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A competitive approach

Tuesday August 17th, 2010

By Daradjeet Jagpal, Regulatory and Compliance Solicitor and Practice Group Leader, Public Sector Practice Group, Harper Macleod LLP

Daradjeet Jagpal discusses the pros and cons of using the competitive dialogue procedure.

The competitive dialogue procedure was introduced into the UK procurement regime around four and a half years ago. Its introduction was designed to counter what were perceived to be the failings in the negotiated procedure, which was the avenue through which major PFI and PPP contracts had been tendered until then. Competitive dialogue was intended to replace the negotiated procedure and sit alongside the open and restricted procedures. The negotiated procedure was considered as being less transparent and therefore more open to abuse than either the open or the restricted procedure.

The European Commission took the view that the negotiated procedure should be looked upon as an exceptional route to be used only within the strict confines of EU procurement laws. Indeed, experience during the last four and a half years indicates that the introduction of competitive dialogue has resulted in the decreased use of the negotiated procedure.

Despite this, competitive dialogue is regarded as being far from the ideal procedure in public procurements. It is argued that, compared to the negotiated procedure, some issues are considered too early in the procurement process. For example, under the negotiated procedure, some issues were not finalised until the preferred bidder had been selected. By comparison, under the competitive dialogue procedure, there are restrictions on the level of discussions that may take place post final offer submission. This may be disadvantageous for contracting authorities and bidders alike, in that they may need to engage in time-consuming and costly negotiations prior to selection of the preferred bidder. This is not a desired state of affairs in the present recessionary market, where all parties will be seeking to minimise bid costs wherever possible.

However, we do not consider that it is necessary to carry out any substantive amendments to the existing procurement rules to rectify this. Indeed, it can be argued that a more commercial and purposive interpretation of the procurement rules might be all that is required to achieve the desired effect.

Procurement legislation only permits changes to the final tender which do not modify the basic features of the tender or the call for tender, and prohibits variations that are likely to have a discriminatory effect or are likely to distort competition. Equally, the tender may only be clarified and commitments may only be confirmed in similar circumstances. There is therefore only very limited scope for amendment of the final tender in relation to competitive dialogue.

A more purposive and commercial interpretation is to be preferred, as this would be consistent with the principles of equal treatment, transparency and non-discrimination, which form the central ethos of European procurement legislation. Indeed, it does not make commercial sense to limit post-dialogue changes to mere fine-tuning of the tender. A test focusing on the materiality of the amendments to be made to the final tender is a more workable and commercial solution, one in line with the aforementioned principles.

The principle of materiality as a concept in determining whether amendments to the tender are permitted is still developing. It has been used by the European Commission in determining whether preferred bidder changes could be made in relation to the London Underground tender process. It has also been utilised by the Court of Justice of the European Union in relation to deciding whether amendments were possible in respect of a concluded contract.

In any case, application of a more flexible materiality test should not give rise to abuse of the interpretation of procurement legislation. Indeed, the recent implementation of the new Remedies Directive into UK law provides a route through which any such abuse by contracting authorities may be challenged.

For further information, please visit: www.harpermacleod.co.uk

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