Workshop 3 - Bird & Bird

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  • 1. Encouraging SME Participation inProcurement Processes Roger Bickerstaff Barry Jennings 9th March 2012
  • 2. Overview – SME Participation● Background to the EU Procurement Rules● Shortlisting – the legal reality● Procurement process issues© Bird & Bird LLP 2011
  • 3. Background to the EU ProcurementRules – Purpose and Objectives ● Public sector purchasing around 20% of EU GDP ● Public sector purchasing was (and is!) inherently nationalistic • Nb Recent Cabinet Office figures: - UK awards 3% of public procurement by value to foreign suppliers, - 1.9% in Germany and 1.5% in France ● Aim of the rules is to open-up EU public sector purchasing on a pan-European basis – to establish a "level playing" field for all EU based suppliers ● No clear objective to achieve value for money (cf the US public procurement rules) ● Equal treatment principle should be advantageous to SME participation in public sector projects© Bird & Bird LLP 2011
  • 4. Shortlisting: Assessment of Financial Standing– Setting the Criteria CAs can deselect bidders that do not achieve "any minimum standards of economic and financial standing" ● CAs set the minimum standards • No constraints in the Regulations ● EU Treaty principle of Proportionality applies • Minimum standard must be both necessary and appropriate in light of the objectives sought ● In practice – is this any more than a "turnover test" • Eg. Any contract no more than 20% of annual turnover • No legal requirement for the turnover test • What about early stage companies? - Foresight is needed by CAs: once a minimum standard set it cannot easily be changed© Bird & Bird LLP 2011
  • 5. Shortlisting: Technical and Professional Ability– Setting the CriteriaCAs can deselect bidders that do not achieve "any minimum standards of technical or professional ability"● CAs set the minimum standards • No constraints in the Regulations● EU Treaty principle of Proportionality applies • Minimum standard must be both necessary and appropriate in light of the objectives sought● Probably more subjectivity than financial standing test • Attempts to introduce objectivity can introduce restrictions - E.g at least 3 projects in the last 3 years of similar scope and complexity • Again, once minimum standards are fixed, they are difficult to change© Bird & Bird LLP 2011
  • 6. Scope of the Project – What about division intolots?● No prohibition in the procurement rules over division into lots● Practical concerns: • Award evaluation becomes potentially much more complex - eg. General "all lots" bids vs lot specific bids - Maximum number of lots that can be won? • Increased contract/service management overheads - Can CAs take into account Customer associated costs? - VFM probably enhanced by single supplier approach● EU Commission Green Paper: • Better access for SMEs and start-ups - could be enhanced clarity on how projects divided into lots can be operated© Bird & Bird LLP 2011
  • 7. Procurement Process Issues● Pre-procurement communications: • Not mentioned in the procurement rules • No prohibition but they should not lead to favouritism or bias in favour of a particular bidder • Should be carried out under a structured programme● Tender submission requirements: • Costs of tender development is prohibitive to SMEs • Complexities of UK approach - PFI and PPP were very complex and expensive to structure - JVs and mutuals may be even more complicated! - Other EU countries "just buy things" (quote from Bird & Bird client)© Bird & Bird LLP 2011
  • 8. Procurement Process Issues (2)● Risk allocation approach: • Standard public sector contracts are heavy-handed and load risk on the supplier - OGC IT Contract, the new PSN contract places more risks on supplier • Large suppliers can accept the risks, SMEs struggle to live with the risks - Insurance is unlikely to be available● Frameworks • Do they assist SMEs or are they yet another barrier to SME participation • Probably a "necessary evil" but - If too many suppliers appointed to a framework there will be very little business to justify the costs of bidding - If too few suppliers appointed, the market place will be overly restricted • Ie. Setting up frameworks needs a good understanding of the market conditions. - It is not just a procurement exercise© Bird & Bird LLP 2011
  • 9. Procurement Process Issues (3)● Lean Procurement – will it help SMEs? • Lean provides useful simplifications to procurement processes BUT • When applied to Competitive Dialogue SMEs should be cautious - CDS processes are inherently complex● Open procurement procedures • No short-listing – direct to tendering • May assist SMEs● Award evaluation processes • Transparency obligations should assist SMEs • Overly complex award criteria matrices deter less experienced bidders© Bird & Bird LLP 2011
  • 10. Thank you Roger Bickerstaff Barry Jennings Tel: +44 (0) 20 7415 6000Bird & Bird is an international legal practice comprising Bird & Bird LLP and its affiliated businesses. www.twobirds.com