Regulation 30 – Competitive dialogue

Commentary

Regulation 30 sets up the specific rules that contracting authorities need to follow when they organise competitive dialogues, provided they are covered by the grounds specified in Regulation 26(4) to (7) PCR2015. The transposition follows closely the wording of Article 30 of Directive 2014/24/EU, with minor drafting improvements and a more detailed structure.

The regulation of the competitive dialogue under the 2004 EU procurement rules (which created it) had given rise to significant academic debate and there was a general consensus about the legal uncertainty that the limited detail and the vagueness of the EU rules created. For an overview of the procedure under the older 2004 rules see S Arrowsmith & S Treumer (eds), Competitive Dialogue in EU Procurement (Cambridge, CUP, 2012).

In its post-2014 configuration, the competitive dialogue is structured as a multi-phase selective process based on the restricted procedure, which necessarily consists of at least three phases: expression of interest and short-listing, technical negotiation (or dialogue) leading to the specification of the technical and financial aspects of the procurement, and final tender (subjected to further fine-tuning and negotiations with best bidder).

As designed under In its configuration under Regulation 30, the competitive dialogue is quite difficult to distinguish from a competitive procedure with negotiation [CROSSREF] except for four issues:

(a) the level of specification of the contracting authorities’ needs and requirements under a competitive dialogue is (apparently) less demanding than that applicable to competitive procedures with negotiation;

(b) competitive dialogue cannot result in an award based on price or cost effectiveness only;

(c) the discussions are not binding in the competitive dialogue but based on binding bids in the competitive procedure with negotiation; and

(d) there is only scope for “finetuning” of final bids in the competitive dialogue. 

Hence, these may be the issues that contracting authorities may take into consideration when they opt for one over the other. Admittedly, we are splitting hairs here and hardly justify the multiplication of procedures based on the restricted, but allowing for negotiations; see Telles and Butler, “Public Procurement Award Procedures in Directive 2014/24/EU“, in F Lichere, R Caranta and S Treumer (ed) Modernising Public Procurement: the new Directive (Copenhagen, Djof Publishing, 2014) 131-184.

Needs and requirements level of specification

On the issue of the establishment of the contracting authorities’ needs and requirements, it is worth stressing that Regulation 30(6) PCR2015 determines that contracting authorities shall set out their needs and requirements in the contract notice and shall define such needs and requirements in that notice or in a descriptive document. 

Those needs and requirements cannot be changed despite the technical dialogue in which the contracting authority must engage, given that Regulation 30(18) PCR2015 clearly demands that the tenders and any clarifications, specification or optimisation thereof, or any additional information, may not involve changes to the essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect. 

Even further, the final negotiations in which the contracting authority can engage with the best tenderer need to respect the limit that they cannot not have the effect of materially modifying essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document and does not risk distorting competition or causing discrimination (Regulation 30(20) PCR2015). While illegal, that is unfortunately likely to happen in practice as negotiations with the preferred bidder will be done without the presence of any competitive threat.

Consequently, even if Regulation 30 PCR2015 does not have a strict equivalent to the rule under Regulations 29(2)(b) and 31(2)(b)PCR2015 [CROSSREFS], according to which the procurement documents of a competitive procedure with negotiation or an innovation partnership must “indicate which elements of the description define the minimum requirements to be met by all tenders,” the combined effect of Regulations 30(6), 30(18) and 30(20) PCR2015 may be quite similar. 

The only advantage for the contracting authority may be to try to benefit from that (apparent) limited prescriptiveness by setting out its needs and requirements in vague terms, or by allowing for non-substantial modifications during the technical dialogue, tender or final negotiation phase. However, this will expose it to litigation based on discrimination and distortion of competition (Regulation 18 PCR2015), which does not seem a particularly desirable scenario. In the end, then, contracting authorities will be advised to draft their needs and requirements for a competitive dialogue as if the were “minimum requirements to be met by all tenders“, and stick to them.

Award criteria

As regards the difference in award criteria available under competitive procedures with negotiation and competitive dialogues, it is worth stressing that Regulation 30(5) PCR2015 expressly sets out that the contract shall be awarded on the sole basis of the award criterion of the best price-quality ratio. Conversely, contracting authorities retain the possibility to award the contract under a competitive procedure with negotiation on the basis of price or cost effectiveness only. 

Nonetheless, it would be very hard to square that possibility with the use of that procedure itself other than in regard to works, supplies or services where, in response to an open or a restricted procedure, only irregular or unacceptable tenders are submitted; ( Regulation 26(4)(b) PCR2015), due to the need to have a full set of completely closed technical specifications if the contracting authority only wants to negotiate on the basis of cost/price. Otherwise, engaging in technical and financial negotiations but only taking the latter into consideration for award purposes would in my view exceed the acceptable degree of discretion available to contracting authorities.

Overall, then, the actual advantages of the competitive dialogue over the competitive procedure with negotiation, or the differences between them, seem rather minimal–not least because contracting authorities could use the blueprint of the competitive dialogue to set out the rules and phases applicable to their competitive procedure with negotiation under Regulation 29(19) PCR2015 and, in that case, it would be almost impossible to distinguish between both procedures except for the specific authorisation to engage in further negotiations with the best tenderer under Regulation 30(20) PCR2015, which could be accommodated by a delayed closure of the negotiations under Regulation 29(21) PCR2015.

Non-binding discussions

Competitive dialogue has always included a discussion stage before bids are submitted and Regulation 30 is no different (paragraph (15)). In the competitive procedure with negotiation however, the negotiations occur after binding tenders have been submitted, thus limiting the scope for going around in circles in the latter.

This is a serious limitation of competitive dialogue and one that contracting authorities need to account for. It is quite possible (and legal) for a detailed discussion with a candidate during the dialogue stage not ending with a tender being submitted or with a very different tender being presented instead. It is also possible that candidates will put forward for the dialogue stage representatives who do not have the power to bind the economic operator or that all discussions will be subject to a subsequent go/no go decision taken by the administration once the moment for tender submission arrives.

Fine-tuning & discussions/negotiations with the preferred bidder

One example of practice passing off as “best practice” with competitive dialogue in the UK has been the race to award and the idea that is more efficient to leave the financial commitments to confirm only with the preferred bidder. The fact that the law provides for this is moot. It does, but that does not mean is a great idea. Having said that, the fact Regulation 30 (16) states that tenders shall contain all the elements required and necessary for the performance of the project, so it is unclear how a contract can be performed without a price or financial make up of a contract to be defined.  

The usual justification for leaving said financial discussions for after choosing the preferred bidder goes along the lines that “oh, but the banks will not be involved during dialogue/tender stage, they just want to deal with the winner.” The experience in Spain with similar structure contracts tells otherwise: if you define clearly the rules of the game and force that discussion during the tendering stage, all interested parties will be drawn into it, including banks if appropriate. Please see, P Telles, “Competitive Dialogue in Spain” in S Arrowsmith & S Treumer (eds), Competitive Dialogue in EU Procurement (Cambridge, CUP, 2012).

Leaving the door open for negotiations and discussions with the preferred bidder, particularly over money and financial commitments is foolish. By the time a preferred bidder has been chosen and financial matters start to be discussed, there is no longer any competition leverage in the hands of the contracting authority. The supplier knows it can drag the discussions out for as long as necessary to get what it wants as the reputational risks lies squarely with the contracting authority’s court and particularly with the procurement officers allocated to that project. Therefore it is easy for the supplier to extract concessions at this stage, even with all the legal safeguards included in Regulation 30. After all what is the likelihood that any of this will leak and an aggrieved bidder challenging it in the courts? Especially in a jurisdiction where “commercial bid secrecy” is so important.

The second problem with negotiations with the preferred bidder is time, or the lack of it. Without any competitive pressure these things drag for a long time. It is no surprise then that in 2010 or 2012 the target for a “good” competitive dialogue was something along 18 months. In Spain, where contracting authorities never entered into discussions with the preferred bidder, almost all were conducted in less than 12 months and most under 9 months

Racing to select a preferred bidder at the expense of discussing some important matters during the dialogue stage is a false economy. It is a shame that neither the Directive nor the Regulations solved this but contracting authorities should be advised of in practice.

A final remark that may be worth stressing is that Regulation 30(21) PCR2015 allows contracting authorities to specify prizes or payments to the participants in the dialogue. This could trigger State aid issues if the prizes were excessive or if they were not awarded in an objective and transparent manner. To avoid any State aid issues it would be possible to restrict the prizes and awards to either the costs incurred by an economic operator or a subset of those.

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

Competitive dialogue

General and selection of participants

30.—(1) In competitive dialogues, any economic operator may submit a request to participate in response to a contract notice by providing the information for qualitative selection that is requested by the contracting authority.

(2) The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice is sent.

(3) Only those economic operators invited by the contracting authority following the assessment of the information provided may participate in the dialogue.

(4) Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with regulation 65.

(5) The contract shall be awarded on the sole basis of the award criterion of the best price-quality ratio in accordance with regulation 67.

(6) Contracting authorities shall set out their needs and requirements in the contract notice and they shall define those needs and requirements in that notice or in a descriptive document, or in both.

(7) At the same time and in the same documents, contracting authorities shall also set out and define the chosen award criteria and set out an indicative timeframe.

Conduct of the dialogue

(8) Contracting authorities—

(a) shall open, with the participants selected in accordance with the relevant provisions of regulations 56 to 66, a dialogue the aim of which shall be to identify and define the means best suited to satisfying their needs, and

(b) may discuss all aspects of the procurement with the chosen participants during this dialogue.

(9) During the dialogue, contracting authorities shall ensure equality of treatment among all participants and, to that end, they shall not provide information in a discriminatory manner which may give some participants an advantage over others.

(10) In accordance with regulation 21, contracting authorities shall not reveal to the other participants solutions proposed or other confidential information communicated by a candidate or tenderer participating in the dialogue without its agreement.

(11) Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information.

(12) Competitive dialogues may take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria laid down in the contract notice or in the descriptive document.

(13) In the contract notice or the descriptive document, the contracting authority shall indicate whether it will use the option described in paragraph (12).

(14) The contracting authority shall continue the dialogue until it can identify the solution or solutions which are capable of meeting its needs.

Final tenders

(15) Having declared that the dialogue is concluded and having so informed the remaining participants, contracting authorities shall ask each of them to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue.

(16) Those tenders shall contain all the elements required and necessary for the performance of the project.

(17) Those tenders may be clarified, specified and optimised at the request of the contracting authority.

(18) But such clarifications, specification or optimisation, or any additional information, may not involve changes to the essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect.

(19) Contracting authorities shall assess the tenders received on the basis of the award criteria laid down in the contract notice or in the descriptive document.

(20) At the request of the contracting authority, negotiations with the tenderer identified as having submitted the tender presenting the best price-quality ratio in accordance with regulation 67 may be carried out to confirm financial commitments or other terms contained in the tender by finalising the terms of the contract, provided this—

(a) does not have the effect of materially modifying essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, and

(b) does not risk distorting competition or causing discrimination.

Prizes and payments

(21) Contracting authorities may specify prizes or payments to the participants in the dialogue.