Reform of the EU procurement rules – public sector

Reform of the EU procurement rules – public sector
Briefing for Procurement Practitioners UNCLASSIFIED

Welcome Introductions, domestic arrangements and safety briefing The delegate pack (programme, slides, handbook, Q&As, instructions for online feedback form, including quiz and opportunity to put specific questions to Crown Commercial Service policy team) The timings for the day (start, finish, breaks, the 8-session structure of the day) Opportunity for questions at the end of each session (the answers to some questions may not yet be available ) These points are a reminder to trainers to tell the delegates the structure of the day and remind them of the papers they should have already printed off. UNCLASSIFIED

The Crown Commercial Service
The new commercial and procurement function for the UK Government Responsible for procurement policy and includes the team that successfully negotiated the reforms to the directives. Also provides expert commercial services and advice Brings together: Commercial function of the Cabinet Office, including Government procurement policy The Government Procurement Service (GPS) Common goods and services procurement undertaken by departments UNCLASSIFIED

The Crown Commercial Service
The new organisation will offer: A fully managed, end-to-end commercial and procurement service An expert commercial advisory service The Crown Commercial Service will enable us to get better value from the £40 billion spent by central government each year UNCLASSIFIED

The new DNA for commercial activities
Managed Commercial Services delivered centrally - once on behalf of Government Procurement Process Contract and supplier management High Before going to market Time spent on value added activity Improving contract and supplier management capability through application of new standards Developing requirements that shape markets and the supply base to Government Simplifying process and reducing turnaround times & supplier bid costs The key point of this slide is the recognition that public procurement needs to concentrate much more of its attention on market and supplier management, and ensuring the contract itself is properly managed, The approach taken to the procurement process needs to be simplified. The procurement directive reforms form a key part of the Crown Commercial Service’s approach to this goal. Low Before Business need identification Sourcing strategy Supplier identification Execution of sourcing strategy Finalisation of contract Contract management Goal Market analysis Supplier relationship management and negotiation UNCLASSIFIED

Introduction Legislative proposals to change the EU directives by European Commission in Dec 2011 Following detailed negotiations between the European Parliament the Commission and Council the texts of the directives have been finalised The new directives were adopted on 28 March 2014 and must be transposed into national law during the next 2 years Crown Commercial Service is preparing to transpose the new rules, through Regulations, earlier than the time allowed These briefing materials aim to assist contracting authorities (authorities) and suppliers more easily to prepare for the changes EU procurement legislation is implemented by various UK regulations implementing directives in the public and utilities sectors. References to the regulations currently in force are given in the handbook. In April 2014 the EU adopted revised public sector and utilities directives and a new directive to regulate the award of concession contracts. The current Defence and Security Procurement Directive and the Remedies Directives have not been amended as these have only recently been brought into law. The key objectives of the new directives were to make the current rules more simple and flexible and to contribute to growth by improving the access of suppliers to the EU market. In particular both contracting authorities and business supported the speeding up the procurement process and the elimination of unnecessary ‘red tape’. The UK government’s view is that the new directives represent a significant improvement of the EU procurement ‘rules’ for both procurers and suppliers. The Crown Commercial Service is therefore preparing to transpose the new rules, through new UK Regulations, significantly earlier than the 2 years allowed to ensure access as soon as possible to the more efficient and flexible procedures. These training materials have been prepared by the Crown Commercial Service to provide briefing for colleagues in contracting authorities throughout the public sector some months before it is expected that the new UK regulations will come into effect. Separate materials are available on the new Utilities Directive. Copies of these materials will also be available in due course access on site. An interactive ‘E-learning’ programme for contracting authorities, based on these materials, is also being developed by the Crown Commercial Service. UNCLASSIFIED

Important note These briefing materials relate to the implications of the new public contracts and concessions directives. Most of the directives’ provisions are mandatory These materials summarise the new rules and do not refer to every relevant requirement. You should refer to the new directives and (when available) regulations and where appropriate obtain independent legal advice as necessary New UK regulations to implement these changes are currently being prepared and formal consultation is about to start – the Crown Commercial Service welcomes comments on this UNCLASSIFIED

Important note Until the new regulations have come into force, authorities must continue to apply the current regulations (the Public Contracts Regulations 2006 (SI No. 5, as amended)) UNCLASSIFIED

The benefits of early transposition of the directives into UK law
The Crown Commercial Service team (formerly Cabinet Office) has delivered an excellent negotiating outcome for the UK Authorities and business will have earlier access to simpler and more flexible rules, freeing up markets and facilitating growth, in particular allowing employee-led organisations/mutuals to gain experience of running public services prior to full and open competition shorter, less burdensome, procurement processes reducing costs to business and barriers to competition more flexibility for authorities to follow best commercial practice to achieve the best procurement outcomes better access to public procurement for SMEs, consistent with non- discrimination and a value for money approach The aim of the training is to encourage procurers to feel empowered by the changes to the directives. Often we have been over-conservative and risk averse in approaches to procurement, losing value and frustrating suppliers who wish to do business with us. The EU legislation has been seen as preventing good practice. The changes negotiated by the UK have significantly freed up contracting authorities to use commercial best practice. In particular the Directive makes clear that contracting authorities can talk to suppliers before a contract process is started, to encourage supplier involvement and fully explore their needs prior to advertisement incorporate social, ethical and environmental objectives in specifications, contract conditions and award criteria use negotiated procedures where value can best be achieved for innovative or complex requirements shorten the procurement process considerably to reduce the time and cost burden of the advertising requirement use a reformed, more practical, dynamic purchasing system to improve the efficiency of procurement of commonly used supplies and services use their discretion in awarding contracts for social and health services by using a much less regulated ‘light touch regime’ exclude suppliers where there are ‘significant or persistent’ deficiencies in performance of a previous contract UNCLASSIFIED

What does not change? No change in the bodies covered by the regulations - “contracting authorities” No immediate change to thresholds of application of the directive (but Commission commitment to review by 2019 the economic effects on the internal market as a result of the application of the thresholds which could lead to an increase in the thresholds) As now authorities must comply with principles of transparency, non- discrimination, equal treatment and proportionality No changes to remedies The regulations will continue to provide a transparent process aimed at maximising opportunity for suppliers whilst allowing achievement of value for money by authorities Although significant changes have been made to the EU rules, the essential structure of the EU process will still be familiar to authorities and to business. The EU thresholds in the current directive were last reviewed over 20 years ago and now seem to be unnecessarily low. However this review depends partly on future negotiations with parties to the World Trade Organisation’s agreement on government procurement (the GPA), which applies to the EU and to some non-European states such as the USA. UNCLASSIFIED

Questions

Does the Public Sector Directive apply to the contract?
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Exemptions for ‘public-public’ contracts
A number of judgments by the Court of Justice of the European Union in the series of cases following the ‘Teckal’ case (C-107/98) have identified circumstances where a contract between two public bodies can be exempted from the EU rules The new directive codifies these conditions, which must all be met where the authority exerts on the ‘supplying authority’ a control similar to that which it exercises over its own departments and where 80% of the activities of the ‘supplying authority’ are for the ‘buying authority’ or other bodies controlled by it and where there is no direct private capital participation in the ‘supplying authority’ The new directive recognises explicitly the need to facilitate co-operation between public authorities (e.g. shared services models aimed at improving efficiency) already established by European case law. The Teckal case concerned a group of local authorities collaborating to purchase fuel and energy services. The changes are helpful in providing greater certainty on, for example, the extent to which the activities of the ‘supplying authority’ must be solely for the ‘buying’ authority UNCLASSIFIED

Exemptions for ‘public-public’ contracts
A judgment by the Court of Justice of the European Union in the ‘Hamburg’ case (C-480/06) identified other circumstances where a contract between two public bodies can be exempted from the EU rules The new directive also codifies these conditions, which must all be met the participating authorities co-operate to perform public services they must provide, meeting common objectives and the co-operation is for public interest reasons only and the participating authorities perform less than 20% of the activities on the open market The Hamburg case considered administrative co-operation arrangements between a number of German local authorities that needed to work together on establishing a new domestic waste disposal service (shared waste streams and a shared disposal plant). This provision differs from the provisions for ‘Teckal’ situations in that here the authorities can be autonomous (joint ‘control’ is not needed) UNCLASSIFIED

Contracts with defence/security implications
The public sector directive does not apply to contracts in the field of defence and security which fall within the scope of Directive 2009/81/EC (implemented in the UK by the Defence & Security Public Contracts Regulations 2011) or are excluded by that directive The Defence & Security Public Contracts Regulations apply to contracts for purposes that are military or ‘sensitive’ (i.e. involving, requiring and/or containing classified information) The Defence & Security Public Contracts Regulations 2011 cover the supply of military equipment the supply of sensitive equipment works/supplies services directly related to military and sensitive equipment works and services for specifically military purposes or sensitive works and sensitive services Sensitive = works/supplies/services involving, requiring and/or containing classified information Directive 2009/81/EC therefore mainly affects the Ministry of Defence but other authorities, including some in the wider public sector, may need to award contracts which include elements that are ‘sensitive’ UNCLASSIFIED

Contracts with defence/security implications
Even where the Defence & Security Public Contracts Regulations do not apply the Public Contracts Directive does not apply to contracts where essential security interests cannot be protected by less intrusive measures than exemption; or for contracts that are declared secret or must be accompanied by special security measures; or where application would oblige a Member State to supply information the disclosure of which it considers contrary to its essential security interests UNCLASSIFIED

Concession contracts The new Public Contracts Directive explicitly excludes both works and services concession contracts i.e. where the consideration consists in the right to exploit works or services or that right together with payment (e.g. toll bridges, canteen services, outsourced leisure centres) and operating risk is transferred to the supplier This exclusion reflects the agreement at EU level of a new directive to cover such contracts (2014/23/EU) which will be transposed separately and authorities intending to award concession contracts should follow the relevant guidance. UNCLASSIFIED

Concession contracts The Concessions Directive provides a relatively light touch regime which will apply to both works and services concessions (the latter are currently exempted from the UK Regulations). The threshold of application of the directive to both works and services concessions contracts will be identical to that for works contracts UNCLASSIFIED

Reservation of certain contracts for mutuals and social enterprises
The directive provides that certain services contracts (mainly social, health and educational) can be reserved to organisations that meet all of the following conditions has as its objective the pursuit of a public service mission linked to the delivery of these services and reinvests profits to meet this objective (where profits are distributed this should be based on participatory considerations) and owned/managed on the basis of employee ownership/participatory principles or the active participation of employees, users or stakeholders and not have been awarded a contract for the services concerned by the contracting authority concerned pursuant to this reservation within the past three years. Note that this provision does not exempt services from the application of the directive but simply limits the type of supplier that may apply to take part in the contract, wherever it is established. Thus an OJEU call for competition (either a contract notice or in certain cases a prior information notice) will be required and a special light touch regime is to be used to award the contract – see later slides. This provision may only be applied to contracts for certain services listed in the directive and defined using the CPV code. These services are within the areas of health, social and related services, education and training services, library, archives, museums and other cultural services, sporting services, and services for private households. UNCLASSIFIED

Reservation of certain contracts for mutuals and social enterprises
The duration of the contract to be reserved must not exceed 3 years Such ‘reserved’ contracts must be open to all relevant suppliers with rights under the directive and must be awarded using the procedures in the directive, including a call for competition in OJEU The contracts will be awarded using the ‘light touch’ regime described later (this applies to mainly health and social services contracts listed in Annex XIV of the directive) The OJEU call for competition for the contract must make reference to the relevant article of the directive. Note that throughout these slides the term ‘call for competition’ is used to refer to an OJEU notice that seeks tenders or requests to participate, e.g. an individual contract notice or a prior information notice (PIN) These provisions aim to limit the potential damage to free competition posed by this special reservation. Note that the directive provisions for some of these services are less onerous that others – the ‘light touch’ regime referred to later applies to some of these reserved contracts. UNCLASSIFIED

Reservation of certain contracts for sheltered workshops
Any contract may be reserved to organisations that provide sheltered workshops or to suppliers who’s main aim is the social and professional integration of disabled or disadvantaged persons. However: The term ‘disadvantaged’ is a new provision The percentage of the workforce that must be represented by those persons is also new - this will reduce from 50% of the workforce to 30% Such contracts could also be required “to be performed in the context of sheltered employment programmes” Such ‘reserved’ contracts must be open to all relevant suppliers with rights under the directive and must be awarded using the procedures in the directive, including a call for competition in OJEU UNCLASSIFIED

The new light touch regime (social, health and other services)
The distinction between part A and part B services will be abolished thus the normal rules will apply to many former part B services contracts, formerly subject to a very light regime However some services defined by CPV code in Annex XIV (mainly social and health services) will be subject to a new ‘light touch’ regime to reflect their limited cross-border interest (e.g. they relate to legal services in the context of national law) or are sensitive (e.g. services to the person) Former part B services contracts were subject to a very light regime, not requiring a call for competition but requiring the application of the Treaty principles including transparency and non-discrimination and the publication of a contract award notice as well as the application of the rules for specifications. This approach was considered to lead to some confusion as to procedure amongst authorities and suppliers. Contracts for these services, by their nature, may be more likely to be of interest to domestic-based suppliers. But there comes a point where the value of the contract makes it more attractive to cross-border competition, hence the higher thresholds for OJEU-advertising Note: Not all former part B services are subject to this new regime - it is important that the list of CPV codes in the Annex is checked carefully before applying the new light touch regime to a contract. UNCLASSIFIED

These contracts will only be covered by the directive if their value exceeds 750,000 Euro (a much higher threshold than for other services) Contracts below this threshold are assumed to be of no cross border interest, so no OJEU advertising is necessary. UNCLASSIFIED

The directive requires that authorities award contracts for these services in the following way: Publication in OJEU of a call for competition (either a contract notice or prior information notice - PIN) Publication in OJEU of a contract award notice (or quarterly submission of batches of contract award notices) The directive also requires Member States to establish their own rules for the award of these contracts, within the framework of Treaty obligations The new regime makes clear the need for an OJEU ‘call for competition’ notice, to ensure the transparency needed to avoid discrimination but imposes few other obligations. Member states are given some discretion to establish their own rules. Those proposed for the UK are subject to formal consultation. It is intended to allow authorities considerable flexibility to use procedures, tools and techniques of their own choosing, subject to the Treaty obligations of transparency, equal treatment and non-discrimination UNCLASSIFIED

The UK has prepared a minimalistic approach to avoid unnecessary regulation Beyond the new OJEU advertising requirement, the UK’s light-touch regime rules will be very flexible So authorities will, as now, be able to use procedures and tools analogous to those in the main rules, or use simpler or otherwise modified techniques, providing they comply with the essential principles of the EU Treaty (i.e. ensuring transparency, equal treatment, non-discrimination etc) UNCLASSIFIED

Questions

Encouraging greater access to contracts
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Preliminary market consultations with suppliers
The new rules explicitly allow prior discussions with suppliers and expert bodies prior to starting a procurement procedure both to inform suppliers and to allow the authority to seek advice in the planning and conduct of the procurement procedure Government has for some time encouraged this ‘pre-market engagement’ as the current rules do not prevent such discussions and such engagement has been found to increase the number of SMEs applying for contracts, widening competition and improving value for money Care must however be taken to ensure such contact does not distort competition or violate the transparency and non-discrimination principles The directive makes it explicit that contact with suppliers before the formal procurement process starts is permissible. The UK government’s view is that early market engagement is important both for achieving value for money and to encourage access to public procurement by SMEs Care must however be taken in using the discretion provided by the directive to preserve transparency and equal treatment. UNCLASSIFIED

Benefits of preliminary market consultation
Helps to manage the market – through stimulating increased competition which can reduce dependency on a limited number of suppliers Helps to define the requirement – by informing the business case and helping to identify or develop the contract’s requirements. Helps to provide a better understanding of the feasibility of the requirement, the best approach, the capacity of the market to deliver and possible risks involved Reduces procurement timescales by minimising the dialogue needed during the formal procurement process and minimises the need for complex and costly procedures such as Competitive Dialogue. Encourages a more responsive market and allows suppliers to ask questions/raise queries at an early stage. UNCLASSIFIED

Setting appropriate scope and specification
The new directive includes an obligation to include accessibility criteria where the outcome of the contract is to be used by natural persons (except where duly justified) There is greater flexibility to include in the specification requirements such as carbon intensity that are related to methods of production/provision of the contract outcome in any stage of the life cycle (provided linked to subject matter and proportionate to value/objectives) The new directive responds to the needs to take account of equality and environmental protection issues when preparing the scope of a contract, subject to safeguards to prevent discrimination. It is particularly significant that the specification can refer to production methods that meet certain policy objectives (e.g. the extent of pollution caused by manufacture of steel) UNCLASSIFIED

Setting appropriate scope and specification
The directive recognises the potential benefits of dividing contracts into lots, in order to assist access by SMEs. Subject to consultation it is not proposed to require authorities to divide contracts into lots However, where it is decided not to ‘lot’ the contract the authority must indicate why in the contract notice or in its report on each contract (which can be requested by the Commission or by national monitoring authorities) Authorities will also be given the flexibility to award more than one lot for a contract to the same supplier UNCLASSIFIED

Using environmental and social labels
Social/environmental labels are permitted as part of specification, award criteria or terms and conditions as proof of compliance with a requirement with specific characteristics that are linked to the subject matter of the contract (e.g. working conditions of the employees producing coffee to be supplied to the authority) However, suppliers must be allowed to offer compliance with equivalent labels or offer other proofs (e.g. technical dossiers) where the label cannot be obtained within the relevant time limits Labels must also, as now, meet certain conditions such as being based on transparent and non-discriminatory criteria and awarded by a body independent of the supplier applying for the label The new directive codifies case law that showed that social and environmental requirements could be built into specifications provided they were linked to the subject matter of the contract and made transparent to suppliers. The directive also makes clear that publicly available labels are an effective method of demonstrating compliance with such specifications subject to safeguards linked to equal treatment and non-discrimination. Thus an supplier cannot be excluded for failing to have received a particular label and must be able to offer other proofs of compliance if there is insufficient time to achieve certification to any relevant label. Labels could for example be related to workforce issues (e.g. fair trade labels) or environmental issues (e.g. energy use of appliances) UNCLASSIFIED

Use of electronic procurement
Current EU rules already allow/encourage electronic communication: the new directive mandates electronic methods in parts of the award process (and mandates safeguards on interoperability and data integrity) Electronic OJEU notification and electronic availability of procurement documents to suppliers from date of notice publication will be mandatory from when the regulations come into force Authorities must in due course allow electronic submission of tenders and requests to participate but to allow authorities and suppliers to adapt to the new requirements this will be deferred for most authorities until October 2018 for Central Purchasing Bodies until April 2017 New directive reflects EU commitment to ‘end to end’ use of electronic communication methods throughout public procurement where possible. This reflects consensus on the efficiency and transparency benefits of electronic communications. Deferment of electronic submission requirement recognises the extent of changes to procedures and systems needed in some Member States. UNCLASSIFIED

Use of electronic procurement
The directive does not normally require electronic processing/evaluation of tenders or during post award period Oral communication is permitted provided it does not affect essential elements of procurement e.g. tender documents and provided a record is kept of decisions made Other methods of communication are permitted for sensitive information or where special equipment/file formats are required or where a information is so confidential that generally available tools cannot be used New directive recognises the practical limits of a fully electronic approach and provides flexibility in relation to issues such as particularly sensitive information and the need use certain specific tools in some circumstances. Oral communications are therefore permitted except where there is a risk to the integrity of the procurement process, hence the requirement to keep appropriate records (e.g. a written or audio note or summary). UNCLASSIFIED

Electronic catalogues
Tenders can be sought by authorities in catalogue form provided the OJEU call for competition makes this clear and also specifies the required technical format, equipment, connection requirements etc. Where multi-supplier frameworks have been concluded on the basis of catalogues the reopening of competition for a particular contract may be achieved by seeking resubmission of the catalogues Alternatively the framework might allow the award of the contract by comparing the information already submitted Note that suppliers must be allowed each time to verify that the information used for the comparison is accurate This provision makes it clear that authorities can seek tenders in the form of catalogues but these should not be the supplier’s general catalogue – must be adapted to the authority’s requirement The provision for frameworks allows an authority to seek a retender of the catalogues at the call off stage or rely on the submitted catalogue (provided the suppliers are notified when call off takes place in order to verify the accuracy of the tender considered). The notification time should be adequate to allow the supplier to respond UNCLASSIFIED

Setting up a dynamic purchasing system (DPS)
Like a framework in that an authority may use it to award contracts by competition between those suppliers appointed to the system in response to an OJEU call for competition – unlike a framework in that new suppliers can be added to a DPS over its duration The duration of the DPS should be indicated in the OJEU notice. The current 4- year limit is removed A modified version of the restricted procedure must be used set up this entirely electronic system, rather than the open procedure as is the case now. For a DPS an authority may set exclusion criteria and minimum levels of financial and technical capacity but is not allowed to reduce the number admitted by using these criteria to ‘score’ the relative capacity of suppliers in order to limit the number of suppliers on the system. There is no need for maximum time limits for a DPS, because it is “always open to new competition”, and therefore cannot be used to subvert competition as for example an everlasting framework might do A key advantage of a DPS compared to a framework is that suppliers can be added at any time to a DPS provided that they pass the exclusion criteria and minimum capacity requirements. This should allow greater competition to be maintained. Note however that the authority cannot therefore limit the number of suppliers on the DPS: any ‘qualified’ supplier must be considered when awarding contracts using the DPS. Unlike frameworks no initial tender is sought from an supplier wishing to join a DPS: tenders are sought by the authority for each contract opportunity as it arises and an award notice is sent to OJEU for each contract (if desired notices can be sent in groups each quarter) UNCLASSIFIED

Setting up a dynamic purchasing system (DPS)
When establishing a DPS, the minimum time limit for receipt of requests to participate is 30 days from despatch of the OJEU contract notice – note that tenders are not sought at this stage. No ‘award notice’ is needed for a DPS (the notice will continue to be available in OJEU during the lifetime of the DPS). The authority must however notify OJEU if the DPS has been terminated or its duration altered UNCLASSIFIED

Making call-off contracts from a DPS
The UK has secured a major simplification: the old EU rules required an OJEU notice for DPS call-offs of any value, which was unnecessarily burdensome and made DPS unattractive. In the new rules, the process is much simpler. Once a DPS is established the authority must allow a supplier to apply to join it at any time - a decision to admit it must generally be made within 10 days (or within 15 days where verification is needed or additional documentation needs to be assessed) UNCLASSIFIED

Making call-off contracts from a DPS
To award a contract the authority must seek tenders from all suppliers admitted to the DPS (or to an appropriate category within it) - minimum time limit for receipt of tenders is 10 days The contract must be awarded on the basis of the award criteria in the OJEU notice, where appropriate formulated more precisely in the invitation to tender Notices for each contract awarded under the DPS must be sent to OJEU within 30 days (although these can be grouped in quarterly batches) UNCLASSIFIED

Central purchasing bodies (CPBs)
It is proposed to continue to give flexibility to authorities to award supplies and services contracts to CPBs acting as wholesalers It is also proposed that authorities may continue to award supplies, services or works contracts using dynamic purchasing systems (DPS) or frameworks operated by a CPB Authorities must comply with the directive when awarding a contract under a DPS operated by a CPB, or determining which supplier should perform a task under a framework Where the CPB is acting as a wholesaler it must apply the EU rules when awarding contracts for supplies and services. Note that there is no facility to source ‘wholesale works’ in this way. Note that a private body cannot be considered a CPB for the purpose of meeting an authority’s EU obligations. These provisions are similar to the ones in the current directives which allow, but do not compel, use of CPBs should authorities wish to use them for particular procurements. They have seen much use, so we have decided this flexibility should continue UNCLASSIFIED

Minor changes to rules for frameworks
The new directive makes it explicit that only authorities clearly identified in the OJEU notice may use a framework to award contracts and that contracts awarded under frameworks may exceed the length of the framework itself Where a framework allows the authority a choice between applying the terms of the framework or re-opening competition within the framework the choice must be made by applying objective criteria set out in the procurement documents for the framework (e.g. quantity, value or characteristics of the works/supplies/services involved) The new directive makes it clear that authorities take legal responsibility for applying the rules set by a Central Purchasing Body when using their frameworks to award contracts These provisions make explicit the need for transparency as to which authorities use frameworks and the ways in which they are able to use the framework to award contracts. They also confirm the legal obligations of authorities when using a framework to award a contract. UNCLASSIFIED

Questions

Streamlining the EU procurement process

Changes to procedures Five main procedures involving competition rather than four: The open procedure The restricted procedure The competitive procedure with negotiation (similar to the existing negotiated procedure) The competitive dialogue procedure plus The innovation partnerships procedure (a new procedure) Note that the directive makes no significant changes to the situations where contracts may be negotiated without competition, which are deliberately very limited Authorities have a free choice of the open and restricted procedure. There are now three procedures that allow a degree of negotiation with suppliers (competitive procedure with negotiation , competitive dialogue and innovation partnerships) Negotiation without competition is, as now, permitted only in certain narrow circumstances, e.g. where proprietary rights exist, in view of the implications for market opening and equal treatment. UNCLASSIFIED

Choice of procedures The directive recognises the contribution that negotiation can make to the achievement of value for money in certain circumstances It also provides a greater opportunity for authorities to seek better value through negotiation, by setting out broader justifications for its use These justifications apply equally to competitive dialogue and the competitive procedure with negotiation Note that recital 42 to the directive (the recitals act as a guide to Member States when interpreting the directive) encourages the greater use of negotiated procedures with a call for competition (which the Commission has found leads to increased cross border trade) Note also that there are some policy issues for central government (e.g. on the priority to be given to open procedure or in what circumstances competitive dialogue procedure should be used). These are currently being considered and the policy position will be clarified in due course. UNCLASSIFIED

Choosing a procedure with negotiation
Where needs cannot be met without adaptation of readily available solutions (new justification) Where the contract includes design or innovative solutions (new justification) Where the requirement is complex in nature, in its legal and financial make-up or because of its risks (extended version of the current justification for competitive dialogue) Where the technical specifications cannot be established with sufficient precision (as current negotiated procedure with a call for competition) In the case of unacceptable/irregular tenders (as current negotiated procedure with a call for competition) Authorities should keep records of the reasons why the procedure is used for the report on the contract which may be asked for by the Commission UNCLASSIFIED

Changes to existing procedures
No changes to open and restricted procedures (except in respect of time limits, see later) Competitive dialogue explicitly allows negotiation with the preferred bidder (provided changes not material) Competitive procedure with negotiation now described more clearly: authority must indicate (and cannot change) minimum requirements and award criteria authority must negotiate with those suppliers submitting initial offers (unless it reserves the right to accept tenders without further negotiation) authority must seek a final tender from suppliers following completion of the negotiations UNCLASSIFIED

Innovation partnerships
New procedure allowing authorities to encourage suppliers to develop works, supplies or services not currently available on the market, through long term partnerships Awarded to one or more suppliers using the competitive procedure with negotiation – authority must disclose required selection information and minimum requirements for tenders as well as award criteria Procedure may be constructed in phases to match the research/innovation process – authority could reserve right to terminate process or reduce the number of partners Authority must make clear the position on property rights and must not disclose suppliers’ confidential information without agreement Note that this procedure is new and gives the authority considerable flexibility to seek innovative approaches whilst ensuring some protection for intellectual property and reducing the chance of adverse competitive effects in the market. Recital 49 of the directive refers to the need for “the innovation partnership [to] be structured in such a way that it can provide the necessary ‘market-pull’, incentivising the development of an innovative solution without foreclosing the market “ The recital also requires innovation partnerships “to be awarded on the sole basis of the best price-quality ratio” (i.e. value for money) rather than lowest price. UNCLASSIFIED

Revised OJEU notices The new directive introduces some new forms (e.g. PIN as a call for competition), all of which must be sent electronically It also requires some additional information to be provided on existing forms such as the contract award notice, where statistics on the number of SMEs tendering, number of tenders received electronically etc will be gathered The Commission is working to amend/supplement the existing standard forms but it is possible this will not be complete by the time the UK implements the directive The Crown Commercial Service is working with the Commission to agree that the existing forms may be used initially by taking advantage of free text boxes (to be the subject of CCS guidance in due course) The forms must be sent electronically (i.e. using e-sender such as SIMAP) – there will be no option to use paper/faxed forms Note that the extra information to be included by authorities in forms should reduce the overall reporting burden on authorities as the Commission will draw statistical information from its TED database of submitted notices, rather than requiring annual returns from authorities as now. UNCLASSIFIED

Negotiation without prior OJEU publication
As now this is allowed only in certain circumstances. Subject to formal consultation it is proposed to maintain this flexibility. Justifications include: no tenders/suitable tenders or requests to participate only one supplier could apply for artistic/technical/exclusive rights reasons (in the last two cases provided no reasonable alternative exists and that the absence of competition is not the result of an artificial narrowing of the requirement) extreme urgency from events unforeseeable by the authority, mean the time limits for competitive procedures cannot be complied with. The extreme urgency of the need must not be attributable to the authority. products involved are manufactured purely for the purpose of research, experimentation, study or development UNCLASSIFIED

Availability of procurement documents
New requirement that all procurement documentation must be available via Internet from date of publication of the contract notice (date of invitation to confirm interest where PIN is used as call for competition) Exceptions only for: substantiated urgency (accelerated procedures) where practical limitations arise from specific file formats, tools, equipment or the need for physical/scale models where the authority needs to place limits on the confidential information involved If the documentation is not available five days must be added to the minimum response times for suppliers set out in the directive (except in the case of ‘substantiated’ urgency) UNCLASSIFIED

Shorter minimum time limits for responses to adverts/tenders
Unnecessarily long time limits can increase the costs of procurement and deter suppliers from taking part The new rules include minimum time limits around 30% shorter than at present. These can be shortened further in certain cases (see later). However when setting time limits authorities must as now take into account the complexity of the contract and the time required for suppliers to respond. In all cases, a notice of contract award must be sent to OJEU within 30 days of conclusion of the framework or contract UNCLASSIFIED

The Prior Information Notice and time limits
In some procedures it is possible for authorities to reduce the minimum time limits where a suitable PIN has been published A PIN would be ‘suitable’ where all the following apply: The PIN was not itself intended to represent a call for competition (see later) The PIN was published no more than 12 months and no less than 35 days before the date of dispatch to OJEU of the contract notice The PIN includes certain brief information about the type and value of the contract, to the extent that it was available to the authority at the time of its dispatch to OJEU As now the PIN provides early notice to suppliers that a contract may be awarded and suppliers can thus take steps to monitor the EU database of notices (TED). Authorities can thus use a PIN to give suppliers early awareness of the pipeline of future projects and allow them to plan accordingly including taking steps to monitor the EU database of notices (TED). UNCLASSIFIED

Minimum time limits – open procedure
Normally a minimum of 35 days for receipt of tenders (30 days if electronic tenders permitted) If preceded by suitable Prior Information Notice (PIN) minimum 15 days If urgent (whether or not suitable PIN published) minimum 15 days UNCLASSIFIED

Minimum time limits – restricted procedure
Minimum of 30 days for requests to participate Minimum of 30 days to submit tenders (25 days if electronic tendering permitted) If preceded by suitable Prior Information Notice (PIN) minimum time to submit tenders is 10 days If urgent (whether or not suitable PIN published) minimum time to submit requests is 15 days, minimum time to submit tenders is 10 days UNCLASSIFIED

Minimum time limits – competitive procedure with negotiation and innovation partnerships
Minimum of 30 days for requests to participate If preceded by suitable Prior Information Notice (PIN) minimum time to submit requests is 15 days Minimum of 30 days to submit initial tenders (25 days where electronic tendering permitted) If preceded by suitable Prior Information Notice (PIN) minimum time to submit initial tenders is 10 days If urgent (whether or not suitable PIN published) minimum time to submit requests is 15 days, minimum time to submit initial tenders is 10 days UNCLASSIFIED

Minimum time limits – competitive dialogue
Minimum of 30 days for requests to participate No provision for time reduction following Prior Information Notice (PIN) No explicit time limits for submission of initial/subsequent tenders or time limit implications of PIN publication No provision for acceleration UNCLASSIFIED

Urgency Accelerated time limits are permitted where the requirement is ‘urgent’ “Where a state of urgency duly substantiated by the contracting authorities renders impracticable the [normal] time limit…” The reason for urgency must be disclosed in the contract notice Note that the directive makes it clear that the authority need not prove that the urgency is brought about by events unforeseeable by and not attributable to the authority this is the stricter test for justification of the use of negotiation without any call for competition in OJEU Note that it would be wrong to overuse the ‘urgency’ approach. Artificially reducing the time limits for requests to participate in or tender for contracts risks reducing suppliers’ access, damaging competition and adversely affecting value for money. UNCLASSIFIED

Additional flexibility for sub-central authorities
Subject to formal consultation it is intended to allow authorities other than central government (so-called sub-central authorities) to: vary, in agreement with tenderers, the standard minimum time limit for tendering in the restricted procedure only to allow shorter times where appropriate (in the absence of agreement the time limit must be no less than 10 days) use the PIN notice itself as a call for competition (removing the need for a contract notice) suppliers must express their interest in one or a number of contracts referred to in the PIN and the authority must subsequently invite those operators to confirm their interest. UNCLASSIFIED

PIN as a call for competition (sub-central authorities only)
PIN must: refer specifically to the supplies, works or services that will be the subject of the contract(s) to be awarded indicate that the contract will be awarded by restricted or competitive procedure with negotiation without further publication of a contract notice and invite interested suppliers to express their interest in writing contain specific information about the contract, similar to that required in the standard contract notice form have been sent for publication between 35 days and 12 months prior to the date on which the authority subsequently invites responders to the PIN to confirm their continuing interest. Where PIN is used as a call for competition the authority must provide additional information about the contract in a special section of the PIN The authority must maintain records of those expressing interest in the contract(s) referred to in the PIN and invite all replying suppliers to confirm their interest when/if it is decided to award the contract. The authority would then apply the rules for selecting suppliers (see later) when deciding which should be invited to tender for the contract. UNCLASSIFIED

Questions

Simpler, more flexible, rules for selection
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Selecting suppliers and seeking tenders - principles
As now the directive provides a number of stages in assessing whether a supplier should be allowed to tender for a contract Reasons for exclusion - mandatory (e.g. criminal conviction) and those at authority’s discretion (e.g. bankruptcy) Minimum capacity levels (financial and technical) Criteria for reducing the number of suppliers to be invited to tender (not permitted in open procedures) In open procedures, authorities may assess tenders in advance of checking capability (only the ‘winning’ supplier need supply proofs) Authorities may allow suppliers to supplement or clarify their submissions (subject to preserving equal treatment in order to allow correction of errors etc.) UNCLASSIFIED

Mandatory exclusions As now suppliers must be excluded from contracts if convicted of offences related to organised crime, corruption, fraud, money laundering, New obligations will be introduced to exclude suppliers for convictions for terrorist, child labour and human trafficking related offences There will be new obligation to exclude a supplier which has been subject of a binding legal decision which found a breach of legal obligations to pay tax or social security obligations (except where disproportionate, e.g. only minor amounts involved) Note however that an authority may also use its discretion to exclude a supplier where it can demonstrate the supplier’s non-payment of taxes/social security contributions where no binding legal decision has been taken (see later slide) ‘Conviction’ in the case of a legal person (e.g. a company) includes the conviction of a person within that company who has powers of representation, decision or control (e.g. a director) As now, these mandatory requirements to exclude can be waived, in exceptional cases, where there are overriding public interest reasons (e.g. protection of the environment) UNCLASSIFIED

Discretionary exclusions
As now, at the authority’s discretion, a supplier may be excluded if grave professional misconduct can be demonstrated (including any conviction related to its business) which affects the supplier’s integrity or where the supplier is guilty of serious misrepresentation There are also a number of new exclusions, e.g. where: the authority can demonstrate violations of social, labour or environmental conventions listed in Annex X to the directive e.g. ILO Convention 29 on Forced Labour there are ‘plausible indications’ of agreements aimed at distorting competition there are conflicts of interest, including those arising from prior involvement of the supplier in preparation of the procedure (e.g. specifications) that cannot be remedied by less intrusive measures (e.g. ‘Chinese walls’) UNCLASSIFIED

Discretionary exclusions
A supplier may also be excluded where there are ‘significant or persistent’ deficiencies in performance of a contract or concession for an authority or utility body that led to early termination of the contract or other sanctions supplier has tried to unduly influence the authority/seek confidential information (e.g. canvassing) supplier has negligently provided misleading information the authority can demonstrate the supplier’s non-payment of taxes/social security contributions where no binding legal decision has been taken (see earlier mandatory exclusions slide) Note that a ‘utility body’ is a person regulated by the EU Utilities Directive (e.g. water companies) UNCLASSIFIED

Application of mandatory and discretionary exclusions
Suppliers must not be excluded if they have provided sufficient evidence of reform (e.g. payment of compensation, changes in organisation/personnel) – ‘self cleaning’ The maximum period of exclusion allowed is 5 years from the exclusion event in the case of mandatory exclusions or 3 years if exclusion is discretionary Exclusions can be applied after the selection stage. Supplier could be excluded if necessary evidence (e.g. of conviction) arises at any part of the procedure (e.g. at the stage where tenders are being evaluated) The directive requires an authority not to exclude a supplier if it provides sufficient evidence of reform – as judged by the authority. If authority does not find the supplier’s evidence sufficient it must state its reasons to the supplier. UNCLASSIFIED

Conflicts of interest The directive requires that Member States take ‘appropriate measures’ against conflicts of interest in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all suppliers. Subject to formal consultation, this obligation will be met by the provision of appropriate guidance to authorities. This guidance will cover situations where staff members of the authority or of a procurement service provider acting on its behalf may have a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure. UNCLASSIFIED

Improving suppliers’ access to contracts
Minimum requirements for economic and technical capacity authorities must ensure these are related to and proportionate to the contract Where turnover used as a measure of financial capacity this must not exceed twice the value of the contract except in justified cases (e.g. where high risk) - reasons must be declared in procurement documents or authority’s reports Authorities must disclose in notice or invitation to confirm interest (where PIN is call for competition) the objective rules and criteria to be used to determine whether suppliers meet minimum capacity and to be used to reduce further the number to be invited to tender. Minimum/maximum numbers to be invited to tender must be disclosed - minimum 5 (restricted)and 3 competitive with negotiation and competitive dialogue. These changes to the use of turnover as a measure of financial capacity, and the explicit reference to these being “related to and proportionate to the contract” are aimed at reducing barriers to access to contracts facing all suppliers. The effects on SMEs in particular, are considered important to economic growth. The number invited to tender must be sufficient to ensure genuine competition - in some cases this could be greater than the minimum number. UNCLASSIFIED

Collecting information for selection
Suppliers may submit ‘self-declarations’ in relation to capacity/exclusion requirements (proof to be provided by the winning tenderer only) Some of these proofs are available in national databases, which are linked to the EU database ‘e-Certis’. This will in due course be EU authorities’ primary source of certain forms of documentary evidence of capacity (e.g. certificates) Subject to formal consultation it is proposed to defer compulsory use by authorities of e-Certis until 2018 It is also proposed, subject to formal consultation, not to implement the option to establish standard terms for determining whether groups of suppliers meet various selection criteria. The changes to the way that information on exclusions and financial/technical capacity are managed are aimed at one of the primary purposes of the new directive - reducing duplication and other unnecessary red tape that increases the costs of suppliers. UNCLASSIFIED

Collecting information for selection
Commission to develop a standard ‘European Single Procurement Document’ for completion which a supplier could use to submit standard information, to be used for a number of procurement opportunities The changes to the way that information on exclusions and financial/technical capacity are managed are aimed at one of the primary purposes of the new directive - reducing duplication and other unnecessary red tape that increases the costs of suppliers. It is not known at present when the ‘European Single Procurement Document’, which is being developed by the Commission, will be available for use by suppliers UNCLASSIFIED

Questions

Tender assessment and contract award
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Award Criteria The award of the contract must be based solely on the ‘most economically advantageous tender ‘, however this includes price; cost (including life cycle costs); and the best price/quality ratio (= value for money) The directive sets out some rules for costs that may be included in a life cycle approach (e.g. environmental externalities provided their monetary value can be determined and verified) There is, as now, no exhaustive list of award criteria but these must be linked to the subject matter of the contract. Examples given in the directive explicitly include social as well as environmental aspects. Amongst other examples are quality, accessibility, design for all users, and innovative characteristics Note that it will still be possible for an authority to award a contract to the supplier that offered the best price that meets the requirements set out in the authority’s procurement documents UNCLASSIFIED

Award Criteria Award criteria are considered to be ‘linked to the subject matter’ of a contract where they relate in any respect to the works/supplies/services in question at any stage of their life cycle including the process of production of goods (e.g. no toxic chemicals) the provision of services (e.g. energy efficiency of machines) trading (e.g. the use of ‘fair trade’ products in the contract) Note: award criteria must be contract-specific rather than aimed at assessing the corporate policy of the tenderer (e.g. It would be wrong to award extra points to a supplier that supplied fair trade products to all its customers) UNCLASSIFIED

Award Criteria The new directive confirms that award criteria can include the organisation, qualification and experience of staff to perform the contract (where this significantly impacts the supplier’s level of performance) Criteria should be structured such that the information in tenders can be verified effectively against the criteria As now the contract notice or ITT must disclose the relative weighting of each of the award criteria (including the use weighting or range of weighting or, exceptionally, ranking) The directive gives very clear guidance that award criteria can include assessment of the capabilities and experience of staff assigned to perform a contract, and is a welcome removal of doubts that arose in the Lianakis case (Case C- 532/06) in the European Court. The point about ‘verifiability’ of information in tenders also arose in a case in the European Court (EVN – Case C- 448/01) where the winning supplier had been given points in an award matrix for something that could not be verified by the authority from the information in the supplier’s tender. UNCLASSIFIED

Challenging abnormally low tenders
Authorities will be required to seek explanations from suppliers that submit a tender which ‘appears’ to be abnormally low Examples of ‘explanations’ that could be accepted include the economics of the method of construction to be used and the technical solutions chosen. The authority may reject the tender where the evidence supplied is not satisfactory If the authority has established that the low price is the result of a breach of social and environmental law listed in Annex X the authority shall reject the tender If it is discovered that the low price is the result of State Aid the authority may reject the tender if the supplier is unable to prove that the aid is compatible with the rules of the EU Treaty This new provision places a greater duty on the authority to investigate offers it considers abnormally low but no guidance is given as to how the authority should discern this – effectively it is a matter for the judgment of the individual authority. The provision is aimed in part at avoiding an authority being forced to accept a ‘best offer’ which is in fact unsustainable and will not therefore achieve the authority’s objective. This could be because it has been inaccurately prepared or because it depends on state aid that in fact breaches EU rules (and if subsequently removed as a result of subsequent Commission action against the supplier’s State would prejudice achievement of the authority’s objective). It should be noted however that the provision also refers to a duty to check whether the low pricing results from a breach of international social or environmental law. If so the tender must be rejected however economically advantageous it might be. UNCLASSIFIED

Other points UNCLASSIFIED

Contract conditions Greater clarity that conditions for performing contracts can include ‘special’ conditions in particular those relating to innovation, or environmental, social or employment related considerations. Subject to formal consultation it is proposed to issue guidance, together with a standard contract condition, to allow authorities to ensure that suppliers comply with international legal obligations in relation to social/environmental/labour laws referred to in Annex X to the directive The directive makes it clear that all conditions must be linked to the subject matter of the contract (as is the case with criteria for contract award) The conditions could thus not relate to actions by the supplier unrelated to that contract (e.g. employment conditions of the supplier’s workforce on contracts for other customers) UNCLASSIFIED

Sub-contractors Where it has verified that one of the conditions of mandatory exclusion applies to a sub-contractor (e.g. breach of labour laws) the authority shall require its substitution Note that, rather than impose a blanket requirement in applying the directive’s policy towards sub-contractors’ compliance with environmental, social or labour law, the UK intends to take the option to allow authorities discretion to decide the action to be taken in the circumstances of each procurement. UNCLASSIFIED

Changes to contracts/frameworks
A contract/framework may change without re-advertisement in OJEU where: minor changes that do not affect its nature and not exceed the relevant threshold and not exceed 10% services/supplies) or 15% (works) of the initial value minor changes that do not affect its nature and are explicitly provided for in review or option clauses in the procurement documents The provisions described on this and the following slide aim to reduce uncertainty arising from a European Court case (Pressetext, C-454/06), which found that changes in a contract post award could in certain cases lead to a legal requirement for re-advertisement in OJEU. Their purpose is to provide a ‘safe harbour’ for certain types of change as set out in the slide. The provisions may be helpful to authorities to ensure that changes to contracts once a contract are properly controlled . Improvements in contract management are a major priority for the Crown Commercial Service as explained in the notes to the diagram at slide 3 of the presentation. Although the percentage change limits help to reduce uncertainty it should be noted that some judgment is required by authorities to determine if a change “does not affect [the] nature” of a contract UNCLASSIFIED

A contract/framework may change without re-advertisement in OJEU where: additional works, services or supplies that ‘have become necessary’ where a change of supplier would not be practicable(for economic, technical or interoperability reasons) or involve substantial inconvenience/duplication of costs (limited to 50% of original contract price) the change that arises is unforeseeable by a ‘diligent’ authority, provided these changes do not affect its nature or exceed 50% of the price of the original contract in these two cases the authority must publish in OJEU a ‘Notice of modifications of a contract during its term’ UNCLASSIFIED

A contract/framework may change without re-advertisement in OJEU where certain corporate changes have occurred in the supplier linked to merger, takeover or insolvency or the modification is not ‘substantial’ i.e. would not have led to other suppliers participating, becoming qualified or having an offer accepted if known initially have changed the economic balance in favour of the supplier have extended the contract/framework ‘considerably’ UNCLASSIFIED

Termination of contracts
Authorities must include in contracts a condition that allows, but does not require, termination where the contract has been ‘substantially’ modified, constituting a new award or the Court of Justice of the European Union has decided that the contract should not have been awarded because the authority committed a serious breach of its obligations or the supplier should have been excluded on mandatory exclusion grounds (e.g. as a result of conviction for corruption) The regulations will also include a ‘deeming’ provision to ensure the obligation is complied with These provisions are to ensure that Member States’ contracts allow termination in circumstances where there has been a breach of EU law on public procurement, particularly where this results from a change in an awarded contract There are three grounds for termination, which the authority must have the possibility to exercise should any of the grounds occur. The first ground is that the contract has been subject to a substantial modification that constitutes a new award. The second is where it is discovered after contract award that the contractor should have been excluded under another provision in the directives which requires mandatory exclusion in some circumstances. The third applies where the Court of Justice has declared a serious infringement by the authority of its obligations, meaning the contract should not have been awarded to the contractor. The regulations will specify that authorities must include a condition in contracts allowing them to terminate if any of the grounds are found to apply. As a fallback, subject to consultation, the regulations will also include a deeming provision to ensure this possibility exists where a contract fails to include a termination condition. The period of notice, if any, and consequences of termination are matters best left to the authority and contractor to agree because one size does not fit all. UNCLASSIFIED

Questions

Questions and feedback
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Reform of the EU procurement rules – public sector

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Reform of the EU procurement rules – public sector

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