Chairman - Paul Darling QC. John Houlden Marcus Harling Jon Milward John Smith Maximising Success in EU Procurement Creating a balance for Public and Private Sectors
Mar 28, 2015
Chairman - Paul Darling QC.
John Houlden
Marcus Harling
Jon Milward
John Smith
Maximising Success in EU ProcurementCreating a balance for Public and Private Sectors
Agenda
• Relevance to Property & Construction Sectors
• A basic review of the current regime
• The competitive dialogue in practice with Case Studies
• Framework agreements – how to use them effectively and legally
• Challenges – risks and opportunities
Relevance to Property & Construction
JV with public sector
Grant funded contracts
framework
Infrastructure
Development Agreements
RSL Design & Management
Construction
PPP
FM
S106 Agreements
Relevance to Property & Construction
• Waste• Housing• Regeneration• Nuclear• Sustainability• Transport• Health• Defence
• £2bn PFI credits (2007 CSR)• 45,000 new units p.a (2010)• RDA/ Local Authority led• Decommissioning/ new build• Look out for money allocated• Rail investment• Community based healthcare• Aircraft carrier / accommodation
A basic review of the current regime
• How and why did we get here?
• When does it apply?
• How does it apply?
How and why did we get here?
EC Treaty
• Art. 12 - prohibits discrimination on grounds of nationality
• Arts 28, 43 and 49 prevent restrictions on free movement of goods, freedom of establishment and freedom to provide services
Treaty
Directives
UK Implementing Legislation
TRANSPARENCY
EQUALITY OF DEALING
When does it apply?
Bodyawardingcontract
Subject matter of contract
Value of contract
Need to consider:
When does it apply?
Bodies covered (aka “contracting authorities”):
– those listed in Regulations (i.e.. Ministers, government departments, Houses of Parliament, local authorities etc)
– bodies established to meet “needs in the general interest” if:
• financed;• supervised; or • appointedby a contracting authority
When does it apply?
Central Purchasing Bodies
SupplierContracting Authority
CentralPurchasing
Body
When does it apply?
Bodyawardingcontract
Subject matter ofcontract
Value of contract
Need to consider:
When does it apply?
Subject matter:
– Is it a “public works contract”?
– Is it a “public supply contract”?
– Is it a “public services contract”?
NB Works by any means
When does it apply?
Need to consider:
Bodyawardingcontract
Subject matter ofcontract
Value of contract
When does it apply?
BODY WORKS SERVICES SUPPLIES
Central Govt £3,497,313 A= £90,319
B= £139,893
£90,319
Other Public Sector £3,497,313 £139,893 £139,893
How does it apply?
PIN CONTRACT NOTICE EVALUATION
CONTRACT AWARD
Open
Restricted
Competitive Dialogue
Negotiated
Selection/award
Debriefing
How does it apply?
Open procedure:
– all may submit tenders
– 52 days to return of tender
– suitable for contracts with simple subject matter and award criteria (i.e. stationary)
How does it apply?
Restricted procedure:
– only those invited by contracting authority may submit tenders
– 37 days for EOIs/40 days for tendering
– appropriate for more complex procurements
How does it apply?
Negotiated procedure:
– Very limited application, only in certain specified circumstances, e.g. exceptionally when nature of works/services or risk does not permit prior overall pricing
– two procedures - competitive and non-competitive
– competitive – 37 days for EOIs
How does it apply? Selection and award
Selection
Award
Selection – practical issues
• Requirement to exclude
• Minimum requirements:– financial standing– technical capacity
• Objective criteria
NB Recent ECJ case law
How does it apply? Selection and award
Selection
Award
Award
Criteria for award:
(a)
(b)
lowest price
most economically advantageous to the contracting authority
1
2
3
4
FreedomNB Weightings
Award – practical effect
Establish relative weighting of the evaluation
criteria either:
• at the start of the procurement before notice is placed; or
• before issue of contract documents
KEY PRACTICAL ISSUE!
The competitive dialogue in practice
• When is it used?
• How does it work?
• Case studies
Competitive dialogue – when is it used?
Authority:
• wishes to award a “particularly complex contract”; and
• considers that open or restricted procedures will not allow the award of the contract; and
Competitive dialogue – when is it used?
PIN CONTRACT NOTICE EVALUATION
CONTRACT AWARD
Open – one stage process (tender) with no negotiation
Restricted – two stage process (PQQ/tender) with no negotiation
What is a particularly complex contract?
Authority is not objectively able to:
• define the technical means of satisfying its needs; or
• to specify the legal or financial structure of a project
Competitive dialogue – when is it used?
Requirement known
Solution unknown
Competitive dialogue – how does it work?
PIN CONTRACT NOTICE EVALUATION
CONTRACT AWARD
Competitive Dialogue
Selection/award
Debriefing
Competitive dialogue – how does it work?
Technical dialogue
Contract notice
pqq
Competitive dialogue
Competitive dialogue – how does it work?- incremental reduction in bidders
1
2
3
Competitive dialogue – how does it work?
Final round
Evaluation
Award
Phased Dialogue – no reduction in bidders
Contract Notice PQQ DialogueFinal
TenderClarification/
Contract
PHASE 3:Concluding Issues
PHASE 2:Legal Discussion
PHASE 1:Technical Discussion
Process:
Competitive Dialogue Case Study – Finding the Development Partner
Competitive Dialogue Case Study – Finding the Development Partner• Opportunity created by
local authority looking to use surplus land to kick start redevelopment
• Requirement for local authority offices in scheme
• What to expect.• Avoiding mismatch
between expectation and delivery
Competitive Dialogue Case Study – Finding the Development Partner
• "public works contract" means a contract, in writing, for consideration (whatever the nature of the consideration)—
• (a) for the carrying out of a work or works for a contracting authority; or
(b) under which a contracting authority engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements;
• Application of Competitive Dialogue to a property development transaction
• Developers unfamiliar with regulated procurement
• Contracts conditional on planning are typical
• Developers reluctant to carry significant bid costs or to engage in a lengthy competitive stage
• No standard documentation
• Challenge is how to get to final tender
Competitive Dialogue Case Study – Finding the Development Partner
Planning the procurement
Contract Notice - Short listing
Invitation to Participate in dialogue
Dialogue
Final Tenders
Bid clarification to Contract
“particularly complex contracts.”Be clear on the timetable.
Market testing / information days.
Understand Evaluation criteria, includingrisk based to deal with solutions.Incremental reduction of bidders is usual.
Full contract mark-up or populated Heads of Terms at FT.No substantial modification of bids
afterwards.
The time for planning a strategy has passed!
JON MILWARD
Head of Development
Drivers Jonas
Maximising Success: The Agent’s View
Agenda
• Popular Perceptions of the OJEU process• The Reality• How and When to Engage (Public Sector)• The Marketing Process• How to Get Shortlisted (Private Sector)• How to Get Selected (Private Sector)• The Documentation• Commercial Negotiations – How to get the best result
Agenda
“How to Succeed Despite the Lawyers!”
Popular Perceptions
• Time-Consuming• Costly• Over-Complex• Too Many People Chasing Too Small a Prize
The Public Sector
Developers
Advisers
The Reality
• For the Public Sector – a transparent, open process. Auditable and competitive BUT can be prescriptive
• For the Private Sector – an opportunity to engage on some of the most exciting projects in the UK BUT some barriers to entry.
• For Advisers – lots of ‘recession-proof’ work BUT public sector fees are low and private sector partners may require ‘sweat equity’.
How and When to Engage
• Appropriate Preparation
• OJEU doesn’t mean the public sector can put their feet up!
• Creating Certainty – Horses for Courses
– Planning
– Legal
– Specification
RNOH Bolsover St, W1
• Royal National Orthopaedic Hospital NHS Trust
• Ridgeford / Manhattan Loft
• In-patient facility
• Funded out of Residential Development
LFEPA HQ - 8 Albert Embankment
• Fire Station Headquarters
• Mixed Use – Residential Led
• New Fire Station
• Subject to Planning Deal
Founder’s Place – Guy’s and St Thomas’ Charity
• Detailed Planning Consent granted
• Support accommodation for Guy’s and St Thomas’s
Hospital
• 400 Private and key worker units
•
The Marketing Process
• Most Developers don’t read the European Journal!
• Consider Additional Marketing – which must be consistent with the OJEU advertisement
• The Use of PINs
Poplar HARCA – Chrisp Street Market
• Estate Redevelopment
• PIN to Establish market
appetite
How to Get Shortlisted
• Know the Assessment Criteria
– Track record
– Ability to Fund
• Fill in the Forms Smartly – beware of procurement monkeys
• Expert team
• If limited/no track record, consider partnerships with others
• Sort out your Funding – particularly in today’s market
How to Get Selected
• Engage – treat it as a Partnership
• Make some effort – you are on a shortlist
• Don’t over-promise – be realistic
• Be aware that risk transfer is often as important as value
• Make sure your funders are fully committed
The Documentation
• Keep it Simple Stupid
• Provide as part of the shortlist tender pack?
Commercial Negotiations
• Consider and Agree Key Commercial Points Early – what is important to you?
• Agree Milestones and stick to them
• Understand report deadlines / Board Approval processes
• Don’t try to win every point
• Remember this is a Partnership
I Want My Cake AND I Want To Eat It
Commercial Negotiations
• Be prepared to be flexible – especially in changing market conditions
• Review commercial aspects regularly
• Prepare your parachutes!
• The Principle of “Equal Unhappiness”
JON MILWARD
Head of Development
Drivers Jonas
Maximising Success: The Agent’s View
Any questions………
Framework agreements
• What is a framework?
• How to use them effectively and legally
What is a framework agreement?
Different contractual structures:
• Commitment to purchase
• Mix of commitment to purchase and option to acquire
• No commitment to purchase but option to acquire
What is a framework agreement?
Procurement regulations:
“..an agreement or other arrangement between one or more economic operators which establishes the terms (in particular the terms as to price and, where appropriate, quantity under which the economic operator will enter into one or more contracts….”
NB No commitment but can be legally binding!
What is a framework agreement?
No commitment to purchase but option to do so:
NB: • No more than 4 years• If more than 1 supplier, no less than 3
Contract specifying:
• mechanism for future purchases
• terms of purchase (including price)
Call off 1 Call off 2 Call off 3
How to use them effectively and legally
Two key elements:
• Establishment of frameworks
• Call-offs during framework term
Call-offs during framework term
Two means:
• without competition – by applying the framework terms
• with competition – where not all terms laid down
Call-offs during framework term
With competition:
• only those suppliers who are parties; and
• only those who are capable of performing proposed contract
Call-offs during framework term
Contracting authority must:
• consult in writing
• invite submissions of tenders in writing
• set a time limit for responses
• award on basis of award criteria specified
Challenges – risks and opportunities
• What remedies are available?
• Key risk areas
• Future developments
What remedies are available?
Remedies under the regulations differ according to whether process challenged:
• before; or
• after,
the contract has been entered into
What remedies are available?
Mandatory standstill:
• Minimum 10 day standstill between:
– communicating decision to award; and– entering into a contractually binding
agreement
• Mandatory disclosure of information
What remedies are available?
• Remedies under Regulations pre-execution:
– interim measures
– set aside
– order amendment of documents
– award damages
• Only remedy under Regulations post execution is damages
• NB Timing is critical – “promptly” and within 3 months
Key risk areas
• Transparency
• Equal treatment
• Evaluation – selection/award
• Confidentiality
Future developments
New remedies directive – implementation by 20 December 2009:
• Standstill – similar but:
– potential extension to Part B and framework call offs– ineffectiveness of concluded contracts possible if breach with a
limitation period of 6 months– potential for penalties for authority if wrongful use of exemption
and unable to set aside
• Suspension of process on application
• Increased scope for Commission intervention
Conclusions
• Be aware – contractors are and challenges are on the increase!
• Early identification of issues is crucial – potential mitigation is possible
Practical Issues to Maximise Success – Bid Selection - Bid selection – evaluate client
• Track record of organisation/sector • Commitment to this project – is there real driver• High level sponsor• Are there multi-authorities • Affordability versus ambition • Engage with authority
- Bid selection – evaluate yourself• Your track record• Consider likely criteria • Consider if consortium/other expertise needed
Practical Issues to Maximise Success – During The Procurement - PQQ
- identify authority selection criteria - clarify and question- increasingly used for down selection
- Dialogue - think about tone, approach, team- respond to dynamics - aim to influence constructively - emphasis on early development of solution- make aware of bid costs – e.g. due diligence
- Post dialogue- clarifications if necessary- answer the question- respond to clarifications