How Will Proposed EU Public Procurement Changes Affect You?

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Will proposed changes to public procurement regulations at EU level, make it easier, or more difficult to win public sector contracts? Well, the answer is it could do both.
In this article we review the various changes to public procurement that are presently being considered. We identify 5 ways in which future changes to EU rules could help you win more public contracts.

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How Will Proposed EU Public Procurement Changes Affect You?

  1. 1. A Review Of The EU Procurement Green Paper:How Will Proposed EU Public ProcurementChanges Affect You?Will proposed changes to public procurement regulations at EU level, make iteasier, or more difficult to win public sector contracts? Well, the answer is itcould do both.In this article we review the various changes to public procurement that are presentlybeing considered. We identify 5 ways in which future changes to EU rules could help youwin more public contracts. But, dont get too excited, its not all good news.We have also pulled together a list of the 5 ways in which proposed changes could makeselling to the public sector more difficult. 2011 1|P a g e
  2. 2. Whats Next For Public Procurement?Before examining the impact of proposed changes, lets set the context.There is much discussion at present regarding the future of public procurement within theEuropean Union. It is motivated by two factors:• The drive to maximize the effectiveness and the efficiency of public procurement –resulting in better procurement outcomes at a lower cost• The drive to maximize European Having A Go At EU Procure-o-crats!competitiveness and innovation – something The Green Paper served as the basis for athat procurement rules can have a major process of consultation whereby interestedbearing on. parties were invited to respond to specific questions raised by the Commission.Early in 2011 the EU Commission published agreen paper on the modernisation of EU The irony of a process of simplifying EUpublic procurement regulations. procurement starting with what was effectively a questionnaire of 120 questions –Titled Towards a more efficient European was not lost on many!Procurement Market the document began aprocess of discussion on proposed changes However it is all too easy to have a go at EUunder a total of 24 different headings – from procure-o-crats. In our view the Green Paperthe modernisation of procedures to the and the manner in which its consequentpromotion of innovation through consultation has been managed demonstrateprocurement. an earnest attempt by the Commission to modernise procurement.With a little background set, lets examinehow the proposals are likely to affect you. We Far from being straight-forward that iswill start with the positive first, then moving something that entails a difficult balanceon to the other side of the picture. between international treaty obligations, the requirements of maintaining an open market and the demands of Europes economy. 2011 2|P a g e
  3. 3. 5 Changes That Would Help You Win More Public ContractsVarious reviews of the impact and performance of the Unions public procurement regime havehighlighted disappointingly low levels of access to public spending among smaller enterprises,as well as low cross border access to public contracts generally.This is one of the key factors in putting the issues of greater flexibility and reducedadministrative costs (for both buyer and seller) on the EU procurement agenda. In short theCommission is concerned to make it easier to bid for public projects. Some of the ways inwhich this could benefit you are listed below.1. Lets Sit Down And Talk...One of the key proposals offering the promise of greater flexibility is the more widespread useof the Negotiated Procedure. In this model the purchaser selects one or more potentialbidders with whom to negotiate the terms of the contract (in most cases following an OJEU ad).Presently the negotiated procedure is applied to approx. one fifth of advertised EU publicprocurement tendering.While there are concerns that the expansion of this procedure might restrict access and resultin favouritism, there are clearly situations where a lets sit down and talk makes more sensethan the more rigid approach to tenders. Specifically contracts where the requirements arecomplex and evolving, or where smaller sums are involved. If you would prefer a return to themore traditional approach to selling a rise in the use of negotiated procedures is likely to bewelcome.2. Shorter Sales CyclesA proposal to collapse the two-stage EU public procurement process could help you win morepublic sector business. In particular it has the potential to acceleratepublic sector sales cycles and reduce tendering costs. 2011 3|P a g e
  4. 4. Todays procurement rules stipulate that procurement decisions must involve two clearlydistinct steps: The supplier selection/short-listing (based exclusively on appropriate supplier eligibility criterion) The award decision (based only on relevant product-service criterion).Merging, or confusing these steps and their respective criterion results in the purchase processbeing fatally flawed. For example, a buyer cannot consider supplier capability criterion at theaward stage - it is too late! Only product / service-specific criterion can be applied in makingthe final decision.The law has been interpreted to allow for the selection and award stages to happenconcurrently, once they remain distinct. However, the reality is that this rarely happens, whichmeans that the time and administration involved in the procurement exercise can in manycases be doubled.The Commissions proposal to collapse the two stages would enable greater speed andflexibility in decision making. That is something that could benefit the seller as well as thebuyer.3. Paperwork Only On WinningRelated to the two stage process, the Commission has suggested tackling the issue of the proofof capability / certification requirements at the supplier selection stage. This could greatlyreduce the tendering burden.The proposal is that while all bidders would have to declare that they meet the certificationcriterion, actual proof, or documentary evidence of; certification need only be produced by thewinning bidder. Thus unsuccessful bidders would be spared some of thepaperwork and documentation burden.There is also a proposal for greater standardisation of not just certification,but also pre-qualification criterion EU wide. These measures if successfulcould reduce the amount of time and money required by sellers to tender. 2011 4|P a g e
  5. 5. 4. We Have Other Advantages To...The EU faces new challenges, including the environment and innovation, to name just two. Itwould seem logical therefore that these goals should be reflected in how it spends money,right? Well, reconciling new goals with the original objectives of an open and fair market inpublic spending, is problematic.One of the major problems is that the inclusion of decision making criterion or technicalspecifications that are not subject-matter related is not allowed. Here are two examplesoffered in the Green Paper:• While carbon and green are a priority, current rules don’t allow for any requirement that does not relate to the manufacturing of the product and is not reflected in the products characteristics.• Public authorities may claim that for environmental and health related reasons, certain products should, or must be sourced locally. However, this represents an infringement of EU law if it results in unjustified direct, or indirect discriminations between suppliersSo, although as a supplier your proposition may be in support of the environment, innovation,or another aspect of the public good – in most cases this cannot be a factor in theprocurement decision.EU rules prevent arbitrary award decisions, by requiring that any criterion used must meet thefollowing conditions:• Is linked to the subject-matter of the contract• Is expressly mentioned in tender documents• May not confer an unrestricted freedom of choice.So it is that the best and best priced widget from an eligible supplier wins. The fact that notrees have been cut down in the process, or you have won an international award forinnovation makes no difference. That means some of your supposed competitive advantagesare set to nought. 2011 5|P a g e
  6. 6. If your advantages extend beyond the immediate good, or service you provide then breakingthe absolute requirement that all criteria direct relate to the subject matter could help you winmore business. It means that when you say we have other advantages too the buyer may beable to listen.5. Clarification & SimplificationMany aspects of procurement are prone to confusion among both buyers and sellers. So, it isgood news that the Commission is exploring ways to clarify, standardize, or simplify manyaspects of public procurement. Some examples include:• Simplifying definitions, including grouping part 1 and part 2 services and the definition of works contracts• Revisiting and clarifying the scope of the rules, including; whether regulations apply beyond public purchases to other spheres of public activity, public-private partnerships, below threshold contracts, local and regional authorities, utilities and social services• Clarifying and standardizing how many areas are to be treated, including; disqualification grounds and procedures, conflicts of interest, cross border projects, sub-contracting and contract terminationIf you find aspects of public procurement confusing, then a simplification and clarification ofthose areas most prone to confusion, is sure to be welcome. 2011 6|P a g e
  7. 7. 5 Changes That Could Hinder You In Winning More Public ContractsWhen it comes to the proposals of the Commission it is not all good news for sellers. Here aresome of the changes that if implemented could make it more difficult to win public sectorbusiness:1. The Incumbency AdvantageThe Commission is drawing attention to the risk of an unfair advantage being conferred on anincumbent supplier. That includes the possibility of favouritism where a bidder has had aprevious relationship, or has been involved in designing the specification.One of the proposals is to require the publication to all bidders of any knowledge, orinformation to which an incumbent supplier has unique access. If you are the incumbentsupplier you wont welcome this proposal, however practical or impractical it may be.2. Business As Usual!If the public buyer makes significant contract changes following the award, a return to thetendering process is typically required. This is also likely to be required for changes that occuron the contractor side (internal re-organisation, bankruptcy, loss of crucial staff, etc.). Theresult is a zero tolerance approach to amending the contract, or its implementation.It is an area that can however give rise to confusion and one which the Commission proposes toclarify. The commission is also addressing the issues as to whether in an environment of fastchange, some modifications in contracts once awarded should be accommodated.In a related issue the commission has highlighted the absence of regulations on sub-contracting by the successful tenderer. This introduces an element of uncertainty into projectdelivery. 2011 7|P a g e
  8. 8. Presently regulations enable contracting authorities to require that tenderers give notice oflikely or planned sub-contracting. However the court has stipulated that a tenderer is generallyentitled to sub-contract and can only be prohibited where the contracting authority has beenunable to verify the technical and economic capabilities of the subcontractor. |The grounds on which contracts can be terminated, as well as the procedures involved are alsoup for discussion.These measures to give buyers greater flexibility to adapt and respond in the contractimplementation stage may not be welcomed by sellers.3. You Are Disqualified!EU directives require the disqualification of bidders convicted of certain listed offences (notablycorruption), as well as for other unsound business practices (including grave professionalmisconduct). However confusion can arise, particularly in the context of various nationalstandards and safeguards.Now the commission proposes a more rigorous exclusion regime. It proposes that actions, suchas; corruption, or deliberately undeclared conflicts of interest should be subject to more severesanction. It also proposes to mandate disqualification for attempts to gain access toconfidential information, or to unduly influence the tendering process.If the EU Commissions proposals are accepted then more sellers are likely to face exclusion anddisqualification.4. Central BuyingNewer regulations have facilitated centralized buying and the use offramework agreements. However the Commission is consideringwhether the measures now in place go far enough. If more provisionsfor aggregated demand (including cross border aggregation) areimplemented the result is likely to be a concentration of business 2011 8|P a g e
  9. 9. among fewer suppliers.5. More Centralized ControlMany of the changes up for discussion could have the result of generating more rules andincreasing the administrative burden involved for both buyer and seller. Examples include:• Standardizing anti-corruption measures• The strategic use of procurement to achieve other goals• Preventing conflicts of interest• Regulating unfair advantagesSellers know that clarification and standardisation, typically means more rules and regulations.© ASGgroup 2011Terms & Conditions ApplyFor more information visit: www.theASGgroup.com+353 (0)1 6205787Unit 24 Park West Enterprise Centre, Park West, Dublin 12. 2011 9|P a g e

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