European Public Procurement Course Notes

1. INTRODUCTION TO EUROPEAN PUBLIC PROCUREMENT

When a governmental organisation or a public authority purchases from external suppliers, it is called Public Procurement. In Europe, public authorities spend over 2000 billion a year to purchase goods and services. This giant purchasing power is a major instrument for authorities to create more wealth for all its citizens. This is done by creating competition as this forces each supplier to be innovative and produce better quality products at lower prices. For that reason, (European) public authorities have designed procurement rules, which stimulate maximum free and fair competition amongst suppliers. There are specific rules to be followed but they are actually all centred on the EU core principles, which are transparency, proportionality, equal treatment, and non-discrimination. Care should be taken to apply these rules as much as possible throughout the entire procurement process.

Transparency means visibility and openness at every stage of the procurement process, including logging records open for inspection by internal and external auditors. Equal treatment means that public bodies should treat all suppliers in a fair and equal manner. Non-discrimination means that public bodies in one member state must not do anything to make it more difficult for suppliers from other member states to bid on a contract. Proportionality means that public bodies should not impose conditions that are disproportionate to the requirements of the contract.

With respect to European Public Procurement, the rules only apply to public bodies and government organisations of a European member state, for the purchase of works, goods and services above a specific monetary threshold level. ___________________________________________________________________________________________
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European Public Procurement is actually a best practices procurement process. Many public authorities therefore have adopted the same/similar rules for their purchases which fall below the European threshold level. Also thanks to the Government Procurement Agreement or GPA, an international agreement negotiated by the World Trade Organisation (WTO), the benefits of the rules extend to several other countries worldwide. Therefore, compliance with the European Public Procurement rules ensures compliance with the GPA. The signatory countries to the GPA are: Aruba, Canada, Hong-Kong, China, Iceland, Japan, Republic of Korea, Liechtenstein, Norway, Singapore, Switzerland and the USA.

When the rules are not applied correctly, suppliers can go to court and the buying organisation might if found guilty- have to pay a penalty and/or postpone the project, which might have a major impact on its business. The rules are enforced through local member states' courts and the European Court of Justice.

2.
2.1.

OVERVIEW OF THE EUROPEAN PUBLIC PROCUREMENT PROCESS

INTRODUCTION

The European Public Procurement process can be divided into two broad steps, Pre and Post Publication. The turning point of the process is the publication of the purchase i.e. when the buyer formally turns to the market.

The steps before publication are: developing specifications developing a 5-step preparation plan: 1. Determine type of purchase 2. Estimate the contract value 3. Choose a procurement procedure (open/close, negotiated or competitive dialogue procedure) 4. Develop selection criteria. 5. Develop and award criteria writing of the Request for Tender of RFT document

After publication and once the RFT is released, care should be taken regarding how to: communicate with suppliers evaluate the tenders

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award the contract

Special rules apply to the utilities sector, which covers water, energy, transport and postal services sectors. The Utilities directives provide more flexibility in tendering procedures, reflecting the more commercial remit of the utilities sector. These are for example higher thresholds and a much wider scope to choose for the negotiated procedure.

2.2. 2.2.1.

STEP 1: SPECIFICATIONS Role of the Buyer

Off all of the stages for the procurement process, the potential for savings is highest at this specification stage.

The internal customer is responsible for setting the specifications. Next to guarding the rules, the role of the buyer in this phase is to challenge and influence specifications to reduce total costs and safeguard a competitive market.

2.2.2.

Best Practices for Developing Specifications

Development of specifications is a 3-step process:

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1. Assessing the needs of internal customers In this first step, you would sit down with your internal customer and explore his needs, align expectations for the upcoming procurement process and develop a timetable. 2. Market consultation Second match the needs with the appropriate products or services. You will probably need to consult an internal expert within your organisation or refer to the specifications from a previous tender. If in-house expertise is not available, you should turn to the market. This is called market consultation. You can approach consultants with market expertise, look for information on the Internet, visit exhibitions or even approach suppliers. When approaching potential suppliers, you should be extremely cautious with respect to the principles of equal treatment and transparency. 3. Developing the specifications document. Decide on using functional or technical specifications: Technical specifications describe in detail what the product will look like. Functional specifications describe what the product needs to deliver entirely from the user's perspective. Make a distinction between knock-out and nice to have criteria. The knock-out or must-have criteria are specifications that are mandatory for all suppliers. A supplier who does not comply with any of the knock-out criteria is deemed to be out of contention. On the other hand, the nice to have criteria are specifications that could be beneficial, but are not strictly required to comply with the project. These specifications are optional.

Categorising specifications based on knock-out and nice to have criteria helps avoid over specification. It is good practice to focus on the knock-out criteria and primarily add them in ___________________________________________________________________________________________
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the specifications document. Develop the specifications document Use the 5W in the bed methodology to challenge the specifications. Categorise specifications: a possible categorization might be: 1. Product/service description Detailed description of the requirements. As stated above, you have the choice between technical or functional specifications to describe your need. 2. Deliverables: Volumes: quantities, batch sizes, and other related aspects Due dates, lead times (time between raising the order and final delivery), frequency of delivery, delivery places and such similar information. Duration 3. Quality requirements Service Level Agreements Minimum acceptance criteria (ex. ISO standards, permits, ) 4. Approvals 5. Buying organization input

2.3.

STEP 2: 5-STEP PLAN

Next, the buyer and the project team need to run through 5 stringent and specific steps: 1. Determine the type of purchase. The European Union directives only cover contracts for purchase of works, supplies and services. It is important to determine the right type of contract as there are some differences in treatment, for example with respect to monetary threshold levels. Works is about buildings and civil engineering contracts, such as construction of a bridge or an office building. Supplies relates to the purchase of goods and supplies, such as stationary items. Services relates to the purchase of priority services. Priority services are commonly purchased services that are subject to the full scope of the EU directives. Examples are advertising, property management, cleaning, management consultancy, financial and ICT-related services. Non-priority services are excluded. Examples are hotel, restaurant, rail transport and water transport services. Everything else is excluded. So, labour agreements or purchase of property, for example, are excluded. There are some more exceptions as well. For example, when the military would purchase arms and war material, there might be security issues and hence they are excluded from the rules. 2. Estimate the contract value. Only purchases above a specific monetary threshold value are subject to the European Public Procurement rules. Depending on the type of contract and buying organisation, different threshold

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levels apply.

Threshold levels 2010. 3. Choose the appropriate tendering procedure. Public authorities have the free choice between the Open and Restricted procedures. The Competitive Dialogue procedure and Negotiated procedure however are exceptional procedures. Utilities have the free choice between the Open, Restricted and Negotiated procedures, but the Competitive Dialogue procedure is not available to them.

4. Develop selection criteria. To select the appropriate bidders for your project. The selection of candidates must be solely based upon the following two selection criteria: economic and financial standing and technical ability. 5. Develop the award criteria. Following the rules, contracts may be awarded on the basis of the lowest priced tender or the most economically advantageous tender. Apart from price, other qualitative criteria would be included, for example, running costs, servicing costs, level of after-sales service, technical assistance, technical merit ___________________________________________________________________________________________
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and environmental characteristics. These criteria are weighted and each of the team members would score each tender against these criteria. The best ranked supplier will be awarded the project.

2.4.

STEP 3: WRITING THE RFT DOCUMENT

An RFT is a formal document, which the buyers send to suppliers to quote for their business. The RFT document includes 3 sections: The Introduction, bidding and Requirements section.

2.4.1.

Introduction Section

The Introduction section has a short preface, along with the scope of the project and description of the company. This section should be kept short and crisp.

2.4.2.

Bidding Instructions

The Bidding and Instructions section describes the bidding directions that the supplier must adhere to. The most important bidding instructions are the terms of participation, RFT key dates, response format, award criteria, company contact and procedure to handle queries.

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2.4.3.

Project Requirements

Finally, the Project Requirements section lists the project specifications. If you have prepared the specification stage well, you can simply paste your specification document in this section.

2.5.

STEP 4: PUBLICATION OF THE RFT DOCUMENT

To inform a maximum number of potential bidders, contracts will have to be published in the Supplement of the OJEU, the TED. Information stored in the TED is easily available and accessible to all suppliers.

The CPV code will help suppliers to easily identify attractive projects.

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For efficiency reasons, publish your notices online through the European Public Procurement Website or the eTenders procurement Website. Organisations with an aggregate procurement requirement beyond the PIN threshold value are encouraged to publish a PIN at the start of each budgetary year. In return, the public authority can reduce the project deadlines.

Guidelines after Publication of the RFT Document

2.6. STEP 5: COMMUNICATING WITH SUPPLIERS

During the time the RFT is out and until tender evaluation, it is important to ensure a transparent, open and fair process: care should be taken when communicating with suppliers, especially with respect to the principles of transparency and equal treatment. Examples are: all supplier questions should go to one company contact, suppliers should submit their questions in writing, your answers - if relevant to other suppliers - should be sent to all suppliers.

2.7.

STEP 6: EVALUATING OFFERS

For the Open procedure, you will first assess which suppliers meet the selection criteria. Only their offers will be taken to the next step. Next, and for all other procedures, you exclude all tenders that do not comply with the knock-out criteria. Evaluation should be carried out by a team with the necessary competence. They should use a clarification and scoring table.

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2.8.

STEP 7: AWARD

As soon as the winning supplier has been selected, all of the suppliers must be informed of the results without delay and via a justification (motivation) letter.

Unsuccessful suppliers must have - if their rights have been infringed or an award decision is deemed unlawful the opportunity to have a contract award decision rescinded. For that reason, there is a waiting period (14 days) in which the contract cannot be awarded to the winning supplier. ___________________________________________________________________________________________
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3.

ETHICS IN PUBLIC PROCUREMENT

Ethics in procurement is about: Adhering to national and European legislations Adhering to the guiding principles and refraining from any activity that could reduce a fair and open competition Integrating sustainable procurement principles, such as promoting basic social rights, non-exploitation based on race, sex, disability, religion or belief, sexual orientation and age.

Green Public Procurement (GGP), which means bringing environmental concerns into the tendering process.

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