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“Light Touch” Procurement Procedures

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Background
The recitals to Directives 2014/24/EU and 2014/25/EU set out reasons for excluding certain social, health, educational and other specified services from their full scope and for applying higher thresholds of €750,000 and €1,000,000 respectively before OJEU advertisement of these requirements is mandated.

The Directives go on to specify the services subject to this so-called “Light-Touch Regime” by reference to a listing of CPV (Common Procurement Vocabulary) Codes set out in Annex XIV to the Public Sector Directive and Annex XVII to the Utilities Directive.

The “Light-Touch” Annexes are curious in that they look to have been put together in something of a hurry. Instead of setting out a clear and full listing of the services in question as one would expect in a legal enactment, it includes numerical-only groupings such as “from 85000000-9 to 85323000-9” which requires procurement officials to carry out a cross-reference check against the full CPV Code listing in order to establish what services are in fact covered in that grouping.

There also seems to be a degree of arbitrariness when it comes to the services included in the “Light-Touch” regime. For example, the provision of “security services” is classified as “Light-Touch” and excluded from standard procedures whereas “cleaning services” is not and remains subject to the standard rules. Both these services are increasingly provided and procured together as “facilities management” packages and it is not at all clear why such closely-related economic activities should be subject to very different treatment under public procurement law.

Uptake to Date

It appears from Tenders Electronic Daily that there is a significant appetite for the new procedures with some 170 over-threshold “Light-Touch” procedures advertised on TED from 2015 to date, mostly involving health service requirements in the UK (141 notices), Ireland (26) and Luxembourg (3).

This begs the question as to how the other EU Member States are applying the “Light-Touch” rules, or if they are using them at all?

A review of some of the Notices published on TED also highlights the following:

  • One project for housing services, which expressly claims to be an “Annex XIV procedure” uses CPV codes that are not so designated in the Directive;
  • One notice for “Executive and Legislative Services” is in fact for qualified accountants to act as court-appointed official receivers in corporate bankruptcy matters. As accountancy services are subject to the normal rules, one would have expected the procurement in this case to err on the side of caution and follow standard procedures for accountancy services.
  • Another notice classifies what appears to be a works/fitting-out project as “Health Services” apparently because the works in question are required for a hospital.

This raises the question as to whether anyone is monitoring these notices in the publishing authorities before release.

Issues for Procurement Officials

CPV Codes should always be carefully checked prior to issue of Contract Notices.

Consideration of the “Light-Touch” procedure needs to be carefully checked by cross-reference to the CPV Code. This can give rise to tricky situations where the procurement official will have to exercise careful judgment. For example: a requirement may involve the provision of “event services” with CPV Code 79952000 which is within the scope of the Light-Touch regime but may also involve the hire of audio equipment or other goods/services which have different CPV Codes that are subject to the normal transparency requirements and the lower thresholds. Prudence would suggest that an orthodox approach using standard procedures should be taken in such cases.

The use of CPV Codes is a mandatory legal requirement for all notices published at OJEU/TED level and is a critical element in the effective communication of requirements to the market, and in enabling contracting authorities/entities to meet their transparency obligations. The incorrect use of CPV codes would seem to be a matter of concern to the EU Commission, particularly in the light of the 2017 Cosinex report which cited one study that found incorrect use of CPV codes in 23% of notices analysed. The Cosinex report concluded that CPV errors have an appreciable adverse impact on transparency and the achievement of value for money. It remains to be seen what action the Commission will take in response. In the meantime, procurement officials should exercise care in the use of CPV codes given that incorrect or misleading CPV Codes may conceivably result in legal challenge1, particularly if there has been an adverse or misleading impact on the transparent communication of a requirement to the market.

Issues for Service Providers

Service providers need to be alive to the potential for mis-classification errors with the CPV Codes and should establish procedures to monitor published TED notices by use of key-word searches in addition to monitoring by CPV Code.

There is also a risk of reduced competition in the market sectors subject to the “Light-Touch” rules because there is no longer a legal obligation to advertise on TED/OJEU for requirements with values in the ranges €144- €750K (Central Government) and €443- €1m (Utilities).

This could see a lot of business being awarded without advertised competition although it appears that, for now, many contracting authorities/entities are continuing to advertise such contracts on national e-procurement portals on the basis of either national administrative rules or good practice in securing value for money. However, in the case of Ireland at any rate, there may be a further question as to whether such contracts are “reviewable contracts” as defined for the purposes of the Irish Remedies Regulations because the awarding of such contracts is outside the scope of the Irish Public Contracts Regulations of 2016. If that view is correct, it could mean that Irish economic operators in the social/health/educational sectors do not have access to the same legal remedies to challenge procurement decisions as economic operators in other sectors. This seems inherently unfair and a perverse outcome for legislation that has the elimination of arbitrary discrimination as one of its primary objectives.

James Farrell
Senior Procurement Consultant 

Snapshot of Irish Procurement Activity at EU level* in 2018

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The following statistics, extracted from the EU Commission’s Tenders Electronic Daily, provide an interesting snapshot of the level and types of procurement activity undertaken by Irish contracting authorities during 2018. It suggests a number of interesting trends including:

  • the emergence of the first Dynamic Purchasing Systems as enabled by the 2014 Directives;
  • significant uptake in the use of Competitive Procedure with Negotiation (41);
  • the first use of Contract Modification Notices (which permit certain changes to contracts during their term);
  • the first use of so-called “Light-Touch” procedures for certain health and social services as prescribed in Annex XIV to the 2014 Directive; and,
    an increased use of Voluntary Ex Ante Transparency Notices (VEAT).

We will comment further on the foregoing trends in future posts over the coming weeks but, for now, here are the main details for 2018:

Irish Procurement Activity at EU level* in 2018

Edit
Type of Notice Number Published by Irish Contracting Authorities Comment
Contract Notice 1,545 Of which 1,268 were issued under the Public Sector Directive; 269 under the Utilities Directive and 8 under the Defence Directive.
Contract Notice for Open Procedure 1,016
Contract Notice for Restricted Procedure 215
Contract Notice for Negotiated Procedure 237 (Utilities only)
Contract Notice for Competitive Procedure with Negotiation 41 (only available to Public Sector CAs since 2016)
Contract Notice for Competitive Dialogue 35
Contract Notices for Framework Agreements 320
Contract Award Notice 1,188 1,029 under Public Sector Directive; 157 under Utilities; 1 under Defence; 1 under other.
Prior Information Notice without Call for Competition 125
Prior Information Notice with Call for Competition 15
Periodic Indicative Notice 27
Without Call for Competition
Periodic Indicative Notice with Call for Competition 1
Design Contest 6
Works Concession 1
Services Concession 10
Concession Award Notice 4
Qualification System with Call for Competition 37 Available to Utilities Sector only
Dynamic Purchasing System 5
Voluntary Ex Ante Transparency Notice 28
Contract Modification Notice 26
Annex XIV Notices (“Light Touch” Procedures) subject to €750k threshold (Public Sector) and 1m (Utilities) 12 Approx. 100 such notices for EU as a whole, with remainder from UK.
Corrigendum Notices 149

*This data relates only to contracts/concessions with values in excess of monetary thresholds prescribed in EU Directives. A large volume of contract notices for contracts under EU-Threshold values are published on the national procurement portals www.etenders.gov.ie and www.supplyGov.ie

The publication of contract notices represents the majority of activity and the number published in 2018 (1,545) represents an increase of 326 (or 26%) over the number of such notices published in 2014 (1219).

The publication of contract award notices shows a continuing and welcome improvement over previous years with 1,188 such notices published in 2018, an increase of 466 or 64% over the 722 award notices published in 2014.

At national level, the etenders website indicates that there were approximately 6,300 contract notices published on that portal during 2018 with approximately 2,800 award notices.

However, on the down side, the 2017 Appropriation Accounts published by the Comptroller and Auditor General during 2018 showed a continuing high level of contracts awarded or renewed without competitive process in 2017. The published figures show that, across the 42 Votes covered, there was a total of 686 such awards made during 2017 to a combined value of €122.6 million. These figures, which are self-declared under Circular 40/02, are in respect of central government bodies only and do not cover the Health, Local Authority, Semi-State (commercial and non-commercial) and Utilities Sectors.

With regard to the Health Sector, the 2017 HSE Annual Report confirms that non-compliance with public procurement rules remains an issue. That Report states that “Comptroller and Auditor General findings in 2017 indicated a level of non-compliance in relation to 36% (by value) of the sample of payments examined at 5 HSE locations visited during the audit.” However, the HSE (Health Procurement Services) is committed to addressing this matter and has put a programme in place to enhance compliance in the coming years.

Clearly, while much is being done by many diligent officials across the system, there is still room for improvement.

James Farrell
Procurement Research Limited
7 February 2019

© Copyright Procurement Research Limited, February 2019. Used by Public Procurement Services Ltd. with permission. Further use or citation not authorised without permission of copyright holder and due attribution.

National Development Plan – Procuring €116 Billion

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Peter Brennan, Chairman of Bid Services, shares his thoughts on the Project Ireland 2040 National Planning Framework and Capital Development Programme announced by the Government this afternoon.

I reviewed the NDP to find out what the Government is proposing in terms of procuring the announced €116 billion in works, supplies and services.

Correctly, there is a lot of emphasis in the document in terms of securing value for money through the strict application of the Public Spending Code.

However, to my astonishment, procurement is barely mentioned. There is no policy statement about the procurement strategy that will be used to drive this unprecedented level of socio-economic infrastructure.

There is no indication as to how much of the projected €116 billion should be won by Irish SMEs by way of competitive tendering. If current trends continue, over €12 billion of this quantum may be awarded to non-Irish contractors with a commensurate loss in taxation, jobs and knowhow. DPER should lead an initiative whereby Irish companies and sub-suppliers are trained to secure the maximum amount feasible from this not inconsiderable capital investment.

In the absence of any other option, public bodies will continue to rely on the Capital Works Management Framework (CWMF), a set of guidance dating from 2004 that is not fully compliant with the current EU Procurement Directives. It is timely to ask the question: is the CWMF fully ‘fit for purpose’ to deliver the wide variety of works projects identified in the NDP. While the CWMF provides important templates and model letters and contracts, it needs more flexible rules to make it easier for contractors and sub-contractors to pre-qualify. Only in relation to works contracts, are all tenderers required to submit a suite of supporting documents as part of the qualification process.

In addition, new rules should be written into the CWMF to allow some projects to be procured using the (very flexible) EU Concessions Directive. Many contracting authorities should be using the Competitive Procedure with Negotiation to procure complex works projects yet the CWMF is silent as to how best should be done.

The OGP should use the Dynamic Purchasing System to procure construction professionals for the many public bodies that will need specialist service providers over the coming decade.

It is notable that the Office of Government Procurement – Ireland’s Centre of Procurement Excellence – is mentioned just once in the NDP; in relation to the proposed investment in the eTenders platform.

The NDP states clearly that all large-scale projects should continue to be assessed in terms of suitability for procurement by Public Private Partnership and/or alternative financing (by means of user charges for example). There is a commitment to look at a ‘new procurement option’ (whatever that might be) later this year. The construction sector/PPP industry does not like the Competitive Dialogue, so whatever new process is preferred in its place will be an improvement.

Many of the works procurements will be tendered by Ireland’s utilities. Is there scope to streamline and make these tender competitions less costly for potential contractors?

The National Planning Framework identified the transition to a low-carbon and climate-resilient society and achieving sustainable mobility as ‘vital’ strategic outcomes. Yet there is no mention as to how green procurement techniques that are deployed in every other Member State could be best used to reduce Ireland’s carbon emissions. For example, energy efficiency in buildings and transport solutions could be hugely influenced if sustainability award criteria were written into tender requirements.

DPER’s Infrastructure Projects Steering Group and the Construction Sector Working Group need to assess how best smart procurement techniques should be used to drive the wide portfolio of projects in the pipeline.

Procurement Under the Spotlight

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The EU Public Contracts Directive (Article 84) requires all contracting authorities (of which there are over 3,000 in Ireland) to prepare a written report after every tender competition, other than mini-competitions conducted under framework agreements.

This audit report should contain the following:

– The name of the buyer
– The subject matter and value of the contract
– The results of the pre-qualification process i.e. the names of the successful candidates with reasons provided for selection/non-selection
– Reasons for rejecting abnormally low tenders
– The name of the preferred bidder and the reasons for selecting their tender
– The name(s) of sub-contractors and the share of the contract to be sub-contracted
– Justification, where appropriate, for the use of the competitive dialogue/competitive procedure with negotiation
– Reasons for not awarding a contract or a framework
– An explanation for not using an electronic submission
– Measures taken to address potential conflicts of interest of the evaluators
– Reasons for not using lots
In addition, buyers must maintain records of internal deliberations, records of dialogue or other meetings and details about the preparation of the procurement documents, including the setting of selection and award criteria.

Over time these procurement audits will become an important source of insight for unsuccessful suppliers. These documents may be discoverable under the Freedom of Information Act.

The preparation of procurement audits is a significant additional layer of compliance for buyers.

Contracting authorities that need advices or support in relation to the preparation of these new procurement audit reports should contact us now.

Rebuilding Ireland – Smarter Procurement Needed

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The Government’s plan includes the setting up of a Housing Procurement Unit within the Housing Agency to provide a procurement centre of excellence and support to local authorities and approved housing bodies. With some €5.35 billion to be spent over five years in constructing 47,000 housing units one could well ask if the current suite of procurement rules for small scale works of this nature is ‘fit for purpose’; and the answer is probably‘ no’ if the feedback we are getting from builders is anything to go by. What could be done to accelerate procurement, while incentivising small builders and developers and staying within the EU procurement rules?
Here are a few practical ideas.
1. The Office of Government Procurement should prepare a standard and simplified template for minor works contracts to replace the cumbersome and multiple forms that are currently used. Corresponding guidance for contracting authorities and suppliers should also be issued.
2. The template should comprise:
– a. Details of the houses to be built and the contracting authority’s requirements.
– b. A bespoke European Single Procurement Document (that can be used multiple times) for housing construction which allows tenderers to self-declare, for example that they will comply with the current Building Regulations.
– c. Standard award criteria, for example the contract fixed sum might account for 50% of the marks.
– d. A short standard contract for minor works.
– e. A standard Service Level Agreement to be agreed with all preferred bidders.
3. Tenderers should be asked to complete one document only.
4. All submissions should be done online. The current requirement is for the submission of multiple hard copies.
5. Set the limit for the vast majority of contracts below €5,225,000 as these tenders will not need to be advertised outside Ireland.
6. Stage payments should be made if contractors meet the deliverables set in their Service Level Agreement.
7. Use the single stage open procurement procedure as this is the cheapest way to procure.
8. Local authorities and AHBs who have not yet done so should set up a four-year framework for their requirements and appoint at least ten suppliers per county.
9. As many builders are not comfortable with tendering the Housing Procurement Unit should provide a ‘Help Desk’ facility.
10. Already very high turnover limits have been set which has the potential to exclude many small builders. Contracting authorities need to be mindful of the EU procurement rule that requires turnover thresholds should not be set at more than double the proposed contract value.
11. A fully resourced Housing Procurement Unit should actively encourage the setting up of bid consortiums and allow sole traders and small businesses combine their turnovers and capabilities.
12. The sooner the Unit arranges regional briefings to inform potential suppliers of the procurement rule of the road the better.
An up-front investment in getting the procurement rules right will save everyone time, money and effort.

The Remedies Directive and You

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The Remedies Directive was transposed into Irish law in March 2010. It was designed to bring a greater commonality amongst the EU Member States regarding aspects of Public Procurement that take place post the award of Contract.

The Remedies Directive provides guidance on how contracting authorities manage their ‘stand still’ period, areas where aggrieved suppliers can seek redress and also allows for award nullification in certain cases of serious breach of conduct. [Read more…]

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