The housing sector is increasingly turning to the EU Open Procedure to procure R&M contracts. But does this leave the process open to challenges from disgruntled bidders?
A number of repairs and maintenance contracts - complex requirements involving technical specifications, multi-faceted pricing documents, contract terms to be carefully considered, and comprehensive TUPE and pensions provisions - have recently been put to the marketplace via the EU Open Procedure.
Should this single stage procedure be used to procure such complex contracts or are the clients that are using it putting themselves at risk of challenge for potential misuse of the procedure, while adding unnecessary time, cost and effort into the procurement process?
Unlike the two-stage Restricted Procedure, the Open Procedure is a single-stage process, in which all interested parties are able to submit bids. Selection and evaluation is carried out after the receipt of tenders without any prior shortlisting. The Open Procedure is perceived as being fast and simple, requiring only one round of evaluation.
Anecdotal evidence has indicated that clients are being tempted into using the Open Procedure due to an interpretation of the requirement under Regulation 53 of the Public Contracts Regulations 2015 to publish all procurement documents at the time the contract is first advertised in the Official Journal of the European Union (OJEU).
This requirement has led clients to “front-load” their procurement preparation which causes delay at the outset of the procurement timetable. This has led some clients to try and recoup this “lost time” by undertaking the procurement process in the accelerated time-scale provided by the Open Procedure.
However, this rationale does not reflect recent Crown Commercial Service “Guidance on Electronic Procurement and Electronic Communication” (September 2015) on Regulation 53, which adopts a “purposive” view of the publication requirement and recommends that procurement documents only have to be published at the relevant stage of the procurement process, once the needs of the client have been crystallised. This reflects current UK practice but undermines the rationale that seems to underpin the current fashion of using the Open Procedure for repairs and maintenance procurements (R&M).
But what of the risk of challenge from disgruntled bidders? Putting aside the time limits for procurement challenges (30 days from when the bidder knew - or should have known - of that breach), the adoption of the Open Procedure for anything other than simple supplies and services and/or the subsequent negotiation with the winning bidders could prompt a challenge from a disgruntled bidder.
The use of the Open Procedure for R&M contracts is likely to lead to increased costs on both sides of the client/bidder relationship
The Open Procedure limits the client’s ability to interrogate a bid or consider how best to deal with key variables such as TUPE and pension liability. Given this prohibition on negotiation at any stage of the process, any significant post-tender “chats” with the winning tenderer presents a risk of challenge.
Any client still considering the Open Procedure for its R&M contract should adopt a risk-based approach and weigh-up the potential risks of challenge at the various stages of the process.
In addition to the risk of challenge, what about the additional costs to the sector introduced by this procedure? The lack of a separate pre-qualification stage may seem like a useful time-saver for the client but for bidders, it makes competition tougher by increasing the number of bids to be considered.
Bidders are also required to submit a fully-priced tender from the outset, without a steer as to whether they are the type of company that the client wants to/can contract with. This makes it more difficult for bidders to assess their chances of winning a contract, relative to the time and cost expended to bid for it. If this trend of adopting the Open Procedure continues, it is likely to result in contractors declining to bid for projects or, conversely, employing more estimators to assist them in bidding for all potential contracts - an additional cost that is likely to be passed to the client - adding more cost to the sector.
On the client side, assessing numerous fully-priced tenders for a contract is an onerous and expensive exercise, requiring assessment of a greater volume of material. Clients keen to save time and money may be tempted to abuse the process, by adopting non-compliant short-cuts or sneaking a look at the tender price before fully appraising the contractor’s suitability or compliance with the specification.
The use of the Open Procedure for R&M contracts is likely to lead to increased costs on both sides of the client/bidder relationship, and may cause market apathy, as contractors are discouraged from bidding without the certainty of a shortlist. While it is acknowledged the client may well benefit from a more varied long list of tenderers, do the additional costs and attendant risks mean that it would be better for the R&M sector to stick to a two-stage process?
Rebecca Rees is a procurement partner in law firm Trowers & Hamlins