources (Art. 36).

4. Preparation of the draft contract

• The contract is drawn up in a standard form (Art. 31 – procurement information).
• It must include subject, price, deadlines, payment terms, quality guarantees, liability of the parties.
• Additional conditions (e.g., manufacturer’s warranty) are included when purchasing equipment (Art. 34).

5. Registration of the contract

• The concluded contract must be registered in the Unified Register of Contracts (Art. 47).
• The register contains information about the customer, subject, price, deadlines, contractor, and its beneficial owners.
• Without registration, the contract is not valid for payment purposes.

6. Publication of information

• Information about the contract must be published on the special information portal (Arts. 27, 47).
• This ensures transparency and public oversight.

7. Financial control

• Payment under the contract by a budget-funded customer is carried out through the Treasury of the Ministry of Finance.
• If the contract is not registered, the treasury blocks payment (Art. 47).

8. Execution and reporting

• The contractor must fulfill the contract within the established deadlines and with proper quality (Art. 24).
• The customer publishes information on contract performance (payment, sanctions, termination) in the Unified Register.
• In case of violations, information is entered into the Register of Unreliable Suppliers (Art. 48).

Procurement through direct contracts is an important tool for flexible regulation of public procurement in Uzbekistan. However, its use requires strict adherence to the principles of justification, transparency, and prevention of corruption. Effective application of this mechanism is possible only when there is a clear distinction between areas where non-competitive procurement is justified and those where competitive procedures are mandatory.