Siobhan Kenny of Frank Murphy Solicitors provides an overview of the public procurement process.
Public procurement is the process whereby government and state agencies acquire goods, services and works. Under EU legislation all such contracting parties are subject to strict rules and procedures in respect of large scale ‘above threshold’ acquisitions and, in lesser or ‘below threshold procedures’ to a body of law which has developed around principles of fairness, transparency, and equality of treatment.
The fundamental driving force behind EU procurement law is to ensure freedom of trade within the EU – so that bidders from across the EU will have the opportunity to market their goods, services and products throughout the EU and to the state agencies of all member states. The fundamental characteristics of the law which has developed in this area is that, in awarding these contracts, the state agency involved is required to act in accordance with the principles derived from that fundamental driving force – i.e. fairly, openly, transparently, proportionately and to
afford equal opportunity to all interested bidders.
In Ireland, public procurement is governed by the rules set out in the procurement directives which have been transposed into national law by the Public Sector Regulations 1.
There are separate Directives and Regulations for Utilities and Security and Defence Contracts, but they are, broadly speaking, similar in terms to those for all other types of publicly procured projects.
The rules require, for example, that such contracts be advertised on an EU-wide basis, that the instructions to tenderers are clear and unambiguous, that everyone bidding for the contract knows and understands the basis on which the decision will be made. The rules are complex and rigid, and in the years since first introduction have been the subject of a substantial number of judgements at both European and national level, as a result of which the rules set out in the directives have been interpreted, and a body of law based on authority and legal precedent has developed.
In 2014, new Public Procurement Directives were passed at European level, and are required to be brought into national law by member states by April of this year. One of the main aims of the
new Directives is to bring fresh clarity to the rules in light of some of the judgements which have been delivered over the years. The new Directives have been incorporated into UK law already – the Irish government has not as yet passed the necessary legislation. The new Directives will bring about a number of substantial changes in the way the state conducts its business, but the fundamentals of the Procurement environment remain the same. The EU procurement rules apply in full to all ‘above threshold’ procurements, which means that where a state agency wishes to obtain goods, works or services valued in excess of these thresholds, it must comply with the rules laid down in the Directives. A failure to comply can lead to challenges by unsuccessful tenderers, or sanction by the European Commission. The thresholds are updated periodically and were last updated in January of this year. See Table 1, above.
The full rigours of the procurement rules and directives do not apply to ‘below threshold’ competitions – being those contracts valued at less than the levels set out above. This does not mean, however, that state agencies are free to award contracts as and where they choose. An enormous amount of state procurement takes place at levels far below the threshold levels and, in the period since introduction of the Regulations, a body of law has developed around these contracts, under which the courts – at both EU and national level – have recognised that whilst a particular competition may fall below the prescribed level, the state agency involved is nonetheless required, in its decision-making, to apply principles of fairness, transparency and equality of treatment. This is particularly so where contracts have cross-border appeal. A contract having ‘cross-border appeal’ in Ireland, usually means one which looks equally appealing to tenderers from north and south of the border. In such contracts the level of attention that must be paid to the broad EU principles is particularly high.
The legal basis for the application of these principles to below threshold competitions lies in the provisions of Treaties entered into by member states, under which they agree with each other that
they will foster and encourage free movement of goods and services, and freedom of trade. Discriminatory practices do not align with the principles of those Treaties.
It is recognised at both national and EU level that, having regard to the amount of state procurement which takes place on an annual basis, and the amounts of money involved, it is in the interests of both the public purse and the broader health of the economy, to encourage as much competition for state agency contracts as possible. With this in mind, proactive and positive measures have been taken at EU level and by successive Irish governments, to encourage SME involvement in tendering for state work and contracts.
Circular 10/10 was issued by the Department of Finance in August 2010, and was intended to encourage the participation by SMEs in tendering for government work. It established procedures to be followed by state agencies in procuring below-threshold works, services and supplies, and set out a range of objectives to be achieved by same. Agencies were required for example to advertise lower value contracts, were encouraged to use open tendering procedure (which means that anyone can bid for the contract without going through a ‘pre-qualification process’), were directed to be proportionate in requests for detail and financial qualification criteria, and were informed of a requirement to provide meaningful debriefing. That circular was issued for immediate implementation in August 2010.
In August 2014, Circular 10/14 was issued and replaced Circular 10/10. Its purpose was to reinforce the determination on the part of the Government to encourage SME involvement in tendering for contracts. A failure to comply with the terms of a Circular is not and cannot be used as the basis for an allegation of breach of contract or duty. It is an expression of the intentions of the government and a statement of government policy. Failures on the part of state agencies to abide by the guidelines and the circulars may well have internal consequences for the parties responsible within such organisations and the decisions they make and, in the case of Local Authorities, may amount to a breach of statutory duty or obligation (arising under the Local Government Act 2001 (section 49).
The Office of Government Procurement (OGP) was established by the Government in 2014. According to the Office the reason for its establishment is as follows: Reform of public procurement is one of the major projects of key strategic importance in the Government’s Public Service Reform Plan. The State spends around €9 billion on goods and services each year. This represents a very significant portion of overall spending and it is, therefore, essential that the public service achieves maximum value for money and operational efficiency in its approach to public procurement. 2
The aim of the OGP is to co-ordinate the manner in which the state acquires its goods, works and services, and to the extent possible, streamline it so that state procurement can be as cost effective as possible.
Tendering for state contracts can be a complex and expensive process – both in terms of money and resources deployed in what is essentially a speculative venture. No-one will reimburse you for the time and money spent in putting the bid together – successful or not. We are informed by the OGP, and by review of the circulars mentioned above, that it is the aim of the government to ensure a much higher level of SME involvement in the process, and that to do so, they will take steps to make the process as proportionate and supplier friendly as possible.
Under the new Directives for example, it is intended that all tendering will ultimately take place online – that process, once successfully implemented in the larger contracts will undoubtedly filter into the below threshold environment as well – and in some sectors is already a reality. The new Directives will seek to standardise some tender documents – so that it will no longer be necessary to adapt template documents into different formats for every new competition. Again, this is a sensible development, which makes all the more sense in a below threshold environment.
A number of other innovations and streamlining processes are proposed in order to make it easier to get involved in these competitions, and developments are awaited. In the meantime, of course, there is a wealth of information already available which might prove to be of immediate benefit to your existing business. Courses teaching companies how to approach tendering and increase their success rate are readily available.
The website of the OGP offers general guidance on procurement in general, and how to go about engaging in the process for all classes of suppliers. It is possible to register your interest on that website (which is linked to Etenders) in respect of the kind of contracts or projects that you might be interested in bidding for. Etenders also publishes details of competitions being run by state agencies, and is updated almost on a daily basis – it is the one place where all above threshold, and the vast majority of below threshold tenders, are published.
In addition of course, Etenders publishes information about competitions which have concluded, and contracts which have been awarded. It may well be that you are ideally placed to approach a successful tenderer with a particular product or suggestion which will assist them in performing and delivering the contract which has just been awarded to them. According to the OGP website, as quoted above, every year the Irish government awards contracts for the supply of goods and services to a value of approximately €9 billion.
It is not intended that the content of this article be treated as, or considered to be, legal advice. It is provided for general information purposes only.
You can contact Siobhan Kenny, Frank Murphy Solicitors on 01 283 5252 or at firstname.lastname@example.org
This Business Support article featured in March/April edition of The Hardware Journal in 2016.
1 The European Communities (Award of Public Authorities’ Contracts) Regulations 2006, SI No 329 of 2006.
2 Source – Office of Government Procurement