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Workshop on Public Procurement

Bucharest, 8Bucharest,
March
, 2005
8 March, 2005

Economics of Procurement,
Project management tools,
Evaluation techniques and
Public Procurement policy in a
Member State

Bucharest, 8 March, 2005

Public Procurement Policy in the


Netherlands:

Very simple: WE HAVE NO PUBLIC


PROCUREMENT POLICY IN THE
NETHERLANDS!
We do not even have national public
procurement legislation!
Only exception: public works.
Here we have uniform procurement
guidelines
Bucharest, 8 March, 2005

Procurement in the Netherlands

These are compulsory for Central


Government, but all other public
bodies are free to do what they like
For Central Government there is only
one other obligation: for every
contract exceeding 50.000 euro a
minimum of three potential
contractors must be asked to make
an offer
Bucharest, 8 March, 2005

Procurement in the Netherlands

Means that participating in


procurement processes can be
extremely difficult and risky
Therefore contractors should
evaluate every invitation to tender
very carefully.
Participating without careful
evaluation/examination beforehand
may KILL your company
Bucharest, 8 March, 2005

Threat or opportunity?

You may regard procurement as a


threat or as an opportunity:
Threat: you lose all efforts (and
money) made in account
management because of procedure
that is open to anyone
Opportunity: Markets that were
traditionally closed will be opened:
Bucharest, 8 March, 2005

Threat or opportunity?

By knowing the rules AND the best


practices you may be able to help
potential new clients to assist them
in setting up proper procurement
procedures (non bureaucratic,
economically viable etc)

Bucharest, 8 March, 2005

Incorporation in acquisition policy

Participation in the public procurement


process must be part of the contractors
acquisition policy because: it takes time, it
costs money, it requires knowledge of the
rules!
It has to be laid down in internal
administrative procedures
It should be communicated through all
levels of the organization
Bucharest, 8 March, 2005

Ideally, one department should be


made responsible for organizing,
coordinating and facilitating
participation in procurement
procedures and for keeping up with
changes in the regulations
This department should also draw up
a timetable and have the (delegated)
authority to force people to deliver
the information that is needed
according to this timetable

Bucharest, 8 March, 2005

Always remember and remind the


contracting authority:

Public procurement is a
COMMERCIAL process rather than a
legal process: Lawyers are necessary
to see that it is executed according
to the law but the COMMERCIAL
specialist should be leading!!
Bucharest, 8 March, 2005

Strategic partnerships

Contractors should ask themselves


whether it is advisable to form
strategic partnerships in order to
become more successful:
By participating with strategic
partners ( maybe even in the form
of a European Economic
partnership) you will be able to
offer:
Bucharest, 8 March, 2005

Partnerships

More turnover
More experience
Bigger workforce
More reference projects
Better quality control(?)
More innovation strength

Bucharest, 8 March, 2005

Exclusion from participation

1.

2.

Contracting Authorities can exclude


potential contractors from participation
when the candidate is:
Bankrupt or being wound up, has not
paid his taxes or social security
contributions, has been convicted for
grave professional misconduct, has
deliberately given false information
They are allowed to ask for official proof
that no such circumstance is the case
Bucharest, 8 March, 2005

Exclusion from participation


z

If they do so, ask them to issue a so


called own declaration in which you
declare that you are in no such
circumstances and that you will come up
will all official proof (official documents)
once they have selected you as their
preferred contractor
This saves time, money and
bureaucracy!
Bucharest, 8 March, 2005

Criteria for qualitative selection

According to the directives certain


documents, declarations and other data
can be asked for in order to be certain
about the applicants abilities
These concern: Enrolment in the
professional or trade register, financial
and economic standing, technical capacity
etc.
This can be proved by all kinds of official
documents
Bucharest, 8 March, 2005

BEWARE:

Criteria for qualitative selection are


about the contractors situation, not
about his offer.
To evaluate an offer one needs
awarding criteria.
These two are completely different,
so beware of contracting authorities
mixing them!
Bucharest, 8 March, 2005

Criteria for qualitative selection

Your advice to contracting authorities:


In general: Be clear!
Dont ask: recent declaration but be
specific: not older than three months
from the day of sending the notification
Dont ask: last three years but be
specific: balance sheets of the year
2000, 2001, 2002 .
Be sure why you ask something and how
you are going to weigh/assess it; If you
are not: DONT ASK IT!
Bucharest, 8 March, 2005

Compulsory notifications
- Notice of open, restricted or negotiated
procedures
- Notice of contract award. This notice must
include the name of the selected
contractor and the value of the contract
awarded.
For EU-tenders all notices must be in
conformity with the standard format as
published on the Internet
(www.simap.eu.int).
In the near future it will only be possible to
send the notices to the Bureau of Official
Publications in Luxemburg BY MAIL
Bucharest, 8 March, 2005

Time limits

All time limits in EU-legislation are


governed by regulation 1182/71/EEC
All time limits are minimum limits
(more time may be granted and you
even have the right to demand more
time if the minimum time limit is not
sufficient
The directives say: 52 day from the
time of sending the notice.
Bucharest, 8 March, 2005

Beware:

Regulation 1182/71 says: A time limit


starts only the day after a legal act has
been performed.
Sending the notification to Luxemburg is
the legal act.
This means that the time limit starts the
next day.
A time limit ends at 24.00 hours of the
last day, so opening of the offers can start
taking place only the day following the
expiration of the time limit.
Note: All days are calendar days.
Bucharest, 8 March, 2005

Restricted Procedure

Free choice between open and


restricted procedure.
Restricted procedure means one can
limit the amount of candidates to be
invited to submit an offer to a
MINIMUM OF 5
Problem is that the directives do not
indicate how this limitation has to be
done
This is therefore at the discretion of
the contracting authority
Bucharest, 8 March, 2005

Beware:

Contracting authorities are advised to


perform this selection very cautiously and
in a very transparent way.
This can be achieved either by a public
draw (not allowed in every EU country) or
by selecting on the basis of an objective
weighting instrument, where only the best
scoring candidates will be selected. In the
interest of transparency this instrument
should be made public.
Bucharest, 8 March, 2005

Advantages/disadvantages of
various procedures

Open procedure:
Advantages: Unlimited amount of offers,
therefore unlimited competition. Relatively
quick
Disadvantages: Risk of huge piles of
paper, all to be examined by the
contracting authority. Besides coming up
with all papers to meet the selection
criteria, all candidates have to submit
offers in the mean time, which means an
lot of calculating. This increases the cost
of participating in the tender procedure
and eventually leads to higher prices
Bucharest, 8 March, 2005

Advantages/disadvantages

Restricted procedure:
Advantages: Preliminary selection of
candidates based on qualitative criteria.
Candidates know beforehand how many
competitors there are so can calculate
their chances. By reducing the number of
candidates: less paperwork to examine by
the contracting authority
Disadvantages: Longer and sometimes
more complicated procedure, higher risk
of complaints if not properly executed.
Bucharest, 8 March, 2005

Contact between Contracting


authorities and candidates

Contact is permitted but contracting


authorities must ensure that this
does not impair fair competition.
It is up to the contracting authority
to decide how he will deal with this.
If he includes a name of a contact
person and a telephone number or
personal e-mail address, he indicates
that he does not object to contact
Bucharest, 8 March, 2005

Contact (continued)

He should in any case organize a question


and answer round ca. halfway procedure
(one in case of open procedure, two in
case of restricted procedure).
He should allow all candidates to submit
their questions till a certain date and hour,
then answer ALL questions and send them
(anonimized) together with answers, to all
candidates. This creates a level playing
field.
Bucharest, 8 March, 2005

Submission of Tenders

Contracting authorities should be


clear about what they want to
receive
It is advisable to be rather rigid in
this, for instance Your balance
sheets over the years 2000, 2001
and 2002 must be included in annex
1, your proof of membership of the
Chamber of Commerce must be
included in annex 2 etc. Failure to
obey this will lead to rejection of
your offer
Bucharest, 8 March, 2005

Submission of Tenders

Also they must be clear regarding:


Final date of submission (date, time)
Note: Always make it very clear that this
is a fatal time limit: One minute too late
means rejection!
Whether the opening is public or not
Where to submit. Note: not only the place,
for instance municipality hall but very
specific: room 210 or secretariat of
the director general for public works or
even: Miss X (who is the administrative
secretary and does not know anything
about the tender procedure)
Bucharest, 8 March, 2005

Submission of Tenders
They must also be clear about:
- how many examples should be send
whether they want one example on CDrom
whether tenders should be send under
closed cover
- how to submit (personally against receipt,
by post etc)
NOTE: They should keep tender documents
closed till after the date and time of
closing of the submission period

Bucharest, 8 March, 2005

Submission of Tenders

Last but not least contracting authorities


should instruct personnel on key-posts,
that a closing date is imminent.
Many candidates wait till the last minute
to submit their tenders as they are afraid
that these might otherwise be opened
before the closing moment (and
information be leaked to competitors)
Therefore people in the mail-handling
department and behind the reception
should be well instructed.
Bucharest, 8 March, 2005

Rules for Tenders

The European directives do not specify


anything as to how tenders should look
like
Contracting authorities can therefore
determine themselves what they want to
receive and how. Standard formats will
help evaluating the documentation
received
Main rule is to be utterly clear about what
one wants to receive
Bucharest, 8 March, 2005

General Conditions applicable

Contracting authorities should draw up


their own general conditions (terms)
It is wise to have separate terms for
works, supplies and services
We always tell Contracting authorities to
insist that only the general terms of the
contracting authority are applicable, with
the exclusion of contractors conditions
(otherwise they will end up with offers
that are not comparable)
However, if they dont, see that your own
conditions are applicable!
Bucharest, 8 March, 2005

Checklists

Make checklists to monitor the whole


process and its progress
Draw up a timetable and send this to
everybody involved in the
procurement process, making clear
that it is everybodys responsibility to
respect the timetable

Bucharest, 8 March, 2005

Awarding of the Contract


The European directives state two
awarding criteria:
- Lowest price
- Economically most advantageous offer
Note: Lowest price IS lowest price and is
not, repeat not, negotiable
Choice between awarding criteria is free and
should be subject of thorough
considerations
Leading thought should be that total cost of
ownership is much more important than
price alone

Bucharest, 8 March, 2005

Awarding of contract

Economic most advantageous offer can


include many aspects that are of
importance to the contracting authority.
These aspects may be:
Quality
Functionality
Service
Warranty
Aesthetic characteristics
Price
Environmental aspects etc.
Bucharest, 8 March, 2005

Awarding of contract

All these are more or less subjective


criteria.
It is up to the contracting authority
to make sure that they are being
judged upon as objectively as
possible and that this judgment
process is transparent
The same applies to the judgment of
criteria for qualitative selection
Bucharest, 8 March, 2005

Awarding of contract

One way of creating an objective system


is a system of musts and wants
(requirements and desires)
Meeting the musts is a conditio sine qua
non (Knock-out criterion)
Concerning the wants all candidates will
be compared in relation to the others in
order to determine who meets the wants
best, who ends up worst and what is the
position of the other candidates
Bucharest, 8 March, 2005

Awarding of contract

Examples of must and wants:


Must: it is not allowed to offer a price
higher than 500.000
Want: the price should be as low as
possible
Must: A service engineer must be
available within two hours
Want: A service engineer is available
as soon as possible
Bucharest, 8 March, 2005

Awarding of contract

In this system all wants will get their


own rating (for instance on a scale from 1
to 10)
The rating reflects the ranking of the
wants between each other
All candidates will be compared in relation
to the others to determine who responds
best to a want, who responds worst and
the position of the remaining candidates.
This is expressed in a mark (on a scale
from 1 to 10)
The best candidate scores 10 points, the
worst 1 point
Bucharest, 8 March, 2005

Award

Explanation:
O = Offer
R= Rating in comparison with other
competitors
T= Total score on this Want
Price= in 100.000 Euro
Available= availability of engineer in hours
Warranty= warranty in years
User panel= evaluation figure on scale of
1-10 (1 is worst, 10 is best) by evaluation
team
Bucharest, 8 March, 2005

award matrix
contractor

wants

price

rating

o r t

o r t o r t o r t

5,
8

12

30

1
0

60

available

10

80

1,
5

7,
5

60

40

warranty

12

1
0

10

30

12

user panel 5

10

50

20

35

Total

139
Bucharest, 8 March, 2005

10
4

13
5

80

Alcatel period

Since EC court ruling in Alcatel case,


member states are forced to
announce intended award
Rejected bidders get possibility to
oppose award during restricted timelimit.
In some member states this limit is
only 14 days!
Greatly increases amount of legal
proceedings.
Bucharest, 8 March, 2005

Checklists

Make several checklists for the monitoring


of your participation:
First one when first reading the invitation:
Who is the contracting authority, what are
they procuring, what procedure, do we
have enough time, financial means, know
how to offer them, what are the
specifications, have they been drawn up
with someone in mind, is there a
reference to certain suppliers or products
Bucharest, 8 March, 2005

Checklists

Second one:
Who is responsible for what
What do we need to submit
What did the contracting authority
forget (this is where we start earning
money!!!)
What is the cost of investment
against the possible net profit (roi)
or its marketing value
Bucharest, 8 March, 2005

Checklists

Do we need to form some kind of


strategic alliance in order to create
more critical mass
Who else might be competing and
what is our added value over them
and /or local contractors

Bucharest, 8 March, 2005

Other things to check

You name it, I will answer it!!

Bucharest, 8 March, 2005