Textbook example of the risks of preliminary market consultations

It is no secret I have a very negative view on fairly lax approach to pre-market engagement taken by Directive 2014/24/EU and the Public Contracts Regulations 2015. This week we have a textbook example of the risks posed by opening the floodgates of communications with potential contractors before a tender is launched.

Here's what the BBC found out about Sports Wales procurement practices:

The email is one of a series seen by BBC Wales, including correspondence between the two discussing the terms of the contract, including work locations, timelines and prices, nearly a month before it went out to tender.
It culminates in an email, two days before the rest of the tender emails were sent, from Ms Powell to Mr Whale which said: ā€œIā€™m still not 100% sure how we are going to finalise this tender but if you could provide us with a submission based on this I can at least get this moving in our system here.
ā€I was thinking if we did this I can send to a couple of people and apologise for the short notice but this is where we are and see who comes back?ā€
Unforgiving Minute was the only tender as the other companies were unable to respond within the required time frame.

While it appears that in this instance Sport Wales was not engaging the market to help the preparation of the tender documents, making it a clearer case of (un)equal treatment, it is only a question of time until the lines get blurred. What if the email said "do you think this tender is doable" instead of "could (you) provide us with a submission based on this"? The end result is the virtually the same, the only change being the emphasis of the question.

Public Contracts Regulations 2015 - Regulation 40

Regulation 40 - Preliminary market consultations

Regulation 40 transposes Article 40 of Directive 2004/14/EU into England, Wales and Northern Ireland, expressly allowing contracting authorities to conduct market consultations with suppliers prior to the start of a new procedure.

The Regulation is quite short with only three paragraphs setting out what the contracting authority "may" do. Unfortunately, the cynic in me would have preferred a clear indication of what the contracting authority "shall not" do as part of preliminary market consultations. It would have been very beneficial to introduce clear red lines of what can and cannot be done during preliminary market consultations.

I suspect suppliers (and contracting authorities) lobbied for this change to be introduced in the Directive. From a common sense perspective, the upside is obvious: how can a contracting authority make an informed decision of what it wants to buy (and draft appropriate technical specifications) without knowing what is out there? The problem is that this common sense approach does not take into account the limited skills, time and availability of procurement officers. The right way to do it is to put out a notice (not on your local paper, or electronic equivalent) and talk with all interested parties. Furthermore, no confidentiality should be agreed upon and all the information made available (although I suspect Albert disagrees with me on this last count). This takes time, delaying the launch of the actual procedure, and soaks up more resources (person hours) than the alternative of not having a market consultation or talking with a single supplier. I had a nice argument about this during Procurement Week last March as my argument is that most contracting authorities, most of the time will just talk with a single supplier...and no one will know if that actually happened or how it happened.

Whereas large, well staffed contracting authorities may make a good use of this possibility, most contracting authorities will simply use it as a shortcut to draft technical specifications. And if it is a shortcut due to limited skills, time or resources, then a simple conversation with a single supplier is all they actually need to achieve the goal of developing some technical specifications.

Whereas it is arguable that some other innovations (innovation partnership) are likely to be used only by a limited subset of contracting authorities (the 1%) the preliminary market consultations have the potential of being badly used by the vast majority of authorities (the 99%).

I suspect as well that this is the reason why suppliers really wanted preliminary market consultations: because they know that if they are the ones getting the call they get a huge advantage of tilting the technical specifications in their favour as the procurement officer will not have enough information to think otherwise (that is why they picked up the phone in the first place). This pre-disposition of suppliers to give information to contracting authorities before the launch of a procedure is one of the reasons why I never bought the "but our IP and secrets" confidentiality argument for competitive dialogue.

How long will it take until trade associations like the FSB start complaining about that the use of preliminary consultations is unfair for smaller suppliers?

PS: Albert's entry is here, although he will comment it in detail together with Regulation 41 tomorrow.