European Union (formerly European Community) Directives on Public Procurement enact the requirement that member states should not impose quantitative restrictions, or measures with the equivalent effect, on trade between themselves. These Directives also endorse certain provisions of the World Trade Organisation (WTO) – formerly General Agreement on Tariff and Trade (GATT) - on Government procurement.

EU Public Procurement Directives are intended to guarantee fair and non-discriminatory international competition in bidding for goods, services and works above specified threshold values.

Specific aims include:

• increasing transparency of procedures and practices;
• facilitating stricter enforcement of the prohibition of restrictions on the free movement of goods and services;
• incorporating changes to the WTO (formerly GATT) Agreement on Government Procurement where applicable;
• developing the conditions for effective competition for public contracts;
• reducing the imbalances in the application of the Directives between Member States by defining the extent of exemptions by sector;
• laying down the applicable thresholds including, where appropriate, the WTO related threshold, in a single provision;
• limiting the use of the single tender procedure by creating a negotiated procedure. This already exists in certain Member States and is considered exceptional and therefore only applies in certain specified cases;
• defining the conditions where extreme urgency can be invoked and the method by which additional deliveries under existing contracts can be obtained;
• adopting the common rules in the technical field to the new Community policy in respect of standardisation;
• providing advance information on public purchasing programmes will allow potential suppliers within the Member Sates and Countries that are WTO signatories to show interest in such purchases and provide information on the conditions under which contracts have been awarded;
• fixing certain time limits in order to avoid delays in the transmission of advance information notices and notices on contracts awarded; and
• ensuring adequate time limits for the receipt of requests for participation and tenders in order to improve access and opportunities for a greater number of suppliers.

a                    Thresholds

The Directives apply to procurements above specified threshold values.  These threshold values are reviewed on a regular basis, normally every two years.  The current thresholds for procurements in which DTI may be involved are as follows:

Table E.8-1: EU Procurement Thresholds - Valid from January 2004

	All Procedures	Pre-information Notice
Supplies	£99,695	£485,481
Services	£99,695	£485,481
Works	£3,834,411	£3,834,411

Exceptions
All Directives permit certain exemptions. The figure for Services threshold value is as per the table above, with the exception of the certain Services that have a threshold of £129,462 (€200,000):

Table E.8-2: EU Services Exceptions Table

Services Exceptions

The following Services exceptions have a threshold of £129,462 (€200,000)

Part B (residual) services Research & Development Services (Category 8) Subsidised services contracts under regulation 25 of the Public Services Contracts Regulations 1993. The following Telecommunications services in Category 5 o  CPC 7524 - Television and Radio Broadcast services o  CPC 7525 - Interconnection services o  CPC 7526 - Integrated telecommunications services

b                    Main Provisions

The main provisions of the Directives are:

• EU-wide Publication of contracts giving firms across the EU Community the opportunity to participate.
• The use of non-discriminatory technical specifications that refer to EU Community-based standards wherever possible.
• The use of objective criteria for selecting participants and awarding contracts.;

 

E.8.5      Participating States

The benefits of the EU Directives have been extended to other countries under the European Economic Area Agreement and various Europe agreements.  The EU is a signatory to the WTO (formerly GATT) Government Procurement Agreement (GPA).

The relevant states and countries included are as follows:

EU:  Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom.

E.E.A:  Iceland, Liechtenstein, and Norway.

Europe Agreements:  Bulgaria, Czech Republic, Estonia, Hungary, Poland, Romania, Slovakia, Slovenia, Malta, Latvia and Lithuania.

GPA:  Aruba, Canada, EU, Hong Kong, Israel, Japan, Republic of Korea, Liechtenstein, Norway, Singapore, Switzerland and USA.

From 1.1.1996 the GPA was extended beyond the central government bodies listed in Schedule 1 to the Supplies Regulations to cover local authorities, other public bodies and public sector utilities in ports, airports, water, urban transport and electricity sectors.  It was also extended to works and certain service contracts as well as supplies contracts.  Broadly speaking, compliance with the EU rules ensures compliance with the GPA, where it applies, and GPA suppliers etc. have the same rights as EU suppliers.

1. Threshold Compliance

Where the Department traditionally purchases centrally, the threshold applies to the aggregate of all Departmental purchases of each type of goods. Where, for a particular type of goods, purchasing is carried out by local or separate units, the threshold applies to each unit's local purchases of these goods.

Contracts must not be split to avoid compliance. Furthermore, public bodies must aggregate the value of contracts for similar goods or services over the previous 12 months and allow for changes in value in the next 12 months, or forecast the value of purchases in the coming year, to determine whether a Directive applies. As the Department has not traditionally centralised its purchasing expenditure, the spends of Headquarters and each Executive Agency and Regional Office are assessed separately, unless a Framework is in place (see Section C.2.3 - Procurement Routes).

It is recommended that procurement exercises with an estimated contract value within 10% of Threshold levels should also be advertised in the OJEU. This would avoid OJEU advertising requirements being unintentionally breached.

A contract above the threshold can only be exempted from the provisions of the Directive on the grounds listed in the relevant DTI Short Guide (see E.8.8 -Sources of Additional Information below). For requirements that are urgent, the procedure may be accelerated. Procurement staff should consult the Procurement Policy and Services Unit (PPS) in IWS Directorate for guidance on exemptions.

During the course of a competitive tendering exercise, staff may become aware that the value of bids received exceeds the EU Thresholds, but bid invitations have not been extended through the OJEU notice procedure - as it was anticipated that the threshold would not exceeded. In such a case the Group, Agency or NDPB Contact should seek advice from the PPS on how to proceed. It will be essential to ensure that staff demonstrate that a full analysis and estimate of likely contract value had been made when deciding on the procurement route. The PPS will keep a record of these cases, as they could expose the Department to potential criticism and legal challenge. The PPS record should identify individual members of staff or Directorates for targeted advice and possibly training,  which "repeat offences". Where circumstances warrant it, the PPS may draw the matter to the attention of the relevant DG for action as appropriate.

2. Prior Information Notices (PIN) (Indicative Notices)

"Contracting Authorities" (the individual public sector bodies, as defined by the Directives) must publish a Notice each April giving brief details of prospective contracts likely to be let in the coming 12 months: that is, contracts within each category which individually or in aggregate are expected to be above the threshold. The PPS coordinates the Notices for HQ Directorates and DTI Agencies that are non-WTO (GATT) entities, and reminds other DTI "contracting authorities".

The open and restricted procedures may be shortened if the requirement has been the subject of a Prior Information Notice (PIN).

Specifications for contracts subject to the Directives must refer to a British Standard that implements a European Standard, whenever this is possible. The words "or equivalent" should always follow the British Standard if a European Standard is not used. Exceptions can be made:

• where the use of a European Standard is precluded by binding national rules e.g. on health and safety grounds; or
• where a derogation of the Directive applies:
  
  • no provision for establishing conformity
  • community measure prejudiced e.g. Directive 86/361/EEU on telecommunications terminal equipment;
  • incompatibility, disproportionate costs/technical difficulties; or
  • innovation.

If a deviation applies, there must be a clearly defined strategy to move to a European Standard or common technical specification. Reasons for using a derogation must be shown in the contract notice.

If a European Standard or common technical specification does not exist, or if a derogation applies, a British Standard may be used. Specifications should not refer to proprietary brands, but where it is not possible to avoid this, the words ‘or equivalent' must be used.

4. Timescales

The Directives lay down some minimum timescales aimed at giving prospective suppliers sufficient time to respond to Notices and ITTs.

There is an "accelerated procedure" which reduces the timescales for urgent requirements advertised under the restricted and negotiated procedures. The use of the accelerated procedure is an exception to the rule and likely to be challenged by the Commission. The reason for the urgency must be stated in the Notice.

You must build the timescales into projections for contract awards.

The Department can alert companies known to be interested in tendering but only after the Notice has been despatched to the OJEU. Such companies should be sent a copy of the notice. No company may be given information additional to that contained in the notice. You need to exercise care when speaking to potential suppliers prior to publication of the notice in the OJEU.

5. Framework (Call-off) Arrangements, Contracts and Agreements

Legally binding agreements involving a commitment to purchase (e.g. Call-Off Contracts/Framework Contracts/CCTA Framework Agreements) must be awarded following the advertising and procedural rules in the Directives. Subsequent call-offs against the contract need not be advertised.

Framework Arrangements (Call-off Arrangements), which establish the terms on which the Department and contractor may enter into any subsequent contract but do not commit the Department to buy anything, are not specifically provided for. Under an informal understanding between the Commission and member states, however, such arrangements may be treated as if they are contracts provided they are advertised and awarded in accordance with the Directives. If Framework Arrangements are advertised and awarded in accordance with the Directives, there will not be any need to advertise individual contracts made pursuant to the arrangement.

Framework Arrangements that are likely to exceed the threshold should be advertised at the outset as though they were contracts. The duration for these arrangements should be limited to three years to ensure that value for money is still being obtained in a changing market place.

The EC has produced an interpretation that the award of an individual contract (under the umbrella of a framework arrangement) can only be made on the basis of the terms and conditions (including the pricing mechanism) established in the framework arrangement itself. No negotiation of price or the pricing mechanism already established in framework arrangements can take place at call-off (including S-CAT, G-CAT and other framework arrangements available for Government Departments and Agencies to use). Where, in either framework arrangements or framework contracts, there are multiple suppliers and it is intended to mount a mini-competition between two or more of them, it follows that the mini-competition must not involve negotiation on the prices and pricing mechanism already established in the framework arrangement or framework contract. The award criteria for these mini-competitions should be a combination of (i) quality/methodology and (ii) resources/costs. During the mini-competition suppliers will have the opportunity to state the type of resources they would deploy and the daily rate or fixed price that they would charge to undertake the proposed task. The quoted price must relate to the rates in the relevant framework but may take into account any price mechanism (e.g. discounts) established within it. Negotiation on price outside these parameters is not permitted, even if offered by suppliers.

The Directives provide for three different procedures:

• Restricted Procedure, whereby only invited suppliers may submit tenders; and
• Open Procedure, whereby all suppliers interested in the contract can subsequently be invited to submit tenders;
• Negotiated Procedure, whereby purchasing bodies may negotiate the terms of a contract with one or more suppliers of their choice (this can only be used in special circumstances, but in certain cases may be used without first publishing a contract notice).

The Department’s policy is to use the Restricted Procedure whenever possible and to make use of the Open and Negotiated procedures only exceptionally.

Deciding which procedure to use may be influenced by:

• the nature of the supply of goods required (e.g. to match existing equipment the Negotiated Procedure may be necessary);
• the urgency of the requirement (this may necessitate the accelerated procedure (see sub-Section d - Timescales above); and
• the results of previous tendering exercises (e.g. no responses received under the Restricted Procedure).

The Negotiated Procedure may only be used where:

• the Open or Restricted procedures have already been used and resulted in unacceptable tenders or irregular tenders;
• the Open or Restricted procedures have already been used and resulted in no tenders;
• the products are purely for research or development;
• only one supplier is available for technical or artistic reasons or on account of exclusive rights;
• extreme urgency exists for reasons that were unforeseeable and not attributable to the department; or
• additional deliveries by the original supplier are justified.

When the use of the Negotiated Procedure can be justified, you must also consider whether it is necessary to publish a notice in the Official Journal of the European Union (OJEU).

7. Publication of Official Journal of the European Union (OJEU) Notices

The European Commission has adopted a new Directive (2001/78/EC) which makes mandatory the use of standard forms for all Notices to be published in the Supplement to the Official Journal. This ruling came into force from 1 May 2002.

As Standard Forms are complex and time-consuming the Department uses a web-based software package for the generation of OJEU Notices and for their transmission to the OJEU office in Luxemburg. It is DTI policy that this software should always be used - no other method for the drafting and publication of OJEU Notices is permitted. The PPS should be contacted for information on how to gain access to this software.

A copy of any OJEU Notice should, when sent to the OJEU office, also be sent to the PPU for publication on the DTI website.  

8. Selection of the Tenderers

The Directives set out rules for the selection of tenderers and award of contracts. These include:

• excluding certain candidates or tenders;
• selecting tenderers under the Restricted Procedure or selecting those to be invited to take part in a Negotiated Procedure;
• the evidence that can be required to demonstrate that a supplier has a registered business and the financial, economic and technical capacity to fulfil the contract;
• the award of contracts on the basis of either lowest price or of the ‘most economically advantageous tender' (but DTI policy is always to award on the basis of ‘most economically advantageous’ - see sub-section i - Awarding the Contracts below);
• recognising existing schemes which give preference to certain tenderers; and
• the treatment of abnormally low tenders.

The qualifications and selection of candidates for short-listing under the Restricted and Negotiated procedures must be based on non-discriminatory and objective criteria.

The number of candidates invited to tender must be stated in the Restricted and Negotiated procedure notices. DTI policy is to aim for 6 companies, where practical. The Directives refer to a minimum number of 5 and a maximum of 20. Tender numbers should be kept small to reduce the cost of tendering for contractors and the internal administrative burden.

Candidates and tenderers must provide a minimum amount of information enabling them to be appraised with regard to their skill, efficiency, experience and reliability. Under the restricted procedure this assists the short-listing process. It is important not to demand too much information at this stage (e.g. 50 companies may respond and send large packs of information including annual reports etc.). Additional information can be requested from the few companies invited to tender.

The DTI criterion for awarding a contract is always to award to the economically most advantageous bid. The alternative (allowed by the Directives) of lowest price must not be used.

Detailed evaluation criteria (e.g. quality, experience, resources), must be stated in the Contract Notice or Invitation to Tender (ITT).

When a contract is awarded the Department is required to send a Contract Award Notice within 48 days for publication in the OJEU and to record details of the award for later inclusion in a statistical return.

It is good practice for the development of suppliers and their future competitiveness to offer a debriefing, so that all suppliers can understand why they were not selected and failed to win the contract. For general guidance on debriefing see Section E.13 - Debriefing.

The Department is required to debrief candidates who fail to be short-listed and unsuccessful tenderers within 15 days of receiving a written request.

An unsuccessful tenderer is entitled to be told the name of the successful tenderer but not the contract price. The range of prices should be disclosed if 3 or more bids have been received.

The Department is also required to explain to candidates and tenderers, who make a writtten request, the reasons for cancelling the tendering process and for not awarding a contract.

Debriefing should never be carried out by the inexperienced and must be accurate, otherwise complaints can result in EU infraction proceedings.

For each contract awarded where the value exceeds the threshold a "report" must be placed on file and made available to the Commission on request. The reporting requirement is met by the completion of the Tender Tabulation form PF50 and supporting documents. Additionally, justification must be recorded if the negotiated procedure has been used.

On an annual basis for Supplies, Services and Works, the Department must submit a return to the Treasury for inclusion in the UK return to the EU. The report records the number and value of contracts awarded by each contracting authority above the threshold.  Contracts are listed by:

• procedure used (Open, Restricted, Negotiated with and without prior notice);
• category of the supplier or service (the CPC number) and;
• nationality of the supplier or service provider.

The provision of this information is mandatory. All DTI "contracting authorities" must therefore maintain records from which it can be derived. The PPS coordinates the return for the Department.

The related Compliance Directive (89/665/EEC), implemented in the UK by embodiment in the relevant statutory instruments sets out the administrative and legal provisions for reviewing and enforcing procedures leading to the award of contracts subject to the public procurement directives.

The Compliance Directive requires member states to have review arrangements in place and enables the Commission to:

• investigate a complaint from an aggrieved company;
• set aside award procedures;
• demand correction to the relevant DTI procedures;
• set aside an unlawful contract (but not a contract awarded lawfully);
• award damages to the aggrieved company;
• fine the Department.

Action to correct allegedly illegal measures may be taken by an independent review body whose findings will be legally binding or by the UK or European courts.

The Legal Services Directorate must be advised if the initial review demanded by the Commission indicates a possible breach of the procedures.

For specific guidance on the application of the Supplies and Services Directives you should refer to the DTI’s Short Guide on EU Supplies Directive and WTO (GATT) GPA or Short Guide on the EU Services Directive, copies of which are currently available on DTINet.

The threshold for procurement under the Works Directive is such that DTI procurement staff are unlikely to be affected. For further advice contact the PPS Unit in IWS.   The Building Facilities Management Unit in IWS Directorate should be consulted for advice on DTI policy and practice on works procurement more generally.