Public Contracts Regulations 2016 - Regulation 26

Regulation 26 - Choice of procedure

Regulation 26 transposes Article 26 of Directive 2014/24/EU and brings us to a part of procurement law I am much more comfortable with: the procedures. The purpose of Regulation 26/Article 26 is to establish the situations where different procedures can be used.

As with Article 26, both the open and restricted procedures are standard in the Regulations. Therefore they can be used any time, anywhere without the need for additional conditions to be met (either than value, contract scope and the authority tendering). Regulation 26(3) also mentions that contracting authorities can use the new innovation partnership, without establishing any conditions of use. That is not to say that these do not exist, but unfortunately the European lawmakers decided to stick them in Article 31 which contains the substantive rules of the procedure. In my view they should have been included here as it was done with all other procedures.

Regulation 26(4) allows for the use of the competitive procedure with negotiation and competitive dialogue if specific conditions are met. These procedures cannot thus be considered standard as they are not free to use in all circumstances. The first comment about both procedures is that not only they share the same exact grounds for use as their structure is very similar. In fact, as I argued in the past, why bothering having two procedures that are almost indistinguishable from one another? It only increases confusion and the possibility of second guessing by contracting authorities (should I use one or the other? Should I have used the other?) without really adding any benefit. In my view, anything that can be accomplished with the competitive procedure with negotiation could have been done with the competitive dialogue and probably vice-versa. This is an obvious situation of hair splitting and where less was probably more.

What about their grounds for use then?

Under the previous Directive 2004/18/EC, competitive dialogue grounds for use were, frankly, clear as mud. The "particularly complex test" was an exercise in futility and the truth is there was no widespread litigation about the grounds for use. The only one I am aware of is a decision by the Conseil d'Etat in France which expressed a generous view about the grounds for use.

Regulation 26(4) establishes two different grounds for use for these procedures. The first depends on the substantive characteristics of the underlying contract, and the second on a previous failure to use an open or restricted procedure (ie, when only unacceptable or irregular tenders were submitted).

Regarding the first set, Regulation 26(4) allows for the use of both procedures if any of the four conditions are met: i) the needs can only be met with adaptation of existing solutions; ii) include design or innovative solutions; iii) negotiations are needed due to the nature, complexity, legal and financial make-up or attached risks; iv) the contracting authority cannot establish the technical specifications precisely enough.

The first two conditions are entirely new and pose some interesting challenges. Virtually anything can be twisted to fit into the first one ("I want pens with this specific colour." "Well, we have to adapt our product then.") and the second is also as wide the Panama canal, unless we apply the innovation definition from Regulation 1 to "innovative solutions". It is obvious the intent of these two conditions were created to facilitate the use of both procedures (not that some Member States such as the UK or France had any problem in blanketing the landscape with competitive dialogues over the last decade) and we can expect an increase in relative terms of the use of both procedures in the future. I am not a huge fan of negotiations in public procurement and will be writing about this in detail shortly. Apparently, neither is Albert though.

My question about this loosening up of procedures with negotiation is thus: was this changed pushed for by the public or private sector? Who stands to win more with an increase in negotiations? I will use a poker analogy as a hint: "If you can't spot the sucker in your first half hour at the table, then you ARE the sucker."

The second set of grounds for use are an evolution of the ones contained in Directive 2004/18/EC. They are clearer and simpler than before and gone is the "particularly complex" test as well as all the confusion generated by Recital 31 (which made it to the body of the Portuguese Public Contracts Code, for example). I do not have much to say other than they are sensible and make reasonable sense, again extending the scope for the use of both procedures. However, it is worth noting that there is an explicit reference to the need "to have negotiations". As these grounds for use are applicable to competitive dialogue, this can only be read - finally! - as an assumption the dialogue stage is indeed a negotiation stage for all intents and purposes.

Pedro, this is too long. Cut to the chase with the irregular and unacceptable tenders

The final set of conditions for the use of competitive dialogue or competitive procedure with negotiation is a previous failure of an open and restricted procedure due to irregular or unacceptable tenders, although all tenders need to have been excluded in that previous procedure.

According to paragraph 5, if the conditions are met, the contracting authority is authorised to run a competitive procedure with negotiation or competitive dialogue, either by publishing a new contract notice or without doing so. The second option implies inviting all participants in the previous procedure to the new one, as long as they complied with the requirements of Regulations 57 and 64 when the original procedure was launched. In other words, if they were excluded due to lack of financial capacity, they cannot be invited back to the new procedure. However, how do we interpret paragraph 7(a) where a tender is considered unacceptable in case of lack of required qualifications by the tenderer? I am not sure how we are to sort out this inconsistency.

Finally, Regulation 26 includes some rules on how to proceed with the call for competition should be undertaken. The most interesting finding is that when a sub-central organisation such a local council wants to tender a restricted procedure or a competitive procedure with negotiation, it can do the call for competition simply by putting out a prior information notice. I cannot understand why these two procedures were singled out for this kind of preferential treatment. However, for a country already madly love with the restricted procedure and that I expect will fall in love pretty quickly as well with the competitive procedure with negotiation, this alone ensures a tilted playing that disadvantages the open procedure and competitive dialogue.

I have written extensively with Luke Butler about the new procedures for our chapter in the Modernising Public Procurement: The new EU Directive book (p.131 - 184) and you can find an ungated version of our paper at SSRN.