the new procurement landscape (cih) policy docs/session 1... · 2.procurement issues relevant to...

1

Introduction

1. New Legislation

2. Procurement issues relevant to the Housing Sector

- Land Development Agreements

- Ambiguous Tender Documentation

- Nature of Selection/Award Criteria

- Abnormally Low Tenders

- Disclosure of Reasons for Award Decision

3. Q & A

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(1) Legislation – Procurement

Treaty of Rome

Freedom of movement of goods (Art 28)

Freedom to provide services (Art 49)

Freedom of establishment (Art 43)

Derived PrinciplesEqual treatment

Non-discrimination

Proportionality

Transparency

Mutual recognition of standards/qualifications

EC Directives2004/17 – Utilities Contracts

2004/18 – Public Sector Contracts

National Regulations(For England, Wales & NI)

Public Sector – SI2006 No 5Utilities sector – SI 2006 No 6

Fully regulated contracts –

Above thresholdContracts not fully

regulated

(eg. Part B services)

Excluded

contracts

(e.g. service

concessions)Contracts below threshold

(e.g. £3.5m works)

Evolving Case law

Commission

Interpretive

Communications

Guidance

(OGC etc)

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(1) Legislation – Procurement

Existing NI law:

Public Contracts Regulations 2006

● Public Sector Directive 2004/18

● Remedies Directives 89/665 and 92/13

● Remedies therein continue to apply to award procedures commenced before 20 Dec 2009

Recent New Legislation:

1. Public Contracts (Amendment) Regulations 2009

• Directive 2007/66 (amends above Directives)

• Amends 2006 Regulations

• Contains new remedies for award procedures commenced on/after 20 Dec 2009

2. Public Procurement (Miscellaneous Amendments) Regulations 2011

• Amends 2006 Regulations further

• Came into force on 1 October 2011

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(1) Main Legislative Changes

a) New Remedies for Breaches of Procurement Law

b) New Rules for the Standstill Period

c) New Time Limits to Bring a Claim for Breach

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(1a) Pre-existing remedies for Breach

PRE-EXISTING REMEDIES…

Before Contract Signed

• Temporary injunction to suspend award procedure

• Order to set aside an unlawful decision of authority

• Order documents to be amended

• Award damages for loss/damage

After Contract signed

• Award damages for loss (only remedy)

Existing remedies open to abuse in certain circumstances..

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(1a) New remedies for breach

NEW REMEDIES…

Public Contracts (Amendment) Regulations 2009

Before Contract signed

• Award procedure is automatically

suspended on issue of legal challenge

– no injunction necessary!

After Contract signed

• MUST order (prospective)ineffectiveness of contract + fine (unless general interest exception applies)

• Contract shortening

• Fines

Courts do not make declaration in ineffectiveness if “overriding reasons relating to a general interest require that the effects of the contract should be maintained”

..in which case remedy = fines/contract shortened

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(1a) Automatic Suspension: Experience to Date

England

Nov 2010: Indigo v Colchester Institute – lifted

Dec 2010: Exel Europe v University Hospitals – lifted

Jan 2011: Halo Trust v Sect of State – lifted

April 2011: Metropolitan Resources v Sect of State – lifted

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(1a) Automatic Suspension: Experience to Date

Northern Ireland

June 2011: Clinton v Dept. for Employment and Learning – not lifted

June 2011: First4Skills v Dept for Employment & Learning – not lifted

June 2011: Resource Management v NI Court Service – not lifted

June 2011: Easy Coach v Dept. of Regional Development - not lifted

Alas..

July 2011: Rutledge v Department for Employment & Learning - lifted

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(1a) Ineffectiveness

Prospective only

Accompanied by a financial penalty

Arises only in 3 circumstances

(i) Illegal Direct Award – no OJEU published

(ii) Breach of procurement law and standstill period/automatic

suspension rules

(iii) Breach of procurement procedures for above threshold call off

contracts under a multi-supplier framework that necessitate a

mini-competition

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(i) Illegal Direct Award

Sounds straightforward (no OJEU)… but could catch:

• misapplication of rules relating to thresholds, service concessions, land development agreements etc.

• mistaken view that service was a Part B service

• contract outside scope of OJEU advertisement

Alstom v Eurostar & Siemens (Eng, HC July 2011) - 1st case seeking ineffectiveness

Question of prior notice = mechanistic test; Alstom argument that scope of contract materially altered since notice published, rendering original notice irrelevant – rejected. There was a notice; if later moved away from advertised scope, that is breach of subsequent procedure.

• material variation to existing contract: Pressetext Case

VOLUNTARY EX ANTE TRANSPARENCY (VEAT) NOTICE? (insurance policy)

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(ii) Serious procurement breaches

TWO PART TEST –

(i) breach of procurement procedural rules

(other than standstill rules) where that breach has affected the chances of the operator obtaining the contract

AND

(ii) breach of standstill rules/automatic suspension rules

if that breach deprives the tenderer of the possibility of starting or pursuing pre-contractual proceedings

Alstom v Eurostar & Siemens (Eng, HC July 2011)

– applicant not deprived of opportunity to commence proceedings

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(iii) Framework Agreements

Applicable only to:

• above threshold

• call off contracts

• under a multi-supplier framework

• that necessitate a mini-competition

Courts can declare such call off contracts ineffective if authority has

voluntarily chosen not to apply a standstill period (as it is entitled to do), and

there is an infringement of the mini-competition rules

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(1b) New Rules for the Standstill Period

Previous Position

1. Request reasons within 2 WD of period; reasons were only released at least 3 WD before end of period

2. All participants in process generally notified (even if eliminated earlier)

3. Not required

4. 10 day period between despatch of notice and entering contract

New Position

1. Full reasons for award decision must now be automatically released at same time as notice of decision

2. Notice only sent to tenderers and candidates who haven’t already been notified of their rejection

3. Notice to include information about the ending of the standstill period

4. 10/15 day standstill period now calculated differently depending on means of communication

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(1b) Standstill Notice

In addition, notices still have to:

• include criteria for award of contract

• reasons for decision and reasons (if any) why technical spec not

met

• name of successful tenderer

• characteristics and relative advantages of the successful tender

• the score (if any) obtained by the recipient of notice and the

successful tenderer

NOW GREATER ONUS ON AUTHORITY TO GIVE ALL REQUISITE

INFORMATION – OTHERWISE RISK OF INEFFECTIVENESS!!

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(1c) New Time Limits to Bring a Claim

Time Limits for claiming Ineffectiveness

6 months of date contract entered into

OR

30 days IN CASES WHERE THERE WAS AN OJEU NOTICE

- by informing tenderers/candidates concerned of the concluding of the contract (once it is actually entered into); and

- giving a summary of the reasons for the decision (could be by reference to reasons given in standstill notice).

Alstom v Eurostar & Siemens (Eng, HC July 2011) – summary does not have to be in any particular form; could be verbal; ‘a clear and relatively short document or statement’; claim for ineffectiveness was time barred.

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(1c) Time Limits for Other Claims

2011 Regulations: (as of 1 October 2011)

‘date of knowledge’ = date when first knew/ought to have known

grounds for proceedings had arisen

- If date of knowledge BEFORE 1 Oct 2011 = 3 months to claim

- If date of knowledge AFTER 1 October 2011 = 30 days to claim

(unless Court believes good reasons to extend up to 3 months)

Henry Bros v Dept of Education (NI, Court of Appeal, Sept 2011)

Standstill period to expire within limitation period, but was extended so standstill ended outside

limitation period (in this case 5 days) - CA extended limitation period

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(2) Procurement Issues relevant to Housing Sector

(a) Land Development Agreements

(b) Ambiguous Tender Documentation

(c) Nature of Selection/Award Criteria

(d) Abnormally Low Tenders

(e) Disclosure of Reasons for Award Decision

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(2a) Land Development Agreements

Auroux v Roanne (ECJ, 2007)

- Regeneration project - municipality agreed with SEDL to construct leisure complex

- No public competition to select SEDL

- Part development to be sold off to third parties / part to be transferred to municipality

- SEDL to acquire land, undertake, manage and co-ordinate the project

- Municipality part funded the development, some facilities to transfer back to

municipality permanently; other facilities to transfer pending sale to third parties

- ‘Public Works Contract’?

- ‘..contacts for pecuniary interest.. which have as their object either the execution, or

both the execution and design of works.. corresponding to the requirements specified by

the contracting authority..’

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French Govt – facilities to be developed and sold to third parties do not correspond to the municipality’s requirements & facilities to be transferred to municipality are pure land acquisition

Held:

- While contract included both services (organising and managing the project) and works, the main purpose was performance of works (by SEDL/its sub-contractors) leading to the development of a leisure centre

- Contract was to redevelop particular area, scope of contract included all facilities –these were to be developed in accordance with municipality’s requirements

- Not relevant that the municipality was to be owner of whole or part of the development

- Above threshold contract – taking account of the total value of works from perspective of a potential tenderer (amounts paid by municipality + revenue from third parties)

- Fact that SEDL was semi-public body (obliged to comply with procurement law itself) did not exempt the deal from application of procurement rules

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Helmut Muller (ECJ, March 2010)

- Challenge by under-bidder who claimed that sale of municipal land would be followed

by a public works contract for redevelopment of the land in accordance with

municipality’s requirements (not tendered)

Held: ‘contract for pecuniary interest’ means a legally enforceable obligation pursuant to

which the authority receives a service in return for consideration (service = realisation of

works from which the authority intends to benefit)

Such a service must be of direct/immediate economic benefit to the authority

- e.g. where authority is to become owner of the work, where authority is to hold legal right over the

use of the work, where authority is to gain economic advantage from future use/transfer of work,

where authority contributed financially to the realisation of the work, where authority assumes risk of

failure of the work

Works need not be physically carried out for the authority but if they are carried out for that authority’s

immediate economic benefit and if they are defined by the authority or the authority has a decisive

influence over the design of the work, it will be a public works contract for purposes of procurement law

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Practical Considerations for Housing Sector

- Is development at the initiative of the authority or the developer?

- Is development to be to authority’s specification/design or based on

developer’s proposals (albeit proposals sought/chosen by authority)?

- Will authority gain any direct/immediate economic benefit from transaction?

- Is there any form of pecuniary interest passing from authority to developer?

- Are there contractually enforceable obligations on developer to realise work?

- If answer is yes – it is likely to be a public works contract

- Sanction of ineffectiveness may be available for 6 months

- If in doubt, hold a public competition/publish a VEAT notice

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(2b) Ambiguous Tender Documents

SIAC (ECJ, Oct 2001)

“Tenderers must be in a position of equality both when they form their tenders and when those tenders are being assessed …

Award criteria must be formulated in such a way as to allow all reasonably well informed and normally diligent tenderers to interpret them in the same way”

No ambiguities which could materially affect preparation of tenders:

Scott & v BELB (NI, June 07)

Implied contract includes an implied term of fairness and good faith

Fairness includes the evaluation of tenders in uniform manner and as intended by the tender document

Mistakes or ambiguities in tender documents may affect uniformity of evaluation

If material, ambiguities may cause a tenderer to proceed on a different basis to others or submit a bid ‘more than negligibly different’ from a bid he would otherwise have submitted.

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Clinton v Department of Employment and Learning (NI, Jan 2012)

Contract for training services

� PQQ assessed on pass/fail basis only

� First selection criterion formulated as follows:

“Tenderers must demonstrate that they have the necessary experience to

deliver high quality training programmes of similar scope to that described

through the use of an example (or examples) of programmes delivered within

the last 3 years. This shall include dates, outcomes and explanations as to

why the experience is considered to be relevant…”

Bidder excluded, even though highly experienced training provider

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Debriefing letter stated:

“Insufficient evidence to demonstrate the necessary experience of high quality provision.

Whilst the number of learners engaged was presented, no data provided in respect of

achievements, success rates or destinations into positive outcomes. The outcomes listed

(…) do not provide specific detail”

Bidder initiated proceedings arguing that:

- first selection criterion was ambiguous

- failed to convey clearly the information required of a bidder

- application of an undisclosed or ambiguous selection criterion

Held – not an undisclosed selection criterion, but criterion gave rise to “an

unacceptable degree of doubt and uncertainty”

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- Objectively review competition rules for ambiguities

- Define precisely as much as you can / ‘one interpretation’

- Invite clarifications from bidders

- Clarify for the benefit of all

- Seek confirmation that bidders are not aware of ambiguities

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(2c) Nature of Selection/Award Criteria

• Qualification criteria

- To select those whose tenders will be considered

- Economic & Financial Standing

- Technical or Professional Ability

- Regulations 23-26 of Public Sector Regulations 2006

• Award criteria

- Used to evaluate tenders

- Lowest price or Most Economically Advantageous Tender (MEAT)

- Regulation 30 of Public Sector Regulations 2006

critical distinction

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(2c) Nature of Award Criteria

Lianakis (ECJ - 2008)

Qualification criteria cannot be used at award stage

Qualification not aimed at identifying MEAT but rather at the tenderers’ ability

to perform contract

Authority may not take account of tenderer experience, manpower,

equipment or ability to perform the contract by anticipated deadline as part

of award criteria.

Pre-qual of applicants

BACKWARDS LOOKING - TO THE BIDDER

Award to ‘tender’

FORWARD LOOKING - TO THE BID

v

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Also..

� Must be concerned with establishing which is the “most economically advantageous” tender (if not being awarded on basis of lowest price)

� Not necessarily ‘economic in nature’

� Must be linked to subject matter of contract

� Must be proportionate

� Must not confer unrestricted freedom of choice

� Must be capable of verification by authority

� Do not use qualification criteria or criteria already checked at qualification stage

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- Criteria should be relevant and proportionate to contract

- Consider an appropriate split between quality and price

- Price criteria should be formulaic and clearly shown

- Use various quality criteria to help distinguish between bidders

- Use a detailed scoring matrix (e.g. 0-5, 0-10)

- Specify tie-breaker criteria

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(2d) Abnormally Low Tenders

- Economic downturn

- Drive to reduce public spending

- “Competitive” pricing attractive on the face of it

- Concerns about:

- deliverability (standard of performance and contractor insolvency)

- seeking changes during contract to recoup additional costs

- long term detriment to competition

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- Some countries’ national legislation defines it:

e.g. [●]% deviation from average price tendered, below cost tendering, a

price which leaves no room for normal profit

- Not the case in Northern Ireland

- Case law establishes that authorities should consider whether the bid is:

“genuine”

“genuine & viable” or “sound & viable”

“reliable & serious”

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Regulation 30 of the Public Contracts Regulations 2006

If offer is abnormally low, it may be rejected only if authority has:

� requested an explanation

� taken account of the response

� verified the offer is abnormally low

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(2e) Abnormally Low Tenders

In seeking an explanation, authority may request details of matters such as:

� economics of construction methods

� any exceptionally favourable conditions available to the tenderer

� details of originality of works/services/supplies

� compliance with employment protection provisions

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(2d) Abnormally low tenders

Varney v Hertfordshire County Council (HCt, Eng, June 2010)

Varney not awarded any of 18 household recycling contracts

1. (Non-disclosure of sub-criteria

ATI case applied; disclosure of sub-criteria/weightings would not have affected preparation of bids, so did not have to be disclosed – affirmed in CA)

2. Abnormally low tenders?

Reg 30(6)

Varney suspected below cost tenders submitted

No duty to investigate suspect bids to see if they are abnormally low

No duty to investigate abnormally low bids, unless going to reject on that basis

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(2d) Abnormally low tenders


- Always follow Regulation 30(6)

- allow bidder to demonstrate reasonableness

- opportunity to explain, not amend bid

- consider the response

- hard to reject where assurances are given

- Consider ‘enhanced’ PQQ

- Consider lower price / higher quality weightings

- Set threshold below which you will investigate price

- Ensure contract is watertight

- Seek performance bond, parent company guarantee etc.

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(2e) Disclosure of Award Decision Reasons

Regulation 32 (1)

Tenderers and candidates must be notified in writing of decision; notices to tenderers must contain:

� Name of economic operator to be awarded contract or to become party to framework

� Award criteria

� Reasons for decision - including ‘characteristics and relative advantages’ of successful bid

� Score (if any) obtained by—

– economic operator which receives the notice; and

– economic operator to be awarded the contract

� Any reason for not meeting technical specifications

� Precise statement of either:-

– when ‘standstill period’ expected to end (and contingencies which might affect this); or

– date before which authority will not enter into the contract/conclude framework.

Reg 32(2A): candidates entitled to reasons and above information, except ‘relative advantages’

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Dynamiki v Court of Justice (Case T-272/06)

“all the information that would be necessary for the unsuccessful bidder to determine whether or not a decision is well founded”

“the reasons given must reflect the actual conduct of the evaluation procedure”

“ a statement of reasons which does not identify the true basis upon which a decision rejecting a bid has been taken and does not reflect faithfully the manner in which the rejected bid has been evaluated is not transparent and does not fulfil the obligation to state reasons..’

Dynamiki v Commission (Case T-59/05)

“It would be desirable… that the contracting authority should ensure that any evaluation committee report issued in a tendering procedure be as substantial as possible, setting out in detail the reasoning which led to the proposal to award the contract to one specific tender and to reject, consequently, the tenders of other candidates.

The fact that ‘a lot of work is done behind the scenes’ cannot release the … authority from the obligation … to take pains to ensure that all the factors on which it has based its decision are revealed”


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Practical Considerations

- Record full reasons for decision during evaluation process

- Provide scores, relative advantages and characteristics

- Beware of divulging confidential information (seek consent in ITT?)

- Ensure award letter is fully compliant

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Conclusions

Housing Sector subject to unprecedented scrutiny

Procurement law becoming ever more complex and litigious

Courts assiduous in protecting the rights of tenderers

Specialist resources are now necessary to ensure compliance

Public sector should be aware of the constraints – to run successful

competition and minimise risk of challenge

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Thank you

Peter Curran, Partner

Head of Projects and Procurement

Email: [email protected]

Tel: 02890 265889

Photo

www.arthurcox.com

Belfast

Capital House, 3 Upper Queen Street, Belfast BT1 6PUtel: +44 28 9023 0007 | fax: +44 28 9023 3464email: [email protected]

Dublin

Earlsfort Centre, Earlsfort Terrace, Dublin 2tel: +353 1618 0000 | fax: +353 1618 0618email: [email protected]

London

12 Gough Square, London EC4A 3DWtel: +44 20 7832 0200 | fax: +44 20 7832 0201email: [email protected]

New York

300 Park Avenue, 17th Floor, New York NY 10022tel: +1 21 2705 4288 | fax: +1 21 2572 6499email: [email protected]