General Principles
Two basic principles underlie public procurement law in England and Wales. These are:
- Treatment of bidders equally and in a non-discriminatory way. A competition must, neither directly nor indirectly, favour one or more bidders. In addition, the country of origin of a supplier should be irrelevant in the outcome of a competition.
- Transparency. Under this principle, an authority must ensure that there is openness and clarity in the procurement process.
For example, where an authority uses a consultant to help develop a requirement, that same consultant may then bid as a part of a consortium to provide the services. If the authority does not regulate this by ensuring that all other bidders have equal access to the same information as the consultant, or by dealing with this risk in the terms of engagement with the consultant, the authority is potentially in breach of the Regulations.
For example, where an authority decides to change the published evaluation criteria but does not tell its bidders, if a bidder suffers a disadvantage, this will be a breach of the Regulations.
Procedures under the Regulations
There are four basic procedures available under the Regulations:
- open procedure;
- restricted procedure;
- negotiated procedure; and
- competitive dialogue procedure.
The open procedure is rarely used in outsourcing procurements because everyone who responds to the advertisement is entitled to participate.
The restricted procedure works by selecting a number of qualified candidates who will be invited to take part in the competition. The restricted procedure can and should be used for straightforward outsourcing procurements. However, the restricted procedure is relatively inflexible and is, most significantly, subject to a prima facie prohibition on post-tender negotiations. Commercially, this would often pose substantial difficulties for complex outsourcing projects and may not always be conducive to producing the best-value solution for a contracting authority.
The negotiated procedure has, to date, been seen as the most suitable for procuring complex outsourcings because of its flexibility. However, it is an exceptional procedure and its use in the UK was criticised by the European Commission. Part of the reason for the introduction of the new competitive dialogue procedure was to address concerns about over-use of the negotiated procedure. Government guidance is that in the future, if an authority has a choice, it should use the competitive dialogue procedure for complex procurements rather than the negotiated procedure.
The competitive dialogue procedure is something of a halfway house between the inflexible restricted procedure and the negotiated procedure. Its use is explained below. Recital 31 of the Public Sector Directive specifically envisaged that large outsourcing projects were classic examples of situations where use of the competitive dialogue procedure would be required.
Thresholds
Generally speaking, the threshold for the application of the Regulations to central government departments is £101,323 with a higher threshold of £156,442 applying in certain circumstances. The higher threshold applies to all local government contracts. These new thresholds came into force on 1 January 2010. However, even procurements which fall below these thresholds are not free of EC Treaty obligations.
Choosing a procedure
The restricted procedure and the competitive dialogue procedure will be principally relevant to outsourcing procurements. The choice of procedure is not discretionary. A contracting authority must be able to justify the use of the competitive dialogue procedure.
The grounds for using the competitive dialogue procedure are where:
- an authority wishes to award a “particularly complex contract” and that means:
- either it cannot define the “technical means” to satisfy its needs or objectives; or
- it cannot specify the legal and/or financial make up of a project; and
- it considers that the open or restricted procedures will not allow it to award the contract.
Normally, technical specifications have to form part of the contract documents that accompany the invitation to tender. The term “technical specifications” is widely defined and covers specifications in relation to such matters as quality levels, design, volumetrics, performance and testing. These specifications can be defined by reference to performance and functional requirements or by reference to published standards. There are detailed rules about which standards are to be used (very broadly the objective is to prefer European standards).
Therefore the grounds when the competitive dialogue procedure applies are as follows:
- Firstly, where the authority cannot say, at the outset of the procurement, precisely what the required characteristics of the services are that it is buying, and the authority needs a dialogue with a range of suppliers before finalising it.
- Secondly, where there is inability by the authority to specify the legal or financial make up of a project. For example, an authority may not know how the project will be financed and what impact that will have on the contract. The best way of allocating commercial and legal risk and responsibilities at the service boundaries may be unclear, and decisions on these matters may be solution-dependent.
Despite its exceptional basis, the use of the competitive dialogue procedure is likely to be justified for many outsourcing projects, since the requirements and the solution for many outsourcing projects of size and complexity are often unclear at the outset of a procurement, and the commercial terms usually require substantial dialogue and negotiation.