ERDF National Procurement Guidance

Transcription

1 ERDF National Procurement Guidance Page 1 of 75

2 TABLE OF CONTENTS 1 BACKGROUND THE LAW THE PRINCIPLES CONTRACTING AUTHORITIES NON-CONTRACTING AUTHORITIES SPENDING ERDF MONEY TYPE OF CONTRACT VALUE OF CONTRACT OJEU PROCUREMENT THRESHOLDS SUB-OJEU PROCUREMENT ADVERTISING SUB-OJEU PROCUREMENTS TABLE OF RECOMMENDED ACTION - SUB-OJEU PROCUREMENT PROCEDURES PROCUREMENT PROCEDURE TIME LIMITS CONTRACT AWARD FRAMEWORK AGREEMENTS SELECTION AND AWARD CRITERIA RECORD KEEPING MOST COMMON ERRORS FINANCIAL CORRECTIONS ABOVE OJEU FINANCIAL CORRECTIONS SUB-OJEU OTHER CONSEQUENCES (REMEDIES DIRECTIVE) SINGLE TENDER ACTION- RARE EXCEPTION(S) Schedule 1 - Key Definitions Schedule 2 - List of Contracting Authorities Schedule 3 Procurement Flow Chart Schedule 4 - Procurement Q&A Page 2 of 75

3 THE FOLLOWING IS INTENDED AS A GUIDE ONLY AND SHOULD NOT BE SUBSTITUTED FOR THE GRANT RECIPIENTS OWN INDEPENDENT LEGAL ADVICE CAPITALISED TERMS USED WITHIN THIS GUIDANCE DOCUMENT ARE DEFINED IN THE KEY DEFINITIONS SECTION IN SCHEDULE 1 Page 3 of 75

4 1 BACKGROUND 1.1 Public procurement is the purchase of goods, works or services by Contracting Authorities. 1.2 The primary objective of the public procurement rules is to open up sufficient competition between suppliers. The secondary objective is to ensure public contracts are awarded fairly, transparently and without discrimination. 1.3 Failure to comply with the public procurement rules was the leading reason for the recovery of grants during the ERDF programme. 1.4 Depending on the nature of the failure, up to 100% of the grant may be recovered by way of a financial correction if a non-compliant procurement is identified by the Audit Authority, the Managing Authority or the EU Commission audit services. 2 THE LAW EU directives 2.1 The EU public procurement directives (EU Directives) set out the legal framework for public procurement: 2.2 Directive 2004/18/EC 1 covers contracts awarded by central government, local authorities and other public sector bodies (such as schools, universities and health authorities). 2.3 Directive 2004/17/EC covers contracts awarded by entities operating in the water, energy, transport and postal services sectors. Implementation in the UK 2.4 The EU Directives have been implemented into UK law by regulations. The current regulations which came into force on 31 January 2006 are: The Public Contracts Regulations 2006 (SI 2006/5); and The Utilities Contracts Regulations 2006 (SI 2006/6). 2.5 (together referred to as the Regulations ). 3 THE PRINCIPLES General EU principles 3.1 The EU Directives are adopted further to the principles of the Treaty on the Functioning of the European Union (TFEU), in particular the principles of: 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 4 of 75

5 3.1.1 Freedom of movement of goods; Freedom of establishment; Freedom to provide services; and the principles deriving from these, such as the principles of: Equal treatment; Transparency; Non-discrimination; Mutual recognition; and Proportionality. 3.2 In the UK, where there is a spend of public money, transparent procurement procedures are encouraged to ensure that those expending public money: Consider value for money (VFM) Maximise the efficient use of public money and; Maintain competitiveness and fairness across the EU. 3.3 It is advised that Grant Recipients in receipt of ERDF (i.e. public) money, regardless of their status (i.e. Contracting or Non-Contracting Authority see section 4 below) comply with the Principles in respect of ERDF spend. 4 CONTRACTING AUTHORITIES ALL GRANT RECIPIENTS (INCLUDING THOSE FROM THE PRIVATE AND CHARITABLE SECTORS) ARE ADVISED TO CHECK WHETHER THEY ARE CONTRACTING AUTHORITIES UNDER THE REGULATIONS What is a Contracting Authority? 4.1 A Contracting Authority is defined in Article 1.9 of the Directive as: Contracting authorities means the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or one or several of such bodies governed by public law. A body governed by public law means any body: (a) established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; Page 5 of 75

6 (b) having legal personality; and (c) financed, for the most part, by the State, 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 by other bodies governed by public law. 4.2 Therefore, a body will be a Contracting Authority if (broadly speaking) it is: established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; and having legal personality; and a) obtains more than 50 per cent of its funding from another contracting authority; or b) is subject to management supervision by another contracting authority; or c) has more than half of its board of directors/members appointed by another contracting authority. Note that this can in some cases include joint venture companies with public and private members. 4.3 Regulation 3 sets out a non-exhaustive list of specific public bodies to whom the Regulations will apply. However, Regulation 3(1)(w) is a catch-all provision which means that a potentially much wider field of public bodies than those expressly listed will be covered. 4.4 Private Organisations falling within definition of Contracting Authority Private sector organisations letting subsidised public works and services contracts are treated as if they are a Contracting Authority, 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: an above-threshold public works contract and which is carrying out: any of the civil engineering activities specified in Schedule 2 of the Regulations; or Page 6 of 75

7 building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings or buildings for administrative purposes; or an above-threshold public services contract which is connected to one of those types of public works contracts. 2 5 NON-CONTRACTING AUTHORITIES SPENDING ERDF MONEY 5.1 The Principles are set out in section 3. Contracting Authorities are expected to comply with these Principles by virtue of the TFEU and Regulations. 5.2 Whilst Non-Contracting Authorities are not subject to the strict letter of the Regulations, the fact that there is public money being spent, attaches with it the Principles by which the Department expects Non-Contracting Authorities to comply with. 5.3 Since EU funds are being used for purposes specified in EU legislation, Non- Contracting Authorities are advised to at the very least, adhere to the EU Principles of free movement, non-discrimination, equal treatment, transparency, proportionality and mutual recognition when expending EU funds. In any event, Non-Contracting Authorities will still need to consider their own procurement policies (including any standing orders applicable) and any other applicable requirements relating to value for money when carrying out a procurement. 5.4 This will involve a sufficient degree of advertising before ERDF money is used to procure services/goods/works. Whilst an OJEU notice is not legally required for above threshold procurements by Non-Contracting Authorities, the expectation is that the higher the value of the services/goods/works being procured by a Non-Contracting Authority using ERDF money, the higher the degree of advertising expected to be demonstrated. 6 TYPE OF CONTRACT 6.1 There are three types of contracts under the 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. 2 Paraphrasing Reg 34 of the Regulations Page 7 of 75

8 6.2 Part A and Part B Services There is a distinction between the procurement of certain services split and referred to as Part A and Part B services and this, together with the contract value, will determine the procurement route to follow. Part A Services Maintenance and repair of vehicles and equipment. Transport by land, including armoured car services and courier services, but not including transport of mail and transport by rail. Transport by air but not transport of mail. Transport of mail by land, other than by rail, and by air. Telecommunications services. a) Financial services: b) Insurance services. c) 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. Part B Services Hotel and restaurant services. Transport by rail. Transport by water. Supporting auxiliary services. Legal services. and transport Personnel placement and supply services. Computer and related services. Investigation and security services, other than armoured car services. 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. Education vocational services. and health Accounting, auditing and book-keeping services. Health and social services. Market research and public opinion polling services. Management consultancy services and related services, but not arbitration and conciliation services. Recreational, cultural and sporting services. Other services. Page 8 of 75

9 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. Advertising services. Building cleaning services and property management services. Publishing and printing services on a fee or contract basis 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 Whilst procurements of Part B services are treated with a lighter touch than those relating to Part A services (mostly in relation to less onerous advertising requirements 3 ) they are still caught by general obligations such as transparency, equal treatment and non discrimination that derive directly from the TFEU. This means that: a) Contracting Authorities should act in a transparent way and treat all potential providers equally and in a non-discriminatory way. b) Contracting Authorities should comply with the detailed requirements relating to technical specifications set out in the Regulations. c) A contract award notice should be published in the Official Journal no later than 48 days after a contract award. d) Details of procurements of Part B services need to be included in any reports that Contracting Authorities submit to the Cabinet Office. e) 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. 3 Parts 1, 9 and 10 of the Regulations and Regulations 9, 31, 40(2), 41 and 42. Page 9 of 75

10 6.2.4 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. 7 VALUE OF CONTRACT 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 for Part A or B goods/works/services) Grant Recipients will need to be able to demonstrate that they have followed the correct procurement route based on the nature and value of the contract The bullet points below set out a guide as to how this value may be calculated: a) The starting point for calculating the contract value is to establish a genuine pre-estimate of the value of the entire contract. This includes all payments to be made, or potentially to be made, under the entirety of the contract and for the whole of the predicted contract period (including proposed extensions and options). b) Grant Recipients should take into account, using their best genuine estimates, the impact of any inflation value or uplift on the contract. c) The Regulations can cover contracts which are below the stated EU threshold where they constitute repeat purchases and/or purchases of a similar type in a specified period. Grant Recipients should therefore seek advice on the application of the EU Rules where they envisage that they may require to make such purchases. d) Where there is uncertainty surrounding the potential total contract value, for example, the inflation provisions have not been finally agreed or there are a number of options, then Grant Recipients need to use their best estimate and act cautiously and assume that the higher potential value will apply. e) In the case of public contracts without a fixed term or the term of which cannot be defined, the value is the monthly value multiplied by 48. f) Grant Recipients should 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 should be aggregated. Grant Recipients should not incorrectly value a contract or framework agreement with the intention of avoiding the Regulations; g) Grant Recipients should not artificially split larger requirements into smaller units to avoid the aggregation rules and thresholds (e.g. collaborative multi-partner projects are advised to 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) Page 10 of 75

11 NOTE 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 SHOULD BE LET IN ACCORDANCE WITH THE PROCUREMENT RULES FOR ABOVE OJEU WORKS CONTRACTS. THE POINT IS THE VALUE OF THE CONTRACT AS A WHOLE, NOT THE VALUE OF 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 OJEU PROCUREMENT THRESHOLDS 8.1 The public procurement procedures set out in the Regulations must be followed before awarding certain contracts when the contract value is above a certain threshold. In particular the contracts should be advertised in the Official Journal of the European Union (OJEU). 8.2 Thresholds are set every 2 years and the current thresholds are set out below. Note that the thresholds have changed four times since the ERDF programme began in 2007: in 2008, 2010, 2012 and now the 2014 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 2014 (thresholds are net of VAT) SUPPLIES SERVICES WORKS Entities listed in Schedule 1 of the Regulations 111,676 ( 134,000) 111,676 ( 134,000) 4,322,012 ( 5,186,000) Other public sector contracting authorities 172,514 ( 207,000) 172,514 ( 207,000) 4,322,012 ( 5,186,000) Indicative Notices 625,050 ( 750,000) 625,050 ( 750,000) 4,322,012 ( 5,186,000) Small lots 66,672 ( 80,000) 66,672 ( 80,000) 833,400 ( 1,000,000) Utilities Contracts 345,028 ( 414,000) 345,028 ( 414,000) 4,322,012 ( 5,186,000) Page 11 of 75

12 9 SUB-OJEU PROCUREMENT 9.1 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 Part A Services, but there are still rules to be followed. Since EU funds are being used for purposes specified in EU legislation, the EU Principles of free movement, non-discrimination, equal treatment, transparency, proportionality and mutual recognition must be adhered to throughout the entire process regardless of the value of the contract. Grant Recipients must be able to demonstrate the legitimacy of the procurement route followed and should be able to demonstrate documentary supporting evidence 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 Grant Recipients are strongly encouraged to read and understand the Commission Interpretative Communication (the 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 The Communication is mainly concerned with the degree of advertising about any Sub-OJEU 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 ADVERTISING SUB-OJEU PROCUREMENTS 10.1 If there is likely to be a cross-border interest the Treaty Principles will apply If a provider in another EU member state would be interested in providing the goods, services or works that a contracting authority requires, the Treaty Principles will apply. This is the case if the procurement is regulated or not There are no formal rules governing whether a contract will attract cross-border interest. The Commission states that the following factors will be significant: a) The subject matter of the procurement. b) The estimated value of the procurement. c) The place of performance or delivery. 4 Cases C-324/98 Telaustria [2000] ECR; Coname, and C-458/03 Parking Brixen 5 Paragraph 62 of Judgement in Telaustria Verlags GmbH v Telecom Austria (Case C- 324/98)). Page 12 of 75

13 d) The size and structure of the relevant service market The Commission also states that it will be down to individual Contracting Authorities to apply these factors themselves on a case-by-case basis. In the event that a Contracting Authority concludes that there is no cross border interest, legal advice should be taken and a full consideration of the factors above should be documented. The fact that a contract is beneath the relevant threshold will not be enough of a reason for there to be no cross border interest. Advertising contracting opportunities: applying the Treaty Principles The obligation to advertise 10.5 The ECJ has held that the principles of equal treatment and non-discrimination require transparency in the procurement process. The first impact of this is the necessity for a "degree of advertising sufficient to enable the market to be opened up to competition" (Telaustria Verlags GmbH v Telecom Austria (Case C-324/98)). The advertising must inform potential providers in other member states of the procurement. It must also allow them the opportunity to express an interest before any contract is let (Consorzio Aziende Metano (Coname) v Comune di Cingia de' Botti (Case C-231/03)) The Commission has stated that it is not sufficient for a Contracting Authority to contact potential providers itself to advertise the opportunity (even if some of those contacted are in another member state). It requires that a "suitably accessible" advert is published. What does this duty to advertise mean in practice? 10.7 Unfortunately, to date the ECJ has not been clear on the degree of advertising required for contracts partially or fully outside the scope of the Directive and the Regulations. However, the European Commission has published non-binding guidance which seeks to clarify the position (referred to in this guidance as the Communication) The first step is to decide whether a particular contract is of interest to providers in other Members States. In order to determine this, the Contracting Authority should consider the subject-matter of the contract; its estimated value; the particular market involved; and the geographical location where the contract is to be carried out If, having carried out this assessment, the Contracting Authority determines that the contract is likely to be of interest to parties in other Member States, it should publish a sufficiently accessible advertisement prior to awarding the contract. The greater the potential cross-border interest the wider the advertisement must be. For Part B Services contracts which exceed the financial threshold, the Commission states that adequate transparency will typically require publication in a medium with wide coverage. Page 13 of 75

14 10.10 The Commission stresses that it is for Contracting Authorities to decide themselves on the most appropriate means of advertising but does suggest the following methods (these are explored further in section 10.20): a) Advertisement on the Contracting Authority s own website b) Advertisement on a portal website specifically created for contract advertisements c) Publication in national newspapers, specialist journals or national journals d) Publication of a voluntary OJEU notice in the Official Journal (which the Commission suggests as an option for larger contracts) e) Local advertising (the Commission s view is that this is really only suitable for very small contracts for which there is only a local market) Very Low Value Contracts There is no set threshold below which contracts do not need to be advertised. When deciding on the sufficient degree of advertising for very low value contracts, Grant Recipients are encouraged to exercise their reasonable judgement The ECJ stated in the Coname Judgement 6 that it might be considered in individual cases that because of special circumstances, such as a very modest economic interest at stake, a contract award may have no interest for suppliers located in other Members States and that effects on the fundamental freedoms are. to be regarded as too uncertain and indirect to warrant the applications of EU Principles In the view of the Commission, the conclusion that a contract is not relevant for the Common Market and may therefore be awarded without observing the EU Principles, cannot be based on abstract criteria unrelated to the circumstances of the contract award, on simple assumptions, or on a past practice not corroborated by objective elements Based on the Commission s experience in infringement cases, it can reasonably be assumed that contracts with a value that amounts to only a minor percentage of the Directives threshold values are in general of little interest to suppliers located in other Member States and therefore can be let without advertising. 6 Cases C-324/98 Telaustria [2000] ECR I-10745, paragraph 62, C-231/03 Coname, judgment of Page 14 of 75

15 10.15 In an earlier EC discussion document, the Commission proposed that in view of these factors, it would, as a general rule, not institute proceedings either upon application or its own initiative with regard to individual contract awards where the contract value does not exceed 10% of the threshold values provided for in Directives 2004/18/EC and 2004/17/EC This, however, is only an indicative value, and others consideration is that this percentage is far too low and that a figure of 20% would be a more appropriate level. This would give rise to an advertising threshold within the UK of approximately 20,000. The Commission nevertheless reserves the right to intervene if the contract award in question corresponds to a widespread illegal practice or if there are concrete indications that a contract of below this threshold is of relevance to the Common Market. Some Examples (to be treated as a guide only) Example 1: Small contract large supply base A contract is to be let by a London borough for painting and decorating to the value of 15,000. Given the potential supply market within London, a local advertisement would be appropriate. However, if the contract was worth 120,000 obviously there would be interest beyond the London supply market and a wider advertisement would be more appropriate Example 2: Small contract limited supply base A London borough requires to let a contract valued at 15,000 for consultancy with regards to flooding issues. The supply market within London is probably very small and therefore even given the low-value of the contract an advert reaching a wider geographical area is required to comply with the Treaty. Only if the authority can demonstrate that advertising a low-value contract cannot deliver value for money or substantiate another business reason can they avoid advertising. The cost of advertising in newspapers or trade publications cannot be considered a legitimate reason for non-advertising as other communication channels with relatively low or no cost implications are available. It is the responsibility of the individual contracting authorities to decide whether an intended contract award might potentially be of interest to economic operators located in other Member States. In the view of the Commission, 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 Choose an appropriate advertising medium Page 15 of 75

16 The appropriate advertising medium depends on the likely level of interest in the procurement. The more interest that there is likely to be, the wider the coverage must be Suggested methods of advertising for sub OJEU contracts Internet a) 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. b) Advertisements on the Contracting Authority 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 Authorities might also consider publishing information on forthcoming contract awards not covered by the Regulations as part of their buyer profile on the Internet. c) 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 Grant Recipients would still be advised 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/or Compete for in London 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 Local means of publication Contracting Authorities 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 16 of 75

17 Official Journal of the European Union/TED (Tenders Electronic Daily) Publication in the Official Journal is not mandatory for Sub-OJEU procurements but could be an option, particularly for larger, significant contracts which do not 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 Include enough detail for potential suppliers The advert should include enough detail to allow potential providers to consider whether they have an interest in meeting the Contracting Authority's needs. In addition, if the Contracting Authority intends to adopt any shortlisting process in relation to expressions of interest it receives, the advert should set out details of this process Running the procurement: applying the Treaty Principles Structuring an "unregulated" procurement All those who respond to an advert must be treated fairly and impartially (Telaustria). The Commission has set out key principles to ensure that the appointment process is fair and impartial: a) The subject matter of the contract should be set out in a nondiscriminatory manner. This includes using general descriptions of the performance or functions of products, rather than specific requirements relating to specific makes or sources. b) Service delivery should allow equal access to operators from all member states. In particular, avoid direct or indirect restrictions, such as requirements based on local establishment. c) There should be mutual recognition of diplomas, certifications and other evidence of formal qualifications. d) Any time limits should be appropriate and long enough to allow for a meaningful assessment of the need and the preparation of a bid. e) A contracting authority should use transparent and objective criteria. f) Where negotiation is involved, ensure that all bidders have access to the same information and that no one bidder receives favoured treatment Shortlisting bidders Page 17 of 75

18 Any mechanism for selecting a shortlist must be transparent and nondiscriminatory. This requires that the shortlisting process be outlined in the advert. The Commission has stated that it may be appropriate to consider the following objective factors: a) The experience of the applicants in the sector concerned. b) The size and infrastructure of the applicants business. c) The technical and professional ability of the applicant Where shortlisting does take place there should be enough shortlisted providers to ensure adequate competition The Commission also accepts that a Contracting Authority may put a qualification process in place. This system would provide a short-list of potential suppliers who can either subsequently compete for contract opportunities without further advertising, or be awarded contracts on a rotating (or other non-discriminatory) basis. However, this approach may only be used where the list of qualified operators is compiled following a sufficiently advertised, transparent and open procedure. Such an approach is replicated in the formal procurement regime by the ability to set up framework agreements Fulfilling the requirement to obtain value for money A Contracting Authority will also always need to consider its own policies or standing orders and the extent to which it is subject to any requirement to obtain value for money when structuring any procurement. These may require that a competition is run in a certain way. Page 18 of 75

19 11 TABLE OF RECOMMENDED ACTION - SUB-OJEU 11.1 In order to ensure that the requirements within the Communication are followed we have developed the table below (as a guide only) which sets out what action is recommended to be taken for Sub-OJEU procurements. Note that this issue must be considered at the outset of a procurement, and an audit trail of that process must be retained. Estimated Value of Goods or Services 20,000 and below Action Required Sufficient degree of advertising is required but is not likely to affect Common Market (see section on Very Low Value Contracts). Grant Recipients to consider using their own website or a portal such as contracts finder. 20,001 to OJEU threshold The level of advertising must be sufficient to allow for competition, potentially from another member state; even if the organisation feels that the contract award might not be of interest to suppliers located in other Member States (depending on other factors e.g. geographical location) it is still advisable to consider advertising on their own website or a portal such as contracts finder. If this is not done, the reason why it is felt that there is no risk of breaching the Principles should be recorded. Formal invitation to tender process is advised and it is suggested that the is 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 Page 19 of 75

20 Part B Services the lighter-touch regime specified in the Regulations Value of Works 429,999 and below Action Required Sufficient degree of advertising; although it might be considered unlikely to affect the Common Market, consider using their own website or a portal such as contracts finder. If not, record why it is felt that there is no risk of breaching the Principles. 430,000 and above The level of advertising must be sufficient to allow for competition, potentially from another member state; even if the organisation feels that the contract award might not be of interest to suppliers located in other Member States (depending on other factors e.g. geographical location) it is still advisable to consider advertising on their own website or a portal such as contracts finder. If this is not done, the reason why it is felt that there is no risk of breaching the Principles should be recorded. Formal invitation to tender process is advised and it is suggested that the is requirement advertised in the press and/or on the internet for a minimum of 10 days to enable fair competition. Over OJEU threshold Full advertisement in OJEU of a fullycompliant open/negotiated or other regulated process 12 PROCUREMENT PROCEDURES 12.1 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 Page 20 of 75

21 costs. 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 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 Competitive Dialogue This is a relatively new procedure for complex contracts, such as design and build, 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 a point at which contract is awarded Negotiated Procedure Features: When to use 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 (at least two) have met the selection criteria and these are sufficient to ensure genuine competition). The Regulations state that the negotiated procedure may only be used where: a) another procedure has failed to produce any acceptable tenders; b) exceptionally where prior overall pricing is not possible; Page 21 of 75

22 c) in the case of services, where specifications cannot be established with sufficient precision; or d) for certain research and development related works contracts However, the Office of Government Commerce (OGC) (now the Efficiency and Reform Group ) issued guidance 7 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 negotiated procedure should no longer be used by a Contracting Authority if it is required to publish an OJEU notice 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 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. 7 Page 22 of 75

23 13 PROCUREMENT PROCEDURE TIME LIMITS 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 Page 23 of 75

24 13.1 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 The Cabinet Office published a Procurement Policy Note (19 th December 2011) 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 A summary flow-chart on the various procedures and timescales can be found below: Page 24 of 75

25 14 CONTRACT AWARD 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. 15 FRAMEWORK AGREEMENTS 15.1 Frameworks 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 Grant Recipients who intend on using a framework (as a partner authority) that has been set up by another Contracting Authority are strongly advised to carry out and document the necessary due diligence and checks to ensure that the framework that they intend on using has been procured correctly and that they are eligible to use the framework. Grant Recipients are encouraged to check: 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 (see further details below) 15.4 Where a Grant Recipient utilises an existing framework that has been procured and set up by another Contracting Authority, the procurement of this framework may be fully checked and audited and if it is deemed to be incorrectly procured or utilised then financial corrections may apply. Procurement risks arising from all multi-purchaser contracts Page 25 of 75

26 15.5 Both the original authority and the partner authorities could be challenged if the procurement process for the original contract is flawed. The following matters should be considered at the outset: The OJEU notice must identify the partner authority (either by name or category) as an actual or potential purchaser under the contract. The description of the goods, services or works in the OJEU notice and eventual contract must include the partner authorities' requirements. Any substantial amendments to the contract after it is advertised may trigger a claim that a new procurement process was required. The value of the contract (as stated in the OJEU notice) must provide for the partner authorities' potential spend. The contract should set out the means by which the partner authorities will purchase through or use the contract (i.e. mini competitions are held if this was an original requirement). 16 SELECTION AND AWARD CRITERIA 16.1 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. OGC (now the Efficiency and Reform Group ) issued some guidance on this point Selection Criteria Selection Criteria 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 an 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 financial standing 25. Information as to technical or professional ability 26. Supplementary information 8 Page 26 of 75

27 The Regulations require a minimum number of candidates to be short-listed under the Restricted process and under the Competitive Dialogue process Award Criteria 16.4 Award criteria are set in order to award the contract on the basis of either the most economically advantageous tender (MEAT) (for example balancing factors such as quality, price, delivery timeframe) or the lowest price. The criteria, subcriteria 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 17 RECORD KEEPING 17.1 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 documentary evidence of a compliant procurement process. This documentation, as a minimum, must include: a) Explanation of procurement procedure selected with justification b) Copy of OJEU notice or relevant advertisement and OJEU Prior Information Notice (PIN) if applicable (including for Framework Agreements) c) PQQ including the associated selection criteria (where used) and log of responses received d) Copy of tender specification with clear award criteria e) Log sheet for all tenders received (time and date) f) Copy of all tenders g) Copy of tender score sheets dated and signed by two people h) PQQ assessment scores i) Copy of OJEU award notice j) Copy of report on evaluation of tenders k) Copy of correspondence, including interview questions where appropriate l) Copy of letters to unsuccessful tenderers giving an appropriate standstill period (where appropriate) m) Copy of award letter /signed contract n) Copy of notes from inception meeting Page 27 of 75

28 o) Summary record of the above process to assist with future monitoring and audits Where a framework that has been procured or set up by another contracting authority has been utilised by the Grant Recipient, the Grant Recipient must be able to provide documentary evidence to show the details outlined in section Records must be maintained for verification until at least the end of Grant Recipients must ensure that delivery partners and sub-contractors also retain such documentary evidence. 18 MOST COMMON ERRORS 18.1 Under procurement law, there are certain procedures that must be followed by Contracting Authorities when tendering and awarding contracts. If these procedures are not followed then there is a risk that the contract award can be legally challenged by third parties which can result in the aggrieved party seeking an interim injunction suspending the tender process or the implementation of any decision or action by the awarding body. The court can also declare the award of a contract ineffective if any aspect of the procurement process has been breached. In addition, the challenger can claim damages for any loss or damage it may have suffered as a result of the breach The risks of facing the consequences of failure to comply with procurement 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 (leading to grant money being clawed back from the Grant Recipient). Financial corrections are enforced in accordance with established guidelines which range 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 but are not limited to: a) Contracts awarded without publication in OJEU (or another suitable means of advertising); b) Amendments to contracts for additional works or services without appropriate consideration of whether an extension/addition is Page 28 of 75