Procurement policy overview

1
Procurement policy overview

• Michael Hill Ian Robertson

2
OGC Transforming Government Procurement

• Transforming Government Procurement
• (www.hm-treasury.gov.uk/documents)
• New powers
• Set procurement standards for Departments
• Monitor compliance
• Ensure action for non-compliance
• Further professionalise the GPS
• Principal advisor to the Major Projects Review
  Group
• Demand Departmental involvement in collaborative
  procurement

3
Increased oversight

• Procurement Capability reviews
• Small teams of highly-skilled experts
• Intensive engagement for a short time
• Rolling out throughout 2007
• Departmental action plans to be published
• Major Projects Review Group
• Examines projects at key stages
• Early scrutinyat business case development stage
• Ensure efficacy before tender
• OGC will support HMT in MPRG work
• Complaints function

4
Policy and Standards Division

• Remit from HMT DTI Ministers
• What we do
• EU Procurement negotiation
• Representation to EU and WTO (GPA)
• Domestic Procurement Policy
• Transposition to UK law of procurement rules
• EU and international developments in procurement
• Infractions Management
• Complaints Handling
• What we dont do
• Procurement practice advice
• Procure
• Provide legal advice
• Act as procurement police (although we know who
  does!)

5
Policy and legal framework for public procurement

• European Union Treaty (c.f. Treaty of Rome)
• World Trade Activities e.g. WTO (Government
  Procurement Agreement)
• EU Directives
• UK Regulations (Statutory Instruments)
• UK Domestic Policy e.g. Value For Money (VFM)
• ECJ Case Law

6
Underpinning Concepts

• European Competitive Market
• European Union Treaty requires
• Non-discrimination for suppliers across the EU
• Equal treatment between potential suppliers
• Transparency of the whole procurement process
• Proportionality of contract value to procedures
  used
• Mutual recognition of standards,
  qualifications, specifications

7
Some Figures

• EU - 27 Countries

• UK public procurement spend - 125 Billion
  (above thresholds)

• About 18 of EU public procurement spend

• 2nd place after Germany

Public Procurement Indicators, published by
European Commission in March 2006
8
2006 Regulations main changes

• Central purchasing bodies
• Electronic systems
• e-auctions
• dynamic purchasing systems
• Clarification on scope to reflect social and
  environmental issues
• Supported factories and businesses
• Framework agreements public sector
• Competitive Dialogue
• Mandatory exclusion for fraud and corruption
• Standstill period

9
Buyer Profiles

• Purchasers websites providing procurement
  information for suppliers, including for example
• PINs (provided the European Commission is
  informed prior to publication on the buyer
  profile)
• This allows a reduction in minimum timescales
• Copies of all other notices as required by the
  Regulation
• Tender specifications and additional documents
• Future procurement requirements
• The purchasers procurement process
• Contact details

10
New Reports

• Reg 32(14) sections (a) to (i) require
  contracting authorities to maintain a
  comprehensive record of their procurement
  activities. This will include, for example
• Contract details e.g. value
• Selection decisions
• Justification for use of the selected procedure
• Names of tenderers, successful or otherwise
• Reasons for selection
• Reasons for abandoning a procedure
• A report based on this record must be provided
  to OGC upon request
• Reg 32 (15) requires a records of progress to be
  maintained for procedures conducted by
  electronically means

11
Over the European Horizon

• Below threshold procurements Commission concern
• Shared Services both a UK and EC issue
• Remedies Directive revision Commission wishes
  easier redress for suppliers
• Alcatel standstill period extended application?
  
• Infractions driver for Commission thinking
  ECJ case law
• SME set asides - (French Proposal) on-going
  negotiations
• Defence procurement New Directive?
• e-procurement - a tepid but warming up policy
  area

12
Using procurement as a lever
13
PSD talking to Contracting Authorities

• Have you addressed procurement issues in
• the business strategy?
• the procurement strategy?
• the procurement process the business case and
  specification rather than left to selection /
  award?
• respect to the delivered outcome?
• Other questions for procurers
• Do you understand your own requirement?
• Is it relevant? Is it proportional?
• Does the market share that understanding?
• Has the market the capability and capacity to
  provide a solution?
• Have you the capability to select, accept and use
  the solution?

14
Framework Agreements

15
Framework AgreementsDefinition

• Reg 2(1) defines a framework agreement as
• An agreement or other arrangement between one or
  more contracting authorities and one or more
  economic operators which establishes the terms
  (in particular the terms as to price and, where
  appropriate, quality) under which the economic
  operator will enter into one or more contracts
  with a contracting authority in the period during
  which the framework agreement applies
• A framework agreement is not a contract.
• A call off from a framework agreement is a
  contract.
• Frameworks can cover supplies, works and services
  and can be used in conjunction with the open,
  restricted, competitive dialogue and negotiated
  procedures

16
Framework AgreementsStyle

• Maximum duration is four years unless,
  exceptionally, a longer period can be justified
• Call offs may extend beyond the life of the
  framework agreement
• Where a call-off duration goes beyond the end of
  the framework agreement, this must be reasonable
  and consistent with other call-offs from the same
  framework agreement
• Frameworks may contain one or three or more
  suppliers provided, in the latter case, more than
  three pass the selection criteria
• Note that 2 is not deemed to have represented
  sufficient competition.

17
Framework AgreementsCall Offs

• For each call off, either
• Award to the single supplier, where only one
  supplier in framework agreement
• Or
• Hold a mini-competition between all capable
  suppliers of meeting the requirement
• Additional award criteria (within framework
  agreement scope)
• Do not substantially change the original terms
  and conditions.
• Award to the supplier who offers best value for
  money based on the framework award criteria.

18
Issues

• 4 years
• lock out for suppliers?
• Too short? Too long?
• Estimating the overall value
• Overspending on the framework
• Establishing a workable framework
• Clear requirements
• Grouping suppliers by category
• Clear definition of framework users
  mini-competitions
• Framework not right for customer
• Prices agreed not tracking market
• No commitment by purchasers and suppliers

19
Benefits a few

• ability for savings, using collaborative
  purchasing power
• choice of suppliers with products and services
  conforming to known, relevant standards and
  requirements
• collaboration with similar minded partners
• consistent and known pricing for all
• consistent procedures do once re-use many
  times
• consistent and known TsCs
• initial market testing and evaluation of products
• legal under EU procurement regulations
• local, regional and national framework agreements
  available
• obtaining the latest technology / innovation
• others have done the hard work
• sharing / reducing procurement costs time,
  resource, money

20
Framework Agreements Summary
Framework agreements are agreements with one or
more suppliers which set out terms and conditions
for subsequent procurements
Does the agreement include a commitment by the
procurer to buy something?
This is a framework agreement. Contracts
subject to EU rules are formed only when call
offs are made
Total value of all call offs over the framework
lifetime estimated to fall below the relevant EU
threshold? Or, is otherwise not covered by the
full rules?
Apply EU rules to advertising and awarding the
framework as if it was a contract. Apply the
specific framework rules to the call offs
No
No
Yes
Yes
This is a framework contract. Treat as any other
contract under the EU rules
Apply EU Treaty based principles (e.g.
transparency) and Value for Money policy
21
Framework Call Off StageSummary
Is there only one framework supplier?
Are the terms agreed in setting up the framework
precise enough for the best supplier to be
identified for the particular need?
Hold a mini competition between the suppliers
capable of meeting the particular need using the
original terms supplemented / refined as
necessary
Award the call off to the supplier who can
provide the supplies, works or services using the
refined terms and the published framework award
criteria
No
No
Yes
Yes
Call off the relevant supplies, works or services
using the terms agreed when the framework was set
up
Refined terms may be needed, e.g. to understand
how the particular requirements of a consultancy
call off would be met New terms requiring office
cleaning services through a framework intended
for accountancy advice would clearly be beyond a
reasonable definition of refinement
22
Shared Services
23
What are shared services?

• Public sector organisations (some 1300 in the UK)
  coming together to deliver services more
  efficiently and effectively
• The services to be shared may be either
• internal, notably HR, Finance and ICT
• public-facing, for example Social Services
• Its all about constitutional status
• Contracting entity
• Can bodies contract with each other
• Crown bodies v. non-crown bodies

24
Different Approaches for sharing services

• Framework agreements
• Set up so a range of public sector bodies can
  call down
• In accordance with regulation 19 of the Public
  Contracts Regulations 2006
• Central purchasing bodies
• These might, for example, act as a goods
  warehouse for commonly required supplies
• In accordance with regulation 22 of the Public
  Contracts Regulations 2006
• Other (Teckal approaches)
• Provision of services by one or more public
  bodies to another through a separate organisation
• Approach based on ECJ case law

25
What is Teckal

• Teckal concerned the award
• by an Italian local authority of a contract for
  the management of the heating services for
  certain municipal buildings
• to a consortium (AGAC) set up by several local
  authorities (including the awarding authority)
  and
• without an EC public procurement tender procedure
  having been followed
• Teckal, a private company, brought a challenge

26
Teckal

• The court held (ECJ judgement reference
  C-107/98) that EC public procurement rules do not
  need to be complied with where the winning
  provider is
• controlled by the awarding authority (or
  authorities) in a manner similar to that which
  it exercises over its own departments
  (structural control)
• and at the same time
• it carries out the essential part of its
  activities with the controlling authority or
  authorities (economic dependency)

27
The Teckal tests

• Distinct in law
• Crown indivisible Crown bodies not distinct in
  law
• Local authorities each is distinct in law
• Distinct in fact - Teckal established the
  two-part test
• structural control
• economic dependency
• Hence, if public entities want to provide
  services to each other the EC public procurement
  rules are applicable only if the entities are
  distinct in both law and fact

28
Guidance

• Shared Services Team (SST) in e-Government Unit
  (e-GU), Cabinet Office
• Recent report Shared Services in Government
  available at
• http//www.cio.gov.uk/documents/ss/eu_public_procu
  ment_rules070325.pdf
• OGC considering producing Shared Services
  guidance
• EC consulting with Member States on need for
  guidance

29
Any Questions?

• See our pages on OGC web-site