Government Contracts Gain Room to Maneuver

Russia's public procurement system is preparing for another round of regulatory easing. A bill has been submitted to the State Duma that proposes expanding opportunities for simplified procedures, increasing small and medium-sized business (SME) access to larger contracts, and allowing contracting authorities to modify contract terms more frequently without termination.

The changes are intended to simultaneously accomplish two objectives: accelerate procurement for the state and reduce pressure on suppliers who, after 2022, faced rising prices, logistics restructuring, and import restrictions. However, the reform has a flip side: the fewer mandatory competitive procedures, the higher the risk of reduced market transparency.

From emergency measures to a new model

After 2022, the public procurement system began moving away from the rigid regulatory model that had been taking shape following the adoption of Law No. 44-FZ in 2014. Where maximum procedural regulation was once the top priority, authorities shifted their focus after sanctions were imposed to maintaining supply chains and accelerating contract execution.

In recent years, the government has introduced a series of relaxations: allowing modifications to essential contract terms when material and equipment costs rise, adjusting delivery timelines and volumes, expanding the possibility of single-source procurement, and simplifying certain procedures.

The reason for these changes is the sharp increase in business costs. Contracts concluded at old prices became harder to fulfill due to rising costs of raw materials, equipment, and logistics changes.

According to Rosstat data, non-food goods prices rose noticeably after 2022: the price index reached 112.7% in 2022, 106.0% in 2023, 106.1% in 2024, and approximately 102.9% in 2025. Rising costs for equipment, materials, and components became one of the reasons contracting authorities and suppliers needed the ability to modify contract terms more quickly.

Public procurement remains one of the largest markets in the Russian economy. The volume of purchases under Laws 44-FZ and 223-FZ is measured annually in tens of trillions of rubles. In 2025, the volume of published notices under 44-FZ grew by 13.6%, reaching 13.6 trillion rubles versus approximately 12 trillion rubles the year before. The total financial provision for purchases under procurement schedules amounted to 17.3 trillion rubles.

The bulk of the market continues to be formed by purchases from state-owned companies under Law 223-FZ—they account for more than 35–38 trillion rubles annually. Meanwhile, the largest contracting authorities continue actively engaging small and medium-sized businesses: in 2025, the volume of SME procurement reached a record 9.55 trillion rubles.

The main trend of the year was not growth in the number of procedures, but an increase in their value: the number of published tenders changed insignificantly, but the average contract price rose. Additional demand came from national projects—the volume of procurement related to their implementation increased by 55.8%—as well as spending in IT and healthcare sectors.

Small businesses gain access to more expensive contracts

One of the bill's key proposals is raising the procurement limit available for small and medium-sized business participation in simplified format from 20 million to 30 million rubles.

Raising the limit will allow SMEs to participate in more expensive procurements without transitioning to complex procedures. For the government, this continues the policy of expanding small business access to public procurement: under current rules, at least 25% of the annual procurement volume for certain categories of purchasers must go to SMEs.

At the same time, expanding access to procurements doesn't solve the main problem for small companies—the financial burden. A contract worth 20–30 million rubles can be a growth opportunity, but simultaneously requires substantial working capital, the ability to obtain a bank guarantee, and the capacity to withstand payment terms.

Therefore, raising the limit will only be effective if accessible financing is available. For some SMEs, participating in large procurements remains difficult not due to a lack of orders, but because of high credit costs and the need to finance contract execution upfront.

Why authorities are betting on simplified procurements

Another notable change concerns expanding the use of electronic quotation requests. The draft law proposes increasing the maximum price for such procurements to 20 million rubles. 

A quotation request differs from a tender or auction in that the purchaser primarily evaluates the proposed price while meeting pre-established requirements. The procedure is considered one of the fastest forms of competitive procurement: suppliers submit proposals electronically, and the purchaser doesn't need to conduct a complex evaluation of qualification criteria.

For the government, this means reducing the time from identifying a need to signing a contract. This is especially relevant for procuring standard goods—office supplies, equipment, consumables, certain types of services—where technical parameters are clear in advance and a complex selection procedure isn't always justified.

The problem with the current system is that formal competition sometimes turns into an administrative burden. The purchaser spends weeks conducting the procedure, preparing documentation, and reviewing applications, even though the supplier selection is actually determined by just a few parameters.

From a business perspective, accelerating procedures can also be an advantage. The faster the procurement process, the fewer resources a company spends waiting for results and the sooner it can begin fulfilling the order.

However, expanding the use of quotation requests changes the competitive landscape. In auctions, suppliers often compete by lowering prices, whereas the simplified procedure depends more on the quality of the technical specification and the purchaser's work with the market.

Contracts will become more flexible. Why this matters right now

One of the most significant changes will be the ability to modify contract execution terms. This concerns situations where, due to external circumstances, the supplier and purchaser find themselves in a position where the original agreement becomes difficult to fulfill.

After 2022, such cases became widespread. For example, a company might win a contract to supply medical equipment or industrial machinery, only to face the departure of a foreign manufacturer, rising component costs, or logistics changes after signing the agreement. As a result, the goods became significantly more expensive than the original price, and delivery within the stipulated timeframe became impossible. Previously, in such situations, the customer often had to terminate the contract and conduct a new procurement, which increased both timelines and costs. 

The new approach provides more opportunities to adjust contract terms. Specifically, the draft law allows for the replacement of goods with equivalents that match the specifications and changes to the country of origin, provided national procurement regime requirements are met.

However, this doesn't mean suppliers can freely substitute any product with a more convenient option. If the contract specifies particular characteristics—such as memory capacity, equipment performance, or technical parameters—the new product must meet those requirements.

For instance, when procuring smartphones with specific requirements, replacing one model with another is only possible if the new device has comparable specifications. Formally, switching to a different brand is allowed, but simply supplying a cheaper product with inferior capabilities is not.

But this creates a problem for the state: each contract modification reduces the level of initial certainty. If the ability to adjust agreements becomes too broad, there's a risk that terms will be revised not only due to objective circumstances.

What the state gains

Today, the procurement system remains one of the most heavily regulated areas of public administration. Customers must comply with numerous procedural requirements: from preparing technical specifications to publishing documents in the Unified Information System.

Any mistake can lead to a complaint, cancellation of results, or the need to restart the entire process.

According to FAS data, in 2025 procurement participants filed 51,586 complaints with the service—7% more than the previous year, when 48,214 complaints were registered. Of these, 41,840 complaints were reviewed on their merits, and 16,311 complaints—38.9% of cases reviewed—were found to be justified, either fully or partially. 

Accelerating procurement potentially allows the state to implement infrastructure projects faster, provide institutions with necessary goods, and reduce costs associated with conducting repeat procedures.

International practice shows that developed public procurement systems typically combine two approaches: strict rules for large and strategic contracts, and more flexible mechanisms for standard procurements. For example, in European Union countries, much of the regulation is built around principles of proportionality and risk assessment: the higher the cost and public significance of the procurement, the stricter the procedural requirements.

The Russian system is gradually moving in a similar direction—toward segmenting procurements by risk level. Large infrastructure projects require maximum transparency, while small standard procurements can be conducted more quickly.

Where the Risks Emerge

The main risk of the reform is tied to the reduction in procedures where suppliers compete in an open format. The more procurements that shift to a simplified regime, the higher the requirements for oversight of contracting authorities. Where previously some risks were mitigated by the competitive bidding or auction procedure itself, now more responsibility falls on the quality of planning and subsequent monitoring.

Among the potential problems is the risk of procurements being tailored to a specific supplier. Formally, the procedure may comply with the law, but the technical specifications can sometimes be used to narrow the field of participants.

This problem remains relevant today. In 2024, the Federal Antimonopoly Service identified violations of the law in a significant portion of cases it reviewed. In total, the agency analyzed 30,732 supplier selection procedures, with violations found in 7,311 cases (24% of those examined). 

At the same time, increased flexibility does not automatically mean increased corruption. The quality of digital oversight becomes the key factor. The Unified Information System for Procurement allows most actions by contracting authorities and suppliers to be tracked, and data on procedures is accessible to regulatory bodies.

But expanding the powers of contracting authorities will require more precise analytics. Oversight will need to cover not just formal violations, but atypical situations: sharp drops in the number of participants, recurring suppliers, unusual changes to contract terms.

What Will Change for the Market in the Coming Years

The public procurement reform is unlikely to be limited to just the current package of changes. In recent years it has become clear that the previous model of Federal Law 44, built around maximum formalization of procedures, requires adaptation to a more complex economic environment.

In the coming years, the market will move toward greater flexibility. The state is interested in conducting procurements more quickly, especially in infrastructure, industry, and the social sector.

One of the main consequences may be an increase in the number of participants among Russian manufacturers. After 2022, public procurement became one of the primary instruments of industrial policy and import substitution.

However, an increase in the number of Russian suppliers does not automatically mean greater competition. In many segments, the market remains limited due to the highly specialized nature of products. Therefore, one of the main tasks will be not simply to expand business access to procurement, but to improve the quality of competition.

The system can become more effective if digital tools are used not only to monitor violations, but also to analyze the market: how many companies are actually capable of fulfilling a contract, why procedures are being declared unsuccessful, where pricing problems arise.