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BERR procurement manual section H: guide to the European Union Services Directive & WTO government procurement agreement (GPA)

URN No: 08/1220/A11

Department for Business, Enterprise and Regulatory Reform procurement manual section H: guide to the European Union services directive & WTO government procurement agreement (GPA)

H. A GUIDE TO THE EUROPEAN UNION SUPPLIES DIRECTIVE & WTO GOVERNMENT PROCUREMENT AGREEMENT (GPA)

H.1 Introduction to the EU Consolidated Directive for Services and Supplies.
H.2 The Directive
H.3 Thresholds
H.4 Scope
H.5 Participating Countries
H.6 Application of the Service Directive to Framework Arrangements and Agreements
H.7 Estimating the Value of a Contract
H.8 Aggregation
H.9 Services and Supplies Contract Procurement Procedures
H.10 Notices
H.11 Classification & Coding of Services
H.12 Advertising Rules
H.13 Rules on Technical Requirements
H.14 Variations to Specifications
H.15 Currency of the Contract
H.16 Qualifications & Selection of Suppliers
H.17 Abnormally Low Tenders
H.18 Award Criteria & Award Notice
H.19 Annulment of the Tendering Process
H.20 Debriefing Suppliers
H.21 Reporting & Statistical Requirements
H.22 Compliance Directive

H.1 INTRODUCTION TO THE EU CONSOLIDATED DIRECTIVE FOR SERVICES AND SUPPLIES

H.1.1 Contents

Purpose of this Guide to the EU Consolidated Directive

H.1.2 Purpose of this Guide to the EU Consolidated Directive

The Purpose of this guide to the EU Consolidated Directive has been prepared to help you:

•        decide if the Directive and GPA apply to your procurement of goods;

•        plan your procurement timetable;

•        prepare various notices; and,

•        avoid some of the problems associated with aggregation, advertising rules, and the qualification and selection of suppliers.

Once you have established the appropriate procurement route you should consult the Procurement Manual to ensure that you follow best practice on specification writing, contracts, tendering, the evaluation of bids and the debriefing of suppliers. If you require further advice contact the Procurement Policy Services (PPS) branch within IWS Commercial Office.

H.2 THE DIRECTIVE

H.2.1 The Directive

The Consolidated Directive for Services and Goods became effective from 31 January 2006.

This Directive, for the most part, incorporates the revised WTO - formerly GATT - Agreement on Government Procurement (GPA), 1988.

H.3 THRESHOLDS (Valid from 31 January 2006)

H.3.1 Contents

Threshold Contract Value
Prior Information Notice Values

H.3.2 Threshold Contract Value

The Directive applies to contracts over £90,319 in value excluding VAT (this lower WTO level applies for Government Departments).

H.3.3 Prior Information Notice Values

Prior information Notices should be published for qualifying contracts whose aggregate value in a given class exceeds £509,317 excluding VAT.

H.4 SCOPE

H.4.1 Contents

Included Contracts
Excluded Contracts (Derogations)

H.4.2 Included Contracts

Requirements for materials, goods, equipment, vehicles, etc. that are obtained by purchase, rental, lease, hire or hire-purchase, with or without the option to buy, are subject to the Directive unless excluded (see Section H.4.3 - Excluded Contracts (Derogations)). Any installation or delivery costs must be included in estimating the cost of the requirement. Some contracts may be negotiated and thus avoid, except for placing an award notice, the Directive procedures.

Contracts which include services or works are subject to the Supplies Directive if the value of the supplies is the greater.

H.4.3 Excluded Contracts (Derogations)

The Directive does not apply to:

•        contracts for which the value is below the threshold (but voluntary notices may be advertised);

•        requirements subject to other Directives;

•        supplies which although above the threshold form part of a works project which is itself below the works threshold;

•        requirements subject to other international agreements;

•        certain defence requirements; and,

•        requirements which are declared secret or subject to special security measures.

H.5 PARTICIPATING COUNTRIES

The benefits of the EU Directives have been extended to other countries under the European Economic Area Agreement and various Europe agreements.  The EU is a signatory to the WTO (formerly GATT) Government Procurement Agreement (GPA).

Companies in the following countries are all entitled to be considered for UK government contracts for supplies:

The relevant states and countries included are as follows:

EU:  Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Germany, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovenia, Slovakia, Spain, Sweden and the United Kingdom.

E.E.A (European Area Agreement):  Iceland, Liechtenstein, and Norway.

GPA:  Aruba, Canada, EU, Hong Kong, Israel, Japan, Republic of Korea, Liechtenstein, Norway, Singapore, Switzerland and USA.

H.6 APPLICATION OF THE DIRECTIVE TO FRAMEWORK ARRANGEMENTS AND AGREEMENTS

H.6.1 Contents

Framework/Call-off Agreements
Call-off Arrangements and EU Framework Arrangements

H.6.2 Framework Agreements

Framework Agreements are legal agreements that involve a commitment to purchase and must adhere to advertising and procedural Directive rules. Subsequent Call-Off purchase orders against an Agreement or contract need not be advertised in the Official Journal of the European Union.

Framework arrangements are non-legally binding and establish the terms by which the Department and the supplier may enter into an eventual contract but involve no commitment to purchase. If an Arrangement has been advertised and awarded in accordance with the Directive, there is no need to advertise individual contracts made pursuant to the Arrangement.

Frameworks which are likely to exceed the threshold should therefore be advertised at the outset as though they were contracts. The maximum duration for a framework is four years.

Further Framework information may be found in Section E.9 - Frameworks.

H.7     ESTIMATING THE VALUE OF A CONTRACT

H.7.1 Contents

Introduction to Estimating a Contract Value

Regular Supply and Renewable Contracts (Normal Purchases)

Fixed Term or Running Contracts for the Lease, Rental or Hire Purchase of Products

Contracts with Various Options

H.7.2 Introduction to Estimating a Contract Value

Supply contract requirements must not be split, nor may the target price set unjustifiably low, to avoid the provisions of the Directive. The target price is determined by estimating the following:

•        the price including delivery and any other charges;

•        the duration of the contract; and,

•        the inclusion of any supplies or works.

As stated in section H.3.2 - Threshold Contract Value, the value of a contract is the total price excluding VAT.

H.7.3 Regular Supply & Renewable Contracts (Normal Purchases)

The basis for estimating the value of regular or renewable contracts is to calculate:

•        the aggregate value of similar contracts - select contracts let over the previous 12 months or fiscal year and adjust for price & quantity changes over the coming year; or,

•        the estimated contract price likely to be paid.

The Directive does not define "regular contracts" but the Treasury suggests a series of recurring contracts let to one or more suppliers over a period of time for goods of the same type. Once the aggregate value exceeds the threshold each subsequent contract must be advertised even though its value is below the threshold. Avoid this situation if possible by placing a Prior Information Notice (PIN) and/or a contract notice in advance for the total estimated requirement. Once the Framework Arrangement has been let under EU Directive procedures all contracts covered by the Agreement, regardless of individual value, can be let without advertising or tendering.

H.7.4 Fixed Term or Running Contracts for the Lease, Rental or Hire-Purchase of Products

The basis for estimating the value of a Fixed Term or Running Contract is as follows:

•        for fixed term contracts of 12 months or less: the projected overall value for the duration;

•        for contract of a period greater than 12 months: the total value less any residual value; or,

•        for contracts of indefinite duration: the monthly value multiplied by 48.

H.7.5 Contracts with Various Options

If a proposed contract includes one or more options (to purchase, lease, rent or hire-purchase) the estimated value is the highest possible amount which could be paid under the contract.

H.8 AGGREGATION

Aggregation refers to the act of gathering something together or creating a group.  Within BERR, there is frequently a recurrent need for the same type of good.  Hence there is often valuation of contracts to meet this requirement.  If a recurring purchase is required it is good practice to note and aggregate the requirements for this need and hopefully the previous valuations can fit the requirement.

The aggregation rule (i.e. the valuation of contracts to meet a recurrent need for the same type of goods) is based on where the decision to purchase rests. This is normally with the BERR HQ Division, the Executive Agency or Government Office. The Directive does not require the deliberate aggregation of requirements across the Department if this is not present policy.

H.9 SERVICES AND SUPPLIES CONTRACT PROCUREMENT PROCEDURES

H.9.1 Contents

Introduction to Contract Procurement Procedures

Open Tender Procedure

Restricted Tender Procedure

Negotiated Procedure

•        Negotiated Procedure with Prior Publication of a Contract Notice

•        Negotiated Procedure without Prior Publication of a Contract Notice

Competitive Dialogue

H.9.2 Introduction to Supplies Contract Procurement Procedures

There are three forms of procurement procedures for Supplies Contracts as follows:

1.        Open Procedure;

2.        Restricted Procedure; and,

3.        Negotiated Procedure (either with or without prior publication of Contract Notice).

Supplies contract procurement procedures are similar to those used for services and works.

Companies invited to tender are called "tenderers" and those responding to notices are called "candidates".

H.9.3 Open Tender Procedure

All companies responding to an "open" notice must be sent the invitation to tender (ITT). Because of the large number of tenders that may then be received it is not normal Departmental policy to use this procedure.

H.9.4 Restricted Tender Procedure

From the number of candidates responding to a "restricted" notice only those short listed by the Department are sent the ITT. The Directive recommends that between 5 and 20 candidates be invited to tender.

H.9.5 Negotiated Procedure 

H.9.5.1 Negotiated Procedure With Prior Publication of a Contract Notice

Following the publication of a “Contract Notice”, negotiations with one or more companies is permitted if:

•        tenders under the Open or Restricted Procedure have proved irregular or unacceptable;

•        all previously qualified tenderers are included; and,

•        the original terms of the contract are not substantially altered.

H.9.5.2 Negotiated Procedure Without Prior Publication of a Contract Notice

Negotiations may be conducted with one or more companies in the following situations only:

•        in the absence of response to an Open or Restricted notice, subject to the terms being substantially unaltered and a report provided to the Commission if requested;

•        when the products are manufactured purely for the purpose of research, experiment, study or development. This provision does not extend to quantity production to establish commercial viability or to recover research and development costs;

•        when, for technical or artistic reasons, or for reasons connected with protection of exclusive rights, the goods may be manufactured or supplied by only one particular company (technical reasons include the need for compatibility of spares, or with existing equipment);  

•        when in cases of extreme urgency not attributable to BERR, the time limits laid down for the Open and Restricted Procedures cannot be met;

•        for additional deliveries by the original supplier either as a partial replacement or extension of normal supplies where a change in supplier would oblige BERR to acquire goods which are incompatible or introduce disproportionate technical difficulties in operation or maintenance (as a general rule, such contracts must not be extended beyond 3 years from award). 

H.9.6.1 Competitive Dialogue

Competitive Dialogue is a similar process to the Restricted procedure, with an added dialogue stage in the middle.  There is a pre qualification exercise and those that meet the criteria are invited to enter into competitive dialogue.  Competitive Dialogue is usually used when innovative solutions are required.  A discussion phase is put in place between Pre-qualification and the invitation to tender requesting the supplier to submit proposals.  Suppliers discuss their solutions with the Department and unworkable solutions are dropped from the process.  This has a funnelling effect of suppliers.  Once a supplier has been removed from the process because of their solution, they cannot be re-entered into the competition.  The Department can ask for a number of draft proposals before the competitive dialogue phase is over.  Once the department is satisfied that workable solutions have been identified the department then enters into the Invitation to Tender stage (ITT).

H.10 NOTICES

H.10.1 Contents

Introduction to Notices

Prior Information Notice

Contract Notice Description

Certificate of Despatch for a Notice

Contract Award Notice

H.10.2 Introduction to Notices

As of 1 May 2002, the European Commission adopted a new Directive (2001/78/EC) making mandatory the use of standard forms for all notices published in the Supplement to the Official Journal of the European Union (OJEU). 

There are 11 Standard Forms, as follows (note that the first three are the most widely used):

1.        Prior Information Notice

2.        Contract Notice

3.        Contract Award Notice

4.        Public Works Concession

5.        Contract Notice - Contracts To Be Awarded By A Concessionaire

6.        Periodic Indicative Notice - Utilities (Not Being A Call For Competition)

7.        Periodic Indicative Notice - Utilities (Being A Call For Competition)

8.        Contract Notice – Utilities Qualification System – Utilities

9.        Contract Award Notice – Utilities

10.   Design Contest

11.   Results Of Design Contest

As Standard Forms are complex and time-consuming the Department uses Project (a web-based software package) for the generation of OJEU Notices and their transmission to the OJEU office in Luxemburg.  It is BERR policy that this software should always be used - no other method for the drafting and publication of OJEU Notices is permitted.  Procurement Policies & Services (PPS) have access to this software.

H.10.3 Prior Information Notice

In April each year, BERR publishes notices giving very brief details of each contract expected to be advertised in the following 12 months within a given coding class (see Section H.11 - Classification & Coding of Services) and where the overall class aggregate value of the contracts is above the Prior Information Notice threshold (see Section H.3.3 - Prior Information Notices Threshold Values).

If in doubt, publish. Prior Information Notices do not commit the Department but can produce worthwhile advantages.

H.10.4 Contract Notice Description

When filling out notices, the description should be brief but, if necessary, may be continued on a separate sheet.

For market testing or contractorisation involving the Transfer of Undertakings / Protection of Employment Regulations 1981 (TUPE) Procurement Policy Services (PPS) within IWS Commercial Office should be consulted.  

H.10.5 Certification of Despatch for a Notice

Article 17(7) requires contracting authorities to provide proof of despatch (Certificate of Despatch for a Notice) for all notices. The software used by the Department provides such proof.

H.10.6 Contract Award Notice

A Contract Award Notice must be published in OJEU within 48 days of award.

H.11 Classification & Coding of Services

Services are defined in terms of the Common Procurement Vocabulary (CPV) codes. The relevant CPV codes for each service required must be entered in Contract Notices.

Latest advice from OGC is that corresponding Central Production Classification codes should be included in any OJEU Notice in addition to the relevant CPV code.

H.12 Advertising Rules

The Directive lays down some minimum time scales aimed at giving prospective suppliers sufficient time to respond to notices and Invitations to Tender (ITTs).

The period for response starts the day the notice is despatched to the OJEU. Where the last day of the period is a Public Holiday, Saturday or Sunday, the period must be extended to the next working day.

Annex 6.G - Milestones for a Contract Under the Restricted Procedure sets out time scales and estimates for the time it may take to appraise candidates and tenders. Timescales must be built into contract completion projections and 7.D - Flowchart for the Restricted Procedure provides an example of what this means in practice. There is no limit on the time the Department may set aside for the evaluation of tenders but the validity period for bids set out in the ITT must be taken into account.

There is an "accelerated procedure" which reduces the timescales for urgent requirements advertised under Restricted and Negotiated Procedures. The use of the accelerated procedure is an exception to the rule and may be challenged by the Commission. The reason for the urgency must be stated in the notice.

If a requirement has been the subject of a Prior Information Notice, the minimum time under the Open and Restricted procedures for the receipt of tenders may be reduced, see Annexes 6.C - Flowchart for the Open Tender Procedure and 6.D - Flowchart for the Restricted Procedure.

If a company seeks additional information (which does not prejudice competition) it must be provided no later than 6 days prior to the closing date for the receipt of the tenders AND this information must be divulged to all of the tenderers in the procurement exercise.

H.13 Rules on Technical Requirements

Technical specifications which define the characteristics of a product or material, including levels of quality, performance, safety and dimensions, should be included in the tender documents.

Where Quality Assurance (QA) requirements are specified certification should be to ISO 9004-2 or equivalent by bodies conforming to EN 45000 or equivalent. BERR cannot refuse equivalent QA measures from suppliers who do not have access to certificates or no possibility of obtaining them within the relevant time limits. In such cases (which might include in-house bids) the candidate or tenderer should be asked to describe the measures in place to assure quality.

The provisions of the Directive require:

•        contracting authorities to consider products from other Member States manufactured to a different design but otherwise equivalent where there is no European standard; and;

•        contracting authorities to use a national standard implementing a European standard or a common technical specification.

There are exceptions to the rules:

•        where the use of a European or common technical specification is precluded by binding national technical rules, for example in relation to health and safety; and,

•        when one of the other permitted derogations applies (see Annex 6.H - Technical Specifications - Definitions of Terms & Derogations).

H.14 Variations to Specifications

Notices must clearly state where the criterion for award is the most economically advantageous (best value for money) and bid variations will not be considered.

H.15 Currency of the Contract

Government Accounting has advised that until now all contracts should be negotiated in sterling. The major aim of this was to avoid possible exchange rate risk fluctuations. Consideration should be given to the need to secure value for money in sterling terms and the guidelines for minimising foreign exchange risk still need to be followed. In an OJEU notice it should be made clear whether bids will be accepted in any currency other than pounds sterling.

H.16 Qualifications and Selection of Suppliers

Under the Restricted and Negotiated procedures the qualifications demanded of suppliers and the criteria for short listing must be non-discriminatory and objective.

The information the Department is entitled to receive is described in Annex 6I - Supplier Appraisal.  There is a minimum amount of information that candidates and tenderers must provide in order to be appraised in regards to their skills, experience, reliability and quality assurance capabilities. However, under the restricted procedures it is important not to demand too much information at the prequalification stage. At a later stage additional information can be requested from the companies invited to tender provided this request complies with Annex 6I - Supplier Appraisal.

Past non-compliance with the Government policy that requires contractors to pay suppliers promptly is not valid grounds for rejecting a company as unsuitable to tender. Such grounds may be challenged by the rejected company and by the Commission. The rules do, however, allow that past poor performance on the substance of a contract may be taken into account.

The Directive requires individuals and corporate bodies to be treated equally except that the latter may be asked to provide evidence of the qualifications of staff who will perform the services.

For market testing, it should be noted that in-house teams will be unable to pre-qualify in the formal sense. In-house bidders may not satisfy normal prequalification criteria because, for example, a lack of accounts. In such circumstances other candidates must be informed, either in the contract notice or ITT, that an in-house bid will be made.

H.17 Abnormally Low Tenders

If some of the tender prices seem abnormally low the Department may ask the tenderer(s) to confirm, in writing the prices, and that they are confident in their ability to meet the specification and abide by the ITT. The enquiry should not indicate that the prices are regarded as low.

The Directive quotes economies in manufacture, technical solutions, any exceptionally favourable conditions available to the tenderer for the supply of the goods, and originality, as examples of objective factors which may be accepted as an explanation.

H.18 Award Criteria & Award Notice

H.18.1 Contents

Introduction to Criteria and Award Notice
Contract Award Notice & OJEU

Contract Award Notice and Legal Obligations & Open Government

H.18.2 Introduction to Criteria and Award Notice

Detailed award criteria, for example, quality, experience and resources must be stated either in the notice or the ITT.

H.18.3 Contract Award Notice & OJEU

A Contract Award Notice must be sent to the OJEU Office within 48 days of the award of the contract. The name of the successful tenderer must be included unless there are exceptional grounds for not doing so.

H.18.4 Contract Award Notice and Legal Obligations & Open Government

Certain information on the contract need not be published in cases where it would impede law enforcement or otherwise be contrary to public interest or prejudice the legitimate commercial interests of a supplier or prejudice fair competition between suppliers. The contract price therefore need not be disclosed under such circumstances. However consideration should be given to publishing the range of bids where three or more have been received.

Notwithstanding the above it should be noted that there are obligations to publish information about contracts under Open Government.

H.19 Annulment of the Tendering Process

If BERR decides not to award a previously advertised contract then the OJEU Office, candidates that have or are responding to the contract notice, and tenderers must be advised. This situation may arise when there is a change in policy or requirement, an in-house bid is successful, or the requirement has been re-evaluated, modified and needs to be re-advertised.

The following proviso should be included in all Contract Notices:

"The Department for Business Enterprise and Regulatory Reform (or name of Executive Agency or Government Office plus 'of the Department for Business Enterprise and Regulatory reform) reserves the right to annul the tendering process and not to award a contract."

H.20 Debriefing Suppliers

H.20.1 Contents

Introduction to Debriefing Suppliers

Cancellation of Tendering and Non-award of Contract

H.20.2 Introduction to Debriefing Suppliers

The Department is required to debrief all candidates who fail to make the shortlist and unsuccessful tenderers within 15 days of receiving a written request to do so. An unsuccessful tenderer is entitled to know their own evaluation score, the name of the successful tenderer including their evaluation score, but not the contract price of the winning tender.  Provide in your debrief areas that the failed supplier needed to improve on to have won this contract.  Note that information is provided to the Department in a tender exercise as commercial in confidence.  This must be considered when debriefing and care must be taken to ensure confidentiality rules are not breached.

H.20.3 Cancellation of Tendering and Non-award of Contract

The Department must also explain to candidates and tenderers, who so request in writing, the reasons for cancelling the tendering process or not awarding a contract. Advice on how to undertake a debrief can be found in OGC’s booklet “Supplier Debriefing”.

H.21 Reporting and Statistical Requirements

Contracting authorities must have in place a system that provides the following statistics no later than the 31st of October each year for the preceding year:

a) for each contract above the threshold:

•        the product classification (Common Procurement Vocabulary (CPV) code number),

•        the nationality of supplier (not make or origins of the good),

•        the award procedure and if negotiated the reasons for not advertising (absence of tenders, research and development, particular suppliers, extreme urgency, and additional deliveries (for compatibility reasons)), and,

•        the actual value of the contract (unrounded);

b) for all contracts under the threshold (or not subject to the Directive):

•        the total aggregated cost.

Procurement Policy Services Branch within IWS Commercial Office arranges collection of these statistics for submission to the Commission via the Treasury.

H.22 Compliance Directive

The Compliance Directive requires the Commission to examine complaints from unsuccessful tenderers and to take action if it is believed that the tenderers interests may have been harmed by a breach of the Directive. The Commission itself may initiate action if it suspects a breach of the rules.

The Commission can take the following action:

•        suspend the procurement procedure;

•        set aside a decision to award a contract; and/or,

•        require corrections to be made.

The Commission cannot require that a contract, once let, be suspended or set aside but damages may be awarded. The Commission may also fine the Department, or in an extreme case, take the Secretary of State to court to enforce its decision.

Any complaint received from an aggrieved company or from the Commission via the Treasury must be referred immediately to the Legal Services Directorate / Solicitors Division for advice.