Are we on the path to better procurement?

Despite having 24 months from March 2014 to turn Directive 2014/24/EU into UK law, the government will in all probability issue the new regulations early in 2015. It is very keen indeed to be seen to encourage SMEs and smaller businesses to tap into a market which over the past few years has actively discouraged them.

The aim of the new regulations is apparently two-fold: to encourage engagement with SMEs; and to achieve value for money, defined as “the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought”. The new regulations will not alter the existing duty on the public sector client (the contracting authority) to comply with the principles of transparency, non-discrimination, equal treatment and proportionality.

SMEs will welcome Regulation 58(11), which states that tenderers should not be required to have turnover more than two times the value of the contract. However, there are special occasions where inherent risks in the project may increase this figure.

I was encouraged to note that Regulation 57 includes discretionary provisions to exclude tenderers on a much wider basis than previously. At Regulation 57 (9) g contracting authorities can now boot out tenderers who have shown persistent or significant deficiencies in the performance of public sector contracts, if this leads to early termination of that prior contract, damages or other comparable sanctions. This is a powerful tool to get rid of the “frequent flyers” who crop up in the trade press for their poor performance.

Regulation 57(9) h is an even better tool to deal with the misrepresentation of the tenderer when demonstrating that it satisfies the selection criteria, or is not caught out by the exclusion criteria. You can use it at any stage in the procedure which has to be included because of a new self-certification process (see below). You could exclude these tenderers for up to three years on the above basis, so clients should keep an eye on the trade press and follow up references and certification claims. 

The new European Single Procurement Document or EPSD (Regulation 59) may be relied upon by tenderers when expressing an interest to demonstrate compliance with the basic requirements normally checked through the pre-qualification procedure, for example lack of criminal convictions, good standing etc. This is deemed a self-certification process which could/should reduce the burden of multiple submissions by tenderers on every new job pursued, since the ESPD can be re-used.

The new rules specifically allow early dialogue between the contracting authority and potential suppliers without such a risk of someone calling foul. This process should of course be open and transparent itself and is intended to gauge the market’s appetite to supply whatever is required. Innovative or complex requirements, for example BIM, may well benefit from an early dialogue with contracting authorities.

Regulation 41 makes it clear that those advising the authority will not automatically be excluded from tendering for the same services they have advised upon. In fact, if the authority does intend to exclude the previous advisers it must give them an opportunity to prove their involvement did not distort the procurement. Also there is an odd provision which appears to say the authority will tell the other tenderers about any relevant information the adviser might have been given during the preparation of the procurement. This sounds unworkable and I look forward to seeing how people apply it.

The Innovation Partnership option is intended to help contracting authorities become less risk adverse. They will call for competition and enter into a phased agreement with the partner to develop a new solution. This could provide real scope for SMEs particularly in emerging field such as waste management or recycling.

While contracting authorities will not be required by the new regulations to split their requirements into lots (Regulation 46) they will need to explain why they have not done so in the contract notice. They may also then be required to explain by the EU Commission why they chose not to do so.

Many contracting authorities pay lip service to the breaking of requirements into lots and will allow “Big Builder Inc” to apply for any portion of the works they want to, hence killing the local market. The new regulations allow them to state that a tenderer cannot bid on all lots and they can identify how many lots might be acceptable to place with one organisation. But in my opinion allowing Big Builder Inc. to bid for all lots is tantamount to wilfully destroying the local economy.

Many SMEs are put off bidding because of the ridiculous need to register with various procurement portals. These are like gateways you need to pass through to get your hands on the information. The rules are clear that interested parties should have unrestricted, direct free access to the documentation. So if the portal requires you to register and await confirmation of that registration, that would not provide “unrestricted access”.

This also raises the question of how much of the documentation should be ready prior to the contract notice being advertised in the Official Journal? The majority of UK authorities will publish the notice before they have the full tender pack ready when using a two-stage process. I frequently see the procurement process stalled because the authority does not have the information ready; in the most extreme instance there was a delay of nine months after pre-qualification!

The regulations provide further guidance on abnormally low tenders and confirms that authorities should seek confirmation on any tender if considered outside the norm. However, care should be exercised to adopt the criteria as set out in Regulation 69, as these are the only test points you can base your assessment upon. However, at the other end of the scale, life-cycle costing is now dealt with and recognises that tenders may appear high on face value but deliver better returns over time.

This is a quick run through some of the planned innovations, but may be subject to some change. Also, for current purposes the old regime remains and should be adopted. And whether these new regulations will, as advertised, help engagement with SMEs is unclear. I for one cannot see any particular features which are SME centric in the main regulations.

Source: Construction Manager

Post date: 12 Mar 2015

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