Recognition of illegal audit report conclusion and order of the DVGA
No.6001-23-00-6ap/1293 dated 11/23/2023
The plaintiff: State Institution "Department of Education"
Respondent: RSU "Department of Internal State Audit" (DVGA)
Interested party: State Institution "Management of Digital Technologies"
The subject of the dispute: to be recognized as illegal:
audit report, conclusion and order of the DVGA;
actions of the DVGA regarding the violation of the procedural order on bringing to administrative responsibility the head of the plaintiff;
actions of the DVGA regarding the conduct of an inspection based on a request from a third party
Review of the defendant's cassation complaint PLOT:
On May 3, 2022, the Department carried out public procurement of "Services for providing access to information resources", as well as services for expert and analytical support of the processes of educational organizations implementing educational programs for preschool education and training, with a period of up to 31 December 2022.
On May 31, 2022, IP LLP filed a complaint with the DVGA, as it believes that the Department unlawfully carried out purchases in this way.
Based on the results of the audit, the DVGA audit report dated October 21, 2022 was compiled, which indicated that the Department had incorrectly applied the method of public procurement.
Disagreeing with the report, conclusion, order, as well as the actions of the DVGA to conduct an audit, the plaintiff appealed to the court with the above-mentioned claims. He believes that the defendant had no grounds for verification, the purchases were made using a single source method, and the contract was concluded with TSTT LLP legally, since only this LLP has the exclusive rights to sell the EVMI-EDS product in the region.
Judicial acts:
1st instance: the claim is satisfied. The DVGA order contested by the plaintiff was declared illegal and cancelled.
The claim regarding the appeal of the defendant's audit report and conclusion, the latter's actions to violate the procedural procedure for bringing the plaintiff's supervisor to administrative responsibility, as well as his actions to conduct an audit based on a third party's request, was returned.
The court also issued a private ruling to the head of the DVGA on the revealed violations of DVGA employees during audit activities in order to take appropriate measures.
Appeal: the decision and the private definition are left unchanged.
Cassation: judicial acts are cancelled. A new decision was made: to dismiss the administrative claim for the recognition of the unlawful order to eliminate the identified violations and to consider the responsibility of the persons who committed them, sent to the plaintiff on November 11, 2022.
Conclusions: Having studied the case materials and the arguments of the cassation appeal, having heard the participants in the process, the judicial board comes to the following conclusions.
Satisfying the claim, SMAS proceeded from the fact that (key arguments):
according to paragraphs 2 and 4 of Article 41 of the Law, the acquisition of goods and services that are objects of intellectual property from a person who has exclusive rights and in relation to the purchased goods and services, using a single source method by directly concluding a contract, is carried out by a decision of the first head of the customer or the person performing his duties, based on the justification of the impossibility of procurement by competitive methods;
"TSTC" LLP is the only comprehensive licensee endowed by CHU "KDS" with the rights to sell relevant services in the field. The services and products supplied as part of the activities of this LLP cannot be purchased from anyone else.;
The plaintiff provided documents confirming the uniqueness of the service provided and the absence of a competitive environment between two or more legal entities in full and exhaustive volume. The certificate of state registration of the rights to the copyright object states the exclusivity of the supplied goods/services;
from the explanation of the representative of CHU "KDS", it can be seen that the E-ORDA platform and the INDIGO configuration, due to their legal nature and the Law of the Republic of Kazakhstan "On Copyright and Related Rights", are unique and inimitable, they also have a number of functional features and pricing policies that are absent not only in the market of Kazakhstan, but also beyond limits;
In 2021, in order to centrally distribute the program, the State Institution "Management of Digital Technologies" purchased the Indigo program for the educational departments of the region and it was implemented in the region. It follows from the submitted public procurement contracts that the Indigo program was purchased in 2021, and services for servicing the previously acquired program were purchased under the contested DVGA agreement.;
the audit report and the conclusion do not contain conclusions on what other ways it is possible to purchase services for the maintenance of a previously acquired program that is an object of intellectual property, without violating the requirements of the Civil Code and the Law "On Copyright and Related Rights". Accordingly, the purchase of services for the maintenance of previously purchased programs using a single source method complies with the requirements of the Law.;
Leaving the decision of the SMAC unchanged, the Court of Appeal pointed out that, according to article 79 of the CPC, an administrative act must be clear to understand, ensure uniform application, and exhaustively determine the circle of persons to whom it applies. In the order challenged by the plaintiff, the defendant did not substantiate and did not provide the norms of the Law to be enforced, thereby failing to ensure compliance with Article 129 of the CPC. The order does not specify what specific measures the plaintiff should take to eliminate the violations he has identified.
Having checked the above and other arguments of the local courts set out in their judicial acts, the judicial board considers that they do not correspond to the circumstances of the case and the applicable legal norms.
By virtue of article 4 of the Law, public procurement is based, inter alia, on the principles of: providing potential suppliers with equal opportunities to participate in the public procurement procedure, except in cases provided for by Law; fair competition among potential suppliers, avoiding collusion between procurement participants; openness and transparency of the public procurement process, including respect for legitimate rights suppliers' right to trade secrets (before summing up the results of public procurement); providing support to domestic producers of goods, as well as domestic suppliers of works and services, to the extent that this does not contradict ratified international treaties; responsibility of participants in public procurement; prevention of corruption; acquisition of innovative and high-tech goods, works, services, as well as respect for intellectual property rights contained in the purchased goods.
According to subparagraph 3) of paragraph 3 of Article 39 of the Law, public procurement from a single source through the direct conclusion of a public procurement contract is carried out in cases of acquisition of goods and services that are objects of intellectual property from a person who has exclusive rights in respect of the purchased goods and services.
However, it follows from the case file that there are several entities on the domestic market that possess intellectual property in software that can provide similar services in terms of functionality, such as (but not limited to): "Platform for automation of public services in the field of education" I.E., "iGolek platform for automation of tasks in the field of education" (automation of state and non-state services in the field of preschool, primary, basic secondary, general secondary, additional education, as well as automation of educational organizations) A.E.,
"ESEP SmartNation information system of the complex SmartNation.kz/SitCen.kz (digitalization of educational processes and interaction with external information systems, educational, accounting and financial accounting, automation of business processes in the provision of public services, digitalization of personnel records management to automate work in educational institutions of preschool education, secondary education, as well as technical and vocational education), S.A., "Information system
"Service of local social services 2.0", V.O. and others.
These circumstances were not denied by the parties and other participants in the case. There is no substantiated evidence that there is no competition in this market either in the lawsuit or in the judicial acts disputed by the cassator. In addition, based on the case materials, no one disputes that there are entities in the considered service market other than TST LLP that have exclusive rights to sell the EVMI-EDS product.
In other words, this LLP is not the only supplier with exclusive rights in relation to the purchased services. At the same time, the arguments about the absence of other suppliers of purchased services in the region are incorrect, since the Law in this case does not prohibit the purchase of relevant services only from an entity with a specifically designated location.
In this regard, the arguments of the Department, as well as the local courts on the validity of conducting public procurement using a single source method, do not correspond to the above circumstances and legal norms.
In the aggregate of the above, given that the courts left without a proper legal assessment a number of circumstances essential for the proper resolution of the case, incorrectly applied the applicable legal norms, the judicial board concludes that it is necessary to cancel the judicial acts challenged by the cassator, with a new decision to dismiss the claim.
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