Public Contracts Regulations 2015 - Regulation 34

Regulation 34 - Dynamic purchasing systems

Regulation 34 transposes to England and Wales the rules contained in Article 34 of Directive 2014/24/EU on dynamic purchasing systems. Dynamic purchasing systems constitute another type of two-stage "system" for awarding contracts the other being the framework agreements we discussed yesterday. The major difference between a dynamic purchasing system and a framework agreement is the freedom with which suppliers can enter the first at any time, whereas in the second, suppliers are admitted only at the start. Up to this moment, framework agreements are by far more popular, particularly in the UK.

Albert has already given a fantastic overview of dynamic purchasing systems and how they are supposed to operate, so I will focus my commentary in a couple of more specific points: the need to use the restricted procedure, its electronic nature, the need to invite all participating tenderers and speculating why it has not been used more widely.

1. The need to use the restricted procedure

Regulation 34(5) establishes the obligation to adopt the restricted procedure with the necessary adaptations to undertake procurement of contracts under dynamic purchasing systems (DPS). This can be interpreted in two different ways: the first that for establishing the DPS a restricted procedure of sorts needs to be followed. The second, that the call offs themselves need to follow a restricted procedure. An interpretation by analogy with framework agreements would indicate that the first interpretation is right (and I suspect that is the most common one), but I struggle to make it compatible with the actual wording of paragraph 5 "In order to procure under a dynamic purchasing system, contracting authorities shall follow the rules of the restricted procedure[...]." (emphasis mine) The killer word for me is "procure".  Neither the Directive nor the Regulations used "establish", which would emphasise the creation of the system, but the actual procurement being undertaken.

Paragraph 6 however refers to the selection of candidates to be admitted to the system, moving the discussion back to the system creation in itself. However, there is another clincher in this discussion: although participation limits are a key feature of the restricted procedure, there are no limits to the numbers of candidates that can participate in a DPS. As such, even though the Regulations state that a restricted procedure needs to be followed, in effect the defining element of that procedure (limitation of candidates) is actually not present at all.

Would it not have been preferable no refer to the open procedure instead? The reference could limited to the traditional open procedure, ie the one with a selection/qualification stage for all participants. The irony of course is that Regulation 20 of the Public Contracts Regulations 2006 made reference to said procedure instead...

2. Electronic nature

Another key feature of the DPS is that it needs to be done entirely electronically. It makes sense: the logic underlying DPS is to allow for common repetitive spend to be done with reduced transaction costs for everyone involved. Although e-procurement is widespread in the UK it is not yet mandatory nor are all contracting authorities geared up to use it. It may be that in the coming years as procurement officers become more comfortable with e-procurement, better tools are made available and the relentless pressure to reduce transaction costs applied may lead contracting authorities to adopt this procedure more widely.

3. The need to invite all tenderers

In a DPS, all admitted tenderers are to be invited to take part in every call off for contracts that they have been qualified for (the DPS can be divided into lots/areas). This is a clear difference from multi-supplier framework agreements where effectively contracting authorities have free reign to invite whomever they feel like for any specific contract. If some practices such as "cherry picking" participants (pun intended), rotating opportunities or effectively always using the same supplier are compatible with the principles of equal treatment/non-discrimination and competition, that is a different matter.

But this change is a nice segway for the section on why DPS are no more popular in the UK and eventually elsewhere.

4. DPS lack of popularity

Over the last decade, framework agreements have been used a lot more widely than DPS in European public procurement. One reason for this state of affairs may be that all participating suppliers must be invited all the time. Experience tells us that contracting authorities (particularly in the UK) do not like to receive lots of bids or even to have the risk that multiple bids are submitted. Over the years we have seen plenty of practices with this objective in mind such as charging for tender documents, detailed PQQs or establishing high turnover requirements: the objective of all was to raise barriers to supplier participation. Therefore, under this light the DPS is a lot less compelling than a framework agreement for a contracting authority as the latter "allows" for more fine-grained controls.

The second potential reason is mentioned by Abby Semple in her new book (para 3.50): DPS have higher administration costs than framework agreements. This is due to another key difference between both, as in the DPS suppliers can apply to join at any time during the lifetime of the system. In consequence, contracting authorities must have someone responsible for reviewing the requests periodically and as mentioned by Albert, the deadlines for admissions are only 10 working days, a very short time window for public administration in general. Each admission does not need to incur in a lot of work, but is certainly more burdensome (yet another task to keep track of) than simply "setting and forgetting" as can be done with framework agreements. In addition, DPS traditionally required a number of notices to be sent for official publication. Those have now been reduced and could easily be automated with the right systems in place.

The third reason is the mandatory use of electronic means. This was already present in the Public Contracts Regulations 2006, so it is not unfathomable to consider that if most contracting authorities are not e-procurement experts today, they certainly were not in 2006. At least in other Member States like Portugal where framework agreement is incipient and e-procurement mandatory for all contracts, I suspect this will not be seen as a hindrance for DPS take up.

The final reason I can think of is the competition with framework agreements. Both can be used for pretty much the same areas/contracts, so they compete with one another for "market share." It is  clear to me that from the eyes of a contracting authority, framework agreements have a number of benefits in comparison with DPS. And as procurement officers are not measured on the impact they have on the market or respect for the principle of competition...

I would add a final note that there is so much experience in the UK using framework agreements (and they are an accepted practice) that I see it difficult for contracting authorities to change wholesale in the UK, particularly if there is no guidance or a clear policy giving them preferential status over framework agreements.