Legal Financial Framework for Regulating the Contract System for the Procurement of Goods, Works and Services for Public Needs

Fedchenko Kristina Igorevna Postgraduate Student, Department of Legal Regulation of Economics and Finance, Institute of Public Administration and Management, Russian Academy of National Economy and Public Administration under the President of the Russian Federation 119571, Russia, Moscow, Moscow, 82 Vernadsky Ave. k.fedchenko0223@gmail.com Other publications by this author

IntroductionRelevance.

The provisions of the current Federal Law No. 44-FZ of 05.04.2013 "On the contract system in the field of procurement of goods, works, services for State and Municipal Needs" (hereinafter also Law No. 44–FZ) have significantly strengthened the financial and legal component of the general regulation of the contract system (compared with the provisions of the previously valid Federal Law No. 94-FZ of 21.07.2005 "On placing orders for the supply of goods, performance of works, provision of services for state and Municipal needs").

The corresponding trend towards increasing the role and importance of financial and legal regulation of the contract system can be seen at the level of modern federal by-laws. So, in particular, in accordance with the Concept of increasing the efficiency of budget expenditures in 2019-2024. (Decree of the Government of the Russian Federation No. 117-r dated 31.01.2019 "On approval of the Concept of increasing the efficiency of budget expenditures in 2019-2024") as one of the main steps that can increase the efficiency of budget expenditures, improvement of regulation and functioning of the contract system is named.

Also, the need to increase the degree of interconnection of budget and procurement processes (including through the improvement of the contract system) is also mentioned in the State Program "Public Finance Management and Regulation of Financial Markets" (Decree of the Government of the Russian Federation No. 320 of 15.04.2014), approved by the Government of the Russian Federation. The corresponding task is directly reflected in the framework of the Subprogram "Improving the quality of budget process management" of this state program.

All this indicates the existence of a close relationship between the budget process and the contract system, which is manifested, among other things, in the form of the application of rules and requirements of financial legislation to relations related to the procurement of goods, works and services for public needs.

And the need for additional theoretical understanding of such a relationship becomes particularly relevant in the context of the crisis socio-economic phenomena characteristic of 2020-2022, which inevitably require an increase in the efficiency of budget spending. 

Literature review. The approach to the analysis of the contract system from the standpoint of its financial and legal regulation is quite common in modern domestic science ^{[1, 2]}. At the same time, one of the first authors to study the contract system in this direction was K.B. Markelov, who in his dissertation proved that state and municipal procurement are an integral part of budget law (which is a sub-branch of financial law). He argued that procurement activities are inextricably linked with budget financing, and its direct participants are subjects of budget law ^[3]. Subsequently, a similar position was reflected in the works of E.A. Malykhina ^{[4, 5]}, and the most relevant research in this area is the work of V.A. Yudin, who emphasizes that the norms on the contract system can be studied within the framework of budget law and budget process, since it is in this part of the financial and legal essence of public procurement it becomes most obvious ^{[6, p. 29]}.

The object of the study is the social relations that develop within the framework of the contract system of procurement of goods, works and services to meet public needs. The subject of the study is the fundamentals of financial and legal regulation of the contract system of procurement of goods, works and services to meet public needs.

The purpose of the study is to identify the key financial and legal bases for regulating the contract system of procurement of goods, works and services to meet public needs. To achieve this goal, the article will consistently solve two main tasks: to analyze the contract system as a financial and legal institution, as well as to establish the limits of financial and legal regulation of public relations that develop within the framework of the contract system.

Research methods include both general scientific (dialectical method, methods of formal logic, analysis, synthesis, induction, deduction, system method, etc.) and special scientific methods (method of system analysis of law, method of formal legal analysis).

The scientific novelty of the study lies in the fact that it not only substantiates the financial and legal basis for regulating the contract system of procurement of goods, works and services to meet public needs, but also formulates the limits of appropriate regulation.

The hypothesis of the study is that, despite the existence of the above-mentioned limits of financial and legal regulation of the contract system, it is the financial and legal foundations that act as the basis of the contract system, since they mediate the correlation between budget and procurement processes within the framework of achieving a single goal - effective satisfaction of state needs with optimal spending of budget funds.

The main part Contract system as a financial and legal institution

The contract system is a legal institution that is "claimed" by several branches of law at once.

In particular, within the framework of the Russian system of legal education, the relevant norms are most often studied within the framework of the so-called "business law". Moreover, certain norms related to public procurement are considered in the theory of civil and administrative law ^{[7, 8, 9]}.

However, in recent years, one can find opinions that the inclusion of this legal institution in the system of financial law seems more adequate. This is quite fair, given the high importance of the contract system in the process of spending state and municipal funds for the practical implementation of the principles of economy, efficiency, legality ^{[10, p. 56]}.

One of the first authors in this direction was K.B. Markelov, who in his dissertation proved that state and municipal procurement are an integral part of budget law (which is a sub-branch of financial law). He argued that procurement activities are inextricably linked with budget financing, and its direct participants are subjects of budget law ^[3]. However, the author rightly emphasized the fact that part of the relations in the framework of public procurement goes beyond the internal relations of financial law.

In favor of the fact that the institution of the contract system should relate specifically to financial law, let us consider two key criteria according to which, in principle, the differentiation of branches of law in the domestic legal system is carried out: the subject and the method.

The subject of regulation of financial law is property-power relations arising in the process of financial activities carried out by the state and other public legal entities, and consisting in the accumulation, distribution, use of funds of public monetary funds (budgets and extra-budgetary funds) ^{[11, p. 61]} for the implementation of public tasks, as well as in the creation and functioning of mechanisms of financial control and mechanisms of accountability for financial offenses ^{[12, p. 12]}.

The main economic and legal purpose of the contract system - financial provision of state and municipal needs at the expense of budgetary funds ^[13] – allows us to unambiguously attribute the relevant public relations to the subject of financial law, namely to the segment that concerns relations on the use of public funds. Moreover, the control mechanisms established within the framework of the legislation on the contract system can be qualified as financial control mechanisms designed to ensure the efficiency of spending public funds, the quality of ensuring public needs ^{[4, p. 54]}.

As for the method, some researchers believe that financial law uses an imperative method of regulation, within the framework of which a specially authorized circle of persons implements power prescriptions with a specific monetary content ^{[12, p. 13]}.

I.V. Rukavishnikova adheres to a slightly different position. In her opinion, the imperative method is extremely important for financial law, but it cannot be limited to it: imperative and dispositive principles in financial and legal regulation are intertwined so closely that we can talk about a unique method. Dispositivity in financial law is used when it is necessary due to objective economic processes, when there is some "democratization of relations" between the bearer of authority and the object of these powers ^{[14, p. 24]}.

However, even in this position, the priority of imperative principles in financial law is not disputed. Dispositivity, according to D.S. Barzilov's fair remark, takes place in financial law only in cases when it is necessary to ensure a balance between private and public interests (for example, dispositive norms can be found in tax legislation) ^{[15, p. 45]}.

The provisions of Law No. 44 and the Budget Code of the Russian Federation of 31.07.1998 No. 145-FZ (hereinafter also referred to as the BC of the Russian Federation) concerning public procurement clearly indicate that the legislator provided for an imperative method of regulation, i.e. the method of power prescriptions, to regulate the contract system.

This does not negate the dispositive principle manifested in the relationship between the customer on the one hand and the supplier (contractor, contractor) on the other hand in the part in which these relations are regulated in a subsidiary manner by the norms of civil law. To the greatest extent, the dispositive principle is manifested in the contractual nature of procurement relations. Of course, one of the parties (the customer) acts as a subject of public law, but most of the provisions of the contract for the purchase of goods, works, services are precisely civil law provisions. The State only establishes a number of information that should be contained in such contracts. It is precisely this mixed nature of agreements concluded and executed within the framework of the contract system that determines the intersectoral nature of this institution. In a certain part, it is really regulated by a dispositive, contractual method (and it is this part that is studied in the civil law doctrine, as well as in the framework of the theory of so-called "business law").

Nevertheless, in terms of the allocation and use of budgetary funds for public procurement, the contract system is adequately regulated through the financial and legal method.

For example, it is with the help of this method that the state, as an authoritative entity, determines the procedure for planning future purchases by customers; coordinates the volume of purchases with the total expenses of the customer as a subject of budget law; establishes rules for compliance with the targeted nature of expenditures during procurement; regulates the correctness of determining the supplier (contractor, contractor) using imperatively established procedures, evaluates the adequacy of the conclusion with him contract by means of control mechanisms, etc.

The specifics of the imperative method in the contract system are already evident in the very circle of relations that develop within this system: the customer is public law entities, and mandatory regulations concerning the planning, conclusion and execution of contracts (as well as control over them) are issued by the state bodies responsible for conducting the financial and economic policy of the state.

In confirmation that the contract system is a financial and legal institution, we also note the fact that its regulation is based on the sectoral principles of financial law. For example, this includes the principle of planned financial activity (by virtue of Law No. 44, purchases must be planned by customers); the principle of priority of public interests over private ones; the principle of citizens' participation in the distribution and use of budget expenditures (for example, Articles 20 and 102 of Law No. 44 establish the participation of society in the discussion of procurement and public control).

Thus, the contract system acts as a financial and legal institution and is structurally located in a Special part of financial law in the section devoted to the regulation of public (state and municipal) expenditures. This can be argued by the fact that the contract system is essentially a mechanism for the distribution and use of funds belonging to the state and municipalities ^{[4, p. 55]}.

As an additional confirmation of this thesis, we can cite the provisions of Article 2 of Law No. 44-FZ, according to which it is established that the legislation on the contract system, among other things, is based on the provisions of the BC of the Russian Federation. In addition, as indicated in Article 69 of the BC of the Russian Federation, allocations for the purchase of goods, works and services for state needs directly relate to budget allocations. Also, the presence of an immanent connection between the contract system and the subject of financial law regulation is evidenced by the provisions of Article 72 of the BC of the Russian Federation, which establishes that purchases for state needs are carried out on the basis of the requirements of the legislation on the contract system, taking into account the provisions of the BC of the Russian Federation. The same article states that, as a general rule, purchases of goods, works and services for state needs are paid within the limits of budget obligations. At the same time, in accordance with paragraph 16, paragraph 1, Article 3 of Law No. 44-FZ, the total annual volume of purchases is set in accordance with the total amount of financial support for the procurement activities of customers.

Limits of financial and legal regulation of the contract systemThe existence of financial and legal aspects in the regulation of the contract system is predetermined by the complexity of public relations arising, changing and terminating in the procurement of goods, works and services for public needs.

The relevant relations in which public and private entities are involved, as well as budgetary funds, due to their divergence, cannot be regulated by the norms of any one branch of law. They are characterized by such an internal structure, within which individual elements of one relationship act as the subject of legal regulation of various branches of law ^[16].

Within the framework of the legal regulation of the contract system, relations of both public and private law are closely intertwined today ^[17]. Thus, the formalization of state needs, their practical implementation in the form of the immediate needs of specific public legal entities (and other state customers) is primarily the subject of regulation of constitutional, administrative and financial law. The process of forming the financial and material base to meet the relevant state needs is mediated by the norms of financial law on the budgetary process, disposal, administration and expenditure of budgetary funds. The organization of procurement activities is regulated by the rules of financial and administrative law. The execution of contracts is carried out in accordance with the general provisions of civil legislation with mandatory compliance with special financial and administrative requirements of procurement legislation. Control over the proper conduct of procurement procedures (i.e., in fact, control over the efficiency of spending budget funds by state customers) is mediated by the rules of financial law.

At the same time, as you can see, the financial and legal regulation of the contract system is manifested at all stages of procurement activities: starting from the process of formalization of state needs and ending with control procedures over the proper conduct of procurement procedures. Such a situation indicates the increased importance of the financial and legal regulation of the contract system (which, however, is not surprising, given the fact that all elements of the contract system are aimed at meeting state needs at the expense of budgetary funds directly related to the subject of financial law).

Within the framework of the contract system, initially there are public relations subject to regulation by financial law, as a result of which they are given the character of financial legal relations. The interrelation of the relevant financial legal relations with public relations that develop within the framework of the contract system and regulated by other branches of law is manifested at the level of the entire procurement system for public needs. Within the framework of the system approach chosen by the legislator (in particular, in Law No. 44-FZ) to the regulation of the contract system ^[18], various elements of this system are linked into a single whole, which allows for financial and legal regulation at all stages of the procurement process.

At the same time, despite the fact that manifestations of financial and legal regulation can be found at all stages of planning and implementation of procurement for public needs, the legal regulation of the contract system contained in Law No. 44-FZ, as well as in other specialized acts, is not limited only to financial and legal aspects. As already mentioned above, certain elements of the relevant relations are regulated by various branches of law.

It is important to understand here that the contract system is at the junction of public law and private law regulation, including public relations in the sphere not only of power and subordination, but also in the sphere of formal equal interaction of public and private entities, characteristic of the performance of civil obligations under public contracts. The very category of "contract" in this case indicates the voluntary and formally equal nature of contractual interaction between public and private entities within the framework of concluding and executing contracts for the supply of goods, works and services necessary to meet public needs.

It is on the basis of the noted features of the contract system that the limits of financial and legal regulation of public relations existing in connection with and concerning public procurement are formed. Procurement participants (suppliers) should not be subject to the same strict mandatory regulation by the rules of financial law as customers (disposing of budget funds or receiving them).

Moreover, as a general rule, procurement participants are completely excluded from the requirements of financial legislation (except in cases of treasury support of accounts of procurement participants). Their main purpose within the framework of the contract system is to properly fulfill the obligations under the concluded contracts, deliver the goods, works and services necessary for customers and, thereby, meet specific state needs.

The establishment of excessive financial and legal requirements for procurement participants can significantly complicate their activities for the execution of contracts and, accordingly, lead to a decrease in the overall efficiency of the contract system and budget spending ^[19]. As a consequence, there is a need for the formation of a balanced system of public and private law regulation of the contract system.

Accordingly, it seems appropriate to delineate the boundaries of the financial and legal regulation of the contract system more precisely.

In the most general form, the limits of financial and legal regulation of the contract system can be drawn along the border of financial legal relations that develop within the relevant field of activity. At the same time, financial legal relations are understood as public relations, the participants of which are endowed with rights and obligations related to the implementation of regulations in the field of education, distribution and use of state (and municipal) monetary funds. The sphere of the emergence of financial legal relations is the financial activity of the state ^[20].

Thus, the limits of financial and legal regulation of the contract system are in direct relationship with power and property relations (mainly of a public nature), which arise and are implemented within the framework of the financial activities of the state and are associated with the formation, distribution and use of state centralized funds of funds in order to meet public needs through public procurement. It is within these limits that the financial and legal regulation of the contract system is carried out.

ConclusionThe institution of the contract system should be considered as one of the institutions of financial law.

Relations within the framework of the contract system have been attributed to the subject of financial law, since they aim at the distribution of funds of monetary funds of public legal entities. The method used to regulate relations within the framework of the contract system combines dispositive and imperative principles with the unambiguous dominance of the latter. According to this criterion, the contract system can also be considered as an institution of financial law.

Thus, from a financial and legal point of view, the contract system can be considered as an institution of financial law, i.e. a set of closely related legal norms regulating homogeneous public relations related to the implementation of public expenditures in order to meet state and municipal needs through a system of procurement of goods, works and services at the expense of state funds and municipalities. In the system of financial law, the institution of the contract system is structurally located in a Special part, in the section regulating the procedure and specifics of public (state and municipal) expenditures.

The limits of financial and legal regulation of the contract system are in direct relationship with power and property relations (mainly of a public nature), which arise and are implemented within the framework of the financial activities of the state and are associated with the formation, distribution and use of state centralized funds of funds in order to meet public needs through public procurement. It is within these limits that the financial and legal regulation of the contract system is carried out.