CIPS Devon & Cornwall Branch

Wednesday 3 July 2013

Reform of EU Public Procurement Rules

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EU Public Procurement Reform

2004 – Public Sector Directive

2007 – Remedies Directive

2014 – New Public Sector Directive

• Latest draft: 357 pages; 439 pages of

European Parliament amendments!!

• Important to start thinking ahead now

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EU Public Procurement Reform

• Engine for growth!

• EU’s Competitiveness Council!

• Simplification

• Flexibility (more opportunity to negotiate)

• Cutting red tape

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EU Public Procurement Reform

• No more Part B Services

• But lighter touch procurement regime for health, social,

cultural and education services

• And legal services?!

• Only basic advertising requirements, obligation to act

transparently and to treat bidders equally

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EU Public Procurement Reform

Helping SMEs

• Self-certification at PQQ Stage

• Turnover requirements: 3 times contract value

• Required division into lots (or else justify why not):

– Contracts for goods and/or services over 500,000 Euros

– Contracts for construction works over 5 million Euros

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EU Public Procurement Reform

Exclusion Grounds

• Corruption, money laundering, insolvency etc. remain

• Past Performance

• Taxes

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EU Public Procurement Reform

New procedures/New flexibility

• No requirement to justify using the competitive dialogue

procedure

• Competitive procedure with negotiation – Contracting

Authorities negotiating directly with tenderers with a view to

improving the content of their offers

• Innovative Partnerships – Establishing a structured

partnership for the development of an innovative product,

service or work

• Abolition of negotiated procedure with advertisement for

public bodies

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EU Public Procurement Reform

• Speedier timetables

• 30 months – Move to 100% electronic tendering required

• Open procedure – 35 Days

• PQQ – 30 Days

• ITT – 30 Days

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Award Criteria

• Qualification and experience of staff assigned to perform

the contract specifically recognised as an award criteria

• Social welfare conditions allowed – working conditions,

staff health protection and the promotion of

disadvantaged and unemployed persons

• Life-cycle costs allowed: Energy consumption, collection

and recycling

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EU Public Procurement Reform

Thresholds

• Euros 200,000 for supplies and services

• Euros 130,000 for supplies and services

(Schedule 1 Bodies)

• Euros 5 Million for construction works

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EU Public Procurement Reform

• Codification of landmark case-law

• Teckal – contracts can be awarded to “in-house”

bodies without a full procurement process

• Pressetext – variations can be made to contracts

without a full procurement process

• Only in some circumstances!

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Teckal Exemption.

• The authority exercises the same kind of control over the

service provider as it does over its own departments (the

“control test”)

• As much control as over one of your own departments

• Similar but not identical – Does the authority exercise a

power of decisive influence over both the strategic

objectives and the significant decisions of the other

entity?

• Joint (public sector) control permissible

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Teckal Exemption • The service provider carries out the principal part of its

activities with the authority (the “function” test)

• Does most of its work for you – are the supplier’s activities

devoted principally to the controlling authority with other

activities only of minor significance?

• Cabotermo – 80% of the entity’s activities to be devoted to

the contracting authority

• Article 11(3) (80%)

• Narrow exemption and complex to apply

• There must be no private shareholding in the entity to whom

the contract is awarded by the authority

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Shared Services

• Hamburg Exemption – Case C-480/06

• Inter authority co-operation, in principle, does not fall

within the ambit of the EU public procurement rules

• Waste disposal facility being procured by four

neighbouring local authorities (cost sharing, landfill

capacity sharing, co-operation on waste collection and

waste disposal)

• Not Teckal – authorities have no control over each other

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Hamburg Exemption

• The agreement is designed to ensure that a public task

is carried out (including saving taxpayers money)

• There is no financial transaction other than

reimbursement of costs/expenditure incurred on the

authority’s behalf

• The participating contracting authorities do not perform

on the open market more than 20% in terms of turnover

of the relevant activities Article 11(4)

• There must be no private shareholding in any of the

contracting authorities/entities involved

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EU Public Procurement Reform

• Pressetext – Variations to Contracts (Article 72)

• Parties still not generally able to materially change

contracts or change the economic balance in favour of

the contractor

• But new ‘safe harbours’ where contracts can be changed

without new contract awards:

a) Where the change is provided for in the contract; or

b) The value of the change is less than 10% (supplies and

services) or 15% (construction works) of the initial contract

value; or

c) A set of conditions are fulfilled

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EU Public Procurement Reform

• Pressetext – Variations to Contracts

• Set of conditions to be fulfilled:

• The need for modification is due to unforeseen circumstances

• The overall nature of the contract is not altered

• Any increase in price is not higher than 50% of the value of the

original contract or framework agreement

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Abnormally low tenders

(Article 69) • Is a tender too good to be true?

• Speculatively low prices – Genuine intention of delivering

at the low price or simply getting a foot in the door and

then increasing revenues once they have been

appointed?

• Purchasers – Facing significant pressure to make

savings and are more likely than before to be swayed by

a low headline figure and therefore not fully consider

whether the price is actually deliverable

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Abnormally low tenders

What is an abnormally low tender?

• No definition in the Regulations or provided by the

European Court of Justice

• European Commission Report – A tender may be

abnormally low if it does not provide a margin for normal

levels of profit and the low tender cannot be explained by

the economy of the selected construction method, the

technical solution chosen, exceptionally favourable

conditions available to the tenderer, or the originality of

the work proposed

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Abnormally low tenders

• Look for a significant difference from the other

bids received – More than 25% lower?

• Know what the suppliers/services/works should

cost – accurate management information about

what a service is currently costing (or what

similar works have previously cost)

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Abnormally low tenders

• Regulation 30(6) – Contracting authorities

right to reject an abnormally low tender,

subject to requirement to give bidder a

right to justify its tender

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Next Presidencies

• July – Dec 2013 Lithuania

• Jan – June 2014 Greece

• July – Dec 2014 Italy

• Jan – June 2015 Latvia

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Awards

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