Negotiations in Public Procurement Past, present and (near) future ICEL Dublin February 2013 Pedro Telles

Plan Past Traditional limitations to negotiation Present Negotiation in numbers Competitive dialogue and contract performance (Near) future New procedures on draft Directive Compromise Text and associated risks

Past Present Near (future)

Negotiations have been frowned upon in European public procurement

Negotiations have been frowned upon in European public procurement Why?

Reasons Protect competition (internal market) Increase transparency As an insurance policy

Insurance policy? To minimise corruption and incentives issues

How did Member States react?

Did the sky fall? Commission initiated two proceedings against the UK in and we are still waiting for a decision Kathro case (R on the Application of Kathro v Rhondda Cynon Taff County BC) 2001

Past Present Near (future)

Legal regime at EU level Standard procedures with negotiations freely available Directive 2004/18No Directive 2004/18 Part B Services Yes Directive 2004/17Yes Contracts not covered by Directives (i.e. low value or concessions) Yes Directive 2009/43Yes

EU %18.6% Source: Eurostat (online data codes: gov_oth_procur) Percentage of public contracts advertised on OJEU (value)

Source: Cost and Effectiveness in public procurement report 2011 Open and restricted procedure represent 80% of advertised contract value

Only 14.88% of total procurement value in 2010 was awarded through procedures without negotiation

What have we learned over the last 8 years with competitive dialogue?

Dialogue stage is actually a negotiation Dialogue after tender submissions should be more limited than on open/restricted procedure Dialogue with preferred bidder is pure madness “Negotiations” within competitive dialogue

Lack of competition leverage Fosters foot dragging by bidder Leads to “negotiation creep” What do you mean by “pure madness”?

Focus discussions on specific topics Use stages for consolidation Set deadlines for end of dialogue/stage Get participants to sign document stating they do not wish to discuss any topic further at the end How to extract value from dialogue stage?

What about negotiations during contract performance? Same caveats apply as before Asymmetry of information and resources, capture of regulator Cautionary tale: Plus Pressetext, Succhi di Frutta and the recent Spain v Commission (AVE) ECJ decisions

Past Present Near (future)

Competitive dialogue (revised) Competitive procedure with negotiation (revised negotiated procedure with prior publication) Innovation partnership (new) A well stocked negotiation toolkit for 2014?

Photo by rocknroll_guitar - Draft Directive appears to bring wider access to negotiations......Is it a good idea?

Higher transaction costs Contracting authority Suppliers Higher opportunity costs Suppliers Scope for much worse outcomes What are going to be the consequences of widespread negotiations in public procurement?

Reasons to limit negotiations Protect competition (internal market) Increase transparency As an insurance policy against corruption, incentive or lack of training

Photo by Bartek Kuzia % of procurement will improve 80% of procurement will get worse results Competitive procedure with negotiation will be the new restricted procedure

Questions welcome.