E U P rocurement Directives

1. EUProcurement Directives

2. What is public procurement? • Public procurement refers to the process by which public authorities, such as government departments or local authorities, purchase work, goods or services from companies which they have selected for this purpose. • Examples include: building a state school, purchasing furniture for a public prosecutor's office or contracting cleaning services for a railway station.

3. Why treat public sector projects differently? • Procurement must be fair. • Public accountability- tax payers money. • Maximising value for money.

4. What constitutes public sector? • EC directive defines contracting authorities as being all bodies governed by Public Law. • A body established to meet the needs of the general public that is not of an industrial or commercial nature which is financed mainly by the State. • Central government • LA(including police and fire) • NHS • Public Utilities(privatised now but still subject to some Public procurement rules) • HE Institutions

5. Local government • Local authorities governed by provisions in their standing orders and financial regulations. • With best value there has been a move away from Prescriptive set of regulations which must be followed at all costs towards a minimum set ofregulations built around transparency, public accountability and value for money.

6. EU Procurement Directives • The EU Procurement Directives set out the legalframework for public procurement. They apply when public authorities and utilities seek to acquire supplies, services, or works (e.g. civil engineering or building). They set out procedures which must be followed before awarding a contract when its value exceeds set thresholds, unless it qualifies for a specific exclusion - e.g. on grounds of national security.

7. EU Procurement Directives • The purpose of the EU procurement rules, underpinned by the Treaty principles, is to open up the public procurement market and to ensure the free movement of supplies, services and works within the EU. In most cases they require competition. • The EU rules reflect and reinforce the value for money (vfm) focus of the Government’s procurement policy.

8. Value for Money • All public procurement must be based on value for money (vfm) • Value for Money (vfm) definitions: • “the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought”, which should be achieved through competition, unless there are compelling reasons to the contrary. • “the optimum combination of whole-life cost and quality to meet the user’s requirement”, which should be achieved through competition, unless there are compelling reasons to the contrary.

9. EU Procurement Directives • The European public contracts directive (2004/18/EC) applies to public authorities including, amongst others, government departments, local authorities and NHS Authorities and Trusts. • The European utilities contracts directive (2004/17/EC) applies to certain utility companies operating in the Energy, Water, and Transport sectors. • The directives set out detailed procedures for the award of contracts whose value equals or exceeds specific thresholds. Details of the thresholds, applying from 1st January 2014 are given below. Thresholds are net of VAT.

10. Directives in National Law • The Directives have been implemented into nationallaw in the UK by Regulations. The current Regulations came into force on 31 January 2006 to implement the Directives. • Public authorities (the State, regional and local authorities and other public bodies) The Public Contracts Regulations 2006 (SI 2006 No.5) http://www.opsi.gov.uk/si/si2006/uksi_20060005_en.pdf • Utilities (i.e. certain operators in the water, energy, transport sectors) The Utilities Contracts Regulations 2006 (SI 2006 No.6) http://www.opsi.gov.uk/si/si2006/uksi_20060006_en.pdf

11. Directives in National Law • These Regulations do not extend to Scotland where separate, but similar, Regulations have been made. Any authority entering into a contract that is to be carried out in Scotland would need to consider the application of the Scottish Regulations.

12. Contracts outside the scope of the Directives • Evenwhen a tender process is not subject to the Directives, (for example because the estimated value of a contract falls below the relevant threshold), EU Treaty-based principles of non-discrimination, equal treatment, transparency, mutual recognition and proportionality apply. Some degree of advertising, which is appropriate to the scale of the contract, is likely to be necessary to demonstrate transparency. • This is in line with the UK objective of achieving value for money in all public procurement - not just those covered by the EU Procurement Directives.

13. Mixed contracts • Although the public sector Regulations have been consolidated, some differences in treatment remain for supplies, services and works contracts. Usually it will be clear how to categorise a requirement from its subject matter but there are occasions when contracts contain elements of both supplies and services, for example. In those cases: • Where a contract covers both services and supplies, the classification should be determined by the respective values of the two elements. • Where it covers works/supplies or works/services, it should be classified according to its predominant purpose. • Where a contract provides for the supply of equipment and an operator it should be regarded as a services contract. • Contracts for software are considered to be for supplies unless they have to be tailored to the purchaser’s specification, in which case they are services.

14. Aggregation rules and thresholds • Where a single work involves more than one contract the estimated value of all the contracts must be aggregated to decide whether the threshold is reached. Where the threshold is reached each of the works contracts will be covered by the rules except small contracts (known as small lots) the value of which falls below the de minimis level provided for in the Regulations. • In determining whether the threshold has been or is likely to be reached for public supplies or services contracts, the rules require aggregation: • of the estimated value of separate contracts for meeting a single requirement; and • where a series of contracts or a renewable contract is entered into for supplies/services of the same typeduring a twelve month period.

15. Aggregation rules and thresholds • Where a public authority is divided into a number of discrete operational units with devolved authority to decide independently whether to enter into procurement contracts, then aggregation need only be applied to each unit. In other cases (i.e. where authority is not devolved) the public authority as a whole must be considered for aggregation purposes.

16. PUBLIC CONTRACTS REGULATIONS 2006 - FROM 1 JANUARY 2014 - thresholds

17. PUBLIC CONTRACTS REGULATIONS 2006 - FROM 1 JANUARY 2014 • 1 Schedule 1 of the Public Contracts Regulations 2006 lists central government bodies subject to the World Trade Organisation's (WTO) Government Procurement Agreement (GPA). These thresholds will also apply to any successor bodies • Schedule 1 is available at: http://www.legislation.gov.uk/uksi/2006/5/schedule/1/made • Schedule 2 illustrates the activities constituting works (including construction) – available at: http://www.legislation.gov.uk/uksi/2006/5/schedule/2/made

18. PUBLIC CONTRACTS REGULATIONS 2006 - FROM 1 JANUARY 2014 • 2With the exception of the following services, which have a threshold of £172,514 (€207,000): • Part B (residual) services • Research & Development Services (Category 8) • The following Telecommunications services in Category 5 • CPC 7524 - Television and Radio Broadcast services • CPC 7525 - Interconnection services • CPC 7526 - Integrated telecommunications services Subsidised services contracts under regulation 34 • 3 Including subsidised works contracts under regulation 34.

19. Tenders Electronic Daily (TED) • TED – Business opportunities in Europe • All public tenders above specific contract values must be published in the Supplement to the Official Journal of the European Union (S series, Official Journal S or OJ S) and published throughout the EU. • The Official Journal S is available exclusively in electronic format and is accessible: • On the TED website(TED — Tenders Electronic Daily) • http://simap.europa.eu/index_en.htm

20. TED (Tenders Electronic Daily) What is TED? TED (Tenders Electronic Daily) is the online version of the 'Supplement to the Official Journal of the European Union', dedicated to European public procurement. How can I benefit from TED? • TED provides free access to business opportunities. It is updated five times a week with approximately 1500 public procurement notices from the European Union, the European Economic Area and beyond. • You can browse, search and sort procurement notices by country, region, business sector and more. • Information about every procurement document is published in the 24 official EU languages. All notices from the European Union's institutions are published in full in these languages.

21. SIMAP • SIMAP - Information system for European public procurement • The SIMAP portal provides access to the most important information about public procurement in Europe. • Tender notices are published on TED website, the official source of public contracts in Europe.

26. Awarding Authorities The awarding authorities for tenders are central government, local or regional authorities, bodies governed by public law, or associations consisting of one or more of these authorities or bodies governed by public law.

27. Supplement to the Official Journal publishes over 1,000 tenders each day In the following sectors: • Public contracts for works, supply and services from all EU Member States; • Utilities contracts (water, energy, transport and telecommunications sectors); • Public contracts from EU institutions;

28. Geographical coverage • In addition to EU Member States, the benefits of the EU public procurement rules also apply to a number of other countries because of an international agreement negotiated by the World Trade Organisation (WTO) titled the Government Procurement Agreement (GPA).

29. Government Procurement Agreement / WTO • The main international agreement related to public procurement is the Agreement on Public Procurement, the Government Procurement Agreement (GPA) in the WTO. • On 30 March 2012 the GPA Parties reached an agreement and adopted a Protocol amending the 1994 GPA. The revised WTO GPA entered into force on 6 April 2014.

30. Government Procurement Agreement / WTO • The revised GPA opens up the public procurement markets of each of the Parties. It applies to contracts worth more than specified threshold values. • In total, 15 parties are currently part of the agreement (the EU with respect to its 28 Member States along with Armenia, Canada, Hong Kong (China), Iceland, Israel, Japan, Korea, Liechtenstein, the Netherlands with respect to Aruba, Norway, Singapore, Switzerland, Chinese Taipei and the United States). Ten other WTO Members, including China, Moldova, Montenegro, New Zealand and Ukraine, are negotiating accession to the GPA.

31. OJEU advertising requirement • Generally contracts covered by the Regulations must be the subject of a call for competition by publishing a Contract Notice in the OJEU. • Use of the Standard Forms for OJEU notices (e.g. a Contract Notice or a Contract Award Notice) is mandatory. They are available at the SIMAP website under “Standard forms for public procurement”. • In most cases the time allowed for responses or tenders must be no less than a set period.

32. Choice of procurement procedure • the open procedure • the restricted procedure • the competitive dialogue procedure • the negotiated procedure

33. Open procedure • This is where all interested suppliers are asked to return tenders by a set date. These are then evaluated and the contract is awarded. • This procedure is often used by local councils.

34. Restricted procedure • This is a 2-stage process: • First stage: Interestedsuppliers are asked to fill out a questionnaire and a short-list is drawn up. • Second stage: The shortlisted suppliers are invited to respond to an Invitation to Tender (ITT). The tenders are then evaluated and the contract awarded. • This allows purchasers to avoid having to deal with an overwhelmingly large number of tenders

35. Competitive dialogue procedure • This procedure is used for more complex procurements e.g. PPP. • The procedure normally involves the following: • After a selection process, the buyernegotiates with suppliers and invites chosen companies to put in a bid. • Suppliers put in their tenders and the contract is awarded. • the negotiations with suppliersmay involve the development ofone or more suitable solutions for the buyer’s requirements (e.g. where the buyer know what their needs are but cannot decide on the most appropriate technical, legal or financial solution).

36. Negotiated procedure • In this procedure, the buyer enters into contract negotiations with one or more suppliers. • An advertisement in the OJEU is usually required but, in certain circumstances, described in the Regulations, the contract does not have to be advertised in the OJEU. An example is when, for technical or artistic reasons or because of the protection of exclusive rights, the contract can only be carried out by a particular bidder.

37. Negotiated procedure • The negotiated procedure can only be used in extremely limited circumstances. Typical indicators that the negotiated procedure with publication of a contract notice might be appropriate would be: (1) the contract is for a genuinely unique type of solution; (2) the funding model is untested; and (3) the contracting authority is not aware of any other contracts using a similar model. • For particularly complex contracts, the competitive dialogue procedure should generally be used rather than the negotiated procedure. • Legal advice should be sought before using the negotiated procedure and a note of why the procedure is being used should be retained.

38. Framework Agreements • If a public sector organisation knows they are likely to need particular goods or services, but are unsure about exactly what they’ll need or when, they may decide to set up a group of approved suppliers that they can use when necessary. This is called a ‘framework agreement’.

39. Framework Agreements • 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”.

40. Framework Agreements • Aframework agreement is a general term for agreements with providers that set out terms and conditions under which specific purchases (call-offs) can be made throughout the term of the agreement. • In most cases a framework agreement itself is not a contract, but the procurement to establish a framework agreement is subject to the EU procurement rules.

41. Framework Agreements • In a few circumstances it may be the case that the framework agreement itself is a contract in its own right to which the EU procurement rules apply. This would be the case where the agreement places an obligation, in writing, to purchase goods, works or services for pecuniary interest (or consideration in UK legal terminology). For this type of agreement, there is no particular problem under the EU rules, as it can be treated in the same way as any other contract.

42. Framework Agreements • the term ‘framework agreement’ is normally used to cover agreements which are not, themselves, covered by the definition of a contract to which the EU rules apply (though they may create certain contractually binding obligations). • Such agreements set out the terms and conditions for subsequent call-offs but place no obligations, in themselves, on the procurers to buy anything. With this approach, contracts are formed under the Regulations only when goods, works and services are called off under the agreement. The benefit of this is that, because authorities are not tied to the agreements, they are free to use the frameworks when they provide value for money, but to go elsewhere if they do not.

43. Framework Agreements • The contractual status of a framework agreement should not cause undue concern; the key is that a means of awarding contracts under framework agreements is provided for without the need to re-advertise and re-apply the selection and award criteria from the outset.

44. Framework Agreements • It is necessary to advertise a framework agreement in the OJEU, if its estimated maximum value over its lifetime exceeds the relevant EU threshold and the procurements in question are not covered by one of the exclusions set out in the Directives. • When assessing the total value of the framework, a required field in the OJEU Contract Notice, it is important that the estimate should include all the potential call-offs over the lifetime of the agreement that may be made by all contracting authorities that are permitted to use the framework, not just the intended call-offs by the contracting authority which is procuring the framework agreement.

45. Framework Agreements • The organisation will invitepotential suppliers to put themselves forward for the framework and choose the one(s) most able to do the work. • Once the framework is set up, individual contracts are made throughout the period of the agreement. If there’s more than one possible supplier on the framework, a ‘mini-competition’ may be held to decide who gets the contract.

46. Framework Agreement considerations • Framework Duration- maximum 4 years unless exceptional circumstances not defined but construction could be considered due to lengthy process. • Number of framework suppliers – minimum number threeunless only one provider. • Call offs – still require competition to identify the most appropriate supplier. • Framework conditions- the original framework conditionsmust be usedto award the contract.

47. Genuine competition • Under restricted, competitive dialogue and competitive negotiated procedures (those where a call for competition is required by advertising in the OJEU) there must be a sufficient number of participants to be selected to proceed to the tender stage to ensure genuine competition. The Regulations require a minimum of five for the restricted procedure, and three for competitive dialogue and negotiated procedures.

48. Stages in the procurement process • Specification stage • Selection stage • Award stage

49. Specification stage How requirements must be specified, avoiding brand names and other references which would have the effect of favouring or eliminating particular providers, products or services – and the requirement to accept equivalence. The Regulations now make it clear that authorities may use performance specifications rather than technical specifications. They also provide clarification on the scope to reflect environmental issues in specifications.

50. Selection stage • The rejection or selection of candidates based on: • evidence that they are unsuitable on grounds, e.g. of bankruptcy, criminal conviction or failure to pay taxes. Certain offences now require, in normal circumstances, a mandatory exclusion; • their economic and financial standing – e.g. that they are judged to be financially sound on the basis of their annual accounts; and • their technical capacity and ability – e.g. that they will be adequately equipped to do the job and that their trackrecord is satisfactory.