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Procurement e-briefing - March 2013

  • Ireland
  • General

13-03-2013

Mapping Public Procurement in Ireland

Introduction

The first comprehensive survey of public procurement in Ireland has been undertaken by the Dublin City University Business School in conjunction with the National Procurement Service (NPS). The lack of data available in an area that accounts for a national spend of €9 billion annually makes the survey all the more welcome. The survey comes at a time when the strategic management of procurement across the public sector has assumed priority status.  Expenditure by public sector organisations on a range of goods and services is coming under increasing scrutiny, with a view to realising cost savings.

Cultural gap

One of the key findings of the study is the continuing cultural gap between suppliers and public sector procurers, suggesting the need for greater interaction and dialogue between them. For example, the survey finds that whilst over 90% of suppliers exercise some responsibility for completing tender documentation, fewer than 30% claim any involvement in researching the needs and buying patterns of potential public sector customers. The survey states that this failure to devote sufficient time or resources to researching the other side's needs and capabilities, has significant implications for the effective functioning of the market.

Circular 10/10

The survey provides an interesting analysis on the use of SME-friendly initiatives contained in Circular 10/10. Circular 10/10 is a Department of Finance instruction to Government departments and other bodies designed to facilitate SME participation in public procurement. The circular instructs such changes as reducing the contract value at which tenders must be advertised on e-tenders, ensuring that qualification criteria are proportionate and increasing the use of the open tendering procedure. The survey results suggest that the implementation of the recommendations have led to greater participation by  SMEs,  with 60% of suppliers typically competing for contracts valued at less than €125,000. Compliance with the open advertising requirement is shown to be high.  However, it is the view of suppliers that public procurers could do more to make processes more SME-friendly. Suppliers claim it is not their experience that contracts are broken into lots where feasible, or that relevant and proportionate pre-qualification criteria are used, or that joint bidding is encouraged by public procurers to the extent envisaged by policy makers. Suppliers claim that the market for public sector contracts has become less business friendly in the past three years, whereas procurers claim it has become more business friendly.

Feedback

Circular 10/10 included an instruction to constructively de-brief unsuccessful bidders. However, 43% of suppliers claim to hardly ever or never receive feedback from public sector organisations. Only 7% claim to have received feedback on every occasion of a submitted tender. This is in marked contrast to the experience of procurers with 57% stating they provide feedback every time and a further 29% providing feedback most of the time.

Knowledge of EU Procurement and Remedies

According to the survey, suppliers compete in the public procurement market with a very low level of knowledge of EU public procurement law. Just over 10% of suppliers have a good or excellent knowledge of the Public Procurement Directives and just over 7% have a good or excellent knowledge of the Remedies Directive. Around half of public sector employees judge themselves to have a good or excellent knowledge of the Directives.  Only 1.5 per cent of suppliers have initiated any legal challenge under the Remedies Directive, with many claiming that the cost of legal representation is the primary stumbling block to initiating a legal challenge.

Conclusion

The survey findings show that researching the market place is a core activity not given adequate attention by public procurers or suppliers.  It states that bespoke training programmes and “meet the buyer” events would assist in addressing these deficiencies. 

The survey concludes that its results will prove to be helpful to the Government in formulating procurement policy and practices in the coming years.


Taking Account of Bidder’s Past Performance and Financial Risk Issues

The Cabinet Office in the UK, which is responsible for public procurement policy, has published two recent Procurement Policy Notes (“PPNs”). One on taking account of bidder’s past performance and the second on financial risk issues.  Both of these are very helpful documents and it would be welcomed if similar guidance was issued in Ireland.

Bidder’s Past Performance

We are often asked to advise on the extent to which a contracting authority can examine a bidder’s past performance and the veracity of information submitted by a bidder in its pre-qualification submission. The PPN in respect of bidder’s past performance is applicable where goods and hired services are being procured in respect of ICT, facilities management or business processing outsourcing services where the anticipated contract value is GBP£20 million or greater.  Although the PPN applies to high value contracts only, some of the principles set out in the note are useful as guidance and could be tailored, as appropriate, for use in other types of procurement or lower value contracts.

The PPN is clear that the underlying Treaty principles of equal treatment, non-discrimination and transparency must be complied with and addresses key issues such as:

  • minimum standards that bidders must meet and information needed to evidence this to be stated in the OJEU notice;
  • OJEU notices and tender documentation to require bidders to provide a list of principal relevant sales in the last 3 years with certificates (confirming satisfactory performance) from the relevant customers or self certification. Bidders must explain why any failures in performance will not recur in performing the contract now being procured;  
  • assessing reliability of consortium members and sub-contractors as well as lead providers;
  • Government bodies can verify bidder information but must state how this will be done and do so following Treaty principles. Bidders have an opportunity to make representations or to provide further information before any decision against the bidder’s interest is taken;
  • re-assessing bidder suitability throughout the procurement process should be expressly included. Framework agreements should contain contractual terms to ensure that this check of suitability is carried out in relation to any relevant call-off.
Financial Risk Issues

In the second PPN issued in February 2013, the Cabinet Office identified that the rigid use of supplier financial risk assessments was an unfair barrier to SME access to public contracts.

It specifically identified the following issues:

  • sole reliance on filed accounts in assessing a potential provider’s financial standing;
  • sole use of credit reports in selecting potential providers;
  • sole use of annual turnover limits in de-selecting potential providers; and
  • insurance requirements disproportionate to the size and nature of the contract.

In light of the findings, the PPN advises that:

  • the financial assessment of potential providers should be undertaken in a manner that is proportionate, flexible and not overly risk adverse; 
  • financial standing should only be considered as part of the overall selection criteria. It may not on its own, reflect potential provider’s ability to deliver; and  
  • only experienced staff should conduct financial assessment, calling on specialist in-house or external expertise as necessary.

The PPN gives detailed guidance on the type of financial information that should be sought by contracting authorities, the use of credit rating reports, turnover limits, insurance requirements, deeds of guarantee and bonds and other methods that could be used to mitigate contract risk and ensure performance security.

The two PPNs make interesting reading for those involved in preparing pre-qualification criteria and in the evaluation of submissions. Whilst Circular 10/10 includes some similar initiatives to encourage SME participation, it is suggested that the guidelines could be a useful tool to supplement the initiatives addressed in Circular 10/10. Aspects of the guidelines could be adapted for use in Ireland, where appropriate.


Appointment of National Procurement Officer

In our previous e-briefing we reported on the Government’s plans to establish a National Procurement Office.  In December 2012, the Minister for Public Expenditure and Reform announced the appointment of Mr. Paul Quinn as the Chief Procurement Officer for the public service.  Mr. Quinn will oversee the National Procurement Office, which will be responsible for implementing recommendations for savings in the public procurement sector. 

The new approach to public procurement will involve:

  • integrating procurement policy, strategy and operations in one office;
  • strengthening spend analytics and data management;
  • much greater aggregation of purchasing across public bodies to achieve better value for money (i.e. centrally purchased);
  • examining the specifications set out for goods and services and seeking to standardise these with a view to achieving savings from central aggregation;
  • using a demand management approach to spending to evaluate demand levels and assess how demand (volume) can be reduced; and
  • strengthening vendor and category management.

Time Limits for bringing proceedings under the Remedies Regulations – Acting Swiftly is Key

As many of you will be aware, there are very strict time limits for bringing legal proceedings for the review of public contracts in Ireland. We have given a brief summary of the time limits below. In our experience the 30-day time period, (which applies in many cases), passes very quickly, in particular, where correspondence is entered into with a contracting authority prior to the initiation of proceedings.  Drafting letters to raise concerns with a tender process and awaiting a response can very quickly eat into the 30 day period. Acting swiftly on receipt of a debriefing letter allows a disappointed bidder more time to liaise with the relevant contracting authority, obtain legal advice and subsequently consider its options prior to the relevant time period for initiating proceedings expiring.

Time Limits

Order 84A of the Rules of the Superior Courts sets out the time frames for the review of the award of public sector contracts under the Remedies Regulations [Regulation 7 of the European Communities (Public Authorities Contract) (Review Procedures) Regulations 2010 and the European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) Regulations 2010]. 

We have summarised the time periods below:-

  • An application for judicial review of a contracting authority’s decision to award a contract must be made within 30 calendar days after the applicant was notified of the decision, or within 30 calendar days after the applicant knew or ought to have known of the alleged infringement. 
  • An application for an injunction preventing further damage to an applicant’s interest must also be brought within 30 calendar days. 
  • Similarly a 30-day time period applies in the event of an application for a declaration that a contract is ineffective. This period can be extended to six months of the conclusion of the relevant contract in limited circumstances.

Whilst there is some discretion for the High Court to extend the 30-day time period, in circumstances where it considers there is “good reason” to do so, it would be advisable for any party considering challenging an award decision, or a decision of a contracting authority during a contract award procedure, to seek to do so within the permitted time period. Otherwise you must convince the Court of the “good reasons” for the extension to the normal time period and rely on the Court’s discretion in this regard.


Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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