Key Aspects of the Procurement Regulations

Financial thresholds

Specific rules apply to contracts with values at or exceeding financial thresholds set out in the regulations; contracts with lower values are subject to less stringent requirements. The regulations include formulae for calculating values for a series of contracts and for framework agreements. In January 2002 new threshold values came into effect, which will remain unchanged for two years in the case of EU member states outside the single currency. The sterling values of these thresholds are calculated on the basis of exchange rates between sterling, euros and special drawing rights (a currency devised by the IMF). Contracts with values at or above the following sterling amounts are subject to the procurement rules, with certain exceptions that chiefly affect categories of research and development and telecommunications services.

	Threshold
Services contracts - central government	100,410
Services contracts - other public sector authorities	154,477
Services contracts - public sector small lots	49,496
Utilities services contracts - water, electricity, urban transport, airports and ports sectors	308,955
Utilities services contracts - oil, gas, coal and railway sectors	247,479
Utilities services contracts - telecommunications	371,219

Prior information on procurement programmes

If the total estimated value of the contracts that a public sector authority intends to award during a financial year is equal to or exceeds 750,000 euros (a sterling threshold value of about 464,000), the authority is required to issue a prior information notice at the start of the year, outlining its procurement intentions for the 12 months ahead. The purpose is to give prospective contractors an early indication of tendering opportunities. So far as authorities other than utilities are concerned, the prior information notice is not a call for tenders and does not require a response from contractors, since it refers to an overall programme rather than giving detailed information about individual contracts. Utilities are able to use an indicative notice to call for competitive tenders for a specific project.

Advertisement and publication of contract notices

Issued five times a week in CD ROM format, Supplement S of the Official Journal of the European Communities (OJS) contains notices of all contracts for which public sector authorities are calling for tenders. Its coverage includes principally:

• public contracts for works, supplies and services from all EU member states;

• utilities contracts;

• public contracts from EU institutions;

• European Development Fund contracts;

• projects funded by the European Investment Bank, European Central Bank and European Bank for Reconstruction and Development;

• European Economic Area contracts (Norway, Iceland, Switzerland and Liechtenstein);

• notices about European Economic Interest Groupings.

An online version of the OJS, updated each day, is available from the Tenders Electronic Daily (TED) Web site (http://ted.eur-op.eu.int). Access to TED is free of charge: the database offers multiple search options and in addition to current notices contains information on contract advertisements over the past five years. Tender opportunities that are part of EC-funded programmes may be notified also through Internet announcements on programme Web sites.

In May 2002 a new European directive came into force, making it mandatory for authorities to use a standard form for contract notices published in the OJS: its aims are to facilitate the online interrogation of notices, reinforce the development of electronic procurement and overcome problems caused by the appearance of incomplete and sometimes inaccurate information. The content of the new contract notice form is comprehensive: it covers, among other matters, the purpose and scope of the contract; legal, economic and technical conditions for participation; whether a fee has to be paid to obtain contract documents or bid specifications; whether provision of a service is restricted to a particular profession; the type of procedure to be followed in awarding the contract; the award criteria to be applied, stated so far as possible in descending order of importance; the time limits for the receipt of tenders or requests to participate; the language or languages in which tenders or requests to participate can be drawn up; and related administrative information.

Authorities may use the standard form to publicize also contracts not subject to OJS notification requirements. Decisions on how and where to advertise such contracts are left to the discretion of authorities: generally, notices about them may be placed in the national, regional and local press and in technical and trade publications.

A note of caution: before deciding to invest time and effort in following up a contract notice about an opportunity in another country, make sure you are adequately informed about both the technical and commercial context of the assignment and the workings of the local procurement environment.

Use of open, restricted and negotiated contract award procedures

Contracting authorities have a choice of three types of procedure:

• Open procedure. Any service provider may submit a tender in response to the contract notice. This procedure can have disadvantages for authorities in terms of the time and resources needed to process what might turn out to be an inordinate number of bids, and may lead service providers to question the likely quality and thoroughness of the tender evaluation. On the other hand, it can provide an opportunity for authorities to learn about sources of expertise and solutions that they might not have considered.

• Restricted procedure. A service provider has first to submit an expression of interest or a request to be selected as a candidate for tendering. The contracting authority then invites tenders from the pre-qualified candidates. In an urgent and exceptional situation, this process may be accelerated: the reasons justifying acceleration must be explained in the contract notice.

• Negotiated procedure. A contracting authority may go directly to one or more service providers and negotiate with them the terms of a contract. This type of procedure is rarely used in contracting for services or consultancy.

Under the open and restricted procedures, a contracting authority may ask bidders for further information to help evaluate tenders, and bidders may request clarification on points of fact or procedure, but negotiating about the content of tenders, and in particular about prices, is not permitted. Discussions may take place between bidders and authorities only for the purpose of clarifying or supplementing the content of tenders or the requirements of authorities and provided this involves no element of discrimination or unfair practice. Requests for clarification are discussed in Chapter 7.

Pre-qualification criteria

In pre-qualifying bidders under the restricted procedure, an authority is required to apply objective and non-discriminatory criteria that relate to their legal position and economic, financial and technical capacity. The contract notice will list the pre-qualification criteria, indicating the references and evidence that are required as proof of the competence and suitability of bidders. Pre-qualification may involve more than one stage of selection. Approaches to pre-qualification are the subject of Chapter 5.

Utilities may apply a qualification system to register potential service providers in place of contract-specific pre-qualification procedures, on condition that the system meets the requirements for objectivity and even-handedness. The UK utility industry uses a Utilities Vendor Database (UVDB) as a single focus point for pre-qualification information, enabling utility companies to comply with EC procurement requirements without having to place individual calls for tenders in the OJS. The option of using a comparable qualification system in sourcing contracts above the EC thresholds is not available to public sector clients outside the utilities sector, though most local authorities maintain lists, registers or databases of approved suppliers for lower-value contracts.

In order to secure an adequate degree of competition, the shortlist resulting from the pre-qualification process will normally have a minimum of five names and perhaps as many as seven or eight. EU procedures enable contractors to receive an explanation of the reasons for failure to pre-qualify.

Contract award on the basis of either the lowest price or the most economically advantageous tender

In services procurement, lowest price is normally used as the sole criterion only in awarding low-value and relatively low-risk contracts. For other contracts, authorities generally prefer the concept of the most economically advantageous tender. This can be defined as the tender that offers the best value for money taking account of technical merit and quality as well as price and cost-effectiveness. The criteria that authorities apply in identifying this tender are discussed in Chapter 22. They have to be the same criteria as those indicated in the contract notice, but must differ from those used in pre-qualification. Changes in the list of criteria or in their relative importance may indicate that an authority favours a particular bidder: they can be grounds for questioning the fairness of the award procedure.

Publication of contract award notices

Authorities are required to publish in the OJS details of contract awards, including the award criteria, the number of tenders received, the name and address of the successful tenderer(s) and the price or range of prices paid. Unsuccessful tenderers have the right to ask for an explanation of why their tenders were rejected and must receive a response within 15 days of requesting this information.