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Procurement e-briefing - November 2012

  • Ireland
  • General

06-11-2012

New National Procurement Office on the horizon

It is estimated that €9 billion is spent by public bodies annually on the public procurement of supplies and services. Consequently, public procurement has been identified as one of the major projects of key strategic importance under the Government’s Public Service Reform Plan. In order to examine what savings could be achieved and what actions might be required to reform public procurement, the Department of Public Expenditure and Reform (the “Department”) commissioned a report to look into this matter. The report, which was carried out by Accenture, was published by the Department on 6 September 2012. 

The key recommendation of the report is the introduction of a “Hybrid Centralised Model” for the implementation of the State’s procurement function. This would involve the establishment of a single integrated procurement function accountable for policy, sourcing and category management of common categories and support operations. Procurement would be centre-led with individual sectors continuing to have responsibility for sourcing proprietary categories based on central policy and procedures. The report suggests that this would address the current inconsistency in the management of public procurement across all sectors.  The proposal would involve the appointment of a Chief Procurement Officer (“CPO”) within a National Procurement Office (“NPO”).  The office would be under the aegis of the Department.  

The report identified that annual potential savings of between €240 million to €637 million, over a 3-year period, could be achieved through the re-structuring of the procurement function in the manner suggested. 

The proposals set out in the report were submitted to Government and subsequently approved.  A detailed implementation plan and governance arrangements are currently being developed and it is expected that these will be submitted to Government by end of March 2013. An open competition for the appointment of the CPO was recently advertised.


National Procurement Service – Choosing the Correct Procurement Procedure

The National Procurement Service has published a useful table outlining the procurement thresholds applicable at both national and European levels and the appropriate procurement procedure that should be used.  The table covers both high and low value contracts and thus incorporates the requirements of Circular 10/10 (Department of Finance Guidance to public authorities on the structuring of procurement processes to facilitate the participation of small and medium size enterprises). As such it should be useful reference to contracting authorities when initially considering the relevant procurement procedure to apply in a broad range of procurement procedures. 

The document may be accessed at the following link:

http://www.procurement.ie/publications/choosing-correct-procurement-procedure


Rules of Aggregation at Play

The case of Commission v Germany (C-574/10) (unreported 15 March 2012) is a good example of the operation of the rules of aggregation under European public procurement law.  These rules require the aggregation of the value of separate contracts awarded by the same contracting authority in certain circumstances. If the overall value of the separate contracts meets or exceeds certain financial thresholds, then the contracts must be awarded in accordance with European public procurement procedures.

The case in question concerned the appointment of a firm of architects by a German municipality for services in respect of the renovation of a multi-purpose hall.  The renovation project was to take place over a three-year period in separate phases. For budgetary reasons, the contracting authority entered into separate contracts with the firm of architects at the beginning of each year to cover the construction phase for that year. 

Article 9 of Public Sector Directive (2004/18) sets out the method for calculating the estimated value of a public contract.  It provides in Article 9(3) that:

"No works project or proposed purchase of a certain quantity of supplies and/or services may be subdivided to prevent its coming within the scope of this Directive”. 

In this case the aggregate value of the individual contracts exceeded the minimum threshold for the application of the provisions of the Directive. 

The Commission argued that the renovation of the multi-purpose hall involved a single construction contract and, as such, the corresponding service contracts should also have been treated as a single procurement and advertised on a European-wide basis.  The Court of Justice applied the functional approach developed in the case of Commission v France (C-16/98) and determined that it was necessary to verify whether the services in question, although undertaken in distinct phases, had a uniform character and were in respect of a single economic and technical function.  The Court found that Germany had infringed the Directive by failing to ensure that the contracts were awarded in accordance with the Directive procedures. 

The Court noted that the dis-aggregation of the services could not be justified for budgetary considerations. The Court also observed that, whether or not the contracting authority intended to avoid the Directive, was irrelevant.

This case is a useful reminder to contracting authorities regarding the application of the rules of aggregation. Whilst the rules do not prohibit works or services being divided up into separate contracts or lots, the key consideration is the overall value of the contracts or lots where these relate to a single economic and technical function.  If these exceed the relevant thresholds, then the Directive procedures must be followed, save in exceptional circumstances.


European Court of Justice rejects allegation of breach of procurement rules by Commission

On 4 October 2012 the Court of Justice dismissed an appeal brought by a Greek company, European Dynamics, against a European Commission procurement competition for the supply of external information services for educational programmes.  This case is useful guidance on the extent of information a contracting authority is required to furnish to an unsuccessful bidder in its letter of notification and the implications of a delay in issuing this information.

The European Commission had issued two letters to European Dynamics, the first setting out the scores of the best-ranked tenderer and European Dynamics and the second setting out the reasoning for scores in question.  The second letter sent by the Commission was issued eight days late.  The maximum time period for bringing an action regarding the award was two months.  The Court noted that the procedural requirement (ie  notification of reasons for failing to succeed) at issue is essential to ensure the protection of the legitimate rights of the tenderer, in particular the right to effective judicial protection. It agreed with the finding of the lower court that European Dynamics had, through the two letters sent by the Commission, received sufficient information to enable it to ascertain and understand the results obtained by the best-ranked tenderer.

The Court then went on to consider the delay in the issuing of the reasoned letter. It stated that the communication of the statement of reasons for a decision rejecting a tender after an unreasonable length of time has a direct effect on the capacity of the unsuccessful tenderer to bring an action for annulment against that decision. Whilst it noted that the Commission had delayed in issuing this letter, it found that European Dynamics had the necessary information to bring an action for annulment of the contested decision.

This judgment adds to existing European case law, which provides that furnishing results to disappointed bidders merely by reference to scores, without supporting commentary, is insufficient. (See for example the case of Alfastar Benelux SA v Council of European Union (T-57/09)).  A contracting authority must provide sufficient information so that a disappointed bidder can understand the results obtained and identify the characteristics and relative advantages of the winning tender.  This case is useful guidance to contracting authorities when drafting debriefing letters and interpreting the extent of their obligations under the Remedies Directive.  Unless sufficient information is included in a debriefing letter, there is a risk that a disappointed bidder may allege that the contracting authority has breached the Remedies Directive. On this basis it may also argue that the standstill period has not properly commenced, thus delaying the award of the contract to the successful tenderer.


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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