ERDF National Procurement Requirements

Transcription

1 ERDF National Procurement Requirements Page 1 of 41

2 National Procurement Requirements 1. Background This document provides an overview of the rules governing procurement, which are often complex and can be difficult to understand; it is, however, no substitute for legal advice tailored to cover individual circumstances. A Grant Recipient of ERDF funding, whether or not it falls within the definition of a contracting authority, should, if in doubt about the way to approach letting contracts for the supply of goods, works or Part A/Part B services funded to any extent by ERDF, seek its own legal advice. In this guidance, we aim to raise grant recipients awareness of their likely obligations and to draw attention to the consequences of failing to do so. Grant recipients should be aware that financial penalties may be imposed for failure to comply with procurement procedures, which could in some circumstances mean repayment of up to 100% of the grant funding, by way of financial corrections imposed by the Audit Authority, the Managing Authority or the EU Commission audit services. 2. Introduction Robust and transparent procurement is required to ensure that Grant Recipients: Comply with the law Consider value for money (VFM) Maximise the efficient use of public money and; Maintain competitiveness and fairness across the EU. 3. The Law The Public Sector Directive 2004/18/EC 1 sets out the EU public procurement requirements. It was implemented into English law by the Public Contracts Regulations 2006 (SI 2006/05) (the Regulations ). The law as set out in the Regulations is subject to interpretation through evolving European and national case law. The law is applicable to contracting authorities as specified and defined in regulation 3 of the Regulations. A list of contracting authorities is set out in Annex A. While government departments and local authorities are listed, along with organisations such as fire and police authorities, a generic definition is provided at Regulation 3(1)(w), which may catch organisations such as 1 Directive 2004/18/EC of the EP and Council on the co-ordination of procedures for the award of public works contracts public supply contracts and public service contracts Page 2 of 41

3 academic institutions or charities which may otherwise not have regarded themselves as bound by the procurement rules. Under that provision, a contracting authority is defined 2 as any body meeting the following three conditions: established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; and having legal personality; and financed for the most part by the State or regional or local authorities or other bodies governed by public law, or subject to management supervision by those bodies, or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or other bodies governed by public law. In addition, private sector organisations letting subsidised public works and services contracts are treated as if they were contracting authorities, and caught under the regulations where: the private sector is acting as a delivery agent on behalf of the public sector; or where more than 50% public money is funding: (a) an above-threshold public works contract and which is carrying out: (i) any of the civil engineering activities specified in Schedule 2 of the Regulations; or (ii) building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings or buildings for administrative purposes; or (b) an above-threshold public services contract which is connected to one of those types of public works contracts. 3 Universities have traditionally fallen within the definition of a contracting authority under the Public Procurement Regulations as the majority of their funding came from the public sector. More recently there is scope to look at the way in which the University is funded before determining which route to follow as if the University can demonstrate that the majority of their funding is now from other sources such as fees and loans then they would not be subject to the Public Procurement Regulations. Responsibility for determining whether or not the Public Procurement Rules apply will sit with the Universities themselves and this will be tested and agreed during the appraisal process. For further information see section of the following document; 2 Article 1 of the Directive and Regulation 3. 3 Paraphrasing Reg 34 of the Regulations Page 3 of 41

4 government-response-students-and-regulatory-framework-highereducation.pdf Grant recipients, even if from the private (or charities) sector, should appreciate that the question of whether or not they may be regarded as a contracting authority is one that should be considered fully. 4. Most common errors Under the law, procedures must be followed by contracting authorities when awarding contracts; the award can be legally challenged by third parties who might otherwise have won the contract, or the authorities. The risks of facing the consequences of failure to comply with the law can be more immediate under the ERDF regime than otherwise because of the intense scrutiny of the use of funds by the Managing Authority, the Internal Audit Services, the European Commission audit services and the European Court of Auditors. Errors or failures in procurement procedures carry the consequence of correction according to established guidelines, on a scale ranging from 2% to 100%. Failures in cross-border advertising are particularly severely dealt with by the Commission, and can carry up to a 100% correction. Grant recipients should not rely on their existing organisational policies to ensure compliance with the EC requirements as they are often not tailored towards ERDF specific issues which auditors will look at. Examples of some of the most common errors made in procurement include: Contracts awarded directly without competition (without appropriate consideration of whether a direct award (often described as a single tender ) is permissible under the Regulations. It is only in exceptional circumstances that an award without competition can be made. Contracts awarded without publication in OJEU (or another suitable means of advertising); Amendments to contracts for additional works or services without appropriate consideration of whether an extension/addition is permissible under the original contract and whether or not a new competition should be held 4 ; The advert or OJEU Contract Notice does not mention all selection and award criteria; The contract notice has insufficient detail; Selection process does not adhere to the published selection criteria; 4 Note in particular the effect of the decision in Case C-454/06 - pressetext Nachrichtenagentur GmbH Page 4 of 41

5 Confusion between selection and award criteria (with criteria being mixed and/or applied at incorrect stages in the procurement); Failure to publish a Contract Award Notice in OJEU; Contracts artificially split in order to fall below threshold levels; Minimal or no evidence of audit trail relating to the evaluation/selection and award process; Failure to advertise to a sufficient degree, even in sub-ojeu procurements, in accordance with the Commission s Interpretative Communication (see more detailed consideration in paragraph 8) Please note the above list is not exhaustive. Should audits reveal that methods of procurement have not been compliant, financial corrections are likely to be imposed. Because of the nature of procurement, once an error has been identified it is rarely the case that a grant recipient can cure the defect, and in most cases some level of financial correction will be applied. This can be of between 2% and 100%, depending on the nature of the irregularity. Note that failure to advertise is regarded as a particularly serious breach of the Regulations and can, of itself, result in a 100% correction. If grant recipients are unsure about anything relating to the procurement or award of any contract for supply, works or services, they should seek their own legal or specialist procurement advice. 5. The key requirements As set out in section 2 above there are general considerations which Grant Recipients are expected to apply to all procurements. The additional requirements of the Regulations only apply to certain procurements depending upon the value and type of the contracts being awarded. Grant Recipients may find it helpful to consider the decision tree below when determining what procurement route to follow. Page 5 of 41

6 Is the contract for supply of goods, services, or works? (See section 6) NO No need to apply the public procurement regulations YES Are you a contracting authority as defined in section 3 above? (Private sector note 50% public works/services contracts) YES NO Follow a robust and transparent process respecting EC Treaty Principles Is the estimated value of the contract above the thresholds set out in section 8? YES NO Follow a robust and transparent process (the general considerations in section 2 above). Also see section 8 and in particular consider advertising using internet and transparency/equal treatment duties Advertise contract in OJEU and see section 9 to determine the type of procedure to follow do not forget to advertise award even when following less onerous procedure Failure to follow the correct steps set out above may lead to financial corrections which means repayment of all or part of the grant, as well as putting the Grant Recipient in the position of being likely to have breached the Funding Agreement, which can have additional consequences. Page 6 of 41

7 6. Classification of types of Contracts As a brief reminder of their scope, note that there are three types of contracts under Regulations: (a) Works are items listed in Schedule 2 to the Regulations (b) Supplies essentially the purchase or hire of goods (including electricity and gas) (c) Services Schedule 3 to the Regulations classifies services into 27 different types. These are then designated as either "Part A" or "Part B" as set out in the table below. Procurements of Part A services where the value exceeds the financial thresholds for those services are subject to the full procurement regime. The rationale is that EU-wide competition is thought most realistic in these services. Procurements of Part B services are treated with a much lighter touch, with only some of the less onerous requirements applying, mainly in relation to advertisement.. These are parts 1, 9 and 10 of the Regulations and regulations 9, 31, 40(2), 41 and 42. This means that: Contracting authorities must act in a transparent way and treat all potential providers equally and in a non-discriminatory way. Contracting authorities must comply with the detailed requirements relating to technical specifications set out in the Regulations. A contract award notice must be published in the Official Journal no later than 48 days after a contract award. Details of procurements of Part B services need to be included in any reports that contracting authorities must submit to the Cabinet Office. A right to take court action for financial loss against a contracting authority is granted to third parties if there is any failure to comply with the requirements of the Regulations or the TFEU. In addition to these specific requirements, a contracting authority will also have to ensure compliance with the requirements that apply to completely unregulated procurements. Where a contract is for a combination of Part A and Part B services, the contract will be deemed to be for the category of services to which the greater value is attributed. Page 7 of 41

8 Part A Services 1. Maintenance and repair of vehicles and equipment. 2. Transport by land, including armoured car services and courier services, but not including transport of mail and transport by rail. Part B Services 17. Hotel and restaurant services. 18. Transport by rail. 3. Transport by air but not transport of mail. 19. Transport by water. 4. Transport of mail by land, other than by rail, and by air. 20. Supporting and auxiliary transport services. 5. Telecommunications services. 21. Legal services. 6. Financial services: (a) Insurance services. (b) Banking and investment services other than financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments and central bank services. 22. Personnel placement and supply services. 7. Computer and related services. 23. Investigation and security services, other than armoured car services. 8. Research and development services where benefits accrue exclusively to the contracting authority for its use in the conduct of its own affairs and the services are to be wholly paid for by the contracting authority. 24. Education and vocational health services. 9. Accounting, auditing and book-keeping services. 25. Health and social services. 10. Market research and public opinion polling services. 26. Recreational, cultural and sporting services. Page 8 of 41

9 11. Management consultancy services and related services, but not arbitration and conciliation services. 27. Other services. 12. Architectural services: engineering services and integrated engineering services: urban planning and landscape architectural services: related scientific and technical consulting services; technical testing and analysis services. 13. Advertising services. 14. Building cleaning services and property management services. 15. Publishing and printing services on a fee or contract basis. 7. How to calculate the value correctly The Department expects all grant recipients to conduct open fair and transparent competitions before awarding contracts for any goods, works or services (whether or not they are Part A or B). Grant Recipients will need to be able to demonstrate that they have followed the correct procurement route based on the value and nature of the contract. The bullet points below set out how this value should be calculated; Pay particular attention to the provisions of Regulations 8(11) - (15) concerning the valuation of a single requirement where a number of contracts have been entered into, and which must be aggregated. Do not incorrectly value a contract or framework agreement with the intention of avoiding the Regulations; In particular, do not artificially split larger requirements into smaller units to avoid the aggregation rules and thresholds. (e.g. collaborative multi-partner projects must consider public procurement requirements at the level of the project i.e. not at individual partner level which could be judged as avoidance of the aggregation rules) Note also that the value of the contract includes the element of the contract price which is funded by ERDF and any other match funding (whether publicly or privately provided). Thus a works contract valued at 5m, 500,000 of which is funded 50% from ERDF and 50% from another public fund must be let in accordance with the procurement rules. The point is the value of the contract as a whole, not the value of Page 9 of 41

10 the ERDF component. Do not be misled into thinking that because the ERDF contribution is below threshold, there is no need to follow the rules. 8. Procurement rules - applicability 8.1 OJEU Procurement thresholds The public procurement procedures set out in the Regulations must be followed before awarding certain contracts when their value is above a certain threshold. In particular the contracts should be advertised in the Official Journal of the European Union (OJEU). OJEU is the central database for European public sector tender notices. Thresholds are set every 2 years and the current thresholds are set out below. Note that the thresholds have changed three times since this programme began in 2007: in 2008, 2010 and now the 2012 threshold applies. These can all be found on the OJEC website, and grant recipients should check this to ensure that they are working to the correct values. FROM 1 JANUARY 2012 (thresholds are net of VAT) SUPPLIES SERVICES WORKS Entities listed in Schedule 1 of the Regulations 113,057 ( 130,000) 113,057 2 ( 130,000) 4,348,350 3 ( 5,000,000) Other public sector contracting authorities 173,934 ( 200,000) 173,934 ( 200,000) 4,348,350 3 ( 5,000,000) Indicative Notices 652,253 ( 750,000) 652,253 ( 750,000) 4,348,350 ( 5,000,000) Small lots 69,574 ( 80,000) 69,574 ( 80,000) 869,670 ( 1,000,000) Page 10 of 41

11 8.2 Sub OJEU procurement: Part B Services, belowthreshold and other procurements not covered by the Regulations partly-subject contract awards A procurement may not have reached the relevant OJEU threshold for the Regulations to apply in full, or in the case of Part B Services, those rules may not apply to the same extent as for works, goods and Part A Services, but there are still rules to be followed. Because EU funds are being used for purposes specified in EU legislation, the EU principles of free movement, nondiscrimination and equal treatment, transparency, proportionality and mutual recognition must be respected throughout the entire process regardless of the value of the contract. Grant Recipients will need to be able to demonstrate the legitimacy of the procurement route followed and any supporting evidence behind this in the event of an audit. As with all other ERDF documentation there is a requirement to retain all procurement evidence until 3 years after the final payment made on the programme and at present this is likely to be until at least It is imperative that all grant recipients read and understand the Commission Interpretative Communication on the Community Law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives, which is available in full at - (2006/C 179/02) and which sets out the legal position in the light of a number of important European Court decisions 5, The Communication is mainly concerned with the degree of advertising about any partly-subject contract awards. The principle is that, for any potential tenderer, there should be a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of the procedures to be reviewed. (Telaustria paragraph 62). Judgements have to be made by the grant recipient about the significance of the contract to the Internal market, and this can depend on the subject matter of the contract, estimated value, specifics of the sector concerned and its geographic location. One of the key principles is whether or not there is cross border interest and grant recipients should provide a fully documented decision making process to evidence why it was considered that there would not be any cross border interest. In order to ensure that the requirements within the Communication are followed we have developed the table below which sets out what action must be taken for these partly-subject contracts where it is believed that there will be a cross border interest in the contract. Note that this issue must be considered and an audit trail of that process retained. 5 Cases C-324/98 Telaustria [2000] ECR; Coname, and C-458/03 Parking Brixen Page 11 of 41

12 Estimated Value of Goods or Services Below 20,000 Action Required Sufficient degree of advertising; but likely not to affect Internal Market. Consider using their own website or a portal such as contracts finder. VFM must be demonstrated by requesting or obtaining 3 quotes or prices but this need not be done through a formal competition. 20,001 to OJEU threshold The level of advertising must be sufficient to allow a level of competition, potentially from another member state (if the contract award might be of interest to suppliers located in other Member States and depending on other factors eg geographical location). Formal invitation to tender process must be followed and the requirement advertised in the press and/or on the internet for a minimum of 10 days to enable fair competition. Over OJEU threshold Goods/Part A Services Full advertisement in OJEU of a fullycompliant open/negotiated or other regulated process Part B Services the lighter-touch regime specified in the Regulations Value of Works Below 429,999 Over 430,000 Action Required Sufficient degree of advertising; but likely not to affect Internal Market. Consider using their own website or a portal such as contracts finder. VFM must be demonstrated by obtaining or requesting 3 quotes or prices but this need not be done through a formal competition. The level of advertising must be sufficient to allow a level of competition, potentially from another member state (if the contract award might be of interest to suppliers located in other Member States and Page 12 of 41

13 Over OJEU threshold depending on other factors, eg geographical location). Formal invitation to tender process must be followed and the requirement advertised in the press and/or on the internet. Full advertisement in OJEU of a fullycompliant open/negotiated or other regulated process This guidance relating to sub-ojeu procurements is the Department s suggestion as to how best to ensure that the principles of openness and transparency and equal treatment are adhered to. Grant recipients must abide by these as a minimum requirement, but they are free to exercise their judgement so as to follow a more rigorous path than the one specified. For example they might decide that a significant service contract for the value of 19,500 may be best advertised through a formal tender requiring sealed bids and evaluated against pre-set criteria, rather than just obtaining 3 quotes. It is the responsibility of the individual grant recipient to decide whether an intended contract award might potentially be of interest to suppliers located in other Member States. This decision has to be based on an evaluation of the individual circumstances of the case, such as the subject-matter of the contract, its estimated value, the specifics of the sector concerned (size and structure of the market, commercial practices, etc) and the geographic location of the place of performance. If it can be demonstrated that this analysis has been carried out and the result is that limited advertising is required then this may be sufficient. Generally speaking, the safest course (on sub-ojeu procurements) to adopt is to avoid direct awards, to hold some kind of competitive bidding process, and (prior to that) to advertise, even if only to the limited extent of the grant recipient s own website or something with a similar reach which is connected with the grant recipient and likely to reach the attention of interested bidders, both in the UK and in other Member States (see below). In all instances a full audit trail of documents, including evidence of advertising where necessary and all decisions taken relating to procurements carried out should be retained for audit purposes. This needs to be retained until 3 years after the closure of the Programme currently estimated to be at least 31 December Page 13 of 41

14 8.3 Suggested methods of advertising for sub OJEU contracts Internet The wide availability and ease of use of the World Wide Web makes contract advertisements on websites far more accessible, especially for undertakings from other Member States and for small and medium enterprises (SMEs) looking for smaller contracts. The Internet offers a large choice of possibilities for advertising of public contracts: Advertisements on the contracting entity's own website are flexible and cost-effective. They should be presented in a way that potential bidders can easily become aware of the information. Contracting entities might also consider publishing information on forthcoming contract awards not covered by the Regulations as part of their buyer profile on the Internet. Portal websites specifically created for contract advertisements have a higher visibility and can offer increased search options. In this respect, the setting-up of a specific platform for low value contracts with a directory for contract notices with subscription for constitutes a best practice, making full use of the Internet's possibilities in order to increase transparency and efficiency. It is however important to note that you still need to carry out some kind of sub selection from these portal websites which must be done in an open and transparent way. Contracts finder It is recommended that contracting authorities register on Contracts Finder, and publish opportunities on this site. Contracting authorities can also sponsor suppliers enabling them to post sub-contracting opportunities on the service. Any open procurement opportunity above 10k can be advertised on the site if a grant recipient chooses, although as stated above the DCLG suggested threshold for sub OJEU is 20k. National Official Journals, national journals specialising in public procurement announcements, newspapers with national or regional coverage or specialist publications Local means of publication Contracting entities may still use local means of publication such as local newspapers, municipal announcement journals or even notice boards. However, such means ensure only strictly local publication, which might be adequate in special cases, such as very small contracts for which there is only a local market. Page 14 of 41

15 Official Journal of the European Union/TED (Tenders Electronic Daily) Publication in the Official Journal is not mandatory but could be an option, particularly for larger, significant contracts which don t quite reach the OJEU threshold. Grant recipients are advised that if they chose to follow this route it must be followed correctly otherwise financial corrections may be imposed. 9. Procurement; Four main procedures/frameworks 9.1 Open Procedure - This procedure provides the broadest scope for competition as anyone can tender, but risks a large number of tenders and can incur high management costs. The assessment of both tender and tenderer is carried out in a single-tier process. This process will normally take a minimum of 52 days, not including a mandatory 10 day period for appeal once the standstill notice is issued. Where an effective degree of pre-market engagement has occurred, this can be a good way of finding new entrants to the market, and Cabinet Office prefers contracting authorities to approach new procurement this way. 9.2 Restricted Procedure - The most commonly used, although its tendency to restrict the market to already-established players, and the lengths of each stage have been criticised. This is a two tier process. Potential delivery organisations are selected using a pre qualification questionnaire ( PQQ ) following publication of the contract requirements in OJEU inviting expressions of interest. A minimum of five short-listed organisations are then selected to submit a full tender from which the winning tender is selected. The requirement is to allow 37 days for the first stage and 40 days for the second with a 10 day standstill period before the contract is awarded. An accelerated restricted procedure has in very limited circumstances been permitted which can restrict the process to 30 days, and was only available initially until December At the start of 2011 the Commission agreed to extend the relaxation until the end of Data in relation to projects using this method may be required by the EC at a later date so contracting authorities should keep information on contract values, the type of contract (supplies/works/services), business sector and types of purchased good/services. 9.3 Competitive Dialogue - This is a relatively new procedure for complex contracts, such as build and design, where the best solution is not pre-known. Following the OJEU notice and pre qualification stage, dialogue is permitted with potential bidders to develop options before competitive tenders are invited. Work can continue to refine the proposal with the preferred bidder to point at which contract is awarded. 9.4 Negotiated Procedure Features: Page 15 of 41

16 (a) All interested parties may express an interest in tendering and the contracting authority will select potential bidders with whom to negotiate the terms of the contract. (b) A minimum of three suppliers must be invited to negotiate (unless fewer candidates have met the selection criteria and these are sufficient to ensure genuine competition, that is at least two). When to use The Regulations state that the negotiated procedure may only be used where: o o o o another procedure has failed to produce any acceptable tenders; exceptionally where prior overall pricing is not possible; in the case of services, where specifications cannot be established with sufficient precision; or for certain research and development related works contracts. However, the Office of Government Commerce (OGC) has issued guidance that other than in circumstances where an OJEU notice is not required, the negotiated procedure should only be used in very rare circumstances where there is clear reasoning why the competitive dialogue procedure is not appropriate. In reality, this policy means that the negotiating procedure should no longer be used by a contracting authority if it is required to publish an OJEU notice. Projects considering adopting this procedure should be referred to the PDT for consideration. 9.5 Framework Agreements These can be used for repeat but irregular purchases for example stationery supplies, legal services, building repairs. Generally they are of no more than four years duration. There are four main types, single-supplier, multisupplier, single user, multi-user. Suppliers who are permitted to provide to a closed list or class of purchasers are selected in the normal way under an open or restricted procedure. Subsequent call-off contracts may be the subject of a mini-competition between a number of suppliers on the framework to one particular purchaser. The same selection and award criteria used when setting up the framework agreement should be used when calling off supplies from this agreement. Provided the agreement is compliant with these requirements, pre-existing framework agreements may be used to select suppliers to the project. Contracting authorities utilising a framework agreement need to ensure that they are eligible to make use of it (ie that they are within the class contemplated when the framework was established), the framework agreement has been properly established and it is used in the way it was set up to be used, i.e. mini competitions are held if this was an original requirement. Page 16 of 41

17 10. Selection and Award Criteria There are two distinct types of evaluation criteria that are governed by different rules and objectives and these must each be demonstrated for a compliant procurement. In simple terms, selection criteria aims to establish "can they do it?" and award criteria "how will they do it?" and public bodies must make a distinction between the two separate criteria. Selection Criteria these must assess the ability of the tenderers to perform a contract according to economic, financial capability, technical and/or professional ability (for example experience, qualifications). The selection criteria, sub-criteria and any weighting used must be proportionate to the requirement in question and must be publicised in the OJEU notice or in the Pre-Qualification Questionnaire (PQQ)/tender documents (depending on the procedure adopted). The aspects which can be evaluated as selection criteria are set out in Regulations 23 to 26: 23. Criteria for the rejection of economic operators 24. Information as to economic and financial standing 25. Information as to technical or professional ability 26. Supplementary information The Regulations require a minimum number of candidates to be short-listed under the Restricted process and under the Competitive Dialogue process. Award Criteria these are set in order to award the contract on the basis of either the most economically advantageous tender (for example balancing factors such as quality, price, delivery timeframe) or the lowest price. The criteria, sub-criteria and weightings must be disclosed in the OJEU notice or in the invitation to tender documents. The award criteria must be objective and must relate to the subject matter of the contract and be proportionate and transparent. Award criteria must be made against Regulations 30 to 32: 30. Criteria for the award of a public contract 31. Contract award notice 32. Information about contract award procedures 11. Advertising Requirements 11.1 Non compliance with advertising requirements is a common error. The time limits for open, restricted, competitive dialogue and negotiated procedures all run from the date of notification of the contract in the OJEU. We have already looked at the way that the Commission s interpretative Communication impacts on contracting authorities by imposing obligations to Page 17 of 41

18 consider how best to publicise partly-subject contracts see sections 8.2 and 8.3. Dependent upon the type of procurement procedure prescribed time limits from advert to award apply and these can be found in the Regulations. For planning purposes projects will need to consider these timescales. Other considerations such as failing to meet N + 2 targets are not an acceptable reason for circumventing the timescales. Minimum time limits in award procedures Procedure Minimum time limits Days Open Restricted Minimum time for receipt of tenders from date Contract Notice sent Minimum time for receipt of requests to tender (PQQ response) from the date Contract Notice sent Minimum time for receipt of tenders from the date invitation to tender sent Accelerated restricted (if urgent) Minimum time for receipt of requests to tender from the date Contract Notice sent Minimum time for receipt of tenders from the date invitation to tender sent Competitive dialogue and negotiated Accelerated negotiated (if urgent) Minimum time for receipt of requests to participate in dialogue or negotiate from the date Contract Notice sent Minimum time for receipt of requests to negotiate from the date contract notice sent The minimum time limits set out in the table above may be reduced by seven days (five days for accelerated restricted procedure) where the notices are transmitted electronically (in accordance with the requirements in the Regulations) by five days where the contracting authority offers full access by electronic means to the contract documents from the date of the Contract Notice and provided the Contract Notice specifies the internet address at which the documents are available. Page 18 of 41

19 On 19 December 2011, the Cabinet Office published a Procurement Policy Note confirming that the relaxation of the use of the accelerated restricted procedure, which the European Commission introduced in 2009 as an emergency measure during the financial crisis, has been withdrawn. For procurements where a contract notice is published on or after 1 January 2012, the accelerated restricted procedure will only be available where urgency renders impracticable the normal time limits for the restricted procedure Following the selection and award process, a contracting authority must inform anyone who submitted an offer of its decision to award the contract by notice in writing. It must then allow 10 days ( the standstill period ) before it awards the contract to allow time for any bidder who is dissatisfied with the bidding process to take action (see the 2006 Regulations as amended by the Public Contracts (Amendment) Regulations 2009). A contract award notice must be published in the OJEU within 48 days of the contract award There are only very rare occasions, in relation to fully regulated contract awards, in which an OJEU notice is not required. When a contract is caught by the Regulations, a contracting authority will normally need to publish an OJEU Notice to advertise the opportunity. However, in certain circumstances the negotiated procedure may be used without publishing a contract notice. The most common of these circumstances are: In the absence of tenders, suitable tenders or applications in response to an invitation to tender by the contracting authority using the open or the restricted procedure provided the terms of the contract offered in the original tender have not been substantially altered. Where, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, a contract may only be awarded to a particular economic operator (the sole supplier exemption). When in cases of extreme urgency for reasons unforeseeable by, and not attributable to, the contracting authority, the time limits of the prescribed procedures cannot be met. When a contracting authority wants a contractor to carry out additional works or services, further to a tendered project, which have through unforeseen circumstances, become necessary and could not be provided for separately without major inconvenience and which do not exceed 50% of the original contract value. In Case C-423/07 - Commission v Kingdom of Spain, the ECJ's decision highlights that this provision will be interpreted strictly and cannot be relied on as a method of circumventing the advertising obligations under public procurement law. A version of these requirements is commonly referred to as a single tender action. The use of a Single Tender Action must first be consented to by the Page 19 of 41

20 Department prior to the contract being awarded. The Grant Recipient will need to directly contact their respective PDT for a Single Tender Request Form. In this form the Grant Recipient should set out in writing the nature of the procurement and its reasons for requiring approval. Where Single Tenders are allowed to proceed Grant Recipients should be aware that this is done at their own risk. 12. Record keeping During Project Engagement Visits (PEVs), Article 13 Project Progress and Verification Visits and other audits, procurement processes will be reviewed and Grant Recipients will need to demonstrate satisfactory evidence of the procurement process, with appropriate supporting documentation. This documentation, as a minimum, must include: Explanation of procurement procedure selected with justification Copy of OJEU notice or relevant advertisement and OJEU Prior Information Notice (PIN) if applicable (including for Framework Agreements) PQQ including the associated selection criteria (where used) and log of responses received Copy of tender specification with clear award criteria Log sheet for all tenders received (time and date) Copy of all tenders Copy of tender score sheets dated and signed by two people PQQ assessment scores Copy of OJEU award notice Copy of report on evaluation of tenders Copy of correspondence, including interview questions where appropriate Copy of letters to unsuccessful tenderers giving an appropriate standstill period (where appropriate) Copy of award letter /signed contract Copy of notes from inception meeting Summary record of the above process to assist with future monitoring and audits. Records must be maintained for verification until at least the end of Grant Recipients must ensure that delivery partners and sub-contractors also retain evidence. 13. Financial corrections Under the general law (aside from ERDF rules) if the Regulations are not observed a contract may be prevented from being awarded and/or damages Page 20 of 41

21 may be awarded by a Court. In the case of ERDF any audit bodies will look very closely at all of the procurements during their visits. Breach of procurement requirements is the most common reason for repayment of grant and the procedures must be carefully followed and monitored throughout the project. The irregularities are often inadvertent mistakes. Unfortunately the liability for mistakes is strict. This note is intended to help the Grant Recipient to be aware of the steps it must take and the need to seek help from its own advisors in order to ensure it is not subject to a financial correction. The table below 6 illustrates the corrections which can be imposed as a result of procurement breaches. The table is split into two sections:- Above OJEU thresholds; and Below OJEU thresholds. Above OJEU threshold Issue Description Correction Non-compliance with the advertising procedures Non-compliance with the advertising procedures Attribution of contracts without competition in the absence of extreme urgency brought about by unforeseeable events or the absence of an The contract was awarded without complying with the advertising requirements laid down in the EC Public Procurement Directives, except in the cases referred to in point 2 below. This is a flagrant disregard of one of the conditions for Community co-financing The contract was awarded without complying with the advertising requirements laid down in the EC Public Procurement Directives, but was advertised to some extent allowing economic operators located in another Member State access to the contract The main contract was awarded in accordance with the EC Public Procurement Directives, but was followed by one or more supplementary contracts (whether or not formalised in writing) awarded without complying with the 100% of the value of the contract involved 25% of the value of the contract involved 100% of the value of the contract involved In cases where the total of supplementary 6 Taken from COCOF 07/0037/03-EN Page 21 of 41

22 unforeseen circumstance for complementary works and services or for supplies Additional works or services exceeding the limit laid down by the Directives provided in Unforeseen circumstances provisions of the Public Procurement Directives namely the ones related to the negotiated procedures without publication for reasons of extreme urgency brought about by unforeseeable events or for attribution of complementary supplies, works and services The main contract was awarded in accordance with the provisions of the EC Directives, but was followed by one or more supplementary contracts exceeding the value of the original contract by more than 50%. The additional works themselves do not constitute a separate work within the meaning of Article 1(c) of Directive 93/37 or Article 1(2) (a) and 2(b) of Directive 2004/18 or a separate service within the meaning of Article 1(a) of Directive 92/50 or Article 1(2) (a) and 2(d) of Directive 2004/18. In cases where the additional works or services exceed the thresholds of the Directives and constitute a separate work or service, it is necessary to take account of the aggregate value of all the additional works or services for the purposes of the application of the Public Procurement Directives. contracts (whether or not formalised in writing) awarded without complying with the provisions of the Public Procurement Directives do not exceed the thresholds of the Directives and 50% of the value of the original contract the correction may be reduced to 25% 100% of the amount exceeding 50% of the value of the original contract Page 22 of 41

23 Failure to state all the selection and contract award criteria in the tender documents or tender notice Application of unlawful contract award criteria Unlawful selection and/or contract award criteria laid down in the tender procedure Where the additional works or services constitute a separate work or service and exceed the thresholds laid down by the Directives, the above mentioned point 1 applies. Where the additional works or services constitute a separate work or service but do not exceed the thresholds laid down by the Directives, point 21 below applies. The contract was awarded in compliance with the advertising rules of the Public Procurement Directives, but the tender documents or tender notice failed to state all the selection and/or award criteria or to describe them sufficiently. The contract was awarded applying unlawful contract award criteria (for example, use of a selection criterion for the award of the contract, non-compliance with the criteria stated by the contracting authority in the tender notice or tender documents or incorrect and/or discriminatory application of contract award criteria) Cases in which certain operators have been deterred from bidding on account of unlawful restrictions laid down in the tender notice or tender documents (for example, the obligation to already have an establishment or representative in the country or region, or setting technical standards that are too specific and favour a single operator or the possession of experience in the region, etc) 25% of the value of the contract. This amount may be reduced to 10% or 5% depending on seriousness 25% of the value of the contract. This amount may be reduced to 10% or 5% depending on seriousness. 25% of the value of the contract. (A financial correction of 100% of the value of the contract may be applied in the most serious cases when there is a deliberate intention to exclude certain Page 23 of 41

24 Insufficient or discriminatory definition of the subject-matter of the contract Negotiation during the award procedure Reduction in the scope of the contract Reduction in the scope of the contract Incorrect application of certain ancillary The description in the tender documents or tender notice is discriminatory or insufficient for bidders to determine the subjectmatter of the contract or for the contracting authorities to award the contract. The contract was awarded by open or restricted procedure but the contracting authorities negotiated with the bidders during the award procedure, except where the discussions were solely intended to clarify or supplement the content of their bids or specify the obligations of the contracting authorities. The contract was awarded in compliance with the Public Procurement Directives, but was followed by a reduction in the scope of the contract without making a proportional reduction in the value of the contract. (This correction applies even in cases where the amount of the reduction is used to carry out other works). The contract was awarded in compliance with the Public Procurement Directives, but was followed by a reduction in the scope of the contract with a proportional reduction in the value of the contract already carried out. (This correction applies even in cases where the amount of the reduction is used to carry out irregular supplementary contracts). The contract was awarded in compliance with the provisions of bidders) 25% of the value of the contract. This amount may be reduced to 10% or 5% depending on seriousness. 25% of the value of the contract. This amount may be reduced to 10% or 5% depending on seriousness. Value of the reduction in the scope Plus 25% of the value of the final scope 25% of the value of the final scope 2%, 5% or 10% of the Page 24 of 41

25 elements the Public Procurement Directives, but without complying with certain ancillary elements, such as publication of the notice of award of the contract. Note: If this type of irregularity is only of a formal nature without potential financial impact, no correction will be made. value of the contract, according to the seriousness of the irregularity and whether a repeat occurrence Below OJEU threshold Issue Description Correction Non-compliance with the requirement of an adequate degree of advertising and transparency Attribution of contracts without competition in the absence of extreme urgency brought about by unforeseeable events or for complementary works and services brought about unforeseen circumstance Application of unlawful selection and/or contract award criteria Contract awarded without adequate competitive tendering, involving non compliance with the principle of transparency The main contract was awarded after adequate competitive tendering, but was followed by one or more supplementary contracts (whether or not formalised in writing) awarded without adequate competition in the absence of reasons of extreme urgency brought about by unforeseeable events or (for contracts of works and services) in the absence of unforeseen circumstances justifying them. Application of unlawful criteria which deter certain bidders on account of unlawful restrictions laid down in the tender procedure (for example, the obligation to have an establishment or representative in the country or region or the setting of technical standards that are too specific and favour a single operator.) 25% of the value of the contract 25% of the value of the contract(s) attributed without adequate competition. 10% of the value of the contract. This amount may be reduced to 5% depending on seriousness. Page 25 of 41

26 Breach of the principle of equal treatment Contracts awarded in accordance with the rules on advertising but where the contract award procedure breaches the principle of equal treatment of operators (for example, when the contracting authorities have made an arbitrary choice of candidates with whom they negotiate or if they give preferential treatment to one of the candidates invited to negotiate). 10% of the value of the contract. This amount may be reduced to 5% depending on seriousness. 14. Exceptions Single Tender Actions are permitted in exceptional circumstances but are not recommended by DCLG. Where European Funding is being applied the use of Single Tender must be made in accordance with the Regulations. The Regulations permit Single Tenders only in defined and exceptional circumstances including: Cases of extreme urgency arising from unforeseeable circumstances not attributable to the contracting authority; and/or Where there is no alternative supplier in Europe due to technical, artistic and/or exclusive rights. The use of a Single Tender Action must first be consented to by the Department prior to the contract being awarded. The Grant Recipient will need to directly contact their respective GDT for a Single Tender Request Form. In this form the Grant Recipient should set out in writing the nature of the procurement and its reasons for requiring approval. Where Single Tenders are allowed to proceed Grant Recipients should be aware that this is done at their own risk. 15. Summary of relevant websites and regulations Public Sector Directive 2004/18/EC The Public Contracts Regulations 2006 (SI 2006/05) (the Regulations ). COCOF 07/0037/03-EN - GUIDELINES FOR DETERMINING FINANCIAL CORRECTIONS TO BE MADE TO EXPENDITURE COFINANCED BY THE STRUCTURAL FUNDS OR THE COHESION FUND FOR NON-COMPLIANCE WITH THE RULES ON PUBLIC ROCUREMENT Page 26 of 41