Maximising Success in EU Procurement Creating a balance for Public and Private Sectors Chairman - Paul Darling QC. John Houlden Marcus Harling Jon Milward John Smith

Agenda Relevance to Property & Construction Sectors A basic review of the current regime The competitive dialogue in practice with Case Studies Framework agreements – how to use them effectively and legally Challenges – risks and opportunities

Relevance to Property & Construction PPP Grant funded contracts JV with public sector S106 Agreements framework Infrastructure FM Development Agreements Construction Design & Management RSL

Relevance to Property & Construction Waste Housing Regeneration Nuclear Sustainability Transport Health Defence £2bn PFI credits (2007 CSR) 45,000 new units p.a (2010) RDA/ Local Authority led Decommissioning/ new build Look out for money allocated Rail investment Community based healthcare Aircraft carrier / accommodation

A basic review of the current regime How and why did we get here? When does it apply? How does it apply?

How and why did we get here? EC Treaty Art. 12 - prohibits discrimination on grounds of nationality Arts 28, 43 and 49 prevent restrictions on free movement of goods, freedom of establishment and freedom to provide services

UK Implementing Legislation TRANSPARENCY Treaty Directives UK Implementing Legislation EQUALITY OF DEALING

When does it apply? Need to consider: Body awarding contract Subject matter of contract Value of contract

When does it apply? Bodies covered (aka “contracting authorities”): those listed in Regulations (i.e.. Ministers, government departments, Houses of Parliament, local authorities etc) bodies established to meet “needs in the general interest” if: financed; supervised; or appointed by a contracting authority

When does it apply? Central Purchasing Bodies Contracting Authority Body Supplier

When does it apply? Need to consider: Body awarding contract Subject matter of contract Value of contract

When does it apply? Subject matter: Is it a “public works contract”? Is it a “public supply contract”? Is it a “public services contract”? NB Works by any means

When does it apply? Need to consider: Body awarding contract Subject matter of contract Value of contract

When does it apply? BODY WORKS SERVICES SUPPLIES Central Govt £3,497,313 A= £90,319 B= £139,893 £90,319 Other Public Sector £139,893

How does it apply? CONTRACT CONTRACT PIN EVALUATION NOTICE AWARD Open Restricted Competitive Dialogue Negotiated Selection/ award Debriefing

How does it apply? Open procedure: all may submit tenders 52 days to return of tender suitable for contracts with simple subject matter and award criteria (i.e. stationary)

How does it apply? Restricted procedure: only those invited by contracting authority may submit tenders 37 days for EOIs/40 days for tendering appropriate for more complex procurements

How does it apply? Negotiated procedure: Very limited application, only in certain specified circumstances, e.g. exceptionally when nature of works/services or risk does not permit prior overall pricing two procedures - competitive and non-competitive competitive – 37 days for EOIs

How does it apply? Selection and award

Selection – practical issues Requirement to exclude Minimum requirements: financial standing technical capacity Objective criteria NB Recent ECJ case law

How does it apply? Selection and award

Award Criteria for award: (a) (b) lowest price most economically advantageous to the contracting authority 1 2 3 4 Freedom NB Weightings

Award – practical effect Establish relative weighting of the evaluation criteria either: at the start of the procurement before notice is placed; or before issue of contract documents KEY PRACTICAL ISSUE!

The competitive dialogue in practice When is it used? How does it work? Case studies

Competitive dialogue – when is it used? Authority: wishes to award a “particularly complex contract”; and considers that open or restricted procedures will not allow the award of the contract; and

Competitive dialogue – when is it used? PIN CONTRACT NOTICE EVALUATION CONTRACT AWARD Open – one stage process (tender) with no negotiation Restricted – two stage process (PQQ/tender) with no negotiation

What is a particularly complex contract? Authority is not objectively able to: define the technical means of satisfying its needs; or to specify the legal or financial structure of a project

Competitive dialogue – when is it used? Requirement known Solution unknown

Competitive dialogue – how does it work? PIN CONTRACT NOTICE EVALUATION CONTRACT AWARD Competitive Dialogue Selection/ award Debriefing

Competitive dialogue – how does it work? Technical dialogue Contract notice pqq Competitive dialogue

Competitive dialogue – how does it work Competitive dialogue – how does it work? - incremental reduction in bidders 1 2 3

Competitive dialogue – how does it work? Final round Evaluation Award

Phased Dialogue – no reduction in bidders Process: Final Tender Clarification/ Contract Contract Notice PQQ Dialogue PHASE 1: Technical Discussion PHASE 2: Legal Discussion PHASE 3: Concluding Issues

Competitive Dialogue Case Study – Finding the Development Partner

Competitive Dialogue Case Study – Finding the Development Partner Opportunity created by local authority looking to use surplus land to kick start redevelopment Requirement for local authority offices in scheme What to expect. Avoiding mismatch between expectation and delivery

Competitive Dialogue Case Study – Finding the Development Partner "public works contract" means a contract, in writing, for consideration (whatever the nature of the consideration)— (a) for the carrying out of a work or works for a contracting authority; or (b) under which a contracting authority engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements; Application of Competitive Dialogue to a property development transaction Developers unfamiliar with regulated procurement Contracts conditional on planning are typical Developers reluctant to carry significant bid costs or to engage in a lengthy competitive stage No standard documentation Challenge is how to get to final tender

Competitive Dialogue Case Study – Finding the Development Partner Planning the procurement “particularly complex contracts.” Be clear on the timetable. Market testing / information days. Contract Notice - Short listing Invitation to Participate in dialogue Understand Evaluation criteria, including risk based to deal with solutions. Incremental reduction of bidders is usual. Dialogue Final Tenders Full contract mark-up or populated Heads of Terms at FT. No substantial modification of bids afterwards. Bid clarification to Contract

The time for planning a strategy has passed!

Maximising Success: The Agent’s View JON MILWARD Head of Development Drivers Jonas

Agenda Popular Perceptions of the OJEU process The Reality How and When to Engage (Public Sector) The Marketing Process How to Get Shortlisted (Private Sector) How to Get Selected (Private Sector) The Documentation Commercial Negotiations – How to get the best result

“How to Succeed Despite the Lawyers!” Agenda “How to Succeed Despite the Lawyers!”

Popular Perceptions Time-Consuming Costly Over-Complex Too Many People Chasing Too Small a Prize

The Public Sector

Developers

Advisers

The Reality For the Public Sector – a transparent, open process. Auditable and competitive BUT can be prescriptive For the Private Sector – an opportunity to engage on some of the most exciting projects in the UK BUT some barriers to entry. For Advisers – lots of ‘recession-proof’ work BUT public sector fees are low and private sector partners may require ‘sweat equity’.

How and When to Engage Appropriate Preparation OJEU doesn’t mean the public sector can put their feet up! Creating Certainty – Horses for Courses Planning Legal Specification

RNOH Bolsover St, W1 Royal National Orthopaedic Hospital NHS Trust Ridgeford / Manhattan Loft In-patient facility Funded out of Residential Development

LFEPA HQ - 8 Albert Embankment Fire Station Headquarters Mixed Use – Residential Led New Fire Station Subject to Planning Deal

Founder’s Place – Guy’s and St Thomas’ Charity Detailed Planning Consent granted Support accommodation for Guy’s and St Thomas’s Hospital 400 Private and key worker units

The Marketing Process Most Developers don’t read the European Journal! Consider Additional Marketing – which must be consistent with the OJEU advertisement The Use of PINs

Poplar HARCA – Chrisp Street Market Estate Redevelopment PIN to Establish market appetite

How to Get Shortlisted Know the Assessment Criteria Track record Ability to Fund Fill in the Forms Smartly – beware of procurement monkeys Expert team If limited/no track record, consider partnerships with others Sort out your Funding – particularly in today’s market

How to Get Selected Engage – treat it as a Partnership Make some effort – you are on a shortlist Don’t over-promise – be realistic Be aware that risk transfer is often as important as value Make sure your funders are fully committed

The Documentation Keep it Simple Stupid Provide as part of the shortlist tender pack?

Commercial Negotiations Consider and Agree Key Commercial Points Early – what is important to you? Agree Milestones and stick to them Understand report deadlines / Board Approval processes Don’t try to win every point Remember this is a Partnership

I Want My Cake AND I Want To Eat It

Commercial Negotiations Be prepared to be flexible – especially in changing market conditions Review commercial aspects regularly Prepare your parachutes! The Principle of “Equal Unhappiness”

Maximising Success: The Agent’s View JON MILWARD Head of Development Drivers Jonas

Any questions………

Framework agreements What is a framework? How to use them effectively and legally

What is a framework agreement? Different contractual structures: Commitment to purchase Mix of commitment to purchase and option to acquire No commitment to purchase but option to acquire

What is a framework agreement? Procurement regulations: “..an agreement or other arrangement between one or more economic operators which establishes the terms (in particular the terms as to price and, where appropriate, quantity under which the economic operator will enter into one or more contracts….” NB No commitment but can be legally binding!

What is a framework agreement? No commitment to purchase but option to do so: NB: No more than 4 years If more than 1 supplier, no less than 3 Contract specifying: mechanism for future purchases terms of purchase (including price) Call off 1 Call off 2 Call off 3

How to use them effectively and legally Two key elements: Establishment of frameworks Call-offs during framework term

Call-offs during framework term Two means: without competition – by applying the framework terms with competition – where not all terms laid down

Call-offs during framework term With competition: only those suppliers who are parties; and only those who are capable of performing proposed contract

Call-offs during framework term Contracting authority must: consult in writing invite submissions of tenders in writing set a time limit for responses award on basis of award criteria specified

Challenges – risks and opportunities What remedies are available? Key risk areas Future developments

What remedies are available? Remedies under the regulations differ according to whether process challenged: before; or after, the contract has been entered into

What remedies are available? Mandatory standstill: Minimum 10 day standstill between: communicating decision to award; and entering into a contractually binding agreement Mandatory disclosure of information

What remedies are available? Remedies under Regulations pre-execution: interim measures set aside order amendment of documents award damages Only remedy under Regulations post execution is damages NB Timing is critical – “promptly” and within 3 months

Key risk areas Transparency Equal treatment Evaluation – selection/award Confidentiality

Future developments New remedies directive – implementation by 20 December 2009: Standstill – similar but: potential extension to Part B and framework call offs ineffectiveness of concluded contracts possible if breach with a limitation period of 6 months potential for penalties for authority if wrongful use of exemption and unable to set aside Suspension of process on application Increased scope for Commission intervention

Conclusions Be aware – contractors are and challenges are on the increase! Early identification of issues is crucial – potential mitigation is possible

Practical Issues to Maximise Success – Bid Selection Bid selection – evaluate client Track record of organisation/sector Commitment to this project – is there real driver High level sponsor Are there multi-authorities Affordability versus ambition Engage with authority Bid selection – evaluate yourself Your track record Consider likely criteria Consider if consortium/other expertise needed

Practical Issues to Maximise Success – During The Procurement - PQQ - identify authority selection criteria - clarify and question - increasingly used for down selection Dialogue think about tone, approach, team respond to dynamics aim to influence constructively emphasis on early development of solution make aware of bid costs – e.g. due diligence Post dialogue clarifications if necessary answer the question respond to clarifications