In this first part of his article on EU Procurement, which can be viewed here, Nicholas Gould considered what the impact of European legislation was upon the procurement of construction projects. Part 2 looks deeper into these issues focussing on competitive dialogue.

EU Procurement Directive

The EU Procurement Directive applies where a public authority or a utility wants to acquire:

  1. Goods

  2. Services

  3. Building or civil engineering works.

It establishes a procedure that must be followed where the contract to be award has a value above a certain threshold. Even where an authority is below this threshold they will still need to consider the Treaty objectives, and so may need to advertise to some extent to meet with the minimum requirements of transparency. There are some exemptions to the applicability of the Directive but they are limited.

Implementation

In the UK the Directive has been implemented by Regulations. There are two Regulations (replacing all four of the old public procurement Regulations):

  1. Public Contracts Regulations 2006 (SI 2006 No. 5). Replacing the first three: Supply, Works and Services Regulations; and

  2. Utilities Contracts Regulations 2006 (SI 2006 No. 6). Replacing the old Utilities Regulation.

The aim of the Regulations

The aim of the new Regulations is to reinforce the EU's drive towards free movement of goods and services within the EU. In that respect the aim is to continue to open up the market for public procurement work throughout the EU member countries.

This is done by encouraging and supporting the concept of fair competition. If competition is open to anyone then not only does this assist the market to function, but public bodies and utilities should also obtain the goods, services or works more economically.

The EU and UK Government's driving force behind the concept of competition is to obtain value for money when procuring works, services and supplies.

VFM is defined by the Office of Government Commerce as: "the optimum combination of whole-life cost and quality (or fitness for purpose) to meet the user's requirements".

Procurement procedures

There are four main procurement procedures:

  1. Open Procedure

  2. Restricted Procedure

  3. Competitive Dialogue Procedure

  4. Negotiated Procedure.

From a procedural point of view the distinction between these approaches starts from the advertising of the potential contracts, minimum time periods for a response, and particularly what then happens next.

Advertisement is by way of a notice in the Official Journal of the European Union (an OJEC Notice).

1. Open Procedure

Anyone may respond to the OJEC Notice by submitting a tender. This is the most simple way to tender work, but leaves the public body with little control of the number and quality of tenders.

2. Restricted Procedure

Tenders are selected from those who respond to the OJEC Notice. Only those selected are invited to submit a tender. This means that a limited number of tenders are submitted. The effect is twofold. First, a bidder knows that they have an ascertainable chance of winning, and so is encouraged to submit a carefully prepared tender. Second, the authority is not overwhelmed.

3. Competitive Dialogue Procedure

Once the OJEC Notice period has expired the authority enters into a discussion with the bidders in order to develop at least one suitable solution. The bidders can then submit a tender based on the solution. In effect, the bidders are using their expertise to develop a VFM solution (design and buildability focused) for the authority. The steps are:

  1. OJEC Notice;

  2. Pre-qualification questionnaire;

  3. Select participants. Based on open transparent criteria;

  4. Invitation to participate in dialogue;

  5. Dialogue phase. Note the number of those participating can be reduced at this stage providing that the procedure for doing so is set out in the initial invitation;

  6. Final tenders submitted based on the solution or solutions developed;

  7. Evaluation.

  8. Post-tender discussions. The authority may seek clarification from those who have submitted compliant bids;

Selection of preferred bidder (PB). This is done against the predetermined award criteria based on the most economically advantageous tender (MEAT);

Notification to PB and other bidders;

Mandatory standstill period of 10 days (the "challenge period"). A request for a detailed note describing the reasons for the award decision has to be made within two days after the date on which the notice was sent. The authority must then issue that detailed note at least three days before the end of the standstill period;

Clarification and confirmation of commitment between the PB and the authority; and

Contract signed.

Article 1(11)(c) of the 2006 Regulations makes it clear that this procedure is to be used where the project is particularly complex because the authority finds it impossible (term used in Recital 31) objectively to:

  1. define their requirements; and or

  2. specify the financial or legal structure for the project.

Recital 31 lists some potential examples of projects that might justify the use of the competitive dialogue process: integrated infrastructure projects, large computer networks, those with complex legal and financial requirements. One might therefore assume that the UK's PFI initiative, involving complex long-term legal and financial requirements, may well meet the threshold requirements for the use of competitive dialogue.

In practice, the use of this procedure is restricted following the Pimlico Schools case. In that instance the UK argued that a school procured under the PFI arrangements meant that the other procedures were inappropriate because of the complex nature of a long-term concession agreement. The EU Commission did not accept this argument. It was, after all, a school, and despite the long-term nature of the contract, there was nothing complex or unusual in what should amount to a standard procedure for the repeat procurement of schools.

On the other hand, a complex one-off transportation system, such as the Channel Tunnel Rail Link or the London Underground, might well justify the use of the competitive dialogue procedure.

Confidentiality

The solution(s) discussed with individual participants may be revealed to all of the bidders, but only if the originating participant agrees. The method, scope and confidentiality of the entire process should therefore be set out at the initial stage.

Bid costs

This process is expensive for the bidders. Authorities may pay the bidders costs in order to encourage appropriate organisations to participate and thus encourage competition.

4. Negotiated Procedure

The authority may identify one or more organisations with which the authority can negotiate the contract. An OJEC Notice is nearly always required. This procedure is only really appropriate where the authority requires something that only one organisation can provide, for example an artistic works or an item covered by an exclusive right.

Selection of the appropriate procedure

The authority can use the Open or Restrictive Procedure as it sees fit. The Competitive Dialogue Procedure will rarely be applicable. The use of a Negotiated Procedure is again very limited.

OJEC advertising

Contracts covered by the Regulations require a "call for competition". This is done by publishing a notice in the Official Journal of the European Union (OJEC). Standard official forms are available and their use is mandatory. There are minimum periods during which potential tenderers may respond. These periods can be reduced when:

  1. A Prior Information Notice (PIN) has been issued giving sufficient time in advance of the OJEC Notice;

  2. Full access is given electronically to the tender documents; or

  3. The OJEC Notice was submitted electronically, following the SIMPA website procedures.

Timescales

The OJEC minimum advertising timescales are:

  1. Open – 52 days for receipt of tenders from the date that the notice was sent, reduced by following the PIN procedure to 36 days or perhaps less, but no less than 22 days;

  2. Restricted – 37 days (for the request to participate from the date that the notice was sent), 40 days (for receipt of tenders from the date that the invitation was sent) reduced to 36 days where the PIN procedure has been used, but not less than 22 days;

  3. Restricted; accelerated - 15 days (for the request to participate from the date the notice was sent), 10 days (for receipt of tenders from the date that the invitation was sent);

  4. Competitive dialogue and competitive negotiated – 37 days to submit the request to participate from the date that the notice was sent; and

  5. Competitive dialogue and competitive negotiated; accelerated – 15 days to submit the request to participate from the date that the notice was sent.

The use of electronic notice can further reduce the timescales. Expressions of interest may be further reduced by seven days, five days for the accelerated procedure, if the OJEC Notice has been submitted electronically. It must, of course, comply with the requirements for electronic submission set out by the Office of the Official Publications of the European Union.

Return of tender timescales may also be reduced by a further five days if the authority has provided unrestricted electronic and complete access to the contract documents from the date of publication of the notice. However, the notice must specify the internet address where the documents can be accessed.

Utilities Regulations

These are very similar. There are, however, some differences. For example, they are able to choose freely between an open, restricted, competitive dialogue, or the negotiated procedure.

To see further articles by Nicholas Gould please visit www.fenwickelliott.co.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.