Circular 10/10 Issued by the Department of Finance of Ireland 13 August 2010

The Department of Finance of Ireland (which has legislative responsibility for Public Procurement) has issued an administrative Circular (Circular 10/10 issued on 13 August 2010) addressed to Government Departments and public bodies entitled "Facilitating SME Participation in Public Procurement". This is not legally binding and does not amend the EU Law on Public Procurement as transposed in Ireland. Nevertheless, it is of the first importance for those bodies to which it is addressed. It is intended to remove obstacles to small and medium sized enterprises (SMEs) participating successfully in Public Procurement competitions as bidders.

The Circular comes in the light of the EU Code of Best Practice (published in 2008) on increased SME participation in Public Procurement. In particular, the guidance seeks to inform public bodies how they should structure their competitions in order to facilitate increased participation by SMEs, whilst, at the same time, complying with the principles and rules of the existing EU-based legally binding Public Procurement regime. Two guidance documents have been issued with the Circular in support of the objective, namely "Guidance for Contracting Authorities: Facilitating Participation of SMEs in Public Procurement" and "Suitability Criteria For Contractors, Submission of Evidence and Procurement Thresholds".

Among the features of the Circular are the following, largely based on a pragmatic application of the EU principle of Proportionality:

  • a prohibition on public bodies entering into arrangements that require SMEs to pay to enter the tendering process;
  • all contracts for supplies and general services (other than in a works context) with an estimated value of €25,000 or greater (previously €50,000) must henceforth be advertised on the etenders (Irish Government Procurement) website. The threshold for works contracts and related services remains at €50,000. Contracting authorities are also encouraged to advertise contracts for lower values to promote SME participation;
  • the pre-qualification requirements have been eased somewhat. An Open procedure (that is, without pre-qualification of tenderers) must be utilised for all advertised contracts with values up to €250,000 for works contracts and up to €125,000 for supplies and general service (non-works) contracts. This new arrangement is stated to be to ensure that all contracts within these thresholds would be open to all potential bidders without the necessity of providing pre-qualification documentation such as bank statements, audited financial statements and proof of insurance. This documentary evidence is in future only to be requested when a tenderer has been shortlisted or is close to being awarded a contract. The rationale is to reduce the bureaucracy and administrative burden on small businesses that are interested in tendering for contracts; and
  • the levels which contracting authorities set for suitability criteria (especially tenderer's turnover levels) must be both justifiable and proportionate to the needs of the particular contract. The guidance document notes that the "use of over-restrictive criteria may come about unintentionally from a practice of treating criteria and capacity levels in a standard way (e.g. "cutting and pasting" requirements from other tender documents), instead of examining critically the specific requirements appropriate to each particular contract".

These initiatives are intended to result in more contracts being advertised and more SMEs being able to compete in the light of the eligibility rules having been relaxed somewhat.

Additional guidelines under the Circular include the following (among others):

  • public bodies are advised to request that tenders be submitted using the online submission facility on the eTenders website as this can simplify the tendering process significantly;
  • in order to give SMEs time to respond to upcoming competitions and to prepare their tenders public authorities are encouraged to communicate long term purchasing plans to the market as early as possible by publishing Prior Information Notices (PINs) on the eTenders website;
  • when seeking evidence of the financial standing of a tenderer, contracting authorities should be flexible in the evidence they seek and endeavour to encourage small and start-up bidders. The appropriate turnover level/financial capacity, and the evidence required, should be determined in light of the value, size, duration, nature and complexity of the contract. Where a tenderer has difficulty providing evidence of two or three years turnover, other comfort, such as guarantees or undertakings by third parties, could be used to satisfy the contracting authority as to financial risk to it;
  • as mentioned, the requisite evidence should only be requested when the tenderers have been shortlisted or come under consideration for the award of the contract. At the initial stage tenderers should only be asked to declare that they have the necessary capacity and that they would be in a position to produce the necessary documentation when requested;
  • any requirement as to insurance cover must be both relevant and proportionate to the contract. Furthermore, the requisite cover should be set out in the tender documentation and tenderers should only be asked to declare that they can obtain such cover but should not be required to have it in place at the time of tendering. Only the winning tenderer need obtain the cover and provide evidence of it;
  • where appropriate, and without compromising efficiency or value for money, contracting authorities should consider dividing contracts into lots so as to allow SMEs to compete more effectively;
  • contracting authorities are to ensure that the terms of any framework agreements facilitate the inclusion of smaller enterprises if these can meet requirements or compete for particular lots;
  • contracting authorities should encourage sub-contracting which can enable larger companies to build collaborative partnerships with small innovative enterprises and can help these to establish a track record. Contracting authorities are also encouraged to promote joint bids from SMEs;
  • authorities should encourage new and innovative enterprises by indicating in tender documents that they are prepared to accept variants to the specifications, where appropriate. In other words, tenderers should be asked to submit a solution rather than the contracting authority necessarily prescribing it; and
  • contracting authorities should be aware of the potential of SMEs as key suppliers of eco-innovation and as a green procurement option.

Some further initiatives are being developed currently, including model forms of contracts and tender documents.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.