EU procurement for non procurement professionals

Liz Wilson-Lamb
EU Services Manager
1st July2014

© 2013 Achilles Group Limited Confidential 2
Introductions
 Introductions
 Who?
 What?
 EU tendering experience?
 Expectations from the day?
 Housekeeping
 Timescales
 Information packs
 Themis

Programme
 Introduction to sources of law
 Reasons why we have them
 Treaty Principles
 Key risks
 Specifications
 Selection of quotations/suppliers
 Assessing the bid
 Frameworks
 How do we communicate with suppliers
 Remedies – what happens when suppliers challenge?
 New Directives
 Questions and answers

Setting the scene
 Current climate

Sources of Law - Hierarchy
 Treaty Principles
 EU Directives
 UK legislation
 Courts will review cases
under the UK legislation

What are the ‘EU’ rules?
 Principles and detailed procedures to be applied by ‘contracting authorities’
(e.g. local government) and certain ‘utilities’ such as transport companies
 Reflecting the risk that such companies might favour national/local suppliers
in their procurement
 Such preferences breach the EU Treaty obligations of free movement of
goods, services, people and capital (‘the four freedoms’)
 EU Directives set out the procedures and set the framework of the rules,
legislation implemented the UK, courts will review the legislation, court
cases and Treaty principles

Aims and Principles
 The EU Directive and the Treaty aim to open up supplier opportunities
 Principles (often applied by the courts)
 Equal treatment
 Non-discrimination
 Mutual recognition
 Proportionality
 Transparency

Requirement for competition
 Importance of competition
 Limited scope for no competition
 Who makes this decision?
 Who can take part?
 What must we consider for less regulated procurement?

The process outlined

Financial thresholds 2014-2015
 What are the EU thresholds and why do you need to know?
 How do they work?
 Supplies and services
 £172,514 - Public Sector
 £345,028 - Utilities
 Works
 £4,322,012
 Changed 1st January 2014
 Every 2 years

Valuing the requirement
 How do we determine the value of a contract?
 The requirement not the contract
 Lots and options
 Aggregation
 Extension of contracts
 Frameworks
 How much discretion do we have?

Definition
 What is a Specification ?
 A specification is the key part of the Tender documentation, it should be
clear, accurate, and give a complete description of the supplies, services or
works required.
 The Specification defines the requirements to fulfil the contract.
 A poor description of the requirement may mean that the product or service
is not delivered to the standards required, and later changes to the
requirements may result in a ‘material change’ and abortive costs.
 Preparing a specification requires in-depth research and accuracy.

Pre-market engagement
 Research the market by talking to suppliers, other purchasers, industry
associations, etc. to identify possible solutions, indicative costs and delivery
time-scales
 Look for diversity and Innervation from possible new entrants
 New Directive now provides for Pre-market engagement.
 Be mindful of issues regarding discrimination
 Use of Prior Information Notice – manage risk
 Identify the scope of the contract and the range of goods, services or works
that the supplier will be asked to deliver

Stakeholder Engagement
 Who should produce the specification ?
 Procurement ?
 The end user / stakeholder ?
 The persons who knows the most about the needed commodity or service
 Ensure that there is a clear understanding of what is required.
 If producing a specification for another party, identify and agree the
stakeholders requirements and again, ensure that they are fully understood
 May work with the market
 conflicts of interest

Specifications and Standards
 Technical specification must not lead to discrimination
 Where relevant EU standard exists, must refer to it or to
performance/functional specification – cannot mandate the standard
 Bespoke specifications must not be discriminatory
• E.G Built around a particular supplier’s approach
 Trade names can only be used where absolutely necessary, and
accompanied by the words ‘or equivalent’
 The contract notice must contain the scope of the notice and this will often
necessitate understanding the specification

Selection criteria principles
 Selection criteria
 To assess supplier capacity not the offer it might make
 Information usually obtained using PQQ
 Disclosure of criteria
 All suppliers assessed equally
 How should the criteria be set out?
 Relevant to the contract
 Proportionate

Award criteria
 The evaluation criteria that will be used to assess the bids should be
developed at the same time as the specification. The evaluation criteria
must link to the subject matter of the contract.
 Therefore the specification must be correct, if not the criteria will be flawed
resulting in deficient outcomes
 Can not have random criteria it must be relevant, quantifiably measurable,
proportionate, linked to the specification.
 If the bid received does not meet the specification it can not be accepted –
even if it offers great innovation and VFM
 Post tender negotiation?

Award criteria principles
 Applied to tenders and any subsequent negotiations – Procurement
responsible?
 Most economically advantageous tender (MEAT) or lowest price
 Criteria must be
 Relevant to the contract
 Measureable
 Assessed professionally
 Assessed equally
 Disclosed to suppliers before
they tender
 West Coast Trains – lessons learnt?

The distinction between selection and award criteria
 Supplier’s capacity v supplier’s offer
 Why it matters
 Who does what in the tender?
 Timescales for the competitive process

What are frameworks?
 A framework is a form of ‘quasi-contract’ which is ‘awarded’ in the same way
as a ‘proper’ contract
 Are not a supply contract, a works contract or a service contract in
themselves
 Can be between one or more contracting authority or entity and one or more
economic operators
 Which establish the terms (in particular the terms as to price and where
appropriate, quality)
 Under which the economic operator will enter into one or more contracts
with an authority in the period during which the framework agreement
applies

Who can use a framework?
 Transparency requires disclosure of the contracting authority or authorities
that may use the framework
 At least generic reference (provided adequately detailed e.g. updated list of
central government departments as shown in a maintained list)
 To allow immediate identification of user authorities
 If users known they should be disclosed
 Note need to identify expected maximum expenditure under the framework
in the notice
 See OGC PPN 15-10

Key rules
 Framework duration limited to 4 years normally
 “save in exceptional circumstances, in particular circumstances relating
to the subject of the framework agreement” (Reg 19(10))
 Minimum 3 providers – multi supplier framework
 Where 3 or more meet selection/award requirements (Regulation 19 (6))
 Prohibition of ‘improper use’ and use of framework in such a way to ‘hinder,
prevent, limit or distort competition’
 Translation: “anything we have not thought about that the courts might think
is a breach of the rules is also forbidden”?
 E.g. a framework which effectively allows single tender purchase from a
multi-supplier framework based on preference or non-objective criteria

Awarding contract under framework agreements
 Where framework includes sufficient information (single supplier and some
multi supplier)
 By applying the terms in the framework
 Possible methods of awarding the contract:
 “Cascade” (ranking)
 Virtual catalogue
 Rotation?

Awarding contract under framework agreements
 Where framework does not include sufficient information to determine the
winning supplier the contract should be awarded by ‘mini competition’
 All capable providers invited
 Framework documents should make it clear which firms are qualified for
which type of order
 Bids in writing including electronic methods (no explicit timescales)
 Bids must not be opened until all received (no faxed tenders)
 Contract must be awarded on the basis of application of the criteria set out
in the contract documents based on those in framework agreement.

Supplier notification
 Notification at selection stage
 Pre-qualification
 Non-compliant bids
 Award decision notification to tenderers and concerned candidates (those
not already notified)
 Standstill (cooling off) period of 10 or 15 days

Supplier notification
 How much information is enough and how should we respond to debriefing
requests? Who would deal with this?
 Mermec UK v Network Rail Infrastructure
 How are your comments useful?

Deciding not to hold a call for competition
 When can we directly award contracts?
 Extending contracts – what does this mean?
 How much scope do we have to change contracts?

Changes to contracts post award
 Applies where a contract has been changed to such an extent that a new
contract arises – from pressetext case
 Risk of ineffectiveness arises from the failure to advertise this “new”
contract
 New directive makes clear the indicators in that case and provides some
comfort as to changes that would not lead to a new contract arising

When does modification lead to new contract?
 Modification is substantial where it renders the agreement materially
different from the original
 New conditions would have allowed for selection of different candidates
or acceptance of different offer or would have attracted additional
participants
 The modification changes the economic balance in favour of the
contractor
 The modification extends the scope considerably

How does a legal challenge arise?
 Any decision can be challenged by supplier with ‘standing’ in the UK courts
 In most cases (except for ineffectiveness) supplier must start proceedings
within 30 days from date of knowledge of the breach
 i.e. the date on which the supplier first knew or ought to have known
that grounds for proceedings had arisen
 Court has discretion to extend up to a total of 3 months from date of
knowledge
 Effect of CJEU cases
 Challenge often follows supplier notification and largest volume of
complaints about selection and award criteria – West Coast Trains

Remedies regime
 Suspension
 Set aside
 Damages
 Ineffectiveness (for certain breaches)
 Civil financial penalties (have to accompany ineffectiveness)
 Penalties must be ‘effective, proportionate and dissuasive’
 Contract shortening

Ineffectiveness
 Provides for termination of a contract on application by a supplier
 Applies only to certain breaches
 Illegal direct award of a contract (‘single tender’)
 Failure to observe standstill requirements (if accompanied by a
breach of other rules that might damage supplier’ rights)
 Illegal award of a contract under a framework
 Applies only prospectively – any rights or obligations from the contract prior
to the order unaffected
 Ineffectiveness must be accompanied by a ‘civil penalty’ (determined by the
courts - “proportionate and dissuasive”)

When would the court waive ineffectiveness?
 The court would only waive ineffectiveness in exceptional cases
 In general the court has a duty to make a contract ineffective if the grounds
arise
 There is an exception where ‘overriding reasons in general interest’ require
waiver
 However economic reasons would only be accepted in exceptional
circumstances

When would the court waive ineffectiveness?
 Specifically not allowed would be costs of:
 Delay
 New procedures
 A change in supplier
 Any legal obligations on the purchaser
 Even where ineffectiveness were waived court would still be required to
shorten the contract, impose a civil penalty or both

Time limits for ineffectiveness
 Default is 6 months from award
 Can remove threat altogether with a Voluntary Ex Ante Transparency
(VEAT) notice after 10 days from date of publication (for direct award)
 30 days from publication of contract award notice (for direct award)

Part B Services
 Abolition of Part B services
 No longer two separate ‘types’ of service
 Residual services to fall under full coverage of the directives
 Majority now have cross- border interest
 Certain exemptions remain
 Recognition that some services will require national delivery
 E.g. Health and Social care
 Specific rules surround their award
 Specific thresholds for these categories - €750,000

 Contracting Authorities ‘encouraged’ to break high value contracts (>
€500,000) into lots
 Where not divided into lots – justification to be given in notice
 Turnover requirements explicitly limited to 2x contract value
 Proportionality
 Exception for duly justified cases relating to special risks
 Must accept self-declarations of status relating to exclusions and
financial/technical position at the time of making a request to participate or
submitting a tender
Increase support for involvement of SME’s

Changes
 More relaxed view of justifications for competitive dialogue and competitive
negotiated procedures
 Innovation Partnerships – phased approach to buying product
developments
 Shorter minimum timescales
 Sub-central bodies able to use the Prior Information Notice as a call for
competition
 Abnormally low tenders defined and obligation to exclude tender if low due
to non-compliance with EU law (social, environmental etc.)
 Life cycle costs can include environmental impact of product creation
provided it can be monetised and monitored
 Separate Directive on works and services concessions

Clarifications
 Pre-market/Pre-procurement engagement expressly provided for- subject to
protection of competition
 Award criteria can include whole lifecycle costs and the merits of staff
assigned to the contract (experience issue)
 Exclusion and selection criteria clarified
 Evidence of poor past experience as an exclusion ground
 Material Change defined

Achilles EU Team
Liz Wilson-Lamb EU Services Manager
Debbie Metcalfe EU Procurement Advisor and Trainer
Kate Pucci EU Procurement Advisor and Trainer
Emily Strange THEMiS Product Manager
Daniel Bremner Sector Account Manager
Sally Griffin Sector Account Manager
Jayne Wellman Administrator
Associates
Professor Sue Arrowsmith Legal Expert
Susie Smith Lawyer and Consultant
Steve Kay EU Advisor

Thank you.
Achilles.com/LinkedIn Twitter.com/Achillesltd
www.achilles.com
Contact details:
themis@achilles.com
T: +44 (0)1235 838115
Achilles Information Limited

EU procurement for non procurement professionals

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