January 2015 News New Danish Public Procurement Act The new Danish Public Procurement Act is expected to come into force on 1 October 2015. The question is whether the new act is consistent with the provisions we know today, and how much it will impact the tender procedure? In the following we list the changes that will have the greatest practical impact. When the European Commission proposed changing the public procurement directives, the unequivocal goal was to simplify the public procurement rules. It was going to be easier for contracting entities to apply the sometimes complex rules. For the first time, the Danish government has decided to implement the new procurement directive, setting up a Public Procurement Act Committee in the summer of 2013. On 5 December 2014, a new draft for the Public Procurement Act went out for consultation, and a bill is expected to be introduced in the Danish Parliament in early February 2015. It is questionable whether the draft that recently went out for consultation simplifies the procurement rules. In any event, with its 198 sections, getting an overview of the rules is not easy. This leaflet is an introduction to the most significant changes imposed by the new Public Procurement Act, and it points to some aspects that contracting parties should consider even now. The Danish Utilities Directive (Forsyningsdirektivet) is scheduled for implementation by executive order, effective from April 2016. Consequently, contracting parties procuring goods or services for activities in the water, energy, transportation or postal services sectors will be exempt from complying with the provisions of the Danish Public Procurement Act. However, as many of the provisions in the new Utilities Directive are identical to those of the Public Procurement Act, it will contribute significantly to the interpretation and understanding of the Utilities Directive. Bech-Bruun offers Courses with focus on the new Public Procurement Act: Academy Client, 17 March 2015, 9 am-12 noon in Copenhagen. Academy Client, 23 March 2015, 9 am-12 noon in Aarhus. End-of-day meeting, 10 June 2015, 1 pm-4 pm in Copenhagen. Academy Client, 2 September 2015, 9 am-12 noon in Copenhagen. Customised courses.
News New Danish Public Procurement Act 2 Before the Act comes into force Contracting entities should be aware of a number of circumstances even before the Public Procurement Act takes effect, as it may affect the planning of future procurement significantly. From now on, various services that previously did not have to be put out to tender will fall under the new act. However, the simplified procedures facilitate negotiations between the contracting entity and bidders about available solutions and contractual terms. Consequently, as a contracting entity, it may be worth considering the advantages of initiating procurements before the act comes into force or postponing such procurements. More services to be put out to tender The new Act abolishes the distinction between services classified under Appendix II A or Appendix II B. As a result, more contracts will have to be put out to tender. However, a majority of the services previously included under Appendix II B will have to be put out to tender only if their value exceeds an elevated threshold of approx. DKK 5,582,000. Procurement of such services will trigger a number of general procedural requirements in order for the contracting entity to ensure equal treatment and transparency on entering the contract. In popular terms, this procedure is called the light regime. Contracting entities should also be aware that some services no longer have to be put out to tender and may be awarded directly in future. This includes loans, regardless whether or not they are based on bond issuance. Revocation of the advertising requirement Title II of the Danish Act on Tendering Procedures (Tilbudsloven) will be revoked, and as for future procurement contracts for procurement below the threshold value, contracting entities must distinguish between procurement with and without crossborder interest. It will be easier for contracting entities to enter into contracts on goods and services under Appendix II A without clear cross-border interest, as the advertising requirement will be lifted. The only requirements made to a contracting entity s procurements after 1 October 2015 are that they take place on market terms, and that a reason must be stated if the contracting entity chooses to solicit more than three tenders. By contrast, procurement with clear cross-border interest must be advertised at udbud.dk. To a large extent, additional procedural obligations comprise the same rules as those that apply to services procured under the light regime. To determine whether a contract has clear cross-border interest, the contracting entity must perform a specific evaluation in each individual case. Earlier access to procurement documents One evident pillar of the new Public Procurement Act is that the contracting entity must allow complete electronic access to all procurement documents as from the date of publishing the contract notice. This also applies to contract notices with prequalification. Only in very extraordinary circumstances may a contracting entity refuse to grant access to procurement documents. Extended access to negotiation Contracting entities will have wider access to conducting a negotiated tender procedure or a competitive dialogue. The extended negotiation option applies to all cases in which the contracting entity is not procuring standard off-the-shelf items. As a new feature, contracting entities may opt to apply these procedures when: The contracting entity s requirements cannot be fulfilled without adaptation of an existing solution The goods or services include design or innovative solutions. The contracting entity may choose freely between the procedures, as the conditions of applying them are identical. Interpretation of existing law Some of the changes stemming from the new Public Procurement Directive and from the Public Procurement Act have already affected the interpretation of existing law, for instance when parties have to determine the possibility of amending a contract while it is in force. Other significant tender procedure changes Shorter minimum periods of notice The minimum periods of notice for accepting bids and tenders are shortened so that the contracting entity may complete a tender faster. For open procedures, the minimum period of notice for tenders will be 35 days. Earlier on, the minimum period was, in practice, 45 days for an electronically submitted contract notice and 40 days if the contracting entity allowed simultaneous access to the procurement documents. For restricted procedures, the new minimum period of notice for accepting bids is 30 days. On an acutely arisen need, where it is impossible to observe the usual minimum period, shorter minimum periods may be established for bids and tenders, respectively. The draft explanatory notes state that an acute need does not have be founded on compelling grounds as a result of events that the contracting entity could not anticipate. This probably constitutes an easing relative to the existing terms governing urgent procedures. Duty to describe evaluation method in procurement documents Under the Danish Public Procurement Act, the contracting entity must describe its evaluation method in the procurement documents. Thus the contracting entity must already have prepared an evaluation method at the time of publishing the contract notice.
News New Danish Public Procurement Act 3 Minimum period of notice Prior to 1 October 2015 As from 1 October 2015 Bids, electronically submitted contract Tenders, electronically submitted contract Tenders, electronic access to procurement documents Bids Tenders, general rule Tenders, electronically submitted Open procedure None 45 days 40 days None 35 days 30 days Restricted procedure 30 days 40 days 35 days 30 days 30 days 25 days This requirement is not an implementation of a corresponding provision in the new Public Procurement Directive; it is a new feature that regulates the former practice of the Complaints Board for Public Procurement in this area. Formal requirements The draft explanatory notes state that: The evaluation method is the systematics applied by the contracting entity on evaluation of tenders with a view to identifying the economically most advantageous tender. The evaluation method must relate to all sub- and part-criteria and clarify to potential candidates and tenderers how the contracting entity will evaluate the tenders relative to the criteria. The Public Procurement Act does not require the contractual entity to apply a specific evaluation method. Thus the evaluation method may be based on various models, using prose, price or points. If the contracting entity employs the award criterion best quality/ price ratio (which to a large extent corresponds to economically most advantageous ), one significant issue is whether the contracting entity, under the new rules, is obliged to publish its new evaluation model for converting price into points. The draft explanatory notes suggest that this is the case, but the notes are not completely unambiguous. Generally, tenders are not required to be evaluated by means of a mathematical model when a contract is awarded on the basis of the price criterion or best quality/price ratio. However, if the contracting entity decides to include life cycle costs using the award criterion costs, the contracting entity is under obligation to apply the mathematical model to be prepared by the European Commission. As a new feature, all sub- and partcriteria may be evaluated in relative as well as in absolute terms. So far, the Danish Complaints Board for Public Procurement has barred the option of relative evaluation of qualitative sub-criteria. Adjustment and secondary evaluation methods In the procurement documents, the contracting entity will be given the option of stating that the selected evaluation method may be adjusted or that a secondary method may be employed in certain specific situations. The contracting entity must state this option in advance and describe it clearly in the procurement documents. In this connection, the contracting entity must have determined various objectively identifiable circumstances that must exist before the evaluation method may be adjusted or the secondary method may be applied. Access to adjusting the method or applying a secondary method may be relevant if, for instance, the specific tender prices do not correspond to the contracting entity s expectations. Generally, changes in the already stated evaluation method in a manner that has not been expressed or described will require a new tender. Suitability requirements and selection Revenue requirements The draft introduces a restriction in the contracting entity s ability to state requirements as to candidates and tenderers revenues. Looking ahead, the contracting entity may require as a general maximum that the candidate s or tenderer s annual revenue is twice the amount of the specific procurement contract value. However, in special circumstances, for instance if the contract involves particular risks, the contracting entity will be allowed to raise that maximum. Label requirements The contracting entity may require that certain goods or services be awarded a certain label, if: the label is associated with the subject matter of the contract, the criteria are objectively identifiable and non-discriminating, the label has been developed on the basis of an open and transparent procedure, the label is available to all potential tenderers, the label is defined by a third party on whom the candidate has no decisive influence.
News New Danish Public Procurement Act 4 In the procurement documents, the contracting entity is not obliged to explain in detail the conditions that must be met in order to be awarded the label. However, the contracting entity must always accept a corresponding label or other adequate documentation evidencing that a company meets the label requirements. Using third-party resources As a new feature, if a candidate or a tenderer bases its tender on the educational and professional skills or experiences of a third party in order to meet the minimum suitability requirements, the contracting entity must require that such part of the work is actually performed by that third party. If, for instance, a candidate or tenderer has based its tender on the technical skills of a third party to handle quality control on a construction project, that third party must perform these functions. The Public Procurement Act also allows the contracting entity to demand that central tasks be performed by the tenderer himself or by a specific sub-supplier. Thus the contracting entity may prohibit the employment of sub-suppliers for central tasks that are vital to fulfilling the contract. Exclusion The rules on exclusion are changed in a number of areas: Mandatory exclusion grounds The new Public Procurement Directive and the Danish Public Procurement Act have extended the group of businesses that the contracting entity is obliged to exclude based on the mandatory exclusion grounds. Going forward, the contracting entity must exclude a business when a natural person has been convicted by final judgment of an offence or the like constituting one of the mandatory exclusion grounds, and that person is a member of the business board of directors or management board or is authorised to represent the business. The legislative amendment is meant to ensure that tenderers do not evade the public procurement rules by simply establishing a new legal entity managed by the same person or persons. Discretionary exclusion grounds The draft for the Public Procurement Act adds two new exclusion grounds, based on which the contracting entity may decide to exclude a business in the future: The contracting entity may exclude a business if the contracting entity finds that there are plausible indications that the business has distorted competitiveness. The contracting entity may exclude businesses that have been in material breach of a previous public contract, resulting in a termination for cause of that contract or a similar sanction. Both provisions constitute significant extension of the exclusion grounds defined by the previous Public Procurement Directive. Exclusion period by contracting entity If within the past four years a candidate or tenderer has been convicted by final judgment in one or more offences constituting the mandatory exclusion grounds, the contracting entity must, as a general rule, exclude the business. The period of exclusion begins on the date of final conviction. However, the period of exclusion by the contracting entity is only two years, if the candidate or tenderer is subject to one of the discretionary exclusion grounds. The two year period runs from the relevant incident or action that forms the basis of exclusion. Self-cleaning If a candidate or tenderer is excluded for non-compliance, but is able to document that measures have been taken to ensure their reliability, the contracting entity cannot exclude the candidate or tenderer. This procedure is called self-cleaning. The draft Public Procurement Act includes a list of measures that the contracting entity may accept as documentation for the candidate s
News New Danish Public Procurement Act 5 or tenderer s reliability, for instance that a tenderer has paid damages as ordered. Changes to contracts while in force The new Public Procurement Act includes significant new features that make it easier for contracting entities to change a contract while it is in force. New lower threshold Two conditions must be met for the contracting entity to introduce minor changes to a contract without having to initiate a new tender procedure. When the value of the change: falls below the current threshold values, and is less than 10% of the original contract for services and goods, 15% of the value for construction contracts. However, changes that affect the overall nature of the contract may not be introduced. Change due to unforeseen circumstances The contracting entity may change the contract if the change is due to unforeseen circumstances, subject to the following conditions being met: The contracting entity s option to make changes is based on the principles of the former Public Procurement Directive, although the new provisions are less restrictive. The draft explanatory notes state that the option to change is particularly relevant for long-term contracts, which are more prone to a need for changes that could not reasonably have been foreseen by the contracting entity. E-procurement As from 18 October 2018, all tenders must be conducted electronically. However, central purchasing departments must communicate all public contracts electronically as early as 18 April 2017. From then on, contracting entities must ensure that all communication and exchange of information takes place electronically. Only when the use of electronic communications would require particular tools owing to the particular nature of the tender may the contract be exempt from mandatory e-procurement. The drafting of the Danish provisions has been postponed until the European Commission has progressed in its work on standards etc. Other noteworthy changes The Danish Public Procurement Act clarifies the right to make preliminary market surveys. As a new feature, the contracting entity can apply the Procurement procedure Innovation ship The Danish Public Procurement Act introduces new award criteria, including price, costs and best price/quality ratio The contracting entity s right to request suitability documentation is limited by the introduction of the European Single Procurement Document (ESPD) The contracting entity s right to remedy errors and defects in bids and tenders is clarified Introduction of mandatory debriefing on award of a contract The need for change could not have been foreseen by the contracting entity. The general character of the contract is not affected, The total value of the change does not exceed 50% of the value of the original contract. 1 October 2015 Act expected to enter into force 18 April 2017 Tenders fully electronic for purchasing service departments 18 October 2018 All tenders conducted electronically 2015 2016 2017 2018 2019
News New Danish Public Procurement Act 6 Significant changes in enforcement The new draft Public Procurement Act also includes a few significant changes as to the enforcement of the procurement tender rules. Termination of contracts In general, the draft Public Procurement Act puts contracting entities under an obligation to terminate a contract with appropriate notice if the decision to award was revoked by final settlement or judgment. The time of termination is determined on the basis of the specific contract and the nature of the breach. If the contracting entity decides to initiate a new tender procedure, the contracting entity may await completion of the new tender procedure. In special cases, the contracting entity may continue the contract with the tenderer if certain circumstances apply. According to the draft explanatory notes such circumstances include termination of the contract that would result in an extraordinary loss of value. The contracting entity may also continue the contract if the rejected tenderer has been awarded loss of future profits, and the winning tenderer would have won the contract even though the rejected tenderer had not made a tender offer. The obligation to terminate the contract is a significant new feature. Until now, the Complaints Board for Public Procurement was authorised only to cancel the contracting entity s decision to award; it had no statutory basis to terminate the contract entered into. This new remedy is not described in the new Public Procurement Directive and is thus purely a Danish provision. The provision seems mostly relevant in connection with long-term contracts about delivery of goods and services. Authority of Complaints Board restricted The draft Danish Public Procurement Act restricts the authority of the Danish Complaints Board for Public Procurement in two ways: 1. Mainly, the Complaints Board for Public Procurement is not authorised to disregard an evaluation method described in the procurement documents if the method is transparent and complies with the equal treatment principle. 2. Also, contracts below the threshold value and with no crossborder interest cannot be brought before the Complaints Board. However, the Complaints Board for Public Procurement may test whether the criteria above are actually fulfilled. Standstill and suspensive effect If a complaint is submitted during a standstill period that has been extended by the contracting entity to exceed the statutory standstill period, the complaint will according to the draft carry a suspensive effect. If the contracting entity makes a discretionary announcement about its decision to award a contract, any complaint submitted in the discretionary standstill period of ten calendar days will also automatically carry a suspensive effect. Contact Copenhagen Peter Stig Jakobsen T +45 72 27 34 55 E psj@bechbruun.com Jesper Kaltoft T +45 72 27 35 69 E jek@bechbruun.com Claus Berg T +45 72 27 35 25 E berg@bechbruun.com Anders Birkelund Nielsen T +45 72 27 34 04 E abn@bechbruun.com Contact Aarhus Tina Braad T +45 72 27 33 21 E tbr@bechbruun.com Christian Nielsen Senior associate T +45 72 27 34 83 E cen@bechbruun.com Anne Bergholt Sommer Senior associate T +45 72 27 33 61 E ase@bechbruun.com