How many candidates must a innovation partnership have?

One of my former student's from Bangor pinged me on Facebook yesterday, inquiring how many candidates were needed for a innovation partnership. He pointed out that in my commentary to Regulation 31 I argued that only a single supplier is needed for the procedure to run from start to finish, but Regulation 65 on the other hand mandates that the minimum number of candidates on an innovation partnership is at least 3. Roman, you have a point...

My original argument was based on paragraph 4 of Regulation 31 and paragraph 1 of Article 31 of Directive 2014/24/EU. Both read as follows:

"The contracting authority may decide to set up the innovation partnership with one partner or with several partners conducting separate research and development activities."

The way I interpreted this paragraph was that "to set up the innovation partnership" meant "setting up the innovation partnership procedure" although this last word is not present there. My reasoning was compounded by last bit of the paragraph "conducting [...] research and development activities" which I interpreted (and still do) as referring to the procedure and not the outcome. The outcome of the innovation partnership is the procurement of the goods/services developed during the innovation partnership procedure.

Furthering my conviction that the innovation partnership procedure could be done with a single provider from the start, on Directive 2014/24/EU the sentence cited above is part of paragraph 1. In addition to that bit, paragraph 1 covers a number of different elements relevant at the start of the innovation partnership procedure:

- How economic operators can take part in the procedure;

- Information  that needs to go into the procurement documents;

- Minimum time limits for request to participate;

None of these is relevant for the outcome of the procedure. It is true however, that the final sub-paragraph of paragraph 1 states that "Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65"

Regulation 65 (and Article 65, albeit with a slightly different drafting) establishes:

(1) In [...] innovation partnerships, contracting authorities may limit the number of candidates meeting the selection criteria that they will invite to tender or to conduct a dialogue [...].

(4) In the [...] innovation partnership procedure, the minimum number of candidates shall be 3.

Regulation/Article 65 is clear about the need to have at least 3 candidates in innovation partnerships.

How can we render compatible both provisions then? From the top of my head the only solution coming to mind is to consider that Regulation/Article 31 does not refer to the innovation partnership procedure but only to its outcome. But if that is the case, the drafting is slightly odd and looking into the French version did not leave me any more convinced. Furthermore, if the purpose of that sentence was to refer to the innovation partnership outcome, why on earth would it come in the middle of various other sentences all of them referring to the start of the innovation partnership procedure?

Neither my original solution or this proposal feel right to me. Any thoughts?


Public Contracts Regulations 2015 - Regulations 65 and 66

Regulation 65 - Reduction of the number of otherwise qualified candidates to be invited to participate

Regulation 66 - Reduction of the number of tenders and solutions

What do Regulations 65 and 66 brings us? The rules on how qualified candidates (ie candidates that otherwise would be allowed to continue on a procedure) and tenders can be excluded. This is possible in procedures such as the restricted procedure, competitive dialogue, competitive procedure with negotiation or the innovation partnerships, procedures I decided to christen restrictive procedures. Albert's view is here.

Regulation 65

As in the past, the minimum number of qualified candidates a contracting authority may take forward in case of a restricted procedure is 5 and the competitive dialogue 3. The new competitive procedure with negotiation and innovation partnership is also 3. It means that the contracting authority may exclude all other qualified candidates other than the number it said it would take forward. As the reduction should occur based in "objective and non-discriminatory criteria or rules" which by definition will be focused on the qualities of the candidate and not its future bid, this puts SMEs at a big disadvantage position. If only the X best candidates are to be selected and the criteria will reflect financial requirements (including insurance...), experience and more importantly capacity, smaller suppliers will always be at a disavantage. And the more complex we make procurement the worse it will be for them.*

The above does not preclude the contracting authority advancing with a smaller number in case only say 2 candidates are good enough to be qualified (paragraph 7). It is interesting to note that there is no competition protection exception to this rule and I agree with it. Stating the procedure should not go ahead with only one qualified supplier would be the same as making an undertaking's ability for a contract dependent on other people with the right set of qualifications. "Enough participants" would be an added "selection criteria" and one that each economic operator has zero control on. For all the competition risks, contracting authorities can still pull the plug if they so wish but they are not under the obligation of do so. A contrarian argument, however, may be that 

* I do not have data at hand to prove my assertion but my view is that in restrictive procedures (all those above) participation and success rate by SMEs is lower than in an open procedure. Feel free to prove me wrong.

Regulation 66

Regulation 66 allows for a reduction of tenders (competitive procedure with negotiation) or solutions (competitive dialogue) in accordance with the award criteria stated in the procurement documents. Paragraph 2 of this regulation includes a competition protection exception by stating that the reduction needs to take into account the number coming to the final stage must guarantee genuine competition, "in so far as there are enough tenders, solutions or qualified candidates". This does not appear to make a lot of sense for three reasons.

First, my reading is that if there are at least 2 qualified tenders or solutions then in consequence they can never be reduced to one during the final stage. Effectively, that may mean (especially in competitive dialogue where it is relatively easy for the contracting authority be smitten by a specific solution) that dead horses will be kept in the running just to function as threat of competition leading to transaction and opportunity costs to be laid at the back of economic operators. It is simply unfair (and illegal in jurisdictions where bona fides counts for something) to keep economic operators in a procedure where they have zero chances to win, as sacrificial lambs in the altar of a semblance of competition. I wrote a whole Ph.D thesis about competitive dialogue if you are so inclined...

The second reason is that this limitation only applies "in the final stage", thus apparently allowing the contracting authority to reduce candidates/solutions/tenders to one in the previous stages.

The third reason is also connected with "in the final stage" part of paragraph 2. I am not aware how "qualified candidates" can be excluded in any procedure "in the final stage". Tenders can be excluded for multiple reasons but candidates? Unless they become unqualified (it may happen) but then this paragraph would not be applicable in the first place.

I suspect that what paragraph 2 wanted to stress is that the reductions should lead to a final stage with only a single economic operator. It could have been drafted so much better.

Finally, take a moment to sink in the fact this Regulation 66 is only applicable to the competitive procedure with negotiation and competitive dialogue. Which procedure is nowhere to be seen? The innovation partnership.