Introduction to Public Procurement Law

Transcription

1 Introduction to Public Procurement Law The Directives Public procurement relates to the purchase of goods and/or services by public bodies, bodies governed by public law and entities operating in the utilities sector on the basis of special or exclusive rights granted by the state ( contracting authorities ). There are also rules which apply in the converse case to the disposal (as opposed to procurement) by the state of assets. This article concentrates solely on procurement. If the value of the goods or services to be purchased by a contracting authority is above a certain threshold, the procurement process is generally governed by one of two procurement directives; the Public Sector Directive 1 or the Utilities Directive 2 ( Directives ). The Directives replace the previous public procurement directives which were in force up until recently. Ireland was required to implement the Directives by 31 January 2006 but has not yet done so. The Utilities Directive coordinates the procurement procedures of contracting authorities 3 operating in the water, energy, transport and postal sectors. The Public Sector Directive coordinates the procurement procedures relating to the purchase by contracting authorities of services, supplies and works. The Directives specifically govern how contracting authorities interact with interested third parties and the manner in which contracts (i.e. a requirement) must be advertised, tenders evaluated and contracts awarded. Department of Finance guidelines and circulars Irish contracting authorities are also subject to a series of public procurement guidelines and circulars issued by the Department of Finance which similarly lay down how a procurement process should be run. If the value of the goods or services to be procured is below the applicable value threshold, a procurement process will fall outside the ambit of the Directives, but will still be subject to the guidelines and circulars. EU principles The principles enshrined in the EC Treaty, such as those of non-discrimination, transparency and equality, apply if a contract to be awarded has a European dimension. A contract may fall outside the ambit of the Directives because it does not meet the value thresholds, but still be subject to the principles of EU law. 1 Directive 2004/18/EC. 2 Directive 2004/17/EC. 3 Contracting authorities, in this context, can include private entities operating in the utilities sector on the basis of special or exclusive rights granted by the state.

2 When do the Directives apply? The Directives generally apply if a contracting authority intends to conclude a contract with a formally distinct entity and the estimated value of the contract satisfies the applicable value threshold. The award by a private entity of certain works contracts, and certain services contracts related to works contracts, may also fall within the ambit of the Public Sector Directive if the contract to be awarded is directly subsidised by a contracting authority by more than 50%. In these circumstances, the subsidising contracting authority, and not the private entity, is responsible for ensuring that the Public Sector Directive is complied with. What are the value thresholds? The value thresholds set out in the Directives are broken down by reference to what exactly is to be purchased and are revised from time to time. The Public Sector Directive value thresholds are currently 5,278,000 for works, 137,000 for services or supplies procured by central government authorities such as government departments, and 211,000 for services or supplies procured by other public bodies. Different thresholds apply under the Utilities Directive. Advertising contracts If the Directives apply, a contracting authority is generally required to publish a contract notice in the EU official journal advertising the goods or services it wishes to procure. The particular information to be included in a contract notice is laid down by EU law. It includes the selection and award criteria and certain other information relating to the contract to be awarded. The completion of the contract notice is important as its content lays down the foundation for the entire procurement process. The notice also needs to be drafted carefully to ensure compliance with the EU law principles, particularly those of transparency, non-discrimination and equal treatment. Even if a contract fall outside the ambit of the Directives, for instance if the value is below the applicable value threshold, contracting authorities may still be required under EU law to advertise a contract. The Department of Finance suggests that contracts which fall outside the ambit of the Directives should be advertised on the website if the value of the contract is in excess of 50,000. This website is a reference point for potential suppliers. If the value of a contract is such that it may interest suppliers outside Ireland, advertising may have to be more than national even if the Directives do not apply. In such an event, the same information should be provided simultaneously in national and international advertisements in order to ensure equality of treatment and non-discrimination. This can be achieved in a costefficient manner by publishing a non-mandatory contract notice in the EU official journal.

3 A contracting authority must allow a specified minimum number of days for interested parties to respond to the contract notice. In this way, parties in all member states are given an equal opportunity to bid for and win the contract to be procured. In certain prescribed circumstances, the time which must be allowed to respond to a contract notice, and some of the other applicable timelines laid down by the Directives, may be reduced; thus enabling the procurement process to be accelerated. Award criteria A contracting authority may choose the winning tender only on the basis of technical or economic criteria, namely the most economically advantageous tender or lowest price only. The criterion of the lowest price only does not raise any issues of interpretation. Only the prices offered by tenderers may be taken into consideration and the contract must be awarded to the tenderer which asks for the lowest price. If, on the other hand, a contracting authority chooses to award a contract to the most economically advantageous tender, it is required to set out, in the contract notice or contract documents, all the award criteria which it will take into account in awarding the contract, such as price, technical merit and/or quality. In addition, the contracting authority must set out the weighting to be given to those award criteria. Tendering procedures The Directives allow a contracting authority to put a contract out to tender pursuant to a number of distinct competitive procedures, namely the open or restricted procedures, which contracting authorities are free to choose, or the competitive dialogue or negotiated procedures which can generally only be used in specified exceptional circumstances. Choosing the correct tendering procedure at the outset of a tendering process can prove critical. This is because a contracting authority cannot change from one competitive procedure to another without restarting the entire process once it has been initiated. Under the open procedure, any interested party can submit a tender. Conversely, under the restricted procedure, any interested party may request to participate; however, only those invited to do so may submit a tender. The negotiated procedure and the competitive dialogue procedure allow a contracting authority a greater degree of flexibility than is present in an open or restricted procedure. In the negotiated procedure, a contracting authority consults with entities of its choice and negotiates the terms of the contract with one or more of them. Under the competitive dialogue, any interested party may request to participate. The contracting authority then conducts a dialogue with the admitted candidates with the aim of developing one or more suitable solutions capable of meeting its requirements. The contracting authority then invites the chosen candidates to submit a tender on the basis of the developed solutions.

4 Generally, a contract notice is supplemented by a detailed document, known as an invitation to tender or request for tenders. This document elaborates upon the contracting authority s needs. It also sets out the rules governing the process and contains important legal provisions relating to exclusions of liability or termination of the process, for example. Selection As those who respond to the publication of a contract notice may not be suitable, all four award procedures permit a process of selection in order to eliminate candidates which do not satisfy minimum standards. First of all, the contracting authority establishes that the candidates do not fall within a number of proscribed circumstances relating to the candidates personal situation. Normally, candidates make a statutory declaration to the effect that they do not fall within the exclusion criteria. Then, the contracting authority considers whether the candidates satisfy certain published selection criteria. In the case of the Public Sector Directive, these relate to the economic and financial standing of the candidate and the technical and professional ability of the candidate. In essence, these two sets of criteria act as a threshold which a candidate must cross prior to the contracting authority considering the candidate s ability to perform the contract. Evaluation Under all procedures, the contracting authority evaluates the tenders and awards the contract to the tenderer who satisfies the selection criteria and whose tender best satisfies the award criteria. The selection criteria are not considered when deciding which tender best satisfies the award criteria. When evaluating a tender, a contracting authority may not take account of information submitted by a tenderer after the expiration of the deadline for receipt of tenders if that information amends the tenderer s tender. This is because this is considered to confer an advantage on the tenderer over its competitors which breaches the principle of equal treatment and impairs the transparency of the procedure. Information to unsuccessful tenderers The Directives require contracting authorities to inform candidates and tenderers as soon as possible of decisions reached concerning the award of a contract, including the grounds for any decisions not to award a contract or to recommence the procedure. In addition, a contracting authority must, upon request, inform a candidate or tenderer, as quickly as possible, of the reasons for their rejection. Further, upon request, a contracting authority must, as soon as possible, inform a tenderer of the characteristics, relative advantages and name of the successful tender. The time taken to respond to a request may not exceed 15 days from the date of request.

5 Standstill period In its landmark Alcatel 4 decision, the ECJ ruled that member states are required to ensure that a decision to award a contract is open to a review procedure whereby an applicant may have that decision set aside if it is unlawful. Consequently, an intervening period is generally allowed to elapse between a decision to award a contract to the successful tenderer and the conclusion of a formal contract. Generally, a period of 15 days is allowed to elapse from the date unsuccessful tenderers are notified of the award decision. Attribute to Robert McDonagh, Solicitor, Mason Hayes+Curran Robert McDonagh is a solicitor in the commercial department of Mason Hayes+Curran. For more information, please contact Robert at rmcdonagh@mhc.ie or The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes+Curran ( is a leading commercial law firm with offices in Dublin, London and New York. Copyright Mason Hayes+Curran April All rights reserved. 4 C-81/98.