Procurement of major contracts - A half day conference - Professor Dr. Martin Burgi Research Institute for Public Procurement Law www.rub.de/burgi Law Faculty Competitive Dialogue and the Procurement of major contracts - A half day conference - The Competitive Dialogue in Germany London, 27 October 2011 The Procurement Lawyer`s Association (PLA)

I. Introduction II. The Competitive dialogue in Practice III. The Regulatory Framework IV. Scope V. Conditions for the Applicability VI. Examples of Application VII. Correlation with the other Procedures VIII. Procedure and Operation IX. Key Issues X. Key Issues in Detail XI. Conclusion XII. Approaches to the Commission`s Green Paper Agenda

I. Introduction Prior to 2004 in Germany: negotiated procedure Introduction with the legislative package offering means of discussion Germany: Integration as part of the Act to Accelerate the Realisation of Public Private Partnership of 1.9.2005 designed as a flexible procedure for the realisation of PPP

II. The Competitive Dialogue in Practice Germany as a regular user of the competitive dialogue (in contrast to other Member States) But still: relatively rare use in practice and poor case law Of all contract notices published in the OJ (2009-2011): 59,396 11,440 2,227 Competitive dialogueCompetitive dialogue Negotiated procedureNegotiated procedure Open procedureOpen procedure Restricted procedureRestricted procedure

§ III. Regulatory Framework Art. 29 and recital 31 of Directive 2004/18/EC §§ 101 para. IV Act against Restraints on Competition and §§ 3 para. VII VOL/A-EC, 3a para. IV VOB/A, largely copying the wording of the Directive`s articles Guidance provided (marginally) by legislation and jurisdiction, but strategic assistance is given by the explanatory note of the European Commission (2005), legal experts and e.g. a PPP Task Force installed in North-Rhine-Westphalia §

IV. Scope Established only for contracts above the thresholds Seeking for the most economically advantageous tender, not the tender with the best price Applicability for public works concessions, not available for public service concessions Not established for contracts below the thresholds Not established for contracts in the Utilities sector

V. Conditions for the Applicability „Particularly complex contract“ Technical complexity or/and Legal or financial complexity The purchasing body is either objectively unable to define the technical means capable of satisfying the purchaser`s needs and objectives or incapable of specifying the legal and financial conditions of a project Decision on a by-case basis

VI. Examples of Application Public Private Partnerships (PPP`s) Generally suitable procedure for PPP contracts Reason: the rights, obligations, costs, risks of the partners and the services cannot be sufficiently specified beforehand Co-operation in developing a suitable and needs-oriented solution From the beginning linked with PPP within the legislative context Other Examples (relatively rare) Complex urban development projects Complex construction projects (reconstruction of the State of Brandenburg Parliament; soccer stadium in Mainz)

VII. Correlation with other Procedures 1. The Hierarchy of the procedures Starting point: Competitive Dialogue as a procedure sui generis § 101 para 7 GWB, §§ 3 para 1 VOL/A-EC, 3a para 2 VOB/A Open procedure Restricted Procedure Negotiated Procedure and Competitive Dialogue Art. 28 Directive 2004/18/EC Open and restricted procedure Negotiated Procedure and Competitive Dialogue

2. The correlation with the negotiated procedure Problem: The scope of the competitive dialogue and the negotiated procedure typically overlap The competitive dialogue does not enjoy priority over the negotiated procedure Negotiated procedure is - paradoxically - more flexible Negotiated procedure longer established in Germany More frequent use of the negotiated procedure

3. The main differences Competitive Dialogue Negotiated Procedure Particularly useful in order to find suitable solutions Specification impossible: descriptive document Comprehensive discussions with the tenderer No further discussions after the submission of bids Negotiated Procedure Particularly useful to discuss solutions that are already available Specification of the contract, mostly in terms of functional requirements Comprehensive discussions with the tenderer Discussions after the submission of first solutions/bids But: No further discussions after the „final call“

VIII. Procedure and Operation IV. Award Stage III. Dialogue  Official end of the procedure  Call for final offers containing „all elements“ required for the performance of the contract No modified or adjusted specifications  Core of the procedure  „All aspects“ may be discussed  No solutions to be submitted before the dialogues  Successive reduction due to reasons of procedural efficiency  ensure equality of treatment and confidentiality II. Selection I. Publication  Open the dialogue with the candidates selected  Free to limit the number of candidates to be invited to conduct a dialogue as long as genuine competition is ensured  Contract notice published in the OJ Additional publication in daily newspapers, expert or official journals, internet portals  Roughly draft the procedure, time limits, selection structure

IX. Key Issues Competitive Dialogue Procedure Confidentiality Selection and Reduction of candidates Prices negotiable? Dialogue with only the best bidder? Degree of completeness of tenders and changes Time limits

Not be revealed to third parties (§§ 3 para. 7 lit. b) VOL/A- X. Key Issues in detail 1. Confidentiality Inventory solutions or “confidential” information shall not be revealed to other participants without the consent of the bidder (Art. 29 para. 3) Not be revealed to third parties (§§ 3 para. 7 lit. b) VOL/A- EC, 3a para. 4 No. 3 VOB/A) either Dialogues taking place “behind closed doors” Idea of including a “Mediator” Can the contracting authority use the agreement of the bidder as an “entrance ticket”? Problem: which information is “confidential”? Appropriate compensation for agreement to use confidential ideas (Art. 29 para. 8; § 3 para. 7 lit. f) VOL/A-EC; § 3a para. 7 VOB/A) 14

2. Selection and phased elimination Contracting authority enters into the dialogue with the selected candidates Selection criteria not fully identical with suitability criteria Reduction of the candidates for reasons of procedural efficiency Mostly reduction to 3-5 tenderers Phased elimination of the selected during the discussions (Art. 29 para. 4) possible under the condition that genuine competition takes place 15

3. Are the prices negotiable? On the one hand: the competitive dialogue is a procedure designed to develop solutions; if prices were fully negotiable the complete offers would be discussed On the other hand: Prices need to be negotiable as “all aspects of the contract” can be discussed (Art. 29 para. 3) and bidders may be asked to hand in final offers on the basis of the solutions presented and specified during the dialogue (Art. 29 para. 6) At least: all essential aspects regarding the calculation need to be negotiable 16

4. Dialogue with the best bidder? Art. 29 para. 4: Contracting authorities may provide for the procedure to take place in successive stages in order to reduce the number of solutions to be discussed Art. 44 para. 4 S. 2: In the final stage, the number arrived at shall make for genuine competition insofar as there are enough solutions or suitable candidates No dialogue with only the best bidder unless there is only one solution in the competition “Parallel strategy” enjoying priority over the “linear strategy” 17

5. Degree of completeness and changes Comprehensive discussions with possibility for changes before the submission of final tenders Require „all elements necessary for the performance of the contract“ (Art. 29 para. 6 S. 2) The final tenders need to be complete Art. 29 paras. 6, 7: tenders should not be modified after their submission Only clarifications, specifications and additional information that are not likely to distort competition or have discriminatory effect No discussions allowed after the submission of final tenders 18

No need to publicize adjusted specifications after the 6. Time limits Art. 29 para. 5, 6: The contracting authority continues the dialogue until it can identify the solution or solutions, which are capable of meeting its needs and aks the bidders to submit their final tenders on the basis of the dialogues. No need to publicize adjusted specifications after the dialogue phase has been declared concluded No need to balance out or to outweigh differences between the tenders or the differences regarding the capabilities and abilities of the tenders to submit suitable bids on time Discretion of the purchasing body strengthened 19

XI. Conclusion The Competitive Dialogue in Germany Less flexible than originally designed Until now: Comparatively rare use of the procedure while frequent use of the well-established negotiated procedure In future: more clarity and legal certainty will probably lead to its establishment and to more innovation through public procurement

XII. Approaches to the Commission`s Green Paper 1. The Commission`s Green Paper asks: Do you think that the procedures and tools provided by the Directive to address specific needs and to facilitate private participation in public investment through public-private partnerships (e.g. dynamic purchasing system, competitive dialogue, electronic auctions, design contests) should be maintained in their current form, modified (if so, how) or abolished? 2. Synthesis of replies concludes: that the Green Paper is generally welcomed and that stakeholders put a particularly strong emphasis on the need to simplify procedures and make them more flexible. A very strong majority - with the exception of citizens and some SME representatives - supports the idea of allowing a greater use of the negotiated procedure. 3. Report of the German Bar Association suggests: to establish a second-stage procedure for the open and restricted procedure, in which the contracting authority would first call for indicative tenders and after discussions for definitive tenders. The Association further suggests to adopt Art. 29 para. 3 subparas. 2, 3 of Directive 2004/18/EC on the condition that genuine competition is ensured