An Analysis of the Use of Negotiated Procedures in Turkish Public Procurement Market

According to the Public Procurement Law No.4734 (PPL), the main law regulating public procurement in Turkey, there are 3 main types of procedures that can be used in public tenders. These are:

- Open procedures: All interested tenderers can submit tenders.

- Restricted Procedures: A procedure that entails two stages, first prequalification and then submission of tenders by those qualified. It can be used when the subject of the tender requires competency and/or high technology. It can also be used in construction tenders which has estimated cost more than 19,7 million TL (apprx. 5,5 million USD)

- Negotiated Procedures: A procedure that can be used under circumstances written in the PPL. It can be with tender notice or without it. In these tenders tenderers are asked twice to submit their price offers.

The first sub-type of negotiated procedures in which tender notice is required entails procurements which have subject value of complex items. In these tenders, the contracting entity is unable to describe properly what its need is. Thus, in these procedures tender documents, especially technical specifications, are finalized after consultation with potential tenderers.


The second type of negotiated procedures doesn’t require contracting entities to publish tender notices in advance. This type is generally used under emergency conditions due to natural disasters or defense related concerns or unexpected events that require immediate response by the public agency. This type is also used in procurement of goods and services which have estimated costs below 195.000 TL (apprx. 55.000 USD). In this type the biggest characteristic is that the contracting entity has to invite at least 3 potential tenderers. Those not invited by the contracting entity are not entitled to submit bids in this type.

You can see that negotiated procedures, especially those in the second type without tender notice and with contracting entity, are prone to collusion, discrimination and abuses both by contracting entities and tenderers. What do these mean? Well, potentially low number of tenderers who submit bids, higher price offers thus higher costs for public agencies. In this case, it can be said that public agencies trade-off for fast delivery of needs at the expense of public budgets.


Figure 1: Allocation of Public Procurement According to the Type of Procedure in Turkey in 2016 (USD)




In Figure 1 above, you can see that among the overall 51,4 billion USD amount of public procurement under the PPL in 2016, 81% was spent by open procedures, 5% by restricted procedures and 14% by negotiated procedures. Considering that negotiated procedures are used under certain circumstances, I can say that its extent of use is substantial. What about the trend of the use of negotiated procedures in Turkish public procurement market among different years? The Figure 2 below gives us a clue.

Figure 2: Share (%) of Tender Procedures in Total Public Procurement Contract Value




It looks like the use of negotiated procedures peaked in 2016 in terms of contract value by 14%, after hovering around 9-10% in the past four years. On the other hand the use of open procedures reduced from the peak of 86% in 2014-2015 to 81% in 2016. The use of negotiated procedures was substantial in years 2012-2013 with 10%. But, halved in last 3 years 2014-2016. It is probably due to the complexity of this procedure. Contracting entities opted for two other procedures (especially open procedures) instead of restricted procedures.

As I have claimed above, the use of negotiated procedures is expensive for contracting entities. This fact is clearly illustrated by the ratio of actual contract value/estimated cost. Estimated cost means what the contracting entity expects the contract value to be after tender is completed. Let’s check it out.

Figure 3: Contract Value/Estimated Cost Ratio for Tenders Under the Scope of the PPL





The figure 3 above illustrates that there is substantial difference in contract value/estimated cost ratio between open procedures and negotiated procedures. Even though this ratio climbed from 74% in 2012 to 81% in 2016 for open procedures, it is still substantially below that of negotiated procedures which hovered around 89-90% in last 5 years. The drop from 91% in 2015 to 88% in 2016 is worth to notify. Even though, the use of negotiated procedures increased last year, contracting entities had been able to procure relatively cheaply. Even with last years ratios, the difference between open and negotiated procedures is 7%. If we apply this value to estimated cost for negotiated procedures in 2016, it means loss of 0,6 billion USD compared to open procedures. Is it worth to bear this cost for the sake of fast delivery of public needs by negotiated procedures? It depends. If public is satisfied, it may be OK.

What can be reasons of this ratio difference between open procedures and negotiated procedures? First, lower number of bids in negotiated procedures. Contracting entities can conduct this procedure (without notice) with just 3 tenderers who are invited. Even if just one of them submits a bid, it is OK. Second, in open procedures, tenderers have just one chance to offer a price, thus they do their best in the sealed envelope. But, with negotiated procedure, they have a second choice. They may adjust their prices after seeing the outcome of the first round. For example, in this procedure if you understand that you will not have a competitor in the second round, your second price offer will certainly not decrease much.

To summarize, I can say that use of negotiated procedures are sometimes good for public agencies especially when needs have to be satisfied fast. However, contracting entities should avoid using this procedure without justifiable reasons. Otherwise, there will be substantial negative impacts on public finances.

Umit ALSAC
Public Procurement,EKAP and E-procurement Consultant
Former Public procurement Expert at the Turkish Public Procurement Authority
ualsac@gmail.com