EU public procurement

This year saw the introduction of new EU public procurement rules in Ireland, which imply considerable changes for the construction industry.

The EU, in 2014, adopted three procurement directives; the Public Sector and Utilities were replacements and a new directive specifically for Concessions. The aim was to make public procurement less bureaucratic, have better access for SMEs, increase the emphasis on social, sustainable and environmental considerations, embrace new technology and have explicit rules for principles established by significant case law.   EU States had until the 18^th April 2016 to bring the new rules into national law. Ireland published its regulations for Public Sector and Utilities on the 5^th May 2016, but these were applicable from the 18^th April. It has yet to publish regulations for Concessions; however the mandatory provisions of the directive apply from the 18^th April 2016 by “Direct Effect”.

The new rules, with the exception of the rules on modifications to tenders or contracts, do not apply to existing procurements (defined by the advertisement being published, or bidders being contacted for offers, before 18^th April 2016)

The significant changes include:

Market consultation

- Pre-tender market consultation is clarified with emphasis on better procurement outcomes whilst maintaining equal treatment of bidders.

Opportunities for SMEs

- Encouraging SME participation in public procurement by capping the minimum turnover requirement to twice the contract value and encouraging splitting contracts into lots with a requirement to “Do or Explain” the decision.

Electronic procurement

- Procurement communication, with some exceptions, must be electronic with procurement documents available by Internet access on a 24-hour basis.

Different rules for authorities that are not part of central government

- Non-central government agencies have added flexibility in the rules relating to their procurements.

No distinction between Part A and Part B services

- The distinction between Part A (fully regulated) and Part B (partially regulated) services has been removed.

“Light touch” procurement

- There is a new “Light touch” regime that applies to health, social and specified other services some of which were formerly Part B services. These generally have to exceed a new threshold of €750,000 before being subject to rules which are less onerous than the full EU procurement rules.

More grounds for exclusion of applicants and bidders with self-cleaning provisions

- There are additional grounds for mandatory and discretionary exclusion. Most grounds for exclusion are now subject to expiry times. Persistent poor contract performance, resulting in serious sanctions, may now trigger an exclusion. A new provision however, affords applicants/bidders an opportunity to self-cleanse in relation to some grounds for exclusion and, if they do so successfully, they may not be excluded for that particular reason. Purchaser may also run checks during the procurement process to see if bidders are in a position that should result in their exclusion. Again self-cleansing provisions apply.

Conflicts of interest

- There is greater emphasis on addressing conflicts of interest.

Procurement routes

- There are new award procedures for Innovation Partnerships and revised rules for Competitive Dialogue and Competitive Procedure with Negotiation, whose rules are now more flexible with greater scope for their use. Interestingly in the Competitive Procedure with Negotiation, the final tender round may not be subject to negotiation. There is also now an Accelerated Open procedure as well as the existing Accelerated Restricted procedure for urgent procurement.

Timescales

- Shorter minimum timescales for tenders and expressing an interest in tendering.

Availability of procurement documents

- Full suppliers’ access to procurement documentation is required from the date the Contract Notice is published or the sending of an invitation to confirm interest. This significantly changes existing practice for all but the Open procedure.

What does this really mean?

- The UK Crown Commercial Service suggests that the term “procurement documents” changes at different stages of the procurement process. It also suggests more of the documents, falling within the wide definition of procurement documents, should be generated and therefore supplied but that at the very early stages of the procurement, fewer of the documents, if any, would be included. This appears to support the purpose behind this regulation that potential bidders should have sufficient information to decide if they wish to participate in the procurement.

Selection and award

- Self-declaration to confirm satisfying the procurement’s qualification requirements, including using the new European Single Procurement Document.  Generally only the bidder being considered for award of contract will be required to submit documentary evidence as proof. Purchasers may, however, require such evidence from all applicants who have been short-listed to tender in a two-stage competition.

- All contract awards must be based on “most economically advantageous tender”, using a cost effectiveness approach, for example life-cycle costing, and may include best price-quality ratio. Ireland has not implemented the option to prohibit the use of price-only or cost-only as an award criterion. There is also greater emphasis on using environmental and social considerations such as the employment of job-seekers. The award stage may now address the qualification and experience of key personnel where such quality could have a significant impact on the level of performance of the contract.

- There is a duty to investigate tenders suspected of being abnormally low, but no duty to exclude an abnormally low tender unless it is found that such pricing is due to breaches of environmental, social or labor law.

Rules arising from case law

- Rules permitting contract modifications to tenders and contracts have been codified. Safe Harbours, within which change is permissible, have been created for purchasers, some of which require publication of a standard OJEU notice.

- Rules exempting from the regulations contracts between public authorities and joint procurements by public authorities (Teckal and Hamburg case exemptions) have been codified.

Framework agreements

- There is now a provision for a “hybrid” call off process providing for both direct award and mini-tender competitions in multi-supplier frameworks.

Records and reporting

- There are considerably more onerous, and effectively real-time, record keeping and reporting requirements. The justification for decisions taken at all procurement stages must be included.

Conclusion:

There are clear benefits in the new regime for both purchasers and suppliers. For purchasers there are wider choices of approach and greater scope to use negotiation and the helpful codification of case law. And there are added benefits for public purchasers who are not part of central government. For suppliers, the level of bureaucracy is reduced and there should be better access to procurement opportunities for SMEs.