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Programme Government: Procurement/Tendering

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Quite unusually for a PfG, procurement/tendering is mentioned a lot in the document.

For example…

  1. As part of the National Economic Plan (to be agreed as part of Budget 2021), an action (unspecified) will be taken to support SMEs to compete for public service contracts. Will a bespoke initiative for small businesses replace the Go-2-Tender programme currently funded by InterTradeIreland?
  2. A procurement strategy for EVs will be published. The aim is that by 2025, contracting authorities will only be allowed to purchase low or no-emissions cars and light goods vehicles.
  3. A sustainable procurement policy will be developed and implemented (building on OGP’s guidance of December 2019).
  4. The OGP will be tasked to update all procurement frameworks in line with green procurement practices.
  5. The OGP will also be directed to support the adoption of new technologies (unspecified) through the development of new public service procurement frameworks.
  6. Green procurement will be mandated in all public procurements within three years (above which value threshold?).
  7. Procurement techniques will be used to lead the transition to the circular economy.
  8. The procurement of retrofitting will be centralised (presumably managed and coordinated by the National Retrofit Delivery Body).
  9. OGP will play a key role in rolling out the Public Sector Decarbonisation Strategy (to 2030) through the central procurement of energy-related investments and services.
  10. Procurement policy for social housing will have strong social clauses (and product and design standards?) in line with the new green procurement policy.

Interesting times ahead for those of us in the procurement and tendering environment.

More on EU Public Procurement Stats 2018

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In a previous post I looked at some figures for EU-level public procurement activity undertaken by Irish contracting authorities in 2018. In this post I will look at the overall figures for the EU 27 as a whole in 2018.

The following is a summary of the main figures:

Type of NoticeEU 27 in 2018Notes
Contract Notice213,731An increase of 8% over 2017 (197,976 )
Open Procedure186,047
Restricted Procedure6,804
Negotiated Procedure9,084(Utilities)
Competitive Procedure with Negotiation10,495Only available to Public Sector Contracting Authorities since the adoption of the 2014 Directives. Take-up has been rapid and 2018 represents a 55% increase on 2017 (6,739).
Competitive Dialogue774An increase of 46% on 2017 (528).
Innovation Partnership77Up from 39 in 2017.
Accelerated Restricted Procedure82
Accelerated Negotiated Procedure16
Other/Not Specified352
Contract Award Notice228,548
Open Procedure181,245
Restricted Procedure10,105
Negotiated Procedure8,875(Utilities)
Competitive Procedure with Negotiation9,287
Competitive Dialogue594
Innovation Partnership51
Accelerated Restricted Procedure86
Accelerated Negotiated Procedure1,939Of which Portugal appears to account for 1,920?
Negotiated procedure without a call for competition10,762Seems very high given that this is supposed to be an exceptional procedure.
Contract award without prior publication/direct award5,015This only relates to acknowledged direct awards. There would appear to be a significant number of direct awards which are not declared via OJEU.
Not Specified /Other589
Other Notices Used in 2018EU 27Notes
Voluntary Ex-Ante Transparency Notices7,061Often published to proof direct awards against challenge under Remedies Directives.
Modification of a Contract/Concession during its term11,144New transparency obligation imposed by 2014 Directives.
Dynamic Purchasing System660Usage increasing following simplification in 2014 Directives. UK appears to be the lead user of DPS with 253 advertised in 2018.
Prior Information Notice without call for competition12,990Often published with a view to reducing response timescales.
Prior information notice with call for competition570New feature of 2014 Directives and not available to central government bodies.
Periodic indicative notice without call for competition557
Periodic indicative notice with call for competition102
Qualification system without call for competition291Available to Utilities only
Qualification system with call for competition593Available to Utilities only

Comment:
The overall scale of activity is truly massive. Anyone who has been involved in just one OJEU-level procedure will appreciate the time and effort involved. The figures suggest that across the EU there are approximately 200,000 procedures in train at any given time. This represents a very large expenditure of effort and resources by public purchasers not to mention the corresponding time, effort and resources of all the economic operators who submit responses.

The most striking trend to emerge from the 2018 figures is the high take-up (10,495) of the new “Competitive Procedure with Negotiation” for which there seems to be a strong demand. It will be interesting to see how the use of this procedure progresses in future years in the light of buyers’ experience. There have always been concerns that, if not used properly, this procedure could shift the balance of bargaining power significantly from purchaser to supplier and lead to adverse outcomes for the taxpayer. A space to be watched.

Another noticeable trend is the increased usage of Dynamic Purchasing Systems (660) and it will also be interesting to follow how this procedure fares in future years. It would seem to have great potential in helping contracting authorities to address recurring purchases of standard “off-the-shelf” goods/services and works.
On the downside, the figures for use of direct awards (5015) and negotiated procedure without a call for competition (10,762) are disappointingly high, considering that these options are supposed to be exceptional and subject to strict limiting conditions.

Another curious feature is the apparently high level of Accelerated Negotiated Procedures used by Portugal in 2018 when it accounted for almost 100% of the use of this procedure across the EU 27.

James Farrell
Senior Procurement Consultant

e: james@publicprocurement.

Procurement Research Ltd. April 2019. The material in this post is purely for information and discussion and does not purport to advise on matters of law. Any persons affected by the matters discussed in this post should seek legal advice on their particular situation.

Direct Award of Contracts Without Advertised Competition

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Lessons from Ferrygate and knowing when you’re on Thin Ice.

This is a salutary case for public procurement officials which underlines the commercial and reputational risks inherent in awarding public contracts without advertised competition. While lacking the detail of a fully reported court case, there is still enough information in the public domain to gain an understanding of what happened and what lessons can be taken from it.

The background is that the Department for Transport in the UK awarded significant contracts for cross-channel transport services without having an advertised public procurement process as is required under EU Directives and (for now) UK law. A market operator in this space (Eurotunnel) sued the Department under relevant EU and UK procurement law when learned of the direct awards.

It is understood that if Eurotunnel had succeeded in establishing that the contracts had been awarded illegally the court could have: (i) set aside the awarded contracts; (ii) and/or awarded compensation to Eurotunnel; and/or (iii) imposed financial penalties on the Department.

There are (very limited) exceptional circumstances in which a contracting authority may legitimately award contracts without advertised competition and in this case it appears that the Department for Transport sought to claim that the contracts were not advertised due to “extreme urgency” (a permitted exception) in order to manage a no-deal Brexit. However, for this to work the Department would have to show that the claimed “extreme urgency” was not foreseeable and not of its own making.

Because a “no-deal” Brexit was officially foreseen for a long time before the contract awards it was clear that the Department did have ample time to conduct an advertised tender process if it so wished. On that basis it seems likely that its claimed justification would have failed in court and it could then have faced significant disruption and costs in having existing contracts set aside, and/or payment of substantial damages to Eurotunnel, and/or financial penalties. And so it appears that the Department decided to settle with Eurotunnel for £33 million rather than perhaps risk potentially heavier costs and penalties by letting the matter go to judgment.

This case is of particular relevance in an Irish context where the direct award of public contracts without advertised competition appears to be on the increase. As noted in a previous post, the most recent Appropriation Accounts published by the Comptroller and Auditor General during 2018 showed a significant level of contracts awarded or renewed without advertised competitive process during 2017. The published figures show that, across the 42 Votes covered, there was a total of 686 such awards to a combined value of €122.6 million.

These figures, which are self-declared under paragraph 8 of D/PER Administrative Circular 40/02, are in respect of central government bodies only and do not cover the Health, Local Authority, Semi-State (commercial and non-commercial) and Utilities Sectors, so the true level of direct awards may be far higher. While some of these direct awards may be genuinely justifiable within the permitted exceptions, it is possible that many are simply awarded, “rolled over”, or “extended” for reasons of administrative convenience or lack of resources to undertake the necessary procurement procedures.

The Eurotunnel case emphasises that this approach to the award of public contracts may give rise to serious financial risks for the taxpayer. We have been fortunate that suppliers in Ireland have been reluctant to take issue with “direct award” practices in the courts, up to now, but that could change if more suppliers follow Eurotunnel’s example. There are signs that suppliers are beginning to realise that the enforcement of public procurement law is in their hands via the courts ( or C&AG and the PAC ) and that suffering in silence while waiting for the European Commission or others to intervene and enforce the rules is not a realistic option.

It would seem that many Irish contracting authorities are not fully aware of the nature and extent of the risks they are taking in making direct awards and it must be said that the official guidance materials under which they operate do not fully spell out these risks. Circular 40/02 as the title indicates, dates from 2002 and is not cognisant of major changes to procurement law that have taken place since then, and in particular: the Remedies Regulations of 2010 (as amended); a completely new set of EU Procurement Directives in 2014; as well as several significant Irish and European Court of Justice decisions.

The more recent Office of Government Procurement Guidelines require that direct awards over certain values be reported in line with Circular 40/02 but do not go further in highlighting the risks of court challenge and the possibility of damages and/or financial penalties for unlawful direct awards.
In addition, the OGP Guidelines do not mention the possibility of using Voluntary Ex Ante Transparency Notices to mitigate the risks arising in unavoidable direct award situations and this will be the subject of next week’s post.

James Farrell
Senior Procurement Consultant

The material in this post is purely for information and discussion and does not purport to advise on matters of law. Any persons affected by the matters discussed in this post should seek legal advice on their particular situation.

“Light Touch” Procurement Procedures

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Background
The recitals to Directives 2014/24/EU and 2014/25/EU set out reasons for excluding certain social, health, educational and other specified services from their full scope and for applying higher thresholds of €750,000 and €1,000,000 respectively before OJEU advertisement of these requirements is mandated.

The Directives go on to specify the services subject to this so-called “Light-Touch Regime” by reference to a listing of CPV (Common Procurement Vocabulary) Codes set out in Annex XIV to the Public Sector Directive and Annex XVII to the Utilities Directive.

The “Light-Touch” Annexes are curious in that they look to have been put together in something of a hurry. Instead of setting out a clear and full listing of the services in question as one would expect in a legal enactment, it includes numerical-only groupings such as “from 85000000-9 to 85323000-9” which requires procurement officials to carry out a cross-reference check against the full CPV Code listing in order to establish what services are in fact covered in that grouping.

There also seems to be a degree of arbitrariness when it comes to the services included in the “Light-Touch” regime. For example, the provision of “security services” is classified as “Light-Touch” and excluded from standard procedures whereas “cleaning services” is not and remains subject to the standard rules. Both these services are increasingly provided and procured together as “facilities management” packages and it is not at all clear why such closely-related economic activities should be subject to very different treatment under public procurement law.

Uptake to Date

It appears from Tenders Electronic Daily that there is a significant appetite for the new procedures with some 170 over-threshold “Light-Touch” procedures advertised on TED from 2015 to date, mostly involving health service requirements in the UK (141 notices), Ireland (26) and Luxembourg (3).

This begs the question as to how the other EU Member States are applying the “Light-Touch” rules, or if they are using them at all?

A review of some of the Notices published on TED also highlights the following:

  • One project for housing services, which expressly claims to be an “Annex XIV procedure” uses CPV codes that are not so designated in the Directive;
  • One notice for “Executive and Legislative Services” is in fact for qualified accountants to act as court-appointed official receivers in corporate bankruptcy matters. As accountancy services are subject to the normal rules, one would have expected the procurement in this case to err on the side of caution and follow standard procedures for accountancy services.
  • Another notice classifies what appears to be a works/fitting-out project as “Health Services” apparently because the works in question are required for a hospital.

This raises the question as to whether anyone is monitoring these notices in the publishing authorities before release.

Issues for Procurement Officials

CPV Codes should always be carefully checked prior to issue of Contract Notices.

Consideration of the “Light-Touch” procedure needs to be carefully checked by cross-reference to the CPV Code. This can give rise to tricky situations where the procurement official will have to exercise careful judgment. For example: a requirement may involve the provision of “event services” with CPV Code 79952000 which is within the scope of the Light-Touch regime but may also involve the hire of audio equipment or other goods/services which have different CPV Codes that are subject to the normal transparency requirements and the lower thresholds. Prudence would suggest that an orthodox approach using standard procedures should be taken in such cases.

The use of CPV Codes is a mandatory legal requirement for all notices published at OJEU/TED level and is a critical element in the effective communication of requirements to the market, and in enabling contracting authorities/entities to meet their transparency obligations. The incorrect use of CPV codes would seem to be a matter of concern to the EU Commission, particularly in the light of the 2017 Cosinex report which cited one study that found incorrect use of CPV codes in 23% of notices analysed. The Cosinex report concluded that CPV errors have an appreciable adverse impact on transparency and the achievement of value for money. It remains to be seen what action the Commission will take in response. In the meantime, procurement officials should exercise care in the use of CPV codes given that incorrect or misleading CPV Codes may conceivably result in legal challenge1, particularly if there has been an adverse or misleading impact on the transparent communication of a requirement to the market.

Issues for Service Providers

Service providers need to be alive to the potential for mis-classification errors with the CPV Codes and should establish procedures to monitor published TED notices by use of key-word searches in addition to monitoring by CPV Code.

There is also a risk of reduced competition in the market sectors subject to the “Light-Touch” rules because there is no longer a legal obligation to advertise on TED/OJEU for requirements with values in the ranges €144- €750K (Central Government) and €443- €1m (Utilities).

This could see a lot of business being awarded without advertised competition although it appears that, for now, many contracting authorities/entities are continuing to advertise such contracts on national e-procurement portals on the basis of either national administrative rules or good practice in securing value for money. However, in the case of Ireland at any rate, there may be a further question as to whether such contracts are “reviewable contracts” as defined for the purposes of the Irish Remedies Regulations because the awarding of such contracts is outside the scope of the Irish Public Contracts Regulations of 2016. If that view is correct, it could mean that Irish economic operators in the social/health/educational sectors do not have access to the same legal remedies to challenge procurement decisions as economic operators in other sectors. This seems inherently unfair and a perverse outcome for legislation that has the elimination of arbitrary discrimination as one of its primary objectives.

James Farrell
Senior Procurement Consultant 

Snapshot of Irish Procurement Activity at EU level* in 2018

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The following statistics, extracted from the EU Commission’s Tenders Electronic Daily, provide an interesting snapshot of the level and types of procurement activity undertaken by Irish contracting authorities during 2018. It suggests a number of interesting trends including:

  • the emergence of the first Dynamic Purchasing Systems as enabled by the 2014 Directives;
  • significant uptake in the use of Competitive Procedure with Negotiation (41);
  • the first use of Contract Modification Notices (which permit certain changes to contracts during their term);
  • the first use of so-called “Light-Touch” procedures for certain health and social services as prescribed in Annex XIV to the 2014 Directive; and,
    an increased use of Voluntary Ex Ante Transparency Notices (VEAT).

We will comment further on the foregoing trends in future posts over the coming weeks but, for now, here are the main details for 2018:

Irish Procurement Activity at EU level* in 2018

Type of Notice Number Published by Irish Contracting AuthoritiesComment
Contract Notice 1,545Of which 1,268 were issued under the Public Sector Directive; 269 under the Utilities Directive and 8 under the Defence Directive.
Contract Notice for Open Procedure1,016
Contract Notice for Restricted Procedure 215
Contract Notice for Negotiated Procedure237(Utilities only)
Contract Notice for Competitive Procedure with Negotiation41(only available to Public Sector CAs since 2016)
Contract Notice for Competitive Dialogue 35
Contract Notices for Framework Agreements 320
Contract Award Notice1,1881,029 under Public Sector Directive; 157 under Utilities; 1 under Defence; 1 under other.
Prior Information Notice without Call for Competition125
Prior Information Notice with Call for Competition15
Periodic Indicative Notice27
Without Call for Competition
Periodic Indicative Notice with Call for Competition1
Design Contest6
Works Concession1
Services Concession10
Concession Award Notice 4
Qualification System with Call for Competition37Available to Utilities Sector only
Dynamic Purchasing System5
Voluntary Ex Ante Transparency Notice 28
Contract Modification Notice26
Annex XIV Notices (“Light Touch” Procedures) subject to €750k threshold (Public Sector) and 1m (Utilities)12Approx. 100 such notices for EU as a whole, with remainder from UK.
Corrigendum Notices 149

*This data relates only to contracts/concessions with values in excess of monetary thresholds prescribed in EU Directives. A large volume of contract notices for contracts under EU-Threshold values are published on the national procurement portals www.etenders.gov.ie and www.supplyGov.ie

The publication of contract notices represents the majority of activity and the number published in 2018 (1,545) represents an increase of 326 (or 26%) over the number of such notices published in 2014 (1219).

The publication of contract award notices shows a continuing and welcome improvement over previous years with 1,188 such notices published in 2018, an increase of 466 or 64% over the 722 award notices published in 2014.

At national level, the etenders website indicates that there were approximately 6,300 contract notices published on that portal during 2018 with approximately 2,800 award notices.

However, on the down side, the 2017 Appropriation Accounts published by the Comptroller and Auditor General during 2018 showed a continuing high level of contracts awarded or renewed without competitive process in 2017. The published figures show that, across the 42 Votes covered, there was a total of 686 such awards made during 2017 to a combined value of €122.6 million. These figures, which are self-declared under Circular 40/02, are in respect of central government bodies only and do not cover the Health, Local Authority, Semi-State (commercial and non-commercial) and Utilities Sectors.

With regard to the Health Sector, the 2017 HSE Annual Report confirms that non-compliance with public procurement rules remains an issue. That Report states that “Comptroller and Auditor General findings in 2017 indicated a level of non-compliance in relation to 36% (by value) of the sample of payments examined at 5 HSE locations visited during the audit.” However, the HSE (Health Procurement Services) is committed to addressing this matter and has put a programme in place to enhance compliance in the coming years.

Clearly, while much is being done by many diligent officials across the system, there is still room for improvement.

James Farrell
Procurement Research Limited
7 February 2019

© Copyright Procurement Research Limited, February 2019. Used by Public Procurement Services Ltd. with permission. Further use or citation not authorised without permission of copyright holder and due attribution.

Selling to Government Breakfast Briefing – 31 January 2018

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Selling to Government – Breakfast Briefing – Wednesday 31 January 2018 @ IBEC
InterTradeIreland in partnership with the Office of Government Procurement, Enterprise Ireland, IBEC, SFA, ISME, CIF and Chambers Ireland are delighted to deliver the first of a series of breakfast workshops to demystify, educate and engage businesses on the island around public procurement, a market worth in the region of €12b.

This first introductory level briefing will cover:

What is procurement,
The procurement models on the island,
How to access opportunities,
Good bidding practice and common mistakes to avoid.

The briefing is aimed at micro businesses and SMEs who are new to public procurement or those who wish to update their market knowledge.
The briefing will also be an opportunity to network with like-minded businesses.

Click here to register directly:

https://sellingtogovernment-breakfastbriefing.ya-yaonline.co.uk/

 

Public Procurement Book Launch

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Public Procurement Book - Rules of the Road

Some €90 billion in supplies, services and works will be procured in Ireland and Northern Ireland over the next five years—a significant opportunity by any reckoning. While tendering is an essential but a complex task, many companies struggle to submit a compelling and competitively priced tender document. [Read more…]

Office of Government Procurement – Who buys what?

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On the 1st January 2014 the National Procurement Service (NPS) officially transferred from the Office of Public Works and was integrated into the Office of Government Procurement (OGP) under the Department of Public Expenditure and Reform. The OGP will buy centrally all of the common goods and services on behalf of the entire public sector – this represents a dramatic change in Irish public procurement. [Read more…]

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