Transcript Slide 1

Maximising Success in EU Procurement
Creating a balance for Public and Private
Sectors
Chairman - Paul Darling QC.
John Houlden
Marcus Harling
Jon Milward
John Smith
Agenda
• Relevance to Property & Construction Sectors
• A basic review of the current regime
• The competitive dialogue in practice with Case Studies
• Framework agreements – how to use them effectively and legally
• Challenges – risks and opportunities
Relevance to Property & Construction
PPP
Grant funded contracts
JV with public sector
S106 Agreements
framework
Infrastructure
FM
Development Agreements
Construction
RSL
Design & Management
Relevance to Property & Construction
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Waste
Housing
Regeneration
Nuclear
Sustainability
Transport
Health
Defence
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£2bn PFI credits (2007 CSR)
45,000 new units p.a (2010)
RDA/ Local Authority led
Decommissioning/ new build
Look out for money allocated
Rail investment
Community based healthcare
Aircraft carrier / accommodation
A basic review of the current regime
• How and why did we get here?
• When does it apply?
• How does it apply?
How and why did we get here?
EC Treaty
• Art. 12 - prohibits discrimination on grounds of
nationality
• Arts 28, 43 and 49 prevent restrictions on free
movement of goods, freedom of establishment
and freedom to provide services
TRANSPARENCY
Treaty
Directives
UK Implementing Legislation
EQUALITY OF
DEALING
When does it apply?
Need to consider:
Body
awarding
contract
Subject
matter of
contract
Value of
contract
When does it apply?
Bodies covered (aka “contracting authorities”):
– those listed in Regulations (i.e.. Ministers, government
departments, Houses of Parliament, local authorities
etc)
– bodies established to meet “needs in the general
interest” if:
• financed;
• supervised; or
• appointed
by a contracting authority
When does it apply?
Central Purchasing Bodies
Contracting
Authority
Central
Purchasing
Body
Supplier
When does it apply?
Need to consider:
Body
awarding
contract
Subject
matter of
contract
Value of
contract
When does it apply?
Subject matter:
– Is it a “public works contract”?
– Is it a “public supply contract”?
– Is it a “public services contract”?
NB Works by any means
When does it apply?
Need to consider:
Body
awarding
contract
Subject
matter of
contract
Value of
contract
When does it apply?
BODY
WORKS
SERVICES SUPPLIES
Central Govt
£3,497,313
A= £90,319
£90,319
B= £139,893
Other Public Sector £3,497,313
£139,893
£139,893
How does it apply?
PIN
CONTRACT
NOTICE
EVALUATION
Debriefing
Open
Restricted
Competitive
Dialogue
Negotiated
CONTRACT
AWARD
Selection/
award
How does it apply?
Open procedure:
– all may submit tenders
– 52 days to return of tender
– suitable for contracts with simple subject
matter and award criteria (i.e. stationary)
How does it apply?
Restricted procedure:
– only those invited by contracting authority may
submit tenders
– 37 days for EOIs/40 days for tendering
– appropriate for more complex procurements
How does it apply?
Negotiated procedure:
– Very limited application, only in certain specified
circumstances, e.g. exceptionally when nature of
works/services or risk does not permit prior overall
pricing
– two procedures - competitive and non-competitive
– competitive – 37 days for EOIs
How does it apply? Selection and award
Selection
Award
Selection – practical issues
• Requirement to exclude
• Minimum requirements:
– financial standing
– technical capacity
• Objective criteria
NB Recent ECJ case law
How does it apply? Selection and award
Selection
Award
Award
Criteria for award:
(a) lowest price
(b)
most economically
advantageous to the
contracting authority
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Freedom
NB Weightings
Award – practical effect
Establish relative weighting of the evaluation
criteria either:
• at the start of the procurement before notice is
placed; or
• before issue of contract documents
KEY PRACTICAL ISSUE!
The competitive dialogue in practice
• When is it used?
• How does it work?
• Case studies
Competitive dialogue – when is it used?
Authority:
• wishes to award a “particularly complex
contract”; and
• considers that open or restricted procedures
will not allow the award of the contract; and
Competitive dialogue – when is it used?
PIN
CONTRACT
NOTICE
EVALUATION
Open – one stage process (tender) with no
negotiation
Restricted – two stage process (PQQ/tender)
with no negotiation
CONTRACT
AWARD
What is a particularly complex contract?
Authority is not objectively able to:
• define the technical means of satisfying its
needs; or
• to specify the legal or financial structure of a
project
Competitive dialogue – when is it used?
Requirement known
Solution unknown
Competitive dialogue – how does it work?
PIN
CONTRACT
NOTICE
EVALUATION
CONTRACT
AWARD
Debriefing
Competitive
Dialogue
Selection/
award
Competitive dialogue – how does it work?
Technical dialogue
Contract notice
pqq
Competitive dialogue
Competitive dialogue – how does it work?
- incremental reduction in bidders
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3
Competitive dialogue – how does it work?
Final round
Evaluation
Award
Phased Dialogue – no reduction in bidders
Process:
Contract Notice
PQQ
PHASE 1:
Technical Discussion
Dialogue
PHASE 2:
Legal Discussion
Final
Tender
Clarification/
Contract
PHASE 3:
Concluding Issues
Competitive Dialogue Case Study – Finding the
Development Partner
Competitive Dialogue Case Study – Finding the
Development Partner
• Opportunity created by
local authority looking to
use surplus land to kick
start redevelopment
• Requirement for local
authority offices in
scheme
• What to expect.
• Avoiding mismatch
between expectation and
delivery
Competitive Dialogue Case Study – Finding the
Development Partner
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"public works contract" means a
contract, in writing, for consideration
(whatever the nature of the
•
consideration)—
(a) for the carrying out of a work or
works for a contracting authority; or
(b) under which a contracting
authority engages a person to
procure by any means the carrying
out for the contracting authority of a
work corresponding to specified
requirements;
Application of Competitive Dialogue to a
property development transaction
Developers unfamiliar with regulated
procurement
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Contracts conditional on planning are
typical
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Developers reluctant to carry significant
bid costs or to engage in a lengthy
competitive stage
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No standard documentation
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Challenge is how to get to final tender
Competitive Dialogue Case Study – Finding the
Development Partner
Planning the procurement
Contract Notice - Short listing
Invitation to Participate
in dialogue
Dialogue
Final Tenders
Bid clarification to Contract
“particularly complex contracts.”
Be clear on the timetable.
Market testing / information days.
Understand Evaluation criteria, including
risk based to deal with solutions.
Incremental reduction of bidders is usual.
Full contract mark-up or
populated Heads of Terms at FT.
No substantial modification of bids
afterwards.
The time for planning a strategy has passed!
Maximising Success: The Agent’s View
JON MILWARD
Head of Development
Drivers Jonas
Agenda
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Popular Perceptions of the OJEU process
The Reality
How and When to Engage (Public Sector)
The Marketing Process
How to Get Shortlisted (Private Sector)
How to Get Selected (Private Sector)
The Documentation
Commercial Negotiations – How to get the best result
Agenda
“How to Succeed Despite the Lawyers!”
Popular Perceptions
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Time-Consuming
Costly
Over-Complex
Too Many People Chasing Too Small a Prize
The Public Sector
Developers
Advisers
The Reality
• For the Public Sector – a transparent, open process.
Auditable and competitive BUT can be prescriptive
• For the Private Sector – an opportunity to engage on
some of the most exciting projects in the UK BUT
some barriers to entry.
• For Advisers – lots of ‘recession-proof’ work BUT
public sector fees are low and private sector partners
may require ‘sweat equity’.
How and When to Engage
• Appropriate Preparation
• OJEU doesn’t mean the public sector can put their
feet up!
• Creating Certainty – Horses for Courses
– Planning
– Legal
– Specification
RNOH Bolsover St, W1
• Royal National Orthopaedic Hospital NHS Trust
• Ridgeford / Manhattan Loft
• In-patient facility
• Funded out of Residential Development
LFEPA HQ - 8 Albert Embankment
• Fire Station Headquarters
• Mixed Use – Residential Led
• New Fire Station
• Subject to Planning Deal
Founder’s Place – Guy’s and St Thomas’ Charity
• Detailed Planning Consent granted
• Support accommodation for Guy’s and St
Thomas’s Hospital
• 400 Private and key worker units
The Marketing Process
• Most Developers don’t read the European Journal!
• Consider Additional Marketing – which must be
consistent with the OJEU advertisement
• The Use of PINs
Poplar HARCA – Chrisp Street Market
• Estate Redevelopment
• PIN to Establish market
appetite
How to Get Shortlisted
• Know the Assessment Criteria
– Track record
– Ability to Fund
• Fill in the Forms Smartly – beware of procurement
monkeys
• Expert team
• If limited/no track record, consider partnerships with
others
• Sort out your Funding – particularly in today’s market
How to Get Selected
• Engage – treat it as a Partnership
• Make some effort – you are on a shortlist
• Don’t over-promise – be realistic
• Be aware that risk transfer is often as important as
value
• Make sure your funders are fully committed
The Documentation
• Keep it Simple Stupid
• Provide as part of the shortlist tender pack?
Commercial Negotiations
• Consider and Agree Key Commercial Points Early – what is important to
you?
• Agree Milestones and stick to them
• Understand report deadlines / Board Approval processes
• Don’t try to win every point
• Remember this is a Partnership
I Want My Cake AND I Want To Eat It
Commercial Negotiations
• Be prepared to be flexible – especially in changing market conditions
• Review commercial aspects regularly
• Prepare your parachutes!
• The Principle of “Equal Unhappiness”
Maximising Success: The Agent’s View
JON MILWARD
Head of Development
Drivers Jonas
Any questions………
Framework agreements
• What is a framework?
• How to use them effectively and legally
What is a framework agreement?
Different contractual structures:
• Commitment to purchase
• Mix of commitment to purchase and option to
acquire
• No commitment to purchase but option to
acquire
What is a framework agreement?
Procurement regulations:
“..an agreement or other arrangement between one or more
economic operators which establishes the terms (in
particular the terms as to price and, where appropriate,
quantity under which the economic operator will enter
into one or more contracts….”
NB No commitment but can be legally binding!
What is a framework agreement?
No commitment to purchase but option to do so:
Contract specifying:
• mechanism for future purchases
• terms of purchase (including price)
Call off 1
Call off 2
NB:
• No more than 4 years
• If more than 1 supplier, no less than 3
Call off 3
How to use them effectively and legally
Two key elements:
• Establishment of frameworks
• Call-offs during framework term
Call-offs during framework term
Two means:
• without competition – by applying the framework
terms
• with competition – where not all terms laid down
Call-offs during framework term
With competition:
• only those suppliers who are parties; and
• only those who are capable of performing
proposed contract
Call-offs during framework term
Contracting authority must:
• consult in writing
• invite submissions of tenders in writing
• set a time limit for responses
• award on basis of award criteria specified
Challenges – risks and opportunities
• What remedies are available?
• Key risk areas
• Future developments
What remedies are available?
Remedies under the regulations differ according to
whether process challenged:
• before; or
• after,
the contract has been entered into
What remedies are available?
Mandatory standstill:
• Minimum 10 day standstill between:
– communicating decision to award; and
– entering into a contractually binding
agreement
• Mandatory disclosure of information
What remedies are available?
• Remedies under Regulations pre-execution:
– interim measures
– set aside
– order amendment of documents
– award damages
• Only remedy under Regulations post execution is damages
• NB Timing is critical – “promptly” and within 3 months
Key risk areas
• Transparency
• Equal treatment
• Evaluation – selection/award
• Confidentiality
Future developments
New remedies directive – implementation by 20 December 2009:
• Standstill – similar but:
– potential extension to Part B and framework call offs
– ineffectiveness of concluded contracts possible if breach with a
limitation period of 6 months
– potential for penalties for authority if wrongful use of exemption
and unable to set aside
• Suspension of process on application
• Increased scope for Commission intervention
Conclusions
• Be aware – contractors are and challenges are
on the increase!
• Early identification of issues is crucial – potential
mitigation is possible
Practical Issues to Maximise Success – Bid
Selection
- Bid selection – evaluate client
• Track record of organisation/sector
• Commitment to this project – is there real driver
• High level sponsor
• Are there multi-authorities
• Affordability versus ambition
• Engage with authority
- Bid selection – evaluate yourself
• Your track record
• Consider likely criteria
• Consider if consortium/other expertise needed
Practical Issues to Maximise Success – During
The Procurement
- PQQ
- identify authority selection criteria
- clarify and question
- increasingly used for down selection
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Dialogue
- think about tone, approach, team
- respond to dynamics
- aim to influence constructively
- emphasis on early development of solution
- make aware of bid costs – e.g. due diligence
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Post dialogue
- clarifications if necessary
- answer the question
- respond to clarifications