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EU Procurement Introduction

Introduction

All public sector markets are regulated in the European Union (EU) through Directives. The procurement Directives were transposed into UK National law on 31st January 2006, as The Public Contracts Regulations (2006) SI 2006 No.5 [as amended]. and the Public Utilities Contracts Regulations (2006) SI 2006 No. 6.

These regulations apply to all contracts above a published threshold (thresholds are reviewed biannually. Current thresholds can be found on the OJEC website, which are not covered by an exemption (i.e. Part B Services and Service Concessions).

In determining the value of a contract, for the purposes of assessing whether it is above the threshold, all options and renewals must be taken into consideration. Where a contracting authority has a single requirement for goods, services or works contracts and a number of contracts are to be entered into to satisfy the requirement, the value of the consideration is the aggregate value of all the contracts.  (refer to the Public Contracts Regulations 2006 [as amended] 8 (11-12) for detail on aggregation rules).

There are four procurement options available to the Project Team they are:

  • Open Procedure
  • Restricted Procedure
  • Competitive Dialogue Procedure
  • Negotiated Procedure

All public procurement should be carried out using the Open or Restricted Procedure, unless particular conditions for the use of the Competitive Dialogue Procedure are satisfied.  Negotiated Procedure should only be used in exceptional circumstances.

Even where a contract is estimated to fall below the threshold, it must still comply with EC Treaty principles. These principles include the free movement of goods (Article 28 of the EC Treaty), the right of establishment (Article 43), the freedom to provide services (Article 49), non-discrimination and equal treatment, transparency, proportionality and mutual recognition. The principle of equal treatment and non-discrimination on grounds of nationality imply an obligation of transparency and therefore requires a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of the procedures to be reviewed

A Central Procurement Directorate Procurement Guidance Note PGN03/10 provides guidance on carrying out quotations and tenders for supplies and services contracts below the EU Threshold.

Procurement in Programmes and Projects

It is usually apparent when the Strategic Outline Case (SOC) is being developed, whether a procurement exercise is required in order to deliver the solution.  It is important to approach your Procurement Advisor at the earliest stage to allow them to plan, allocate resource and provide input to early market sounding. A clearer indication of the scale, complexity, likely costs and desired outcomes will emerge as the Outline Business Case (OBC) is being drafted. The procurement strategy (MS Word 85.5kb) can be developed at this stage, this will consider the appropriate procurement procedure to be followed in order to achieve the optimum solution.

Conflict of Interest

A large number of stakeholders are usually involved in the programme or project environment. It is important that the potential for conflict of interest is managed throughout the procurement process. Everyone involved in the project should be required to register their external interests to ensure transparency and to allow the Senior Responsible Owner to assess the risk of conflict.

Conflict of interest may also occur where a consultant has been used to help draft the outline requirements and that consultant is now a bidder, or is part of (or advising) a consortium bid. This should be identified as soon as possible and reported to your Centre of Procurement Expertise for advice. It is important, where possible, to mitigate against the risk of a supplier providing client support (assisting with specification and market sounding) moving to the supply side to bid for the work they have specified. This can be achieved by excluding the winning supplier of the client side support from the subsequent tender.

Frameworks

Frameworks were incorporated into both Contracts and Utilities Regulations for the first time in 2006. The Regulations define a framework agreement as:

“an agreement or other arrangement between one or more contracting authorities and one or more economic operators which establishes the terms (in particular the terms as to price and, where appropriate, quantity) under which the economic operator will enter into one or more contracts with a contracting authority in the period during which the framework agreement applies"

In other words, a framework agreement is a general term for agreements with service providers, suppliers or contractors that set out terms and conditions under which specific purchases (call-offs) can be made throughout the term of the agreement. The procurement to establish a framework agreement is subject to the EU procurement rules, and can be established by using any of the procedures available Public Contracts Regulations 2006 Reg 19 (1) (a)  (i.e Open, Restricted, Negotiated or Competitive Dialogue). Frameworks cannot be for a period longer than four years except in exceptional circumstances. The regulations do not clarify what would constitute exceptional circumstances and legal advice should be sought before establishing a framework for a longer period. Contracts awarded under the framework are not limited to a defined period, however the length of call-offs, as with other contracts, should be appropriate to the purchases in question and should reflect value for money considerations. The OJEU notice must include details of whether a framework agreement is being established; the period of the framework and the public bodies who will use the agreement.

The Office of Government Commerce has published comprehensive guidance on establishing and using Framework Agreements (PDF 988kb).

eAuctions

The procurement regulations allows for the use of reverse electronic auctions (known as eAuctions) when the contract specification can be established with precision Public Contracts Regulations 2006 Reg 21 . An eAuction can be held when using the Open, Restricted or Negotiated procedures, (subject to circumstances referred to in regulation 13(a) and 14(1)(a)(i)) or when reopening competition on a Framework Agreement or Dynamic Purchasing System. Where an eAuction is planned, it must be stated in the Contract Notice

Case Study NI

Central Procurement Directorate fully adhered to the regulatory requirements in the Shared Service PC and Laptop refreshes. Supplier bids were initially evaluated against the quality criteria and these scores were taken forward to the eAuction.

Prior to the eAuction, adhering to the EU Directives and best practice, all suppliers were given a description of the eAuction process and all relevant information concerning the electronic system to be used and the arrangements for and technical specifications relevant to the connection to the electronic system to be used. They were further informed that when they entered the eAuction and throughout the bidding process in the live eAuction, they would see their overall ranking - the summation of their price and non price (ranked as most economically advantageous tender). In adherence with the regulations, the identities of the suppliers were not disclosed.

The eAuction was hosted by Bravo Solutions, who are one of Europe’s leading eSourcing software and service providers who provide web based strategic sourcing tools across the UK public sector. They are an approved provider to the UK public sector.

The PC refresh was for 7,000 - 10,000 PCs. As a result of the eAuction savings of £1,505,000 were realised based upon market prices and the minimum 7,000 PCs being taken by the Shared Service Centre. This could rise to £ 2,150,000 should the Shared Service Centre take the full 10,000 units.

The laptop competition was for 4,500 - 7,000 units. It is estimated that savings of £900,000 will be achieved on the basis of holding an eAuction. Three types of laptops were sought by the Shared Service Centre - Standard, Ultra Mobile and Tablet

Please click on this link to view Case Studies from the OGC website.

Note that the OGC website was taken over by the National Archive on 01 October 2011 and will not be further updated.