Regulation 26 – Choice of procedures

Commentary

Regulation 26 transposes Article 26 of Directive 2014/24 and establishes rules on the choice of procedures for the tendering of public contracts, which have now been increased to a total of 6 options: open, restricted, competitive with negotiations, competitive dialogue, negotiated without prior publication and innovation partnership.

As with the Directive, some procedures are standard (open, restricted) while others can only be used if specific use cases are met and have thus a special (competitive procedure with negotiation, competitive dialogue and innovation partnerships) or exceptional nature (negotiated procedure without prior publication).

Regulations 26(1) and (2) PCR2015 depart significantly from the drafting of Article 26(1) Directive 2014/24/EU and, in our view, improve their drafting significantly. This is achieved by establishing that contracting authorities shall apply procedures that conform to this Part and that they can only award contracts if a call for competition has been published, except where reg.32 PCR2015 permits contracting authorities to apply a negotiated procedure without prior publication. This establishes a clear link to Article 2(d()1)(a) of Directive 89/665 on remedies (as amended), according to which Member States shall ensure that a contract is considered ineffective if the contracting authority has awarded it without prior publication of a contract notice in the Official Journal of the European Union when not permissible to do so in accordance with Directive 2014/24/EU.

Standard procedures (open and restricted)

As with Article 26, both the open and restricted procedure are standard procedures in the Regulations. Therefore they can be used anytime, anywhere without the need for additional conditions to be met (either other than value, contract scope and the authority tendering).

Special procedures – I – (cCompetitive procedure with negotiation, competitive dialogue)

Regulation 26(4) allows for the use of the competitive procedure with negotiation and competitive dialogue if specific conditions are met. These procedures cannot thus be considered standard as they are not free to use in all circumstances. The first comment about both procedures is that not only they share the same exact grounds for use, but as their structure is also very similar, thus raising the question about their existence.

Under the previous Directive 2004/18/EC, competitive dialogue grounds for use were, frankly, clear as mud. The “particularly complex test” was an exercise in futility and the truth is there was no widespread litigation about the grounds for use accross the EU.

Regulation 26(4) establishes two different grounds for use for these procedures. The first depends on the substantive characteristics of the underlying contract, and the second on a previous failure to use an open or restricted procedure (ie, when only unacceptable or irregular tenders were submitted).

Regarding the first set, Regulation 26(4) allows for the use of both procedures if any of the four conditions are met:

i) the needs can only be met with adaptation of existing solutions;

ii) include design or innovative solutions;

iii) negotiations are needed due to the nature, complexity, legal and financial make-up or attached risks;

iv) the contracting authority cannot establish the technical specifications precisely enough.

The first two conditions are new (ie they were introduced by Directive 2014/24/EU) and pose some interesting interpretative challenges. Virtually anything can be twisted to fit into the first one (“I want pens with this specific colour.” “Well, we have to adapt our product then.”) and the second is also as wide as the Panama canal, unless we apply the innovation definition from Regulation 1 to “innovative solutions”. The intent of these two conditions appears to be to facilitate the use of both procedures and we can expect an increase in relative terms of their use in the future. Negotiations in public procurement however are fraught with danger and drawbacks and contracting authorities should bear this in mind. While it is possible for contracting authorities to negotiate well, we remain bearish on the likelihood of good outcomes in general leaving the public sector with a better end result. The increase in scope for negotiations warrants a wider discussion which is beyond the purposes of this commentary, so please see A Sanchez-Graells, Public Procurement and the EU competition rules, 2nd ed, p. 272-278.

The second set of grounds for use are an evolution of those already contained in Directive 2004/18/EC. Thankfully, they are clearer and simpler than before and the “particularly complex” test has disappeared. These changes appear reasonable and contribute to an increase in legal clarity and certainty in the moment of choosing to use one of these procedures.

It is worth noting that there is now an explicit reference to the need “to have negotiations” as a potential ground to use competitive dialogue. This can only be read – finally! – as an assumption that the dialogue stage is indeed a negotiation stage for all intents and purposes.

The final set of conditions for the use of competitive dialogue or competitive procedure with negotiation is a previous failure of an open and restricted procedure due to irregular or unacceptable tenders, although all tenders need to have been excluded in that previous procedure.

According to paragraph (5), if the conditions are met, the contracting authority is authorised to run a competitive procedure with negotiation or competitive dialogue, either by publishing a new contract notice or without doing so. The second option implies inviting all participants in the previous procedure to the new one, as long as they complied with the requirements of Regulations 57 and 64 when the original procedure was launched. In other words, if they were excluded due to lack of financial capacity, they cannot be invited back to the new procedure. However, how do we interpret paragraph 7(a) where a tender is considered unacceptable in case of lack of required qualifications by the tenderer? I We am are not sure how we are to sort out this inconsistency.

Finally, Regulation 26 includes some rules on how to proceed with the call for competition should it be undertaken. The most interesting finding is that when a sub-central organisation such a local council wants to tender a restricted procedure or a competitive procedure with negotiation, it can do the call for competition simply by putting out a prior information notice. I We cannot understand why these two procedures were singled out for this kind of preferential treatment. However, for a country already madly in love with the restricted procedure and that I we expect will fall in love pretty quickly as well with the competitive procedure with negotiation, this alone ensures a tilted playing that disadvantages the open procedure and competitive dialogue.

Special Procedures II – Innovation partnership

Regulation 26(3) also mentions that contracting authorities can use the new innovation partnership, without establishing any conditions of use. That is not to say that these do not exist, but those are contained instead in Regulation 31 and need to be complied with. In our view it would have been preferable to have in Regulation 26 those specific conditions of use applicable only to the innovation partnership.

For a more detailed overview of these procedures please see P Telles and L Butler, “Public Procurement Award Procedures in Directive 2014/24/EU’, in Modernising Public Procurement: The new EU Directive (p.131 – 184). You can find an ungated version at SSRN.

Exceptional procedure – Negotiated procedure without prior publication of notice

It is worth stressing that reg.26 PCR2015 does not transpose Article 26(6) Directive 2014/24/EU, which establishes the unnecessary and redundant rule that “In the specific cases and circumstances referred to expressly in Article 32, Member States may provide that contracting authorities may apply a negotiated procedure without prior publication of a call for competition. Member States shall not allow the application of that procedure in any other cases than those referred to in Article 32”. Economising this paragraph is a positive contribution to simplification of the rules on choice of procedures.

In any event, other than the mention on Regulation 26(1) the use cases of the negotiated procedure without prior publication of notice are to be found instead in Regulation 32. As mentioned about the innovation partnership, it might have been preferable to systematise all grounds of use in the same article.

Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulations 2015, available at: www.pcr2015.uk.

Last modified: September 5, 2016 by Pedro Telles

General

26.—(1) When awarding public contracts, contracting authorities shall apply procedures that conform to this Part.

(2) Such contracts may be awarded only if a call for competition has been published in accordance with this Part and the Public Contracts Directive, except where regulation 32 permits contracting authorities to apply a negotiated procedure without prior publication.

(3) Contracting authorities may apply—

(a) open or restricted procedures as regulated by this Part;

(b) innovation partnerships as regulated by this Part.

(4) Contracting authorities may apply a competitive procedure with negotiation or a competitive dialogue in the following situations:—

(a) with regard to works, supplies or services fulfilling one or more of the following criteria:—

(i) the needs of the contracting authority cannot be met without adaptation of readily available solutions;

(ii) they include design or innovative solutions;

(iii) the contract cannot be awarded without prior negotiation because of specific circumstances related to the nature, the complexity or the legal and financial make-up or because of risks attaching to them;

(iv) the technical specifications cannot be established with sufficient precision by the contracting authority with reference to a standard, European Technical Assessment, common technical specification or technical reference;

(b) with regard to works, supplies or services where, in response to an open or a restricted procedure, only irregular or unacceptable tenders are submitted.

Irregular and unacceptable tenders

(5) Where paragraph (4)(b) applies, contracting authorities are not required to publish a contract notice where they include in the procedure all of, and only, the tenderers which satisfy the criteria set out in regulations 57 to 64 and which, during the prior open or restricted procedure, submitted tenders in accordance with the formal requirements of the procurement procedure.

(6) In particular, tenders—

(a) which do not comply with the procurement documents,

(b) which were received late,

(c) where there is evidence of collusion or corruption, or

(d) which have been found by the contracting authority to be abnormally low,

shall be considered irregular for the purposes of paragraph (4)(b).

(7) In particular,—

(a) tenders submitted by tenderers which do not have the required qualifications, and

(b)tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure,

shall be considered unacceptable for the purposes of paragraph (4)(b).

Calling for competition etc

(8) Subject to paragraph (9), the call for competition shall be made by means of a contract notice in accordance with regulation 49.

(9) Where the contract is awarded by restricted procedure or competitive procedure with negotiation, sub-central contracting authorities may make the call for competition by means of a prior information notice in accordance with regulation 48(5) to (7).

(10) Where the call for competition is made by means of such a prior information notice, economic operators which have expressed their interest following the publication of the prior information notice shall subsequently be invited to confirm their interest in writing by means of an invitation to confirm interest in accordance with regulation 54.