PUBLIC PROCUREMENTREGULATION: AN INTRODUCTION

This material was produced with the financial assistance of the EU. The contents of the material is the soleresponsibility of the members of the consortium involved in the EU Asia Inter University Network forTeaching and Research in Public Procurement Regulation and can under no circumstances be regarded asreflecting the position of the European Union.

The EU Asia Inter University Network for Teaching and Research in Public Procurement Regulation was led byUniversity of Nottingham (Project leader: Professor Sue Arrowsmith) and the other consortium members areCopenhagen Business School, the University of Copenhagen, the Central University of Finance and Economics(Beijing), Xinjiang University, and the University of Malaya.

Editor

Professor Sue Arrowsmith, University of Nottingham

Authors:

Professor Sue Arrowsmith (chapters 1-7)

Professor Steen Treumer (chapter 8)

Professor Jens Fej (chapter 9)

Dr Lili Jiang (chapter 10)

All rights in this work and its content are owned by and reserved to the original copyrightowners. Users may download or print a copy for non commercial use (which includes usefor educational and research purposes). Except as expressly provided, it may not becopied, reproduced, republished, adapted, transmitted, downloaded or broadcast withoutthe permission of the copyright owner.

Preface

This text provides an introduction to the subject of regulating public procurement. Itfocuses, in particular, on principles and policies of regulation and on the approach toregulation adopted in the instruments of UNCITRAL, in particular the UNCITRAL ModelLaw on Procurement of Goods, Construction and Services. The text is designed, inparticular, as a text for students of the subject at university level, but will also be a usefulintroduction to the subject for lawyers, procurement officials and policy-makers.

As explained on the cover page, the book was prepared as a part of a collaborativeproject in higher education, the EU Asia Inter University Network for Teaching andResearch in Public Procurement Regulation 2009-2011, funded by the EU. This projectinvolved several universities in Europe and Asia and has sought to promote and supportthe teaching of public procurement in Europe, Asia and globally. This text is one of fivebooks produced under the auspices of the project that are designed to be used asresources in the teaching of public procurement law and regulation.

The main editors and chapter authors are listed on the cover pages, but it should berecognised that the text is a collaborative effort of all the partners to the extent that ithas benefited from input by, and discussions between, many different persons at thedifferent partner institutions. In addition to the authors and editors mentioned on thecover pages, the text has benefited from administrative, editing and proof reading byGabor Soos, Debbie Yu, Elly Aspey and Pamela Hoebling during their time as students atthe University of Nottingham, and the project would like to acknowledge gratefully theassistance they have provided.

The contents of the book are up to date as of July 2010. It has also been possible toinclude later developments in some parts of the book.

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Table of Contents

CHAPTER 1: PUBLIC PROCUREMENT: BASIC CONCEPTS AND THE COVERAGEOF PROCUREMENT RULES 1

1.1 What is public procurement? 1

1.2 Public procurement distinguished from in-house provision 2

1.3 The legal framework for public procurement contracts 3

1.4 The objectives of public procurement systems and regulatoryprovisions 4

1.4.1 Introduction 41.4.2 Objective 1: Value for money (efficiency) in the acquisition of requiredgoods, works or services 51.4.3 Objective 2: integrity - avoiding corruption and conflicts of interest 81.4.4 Objective 3: accountability 111.4.5 Objective 4: equal opportunities and equal treatment for providers 111.4.6 Objective 5: Fair treatment of suppliers 141.4.7 Objective 6: efficient implementation of industrial, social and environmentalpolicies in procurement 151.4.8 Objective 7: opening up public markets to international trade 151.4.9 Objective 8: Efficiency in the procurement process 19

1.5 Key principles for implementing procurement objectives:transparency, competition and equal treatment 20

1.5.1 Introduction 201.5.2 Transparency 211.5.3 Competition 23

1.6 The purpose and nature of regulatory rules in the public sector 24

1.7 The diversity of public procurement systems 25

1.8 Introduction to the UNCITRAL Model Law on Procurement of Goods,Construction and Services 27

1.8.1 The Model Law 271.8.2 Review of the Model Law 28

1.9 Coverage of public procurement rules 281.9.1 Which entities are covered? 281.9.2 Which transactions are covered? 291.9.3 Value thresholds 31

CHAPTER 2: METHODS OF PROCUREMENT FOR GOODS AND CONSTRUCTION 33

2.1 Introduction 33

2.2 Formal tendering procedures 342.2.1 Open tendering 342.2.1.1 The open tendering procedure and tendering under the UNCITRAL ModelLaw 342.2.1.2 Derogations from tendering under the UNCITRAL Model Law 352.2.2 Two-Stage Tendering 372.2.3 Restricted tendering 39

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2.3 Informal procurement 402.3.1 Request for proposals 402.3.2 Competitive negotiation 412.3.3 Request for quotations 422.3.4 Single-source procurement 44

2.4 Review of the Model Laws rules on choice of procurement methods 45

CHAPTER 3: THE CONDUCT OF OPEN TENDERING PROCEDURES 47

3.1 Introduction 47

3.2 Specifications and other solicitation documents 473.2.1 The solicitation documents in general 473.2.2 Modifications and clarifications to the solicitation documents 503.2.3 Legal rules on drafting specifications 503.2.3.1 Introduction 503.2.3.2 The rules on specifications in UNCITRAL and other approaches 503.2.3.3 The relationship between specifications and choice of award procedure 523.2.3.4 What are the likely practical consequences of not complying with legallybinding rules on specifications or of ambiguous specifications? 53

3.3 Advertising the contract 54

3.4 Qualification and pre-qualification proceedings 553.4.1 Introduction 553.4.2 Criteria for exclusion 563.4.3 Providing incomplete or incorrect information 583.4.4 Administrative suspension or debarment 593.4.5 Disclosure of qualification criteria and required evidence 593.4.6 Evidence and legalisation of documents 603.4.7 Pre-qualification proceedings 60

3.5 Modification and withdrawal of tenders and tender securities 61

3.6 The form of tenders and tender opening 633.6.1 Form of tenders 633.6.2 Tender opening 63

3.7 Non-conforming tenders 643.7.1 Introduction: policy considerations 643.7.2 The regulatory treatment of non-conforming tenders 663.7.2.1 Introduction 663.7.2.2 General obligation not to accept non-conforming tenders 683.7.2.3 The possibility for correction: non-conformity that arises from certainkinds of errors in the tender 693.7.2.4 The possibility for the procuring entity to waive certain minor deviations 713.7.2.5 Possibility of a new tendering exercise to enable the procuring entity toconsider tenderers whose initial tenders did not conform 74

3.8 The deadline for tenders, including extending the tender deadline andlate tenders 75

3.8.1 The tender deadline 753.8.2 Extensions to the deadline 753.8.3 Review of the Model Laws provisions on deadlines 763.8.4 Late tenders 76

3.9 Amendments and corrections to tenders and post-tender negotiations 77

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3.9.1 Introduction and basic principles 773.9.2 Correction of errors 783.9.2.1 Introduction 783.9.2.2 The rules on errors in tenders under the UNCITRAL Model Law 793.9.2.3 What types of errors are covered by the provision on arithmetical errors? 803.9.2.4 The rule that the supplier must accept the correction for the tender to beconsidered 813.9.2.5 A duty towards suppliers? 813.9.2.6 The position when an error remains uncorrected 823.9.3 Clarifications 833.9.4 Negotiations to seek improvements to tenders 833.9.5 Negotiations with the winning tenderer 85

3.10 Award of the contract 853.10.1 Introduction 853.10.2 Basic principles: lowest price or lowest evaluated tender? 863.10.3 Limiting discretion in choosing and applying non-price criteria: objectiveand quantifiable criteria under the Model Law 883.10.4 More flexible criteria 893.10.5 The problem of unbalanced tenders 903.10.6 Advance formulation and disclosure of the criteria and the methodology forthe award 913.10.7 Abnormally low tenders 923.10.8 Cancellation of the procurement 94

CHAPTER 4: PROCUREMENT OF SERVICES AND COMPLEX PROCUREMENT 96

4.1 Procurement methods for services 964.1.1 Introduction 964.1.2 Use of the principal method for procurement of services and its relationshipwith the methods for procuring goods and construction 964.1.3 Outline procedure for the principal method for procurement of services 98

4.2 Selection (shortlisting) 101

4.3 Issues in the evaluation and award phase in services procurementand complex procurement 105

4.3.1 Introduction 1054.3.2 Evaluation and award under the principal method for procurement ofservices 1064.3.2.1 Permitted criteria for the award in the principal method for procurement ofservices 1064.3.2.2 Absence of a requirement for objective and quantifiable criteria 1084.3.2.3 Advance formulation and disclosure of the criteria and the methodologyfor the award 1094.3.2.4 Applying the criteria for the award in the principal method for procurementof services: the three procedures of selection without negotiation, simultaneousnegotiation and consecutive negotiation 1094.3.3 Evaluation and award under the request for proposals procedure 1124.3.3.1 Permitted criteria and disclosure of criteria 1124.3.3.2 Applying the cri