Public Contracts Regulations 2105 - Regulation 46

Regulation 46 - Division of contracts into lots

One of the biggest changes introduced by Directive 2014/24/EU is the new preference for division into lots. The (flawed) logic behind idea is to make procurement easier, more accessible for smaller suppliers by dividing contracts into smaller chunks. This logic is flawed in two accounts: one, it destroys the value of aggregation by increasing the transaction costs for the contracting authority (and to a certain extent) to suppliers who want to bid for multiple lots as they now need to submit multiple bids. Two, it is a competition law nightmare by facilitating collusion immensely, particularly if similarly sized lots are used. Issue two will be more pressing on sectors where there are either limited suppliers or where collusion is already prevalent (yes, *that* industry). I suspect Albert will hammer this point home later today. UPDATE: Here it is.

Thankfully both Article 46 of the Directive 2014/24/EU and Regulation 46 stop short of mandating the use of lots or prescribing any particular strategy to undertake them. The key point is that although lots should be used, they do not have to and all the contracting authority needs to provide is a justification for it. That's it. I suspect "competition fears" would make a good excuse as any other.

In terms of rules, if lots are to be used the ifs, buts and hows need to be spelled out from the start in the tender documents or contract notice. Therefore, any limitations on the number of lots that may be won or the obligation/foreclosure to bid to all lots has to be disclosed.

Paragraph 6 also provides contracting authorities with the possibility of combining lots, again under the condition of informing all putative participants at the start of the procedure that this is a possibility and how it can be done. I am struggling to see how this can be done transparently as different combinations of lots may lead to different winners, therefore creating the risk of steering contracts to a preferred supplier. Having said that, it also creates uncertainty into the system and the extra variable may create issues for cartels and candidate collusion. What is your take Albert?