Throughout 2012, the UK Government and the European Commission have been immersed in on-going negotiations to modernise the EU public procurement rules. Seeking UK public sector stakeholder input to these negotiations, the Cabinet Office has recently provided a progress update on the proposed changes, in the form of a Procurement Policy Note (PPN).
This article highlights the main EU proposals and discusses what their implications might be for private sector businesses wishing to bid for public contracts.
The main proposals
One of the main challenges for the EU authorities in determining the appropriate set of procurement rules is to balance the value-needs of public sector contracting authorities with those of private sector providers. This balancing act is not an easy or an enviable task, but the new proposals, many of which focus on efficiency considerations, go some way to striking a balance.
Negotiations on the precise form of the modernised rules continue through the EU Competitiveness Council but, at this stage, the Cabinet Office, which seems relatively pleased with the direction these negotiations are taking, has chosen to outline the progress made so far. In its PPN, the Cabinet Office commented that the European Commission’s “original proposal in December  had already included several of the UK’s main asks, following a successful UK influencing campaign in 2011.” These included proposals for:
- faster procurement timescales;
- more freedom for negotiation with suppliers;
- allowing assessment of past performance at selection/pre-qualification (PQQ) stage and of relevant skills/experience at award stage;
- simplifying the supplier selection/PQQ process; and
- the adoption of ‘emarketplaces’, with simpler rules on ‘dynamic purchasing systems’.
Reduction in minimum timescales
One of the common criticisms of the existing procurement rules from the perspectives of both suppliers and purchasers is that the processes simply take too long. Most businesses will therefore welcome the UK’s insistence on, and support for, a reduction in minimum timescales for responding to advertised procurements and the preparation of tender documents. These were reduced by about a third on average in the original Commission proposal and further reductions have been agreed in the EU negotiations so far.
Increased scope for negotiation (procedural flexibility)
In addition to complaints on timescales, the procurement rules are also frequently, and rightly, accused of being too rigid, often preventing tenderers and purchasers from securing the best deal as negotiation is deemed taboo in standard procurement procedures. The new proposals attempt to address this concern and key progress has been made in the EU negotiations to date on providing for greater access to the ‘competitive procedure with negotiation’, in particular by relaxing the existing restrictions on use of the ‘competitive negotiated’ and competitive dialogue procedures.
The negotiated procedure may only be used in exceptional circumstances, while the competitive dialogue procedure is currently available for use in procurements of large IT networks and other ‘particularly complex contracts’. The new proposals would allow negotiation for any requirements that go beyond ‘off the shelf’ purchasing.
Increasing performance requirements
One common query from public sector customers is whether, and to what extent, past performance can be assessed in selecting, and awarding contracts to, private sector providers. The new proposals increase the scope for the public sector to select, award and exclude on the basis of past performance:
- Customers will be permitted to take into consideration the past performance of bidders at the selection (PQQ) stage;
- Crucially, purchasers will also be permitted to assess relevant skills and experience at the award stage; and
- Poor performance under previous contracts is to be explicitly permitted as grounds for exclusion.
It will therefore be important for private sector bidders to be able to show a strong track record of successful performance if they are to secure future contracts.
Reducing documentation requirements
In an effort to reduce the documentation requirements (and cost) involved in the procurement process, there is to be an increased use of self-certification with, for example, only winning bidders being required to produce certain certificates and documents to prove their status, and contracting authorities having to become more reliant on self-declarations of compliance from suppliers. This fits with the Government’s desire to reduce PQQ burdens and it is also thought that cost reductions of this nature could encourage SMEs to bid for more contracts.
The new proposals have also dropped the concept of a ‘European Procurement Passport’, since this was widely thought to be an unnecessary administrative burden.
Part of the rationale behind the review of the procurement rules is to seek to encourage greater participation by SMEs in bidding for public contracts. The new proposals not only seek to reduce the documentation burden on suppliers, but also seek to impose less stringent financial turnover requirements (relative to contract value) on those suppliers. To that end, minimum yearly turnover requirements generally should not exceed three times the estimated contract value.
The Cabinet Office also highlights the key progress made in negotiations to date on relaxing the “unhelpful proposals on mandatory division into lots for SMEs”. The UK position remains that the decision whether to break up a purchaser’s requirements into lots should be left to the purchaser.
A compulsory switch to 100% electronic communication within 2 years of the deadline for implementation of the new Directives is currently mooted. However, the UK, despite its general support for e-procurement, urges caution against this, being concerned that this deadline is unrealistic, may cause unnecessary problems for purchasers and suppliers, and may also lead to an increase in infringement proceedings against Member States for minor shortfalls.
Whatever the precise timescale, it seems inevitable that e-procurement will one day become the norm and this will certainly impact upon the processes and the ability of suppliers to compete. There are also proposals, supported by the UK, to simplify the rules on ‘dynamic purchasing systems’, for which take-up has so far been limited.
In addition to these proposals for reform, the PPN provides commentary on some other new developments which have been welcomed by the UK Government.
National oversight bodies
‘National oversight bodies’ will no longer be introduced to oversee the application of the public procurement rules – a relief for the UK Government, which had campaigned that Member States should be free to make their own decisions about monitoring, reporting and advising on the application of the rules.
Innovation partnership procedure
The new proposals continue to make provision for an ‘innovation partnership procedure’ in an effort to develop innovative solutions in long term structured partnerships between authorities and suppliers. Such partnerships will be structured in successive stages following the sequence of steps in the research and innovation process and an important amendment has been introduced to clarify that this procedure is to be used where solutions are not yet available on the market.
The revised EU procurement Directives are unlikely to be adopted until at least 2013, although the precise timing will depend on various factors, not least negotiations between the European Commission and the European Parliament. Following their adoption and publication in the Official Journal of the EU, Member States would then have a further 18 months to implement the new rules.