Procurement News – Europe

The future of public procurement?

September 30 in Daily News by eisc No Comments

The timing of the UK Department of Health’s adoption of PEPPOL (“Pan-European Public Procurement Online) may just help accelerate the economic recovery in EU member countries. With billions of euros tied up in supply chain paperwork, small and medium-sized businesses stand to benefit from faster, digitised procurement transactions.

Among the EU public-sector programs, PEPPOL is a rising star. In the UK, when the Department of Health communicated the mandate to use PEPPOL and GS1 standards for the NHS e-procurement strategy to all trust boards, not one questioned the decision or complained about it, according to Chris Doyle, head of healthcare for GS1 UK.  The adoption of PEPPOL by UK’s Department of Health marks the largest organisation private or public of this international standard.

For the uninitiated, PEPPOL stands for the Pan-European Public Procurement Online project, and since 2008 it has been developing and implementing technology standards to align business processes for electronic procurement across all governments within Europe.

The efforts of the UK National Health Service (NHS) and other early adopters of PEPPOL and GS1 standards will result in substantial savings, efficiency improvements, and greater supplier enablement. It is a big step forward for interoperable public-sector services. An e-procurement reality can boost EU competitiveness because it will usher in new cross-border market opportunities.

By the end of 2015-16, NHS trusts are projected to cut £1.5bn of procurement efficiencies by stabilizing their non-pay spending. Others have had a head start.

Scotland, a PEPPOL trailblazer, has transformed public procurement and now has a single P2P system that covers over half public sector procurement spend. An “Information Hub” captures and analyses over £9bn spend across all sectors and helps to deliver over £1.2bn savings. The “Scottish Model” as they call it, has also delivered social and environmental benefits, stimulated growth, and removed barriers to access for competitive SMEs. 46% of procurement spend goes to SMEs, with half of that going to companies with less than 50 people.

According to Alastair Merrill, Scotland’s director of procurement and commercial, the model “shows that an approach that is both business friendly and socially responsible can not only deliver cost efficiencies but also support innovation, investment and sustainable economic growth.”

Neighbouring Ireland made a similar commitment to PEPPOL last year when Minister Brian Hayes formally launched the first Irish Government and public sector e-invoicing project. The country is on the path to having all public sector authorities use e-invoicing through PEPPOL by 2016. According to a vendor in the region, e-invoicing alone can reduce the costs of doing business in Ireland by €250 million annually.

In Norway, over 2.7 million electronic invoices were exchanged using PEPPOL, with 1.4 million of that within the first three months of 2014. And in Sweden, which is one of four PEPPOL Authority nations, the private sector such as the construction industry is currently testing PEPPOL-based solutions.

It’s also worth mentioning that as of this past March, the Open PEPPOL association reached 100 members from the public and private sectors, and now covers 18 European countries, Russia and USA. The momentum has never been higher. 

With a public sector mandate, common standards and common infrastructure, PEPPOL and other EU digitization programs have the power to unleash enormous opportunity for the entire region. Procurement will grow to be more transparent and connected, spawning collaborative innovation across supply chains on a European level. Some estimates peg the savings of e-procurement at €50 billion per year.

We’re optimistic that we’ve reached a tipping point for e-procurement adoption and more will follow — and help at an important time in our economic recovery.


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Radical EU directives attack low tenders

September 25 in Daily News by eisc No Comments

On 15 January 2014, the European Parliament voted to adopt proposals for three new Public Procurement Directives.

These were adopted on 17 April 2014 and must be implemented in member states’ national laws by April 2016, although the UK government has indicated it would like to implement the directives as quickly as possible.

The new directives are intended to modernise public procurement in the EU.

The PPDs cover concessions, utilities and ‘classic’ public procurement respectively and have two main aims: to “increase the efficiency of public spending in obtaining the best possible procurement outcomes in terms of value for money”; and to support common societal goals. 

These common societal goals include preservation of the environment and a focus on fair employment, social inclusion and high-quality social services.

Changes to how low tenders are treated

The new ‘classic’ and utilities PPDs change the way in which public procurers may treat an abnormally low tender (ALT) reflecting, among other things, widespread concern among member states.

Where public procurement rules force a procurer to accept an ALT, whole projects can be put at risk.

Some firms submit ALTs because they have spotted ambiguities in tender documents and will then generate disproportionate amounts of cash throughout the project from variation claims.

“The short-term cost gain in accepting an ALT can lead to increased overall price, long-term project delay or even project failure”
Alternatively, ALTs are often submitted by contractors in dire straits, some of which may become insolvent before they can finish the work.

The time and expense of finding a new contractor to take over from a non-performing contractor provides a strong incentive to look carefully at a very low bid before accepting it.

The short-term cost gain in accepting an ALT can lead to increased overall price, long-term project delay or even project failure.

How does the commission seek to avoid problems?

ALTs are particularly problematic if procurers are obliged to accept the cheapest bid.

The classic and utilities directives change the basis on which contracts may be awarded. Procurers will be encouraged to award contracts to the “tender presenting the best price-quality ratio”.

“The new directives now allow public authorities to take into account life-cycle costing in order to eliminate suspiciously cheap bids”
Under the current legislation, procurers can choose to award contracts on a “most economically advantageous tender” basis or on a “lowest price only” basis.

The ability of procurers to award contracts on a “lowest price only” basis has been removed: cost considerations have been absorbed into the “most economically advantageous tender” criteria.

When member states implement the directives into their national laws, they will be able to legislate that when making an award decision, procurers should not base their decisions on cost alone.

In addition, the new directives now allow public authorities to take into account life-cycle costing in order to eliminate suspiciously cheap bids.

Increased burden on procurers

The current legislation only requires procurers to request an explanation of an ALT if they intend to reject that tender.

The new directives mean procurers must investigate bids that look abnormally low, whether intending to reject them or not.

However, procurers will not be allowed to reject an ALT solely because it is abnormally low unless the evidence does not justify the low price quoted.

The directives also require procurers to reject an ALT where the low price results from a breach of a long list of social, environmental or labour laws.

This is a radical change from the current legislation, under which compliance with labour laws may form part of a tenderer’s explanation when justifying its ALT, but non-compliance does not automatically require exclusion.

All three new directives also introduce an option for member states to make contractors jointly liable for subcontractors’ failures to comply with social, environmental or labour laws.

Contractors may also be required to submit a list of proposed subcontractors along with the bid, making it easier for procurers to monitor the whole workforce.

The result? Still no definition of an ALT and an increased burden on procurers to follow an ever-growing raft of EU social, environmental and labour laws, but overall a better chance of escaping from potentially disastrous ALT contracts.

Anthony Woolich is a partner and Felicity Burling is an associate at Holman Fenwick Willan. Research by Jeremy Kelly, trainee solicitor at Holman Fenwick Willan


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Public bodies can deviate from procurement process under reforms outlined by Cabinet Office

September 25 in Daily News by eisc No Comments

New draft regulations on public procurement, which will implement new EU rules finalised earlier this year, would see a new ‘light touch’ regulatory regime apply to some public procurements, including contract awards for health and social services and educational and cultural services, among others.
Under the Cabinet Office proposals, public bodies would have freedom to determine the procedures that will be applied to those procurements but generally require those authorities to “conduct the procurement, and award any resulting contract” in conformity with the stated procedures.
However, the proposals would, if introduced as currently worded, allow the authorities to award contracts in accordance with a different process from the one it has previously communicated in its tender notice so long as certain conditions are satisfied, including that “the failure to conform does not, in the particular circumstances, amount to a breach of the principles of transparency and equal treatment of economic operators”.
Public procurement expert Jennifer Robinson of Pinsent Masons, the law firm behind, said: “The rules will be welcomed by public bodies as giving them some flexibility in the way they procure services that are subject to the light touch regime. However, even though the authorities would be required, under the plans, to explain the reasons for deviating from the stated process, the matter of whether doing so breaches the principles of equal treatment and transparency would remain a subjective issue.”
“The flexibility allowed for in the proposals will no doubt open up a further area for scrutiny of contracting authorities’ decisions,” she said.
The draft Public Contracts Regulations 2015 (93-page / 702KB PDF) would apply to public contracts for supplies, services and works that are of a value above certain financial thresholds set at EU level. Contracts worth less than the threshold figures would not, generally, be subject to the new public procurement rules, although a number of Lord Young’s recommendations on opening up public sector procurement opportunities and removing barriers to SME participation are set to be implemented in the new legislation and would apply to ‘below threshold’ contracts that are above certain minimum levels – £10,000 for central government contracts and £25,000 for any other public sector contract.
The Cabinet Office, which has launched a consultation on its plans for the new Public Contracts Regulations 2015 (38-page / 521KB PDF), has not outlined a specific date on which it intends the new rules to come into force. Robinson said that she expects that most of the provisions will be implemented in spring next year.
However, the Cabinet Office made clear that some of the provisions should be delayed. In particular it said that tender processes for the procurement of health care services for the purposes of the NHS should not have to adhere to the new light touch regime until 18 April 2016, the date following the deadline for national implementation of the new EU public procurement rules.
This delay is to allow health care commissioners time to adapt their practices to this new regime, according to the Cabinet Office. This will also provide time for the development of useful guidance on how the light touch regime is intended to sit alongside specific NHS regulation in this area, currently set out in the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013).
According to the draft legislation, the Cabinet Office has also decided to take up the EU on the longer implementation period for certain mandatory electronic procurement (e-procurement) rules, as provided for under the EU’s new Public Sector Procurement Directive.
“Such mandatory provisions include an obligation to use e-communications only during all tender processes and to use the EU’s new Single Procurement Document, a form of pre-qualification document, in procurements,” Robinson said. “These provisions will only kick in on 18 October 2018, under the plans.”
Plans to abolish pre-qualification questionnaires (PQQs) for all public contracts worth below the EU threshold values are also outlined. A pre-qualification process will still apply to major public contract awards although provisions are aimed at making this less bureaucratic.
Public bodies would have to “have regard” to guidance the Cabinet Office issues to help achieve this aim, which Robinson said could have the effect of extending the application of Cabinet Office guidance beyond its current scope of application – generally central government departments, executive agencies and non-departmental public bodies –  to other public sector bodies too.
The Public Sector Procurement Directive allows EU countries to choose whether to require public contracting authorities in their jurisdiction to break up contracts into lots and procure supplies, services and works on that basis.
The Cabinet Office has decided against imposing this requirement but has instead worded the draft regulations in a way which would give flexibility to public sector bodies in England, Wales and Northern Ireland to decide to divide contracts into lots if they wish.
Robinson said that these plans would be welcomed by public bodies given the retention of the flexibility currently available under the existing UK procurement regulations. She said this recognises that one size does not fit all. Lots are already being adopted increasingly in practice, for example in the context of current IT outsourcing trends. Robinson said many IT buyers have decided to follow a ‘tower’ model for the supply of IT services. In practice this means that different components of a rounded IT service are procured for separately, meaning that there is flexibility for the buyers to renegotiate or terminate contracts with suppliers of one of the components without the rest of the supplier arrangements being affected.
The Cabinet Office’s consultation on its proposals closes on 17 October. Further consultations are expected at a later date on its plans to implement the new EU Utilities Directive and new EU Concessions Directive. Those directives were introduced as part of a package of procurement reforms delivered earlier this year that included the Public Sector Procurement Directive.


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UK government launches consultation on implementation of EU procurement reform | Supply Management

September 24 in Daily News by eisc No Comments

The Cabinet Office is seeking comments on the UK’s draft regulations to ascertain if they meet policy requirements, and whether they do so in the best way.

The current consultation covers the public sector directive, along with provisions that are applicable across all three directives, while further consultations will focus on matters unique to the utilities directive and the concessions directive.

The directives include measures to cut red tape, support SMEs and increase social value in public procurement.

Concerning the division of contracts into lots to encourage SME participation, the government has opted not to make this an obligation, and instead it will be up to contracting authorities to decide to do this. But if they do not, they will be “required to explain their decision in the procurement documents or report”. Bids for combined lots will also be allowed.

Regarding termination of contracts, the government said contracting authorities must include a condition in contracts allowing them to terminate if the contract has been subject to a “substantial modification”, where it is later discovered a contractor should have been excluded on mandatory exclusion grounds, and where the European Court of Justice declares a “serious infringement by the contracting authority of its obligations”.

In terms of standstill periods and remedies, the government intends to make no changes from existing rules and they have “simply been moved from the existing UK procurement regulations into the proposed new regulations” with “some minor drafting or technical improvements”.

When it comes to ensuring suppliers comply with social, environmental and labour laws, the government said a “compelling case for regulation has not emerged” and “administrative measures are appropriate”, such as “guidance making it policy to mirror these obligations in contract clauses”.

The government has also decided not to implement a procedure policy that would require contract award notices for call-offs to be sent on a quarterly basis to OJEU “because of the additional administrative burden involved”.

The UK has two years to implement the directives after they came into force in April.

The consultation closes on 17 October, 2014.

- See more at:


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Teddy bears and the UK’s draft new EU Public Procurement regulations | Lexology

September 24 in Daily News by eisc No Comments

Those of you who know your nursery rhymes will know that if you go down to the woods today you’ll be sure of a big surprise. Well the same might be said of anyone taking a peek at the UK’s draft regulations for implementing the new EU Public Procurement Directive; which were revealed and issued for consultation by the Cabinet Office on Friday 19 September (and which can be found on the website and also via this link: Draft new UK Public Procurement Regulations

But the big surprise is by no means a teddy bear’s picnic. Instead, as well as new regulations to implement the new EU Public Procurement Directive, we also have new regulations governing the procurement of below threshold contracts. We are told these follow Lord Young’s recommendations, and the subsequent consultation, on making public sector procurement more accessible to SMEs. If implemented in their current form, the below threshold regulations (which will apply to contracts over £10,000 for Central Government and £25,000 for other contracting authorities) will impose two key requirements:

if the opportunity is to be advertised at all – this must include an advertisement on Contracts Finder; and
a ban on the use of a PQQ or a separate pre-qualification stage.
And the Government’s known dislike of pre-qualification doesn’t stop there. Even when procuring above threshold contracts, contracting authorities will be required to have regard to any Cabinet Office guidance on qualitative selection; which may include guidance on the use of PQQs (including avoiding burdensome, excessive or disproportionate questions) and their assessment.

Other headline points on the new draft regulations are:

if the title of the draft regulations is anything to go by (i.e. “Public Contracts Regulations 2015″) they will not be brought in to force in this calendar year;
the new light touch regime is, as anticipated, very light touch;
there’s some additional breathing space for NHS commissioners in the form of a delayed effective date. The new regulations will not apply to the procurement of contracts within the scope of the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 until the later date of 18 April 2016; and
consultation on and implementation of the other two new Directives (relating to utilities and concessions) will also come later; once the implementation of the public contracts regime is out of the way.
Anyone wishing to respond to the Cabinet Office consultation has a relatively short period in which to do so as the consultation ends on 17 October 2014.


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