Reform of EU Procurement Law: A better deal for construction? - DAC Beachcroft

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Reform of EU Procurement Law: A better deal for construction?

Published On: 2 September 2014

On 11 February 2014, the EU Council adopted a package of three new Directives aimed at reforming the EU procurement regime. Among the stated aims of the reforms are an increase in the efficiency of procurement processes and ensuring that Small and Medium Enterprise (SME) bidders are better able to access public sector opportunities.

In the construction world, it is fair to say the market has traditionally seen public procurement as a barrier to public sector contracts. Procurement processes are traditionally either very restrictive - so that bidders are not able to discuss with the authority its requirements before submitting their tender - or include long and drawn out dialogue processes, which require significant commitment of resources, time and fees to participate in a process where award of a contract is not guaranteed.

So do the reforms do anything to help? Will we see procurement becoming more practical, less cumbersome and more streamlined?

We will see the introduction of an express ability to conduct pre-procurement market consultation with potential contractors and suppliers. The aim here is to reduce the need for discussions with bidders during the procurement process itself. Historically, authorities have shied away from this, given the potential for one bidder to influence the shape of the procurement to its benefit and the clear risk of an unfair advantage. However, the Directive encourages authorities to find ways to level the playing field after such consultations; for example, by distributing information to all bidders. It also prevents an authority from excluding any bidder on the bare assumption that to include them would be unfair to others.

The new Directives have slightly reduced the minimum timescales that authorities must observe when running tender processes. Interestingly, they allow timescales to be significantly reduced where all the bidders in a process agree and there is a slight relaxation of the circumstances in which authorities can use the accelerated/urgency timescales. We have also seen the abolition of arguably the most complex and lengthy procurement process, the negotiated procedure, as well as the introduction of a more streamlined procedure, catchily named the "competitive procedure with negotiation". The latter is tipped to become the most commonly used process for more complex procurements although authorities will still be able to use the competitive dialogue procedure for complex procurements if they so wish.

While the purpose of a competitive dialogue process is the negotiation of solutions to meet the needs of the authority, with tenders submitted at the end of a dialogue process, the competitive procedure with negotiation sees the submission of initial tenders at the start, and negotiation of those tenders with the aim of improving their content. Interestingly, the Directive states that either of these more complex procedures can be used where there is an element of design involved and the EU has stated that this is likely in works contracts for "non-standard" buildings or where innovation is required.

Other measures aimed at making tender processes more efficient include: the mandatory use of electronic communication for all stages of the procurement (including submission of electronic tender documents rather than glossy hard copies); and a requirement to accept a simplified self-declaration that the applicant meets minimum requirements (with information to be verified at a later date) in place of lengthy sections of pre-qualification questionnaires.

The extent to which existing public contracts can be changed without triggering the requirement for a new procurement has also been clarified. For works (i.e. construction) contracts, where the value of a change to the contract does not exceed 15% of the original contract value and is not itself in excess of the applicable EU financial threshold (currently circa £4.3 million for works contracts) then, generally speaking, the change will not be considered to be material and no new procurement will be required.

It is worth noting the Directives have now been adopted by the EU, but they will not be effective in the UK until they have been implemented into domestic law. The Cabinet Office has said it will implement the Directives as early as possible to take advantage of the more advantageous provisions, but concedes it will first need to undertake a period of consultation before any legislation is proposed. New legislation must, however, be in place by March 2016 at the latest.

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