1. Scope of EU Directives & New Government Procurement Procedures Jonathan Denison Cross Workshop on Public Procurement Belgrade 27 March 2009 EU Directives

2. 1. Scope of EU Directives 2. New Government Procurement Procedures - Framework agreements - Competitive Dialogue - Mandatory Exclusions - Mandatory Standstill Contents

3. Office of Government Commerce Policy and Standards EU/International  Negotiate European Directives and international Agreements Represent the UK in Europe and Internationally Transposition of EU Directives and GPA into UK Law  Domestic Set domestic procurement policy and standards for departments and offer guidance on procurement rules Monitor performance and take action where necessary

4. Relevance of EU Directives to Regional Authorities  Scope of EU Directives covers both central and sub-central government i.e. all users of tax payers’ money  Need to avoid temptation of purchasing “local”  Potential for native suppliers to gain greater awareness of the availability of local contracts through advertisements in the OJEU

5. Summary of Key EU Activities (1)  EC Directives 2004/18/EC & 2004/17/EC - Negotiation - Implementation - Constant monitoring/updating Remedies Defence  Small Business Act SBA  Social/Green policies  E-Procurement  Mandatory exclusion of convicted suppliers: anti-corruption

6. EU Activities (2)  Statistics Requirement Collection procedures  Infractions Procedures Benefits  Supplier Feedback Service

7. EU Activities (3)  Wider EU Negotiations Regional Trade Agreements (RTA) Free Trade Agenda (FTA Economic (EPA)  PPN e.g. Supplier Feedback Presidency Role Benefits  EU Learning LAB  Technical Assistance Information Exchange Instrument (TAIEX)

8.  For procurement, the EU wants to:  Open up public procurement to competition  Achieve better value for money: better quality; better prices  Reduce corruption  Establish a single market Scope of EU Directives The EU Objectives

9. The hierarchy of rules UK National Law (Regulations) UK Government Policy EU Directives EU Treaty

10. The Treaty sets the tone for all public procurement The EU Treaty (Treaty of Rome) sets out key principles which all Member States must follow Key Treaty principles relating to procurement include:  Equal Treatment  Transparency  Non-discrimination All public contracts, irrespective of their value, are subject to these principles The Treaty Principles

11. The hierarchy of rules UK National Law (Regulations) UK Government Policy EU Treaty EU Directives

12. The EU Directives on Public Procurement are European Laws Directives are formed via consultation between the Commission, Member States, European Council and European Parliament A Directive, once adopted by the EU, must be transposed into domestic law within a specified timescale The framework of Directives is dynamic – it is evolving – to keep pace with changes in the real world Examples: - Directive 2004/18/EC (The “Classic” Directive) - Directive 2004/17/EC : (The “Utilities” Directive) - Directive 2007/66/EC : (The “Remedies” Directive) EU Directives

13. The hierarchy of rules UK National Law (Regulations) UK Government Policy EU Treaty EU Directives

14. The UK transposes EU Procurement Directives into national law as Regulations The publishing of a new or amended Directive starts the clock for transposition OGC consults UK stakeholders on the implementation  Transposition is mandatory  But there are often optional elements  Plus opportunity to explain: the change; process; timescales Examples: - The Public Contracts Regulations 2006  The Utilities Contracts Regulations 2006 UK Regulations

15. The rules apply in this context  Rules apply to all ‘Contracting Authorities’  All contracts which exceed certain thresholds  Below threshold – EU Treaty principles apply Scope

16. Thresholds  Thresholds are set out in the directives (in Euros)  Revised every two years to take account of currency fluctuations (January to December the following year)  Sterling equivalent thresholds in use – published on OGC website Different threshold values depending on procurement type  13 for Public Sector  9 for Utilities The full EU rules apply when certain thresholds are exceeded

17. Main thresholds Supplies“Part A” ServicesWorks Schedule 1 bodies£90,319 £3,497,313 Other contracting authorities £139,893 £3,497,313 Other key points: Residual, or “Part B” services are subject to a lighter regime; threshold is £139,893 Below threshold procurements are not rule-free! They are still subject to the principles of the EU Treaty (transparency, equal treatment, non discrimination…) as well as to the terms under the GPA

18. Specifications  Purchasers are encouraged to use output / outcome based specifications, so as to open up competition and encourage innovation  Need to accept equivalent standards to those specified and other offers which meet underlying needs  Not to refer to specific make, trade mark, patent etc  Bidders must demonstrate equivalence; Authority’s reason for not accepting equivalence must be provided  Whenever possible account should be taken of access arrangements for disabled people or design for all users e.g. design of works

19. Sustainability Sustainability requirements can to be specified in the tender requirements, but these must be relevant Must be sufficiently precise to allow bidders to understand the requirement and to allow award of the contract Green production standards and relevant aspects of eco-labels can be specified but alternatives which demonstrate equivalence must be considered Special (including environmental and social) conditions relating to the performance of a contract may be specified if:  Compatible with Community law  Mentioned in contract notice or in the specification  Relevant to the contract

20. Sustainability At the selection stage, assessment of capability to undertake works and services contracts may, where appropriate, include:  Assessment of environmental management measures relevant to the performance of the contract  Certificates attesting compliance with environmental management standards may be requested but proof of equivalence must be accepted. E.g. EMAS (eco management and audit scheme) certificates

21. Sustainability  Relevant contracts may be limited to ‘supported’ businesses / employment programmes / factories which employ mostly disabled people unable to gain normal employment – must be stated in the contract notice  A supplier may be excluded for proven non-compliance with environmental and social legislation relating to professional misconduct or for a poor track record on previous contracts involving environmental or social requirements  Contract award criteria may include environmental characteristics provided these are linked to the subject matter of the contract and looked at from the point of view of the contracting authority e.g. running costs, energy costs and additional environmental quality (toxic emissions) etc.

22. There are 4 main procedures available Open Procedure  All potential suppliers can bid Restricted Procedure  2 stage procedure; only short-listed suppliers can bid Negotiated Procedure  Exceptional procedure; direct negotiation Competitive Dialogue Procedure  New procedure for complex contracts; controlled negotiation Procedures

23. Comparing the procedures

24. Procedures: Take-up

25. Minimum timescales (Restricted Procedure) Contract Notice Receipt of request to participate Invitation to Tender Winner notified Contract Award Notice 37 days Accelerated 15 days 10 days min Contract Award 48 days max Receipt of Tenders 40 days 36/22 days with PIN Accelerated 10 days Not specified Electronic communication – 7 day reduction for electronic notices 5 day reduction for electronic tender docs All timescales must be reasonable

26. Contracting Authorities can choose their preferred model Fixed Contract  Precise agreement; clear about volumes; clear about prices; clear about delivery timescales  Framework Agreement (further details later)  More flexibility; parties agree broad terms; contracts are formed when the buyer ‘calls- off’ the framework; 4 years max; ‘closed’ system; mini-competitions used for multiple suppliers  Dynamic Purchasing System  Similar to a framework agreement but: a) must be entirely electronic; and b) the system is ‘open’ – new suppliers can join after the framework has been awarded Types of Contract

27. Contracts covered by the Regulations are subject to advertising and transparency rules Prior Information Notice (PIN)  Not compulsory. Used to: –Warm up the marketplace; –Reduce minimum timescales –Helpful to SME’s in particular Contract Notice  Commonly referred to as the Official Journal of the European Union (OJEU) advertisement Contract Award Notice  Confirms the results of the award procedure Publication of Notices

28. Selection of Tenderers  Minimum numbers of those invited to tender can be stated in the Contract notice, but should be sufficient to ensure genuine competition  Such minimum numbers are  5 for the restricted procedure  3 for the negotiated (with publication of a contract notice) procedure  3 for the competitive dialogue procedure Those found guilty of organised crime, corruption offences or fraud Must be excluded. This requirement is new and supports Community efforts to tackle such issues. Guidance is available on OGC’s website (further details later)

29. Award Criteria  Regulations permit either lowest price or most economically advantageous tender (MEAT)  Contract notices and documentation must provide the relative weighting given to each criterion used to judge MEAT  Where this is not feasible, award criteria must be stated in descending order of importance  MEAT award criteria may include environmental characteristics (e.g. energy savings, disposal costs) provided these are linked to the subject matter of the contract

30. The hierarchy of rules National Law (Regulations) UK Government Policy EU Treaty EU Directives

31. The Government’s overarching policy is that public procurement should deliver value for money  VfM is defined as the optimum combination of whole life costs and quality to meet the user requirement  VfM is not lowest price! (Though sometimes the best VfM solution may be the lowest priced bid). VfM is similar to MEAT UK Government Policy

32. The Procurement Cycle Closure Develop business case Contract Management Supplier Selection Procurement Strategy Competitive Tendering Identify need, Strategic Planning and Early Market Engagement Gateway Review 0 Gateway Review 1 Gateway Review 2 Gateway Review 3 Gateway Review 4 Gateway Review 5 Market Engagement Identify need Contract Award Project / Programme Management

33. New Government Procurement Procedure  Framework Agreements  Competitive Dialogue  Mandatory Exclusion of Suppliers  Mandatory Standstill Agreements

34. Framework Agreements Background  An agreement with suppliers to establish terms governing contacts to be awarded within given period, especially regarding price and quality  Allows for specific purchases or call offs to be made throughout term of agreement  If the framework is itself a contract obliging in writing an agreement to purchase, EU rules apply  If the framework sets out terms and conditions for subsequent call offs but no obligation on procurers to buy, contract only formed when purchases are called off

35. Framework Agreements Process  Need to advertise framework in OJEU if estimated maximum value over lifetime exceeds relevant threshold  4 year maximum length for framework agreement can only be exceeded in exceptional circumstances such as where 4 years are insufficient for a return on investment  OJEU notice needs to include estimated total value of goods/works/services for which call offs are to be placed and if possible value and frequency of call offs to be awarded  Awarding of call offs under framework agreements does not require contracting authorities to go through full procedural steps in directives although treaty provisions still apply

36. Framework Agreements Benefits  Can save transaction costs  Can provide vfm savings  Will be helpful for suppliers  As long as properly and fairly operated

37. A new procedure created by the EC and used by public bodies procuring Public Private Partnership projects for infrastructure assets Competitive Dialogue Select Participants Dialogue Phase Final Tenders Selection of Preferred Bidders PB Clarification Pre Qualification OJEU Notice Contracts Signature

38. Competitive Dialogue  During all procurements, contracting authorities work in partnership with bidders to ensure that bid costs are kept to a minimum and to ensure value for money  The approach has adopted various guidelines which are published by the National Health Service, OGC and the Building Schools for the Future programme, amongst others

39. Mandatory Exclusion  Mandatory requirement for contracting authorities to exclude suppliers convicted of certain offences e.g. fraud and bribery  Applies to individuals directly involved in the tendering process  Evidence of convictions can be obtained through central government records  Unspent and spent convictions

40. Mandatory Standstill Period  10 Day Mandatory Standstill period for public contracts following European Court of Justice (ECJ) judgements  Enables award decision to be set aside by a court where aggrieved bidder has been prejudiced by breach of rules  Contracting authorities must inform all suppliers who have tendered in writing of the result of the award and provide feedback to unsuccessful tenderers  Does not apply below threshold

41. Key Benefits of EU Directives for Serbian/EU Contracting Authorities  Regulatory procedures to ensure competition and VFM  Greater market choice at both central and sub-central level  Better quality goods and services  Competitive pricing does not imply lowest price  Improved statistical data on markets  More opportunities for UK/EU suppliers + increases their  competitiveness

42. Key Benefits of EU Directives for Serbian/EU Contracting Authorities  Major emphasis on transparency and non-discrimination  Guaranteed access to markets within the EU  Sub-contracting, in particular with regard to SMEs  Enforcement procedures through the EU dispute settlement system

43. Procedures EU Directives offer to help contracting authorities and suppliers  Rules to ensure non-discrimination and transparency e.g prescribed advertising procedures, tender processes  Thresholds  Introduction of modern techniques such as, e-procurement/electronic reverse auctions