Introduction

It is now four years since the introduction of the competitive dialogue procedure, a key innovation in the new EU procurement regime which was implemented in the UK on 31 January 2006.

At the time, there was a lot of concern about the potential consequences of the introduction of this new procedure on major public contracts, including PFI and PPP arrangements, which until then had been tendered as a matter of course on the basis of the negotiated procedure.

Indeed, as far as the European Commission was concerned, that was the problem which the introduction of the competitive dialogue sought to address. The Commission's concern with the wide use of the negotiated procedure was that this procedure was, by its nature, less transparent than the open and restricted procedures and therefore more prone to abuse - with extensive negotiations with preferred bidders after the competition was effectively over. In the Commission's view, the negotiated procedure was an exceptional procedure which could only be used in the specific and narrowly construed circumstances provided for in the EU procurement legislation.

As early as 1998, the Commission proposed making tender procedures more flexible, by allowing discussions with bidders "not just in exceptional circumstances". To this end, it signalled its intention to propose a new "standard procedure, the competitive dialogue, which would operate alongside open and restricted procedures and would replace the existing negotiated procedure".

And yet, by the time the Commission's proposals on a new standard procedure completed their arduous journey through the intergovernmental negotiation process, they turned into something completely different. The new procurement regime introduced yet another exceptional procedure. Like the negotiated procedure, the competitive dialogue may only be used in the specific circumstances set out in the legislation.

As far as the Commission is concerned, the introduction of the competitive dialogue has achieved its primary aim: limiting the use of the negotiated procedure. However, at least in the UK, concerns about key features of the competitive dialogue remain. For example, a key concern is that the procedure is "front-loaded". While under the negotiated procedure many issues were left open for finalisation after the selection of the preferred bidder, the competitive dialogue restricts the amount of discussions that may take place following the submission of final offers. This may have the beneficial effect of ensuring that a contract is negotiated and essentially finalised under competitive conditions, but a significant disadvantage is the fact that such process increases costs for bidders as well as the contracting authority which needs to engage in lengthy and substantive negotiations with three or at the very least two bidders before preferred bidder selection.

This state of affairs is unsatisfactory. True, the excesses of the negotiated procedure - sometimes involving negotiations with the preferred bidder lasting for more than a year - were arguably never fully compliant even under the more flexible negotiated procedure requirements. However, the pendulum now seems to have swung too far in the opposite direction. A more proportionate approach is surely required, not least in view of the current economic climate.

Arguably, such an approach is achievable without legislative revisions. Instead, what is required is a more balanced interpretation of the existing rules. The current restrictive interpretation of the competitive dialogue requirements - favoured by the Commission - is largely based on an approach which places undue emphasis on certain aspects of the relevant provisions while underplaying others.

According to the legislation, final tenders may only be "clarified, specified and fine-tuned" provided that this process does not involve changes to the basic features of the tender or the call for tender, variations in which are likely to distort competition or have a discriminatory effect. Equally, the preferred bidder can only "clarify" aspects of its tender or "confirm commitments" contained in that tender provided that this does not have the effect of modifying substantial aspects of the tender or of the call for tender and does not risk distorting competition or causing discrimination.

The conceptual and linguistic tensions evident in the above provisions bear witness to the compromises that had to be struck between the negotiating member states, many of which were pulling in opposite directions. For example, the words clarifying, specifying and fine-tuning suggest limited room for manoeuvre following receipt of final tenders. On the other hand, engaging in a post-dialogue process which only prohibits changes to the basic features of the tender or call for tender or even one which prohibits changes to such basic features only to the extent that these would distort competition or have a discriminatory effect, clearly points to a less restrictive interpretation, providing for greater room for manoeuvre.

While it is true that a more balanced interpretation may be equally criticised for placing emphasis on certain aspects of these provisions and not on others, there are good arguments as to why such interpretation should be preferred. First, the primary aim of procurement legislation is to ensure that the principles of transparency, equal treatment and non-discrimination are respected in the award of public contracts. However, such principles are not absolute and have to be balanced against a number of other factors including limited public resources, costs, and contractual complexities. Indeed, if that was not the case, then the open procedure - the most transparent of all - would have been the only tender procedure available under procurement legislation. Instead, as has been suggested before, the competitive dialogue provisions should be interpreted in the context of a procedure specifically designed to deal with "particularly complex" contracts.

Also, it makes no sense to limit post-dialogue changes to clarifying, specifying and fine-tuning as a result of being guided simply by an out-of-context literal interpretation of these words, when it is possible to go beyond such restrictive interpretation without breaching the principles of equality and non-discrimination. How is this possible? - simply by ensuring that any post-dialogue changes are not "material", in other words, that the changes are not such that they would have had an impact on the outcome of the competition or the identity of parties expressing an interest in it.

The principle of materiality in determining whether amendments should be permissible is one which is still evolving but has been used by the Commission itself in 2002 in determining whether post-preferred bidder amendments were acceptable in the context of the tender process for the London Underground PPP. The European Court has also relied on this principle in determining whether amendments are permissible, most recently with regard to amendments to a concluded contract.

Accordingly, limiting post-dialogue changes to clarifying, confirming and fine-tuning (literally interpreted) would give rise to the absurd situation whereby there is greater room for manoeuvre following the conclusion of a contract, by reference to the materiality test, than before its conclusion. Finally, the recent introduction of an enhanced remedies regime should assuage any concerns that a less draconian interpretation of the competitive dialogue provisions might be prone to abuse.

This article first appeared in Infrastructure Journal, 1 March 2010..