Bidding for a better route to procurement
European procurement rules have become a huge frustration for councils, contractors and architects who face an ongoing struggle with bureaucracy, says Stephen Cousins.
The UK procures far more schemes under EU procurement rules than any other country in Europe, accounting for 24% of all projects. Public procurement in the UK is also one of the most expensive and least efficient of all the 27 member states, according to a report published in 2011 by PricewaterhouseCoopers.
The complexity of the process in the UK means councils desperate to begin projects frequently become entangled in red tape, while consultants’ time and resources are sapped by long, drawn out pre-qualification and tendering processes. And the industry is getting sick of it.
While much of Europe implements the EU procedures with great efficiency, the UK has become encumbered by its adherence to rigid formality, says Walter Menteth, lead consultant architect at Walter Menteth Architects, who is heading up a new RIBA evaluation of UK public procurement in construction. “The problem is not the EU procurement rules per se, but the way they are interpreted and implemented in the UK,” he says.
Evidence suggests that the costs involved, even for those that lose tenders, is discouraging smaller firms from bidding. The RIBA procurement report: Building Ladders of Opportunity — How Reforming Construction Procurement Can Drive Growth in the UK Economy, published at the end of May, claims that on average, OJEU bidding costs for smaller architectural practices represent 29% of the total earnings derived from this work. For larger practices (with more than 30 employees) this rises to 40%.
The RIBA is calling for a number of changes, including: reducing the number of organisations caught up in the bureaucracy of procurement rules by clarifying the definition and interpretation of “bodies governed by public law”; and providing better guidance for public clients and simplifying pre-qualification questionnaires.
It also wants access for micro businesses and SMEs, and suggests the introduction of “value banding” criteria and proportionality in their treatment, for example with regard to annual turnover.
“A whole swathe of people have decided that they just can’t compete with larger organisations and feel that it’s just not worth engaging in the process because of the amount of effort and resource needed when the chances of getting a commission are very slim,” says Peter Caplehorn, technical director at Scott Brownrigg architects. “It’s a shame because clients are often missing out on firms that could give them the best result.”
EU laws on public procurement are complex and designed to ensure that deals between the public and private sectors are fair and transparent. Under the legislation, introduced in 2004, contracting authorities, including public sector bodies and local authorities, must publish tenders for construction contracts of more than £173,00 for supplies or services and more than £4.3m for works in the Official Journal of the European Union (OJEU).
Interested parties must complete a pre-qualification questionnaire (PQQ) detailing their technical knowledge and experience, financial standing, and answer questions relating to the contract.
After PQQs have been submitted, a shortlist of candidates is then invited to tender via one of three procurement processes — “competitive dialogue” is most commonly used and sees the contracting authority enter into parallel discussions with each of the bidders. “Restricted procedure” sees the procuring body specify all the details of the contract and there is very little negotiation, while “negotiated procedure” gives parties the pre-emptive power to renegotiate the terms of a contract when it is finalised.
The competitive dialogue route has gained precedence in the UK over the more streamlined restrictive procedure, which councils are wary of because it does not allow them to negotiate contracts or talk to bidders.
Public authorities often enter competitive dialogue without a fully-formed idea of a project’s requirements and then work with bidders to develop solutions, which are then bid on. The process can take a long time and bidders must invest time and resources, but have no guarantee that they will win the contract at the end.
While Denmark has conducted around 50 competitive dialogues over the past few years, the UK has completed thousands, to its detriment, says Alison Walton, principal associate at legal firm Eversheds: “If contracting authorities don’t know what they want at the outset then the only real option for them is to go to competitive dialogue.”
The drawn-out process has resulted in an increasing number of legal challenges against contract awards by disgruntled losing bidders wanting to recoup their wasted investment. Challenges have also increased since the introduction of the Remedies Directive in 2009, which requires procuring bodies to show losing bidders, on request, how they compared with the winner (see box right).
If the UK is to reform its approach to procurement under EU rules, then pre-tender market engagement could play an important role. Last month the government issued a policy note recommending that authorities consult with the market before going out to tender to gauge appetite for a project and structure their requirements in more detail (see below). “It could mean more efficient procurement that’s less time and resource intensive for bidders and councils,” says Walton.
Hope also comes in the form of an EC green paper which, if adopted by Brussels, could create a less onerous system. The paper proposes a drastic cut to the number of documents required from firms, plans to divide tenders into lots to make it easier for SMEs to bid, and more use of the negotiated procedure.
The EU’s council of ministers and the European parliament are considering the proposals with a view to updating the legislation by the end of 2012, but it could be as late as 2014. For the thousands of firms grappling with the tortuous process, it cannot come soon enough.
Guidance helps public sector avoid pitfalls of EU rules
New guidance has been published by the Cabinet Office aimed at giving contracting authorities the confidence to talk to suppliers pre-procurement without fear of contravening EU procurement rules.
Early engagement is seen as desirable as it allows contracting authorities to define their requirements better, which could reduce bidding complexities and costs. The policy note sets out a number of “dos and don’ts” for public bodies to consider when conducting such engagement. It says procuring organisations should:
- engage early and widely with the market
- give them an opportunity to shape the requirement;
- discuss outcomes to inform the specification;
- Ensure suppliers know that any resulting procurement will be conducted competitively;
- speak to a proportionate number of potential suppliers in relation to the market size;
- maintain the commercial confidentiality of information received during discussions with potential suppliers in line with applicable laws, such as the Freedom of Information Act;
- discuss whether splitting a contract into smaller contracts/lots will stimulate greater competition and deliver better value for money or whether this can be achieved through encouraging a more diverse supply chain;
- Discuss with the market how the requirements might be made more exportable overseas — for example, through the use of internationally recognised product standards;
- discuss procurement pipelines with the market and the capabilities needed to deliver them.
But contracting authorities should not:
- give any one potential supplier an advantage in bidding over another, for example by providing one supplier with substantially more information than another. This could be overcome by publishing all information on your website to ensure equal access;
- as a result of pre-procurement dialogue, shape the requirement in favour of any one particular potential supplier;
- engage in a way that disadvantages any one particular potential supplier or group of potential suppliers — for example, SMEs and mutuals.