EU Regulations (Procurement Policy Section 2)
A Guide To The EU Public Procurement Directives
Durham University, as a public sector organisation, must comply with the Public Sector European Directives for Supplies, Services and Works. This section of the Procurement Policy addresses the Directives for Supplies and Services.
The following is intended as a summary only. The aim is not to provide precise instructions but is to increase the Buyer's awareness of the issues that demand compliance under the European Directives.
The Procurement Service must be contacted at the earliest opportunity in the event of a requirement being subject to these procedures and prior to publishing a Call for Competition (Contract Notice).
1. When The Rules Apply
From 1st January 2012, the threshold for the application of these procedures is £173,934 net of VAT for supplies and services and £4,348,350 net of VAT for works. The threshold changes in January every alternate year. The next change is due on 1st January 2014.
The rules within the Supplies and Services Directives apply to the purchase, lease, rental or hire of goods or services that exceed the threshold, in the circumstances defined below:
- When a single purchase exceeds the threshold e.g. one item of specialist scientific equipment.
- When a committed contract is to be let that in aggregate is likely to exceed the threshold, e.g. a contract for the supply of stationery to be purchased over a 3 year period.
- Contracts for 'regular supply' which, in aggregate, are likely to exceed the threshold. This applies to a series of recurring contracts let to one or more suppliers to fulfil an individual requirement for a product or products of the same type (see notes below). If the aggregate value of all the contracts in total exceeds the threshold then each contract, irrespective of its own value, is subject to the rules (see notes below). The value of the regular supply contracts should be calculated as follows:-
- The aggregate cost of similar contracts awarded over the previous 12 months or accounting period with possible adjustments for price or quantity changes.
An estimate of prices likely to be paid for the quantity of goods supplied within the proposed contract period.
- Where the size of individual contracts is known in advance it is easier to administer if one 'global' contract is advertised at the outset instead of a series of different contracts.
When a contract has no commitment but is a 'standing offer' or framework agreement, the rules only apply when there is some obligation to purchase from the arrangement and the total value of purchases will exceed the threshold. If there is no obligation to use the agreement then the rules will only apply if the value of purchases under the previous framework agreement exceeded the threshold.
Where a contract term is not definable, then an estimate should be made based on the monthly value of indefinite contracts multiplied by 48.
Where a proposed procurement will include options, the contract value should be calculated as the highest possible value inclusive of the option clauses.
The estimate of the contract value must include all the costs not simply the purchase price e.g. the cost of delivery and installation.
If there is a substantial element of 'service' in the contract, e.g. maintenance of equipment, this must be included in the estimated value. Provided the service element does not exceed the value of the supply element the Supplies Directive applies.
Estimated values of contracts for the lease, rental or hire purchase of equipment should be calculated as follows:-
- Fixed term - if 12 months or less the value should be estimated as accurately as possible. If the term exceeds 12 months the estimated value should be based on the total estimated contract value including the estimated residual value.
- Contracts for an indefinite period/or when the precise duration is not known - the estimated value should be calculated as the estimated monthly value multiplied by 48.
Contracts will be of 'the same type' if:-
- they could have been placed on one single contract;
- are available from the same or similar suppliers; and
- demonstrate technically similar characteristics.
Durham University can decide which items are of the same type based on normal commercial practices.
In order to be defined as a series of contracts the following tests should be met by the requirement:-
- Could all of the demands have been met on one contract awarded for the period in question?
- Could the demand for the product be described as recurrent and therefore regular?
- Was the demand for the product, in general terms, predictable?
- Are the contracts to be awarded running consecutively?
- If the above tests are all positive then the contracts envisaged to meet the demand should be aggregated to assess whether they exceed the threshold.
This does not mean that only one contract must be placed. Instead separate contracts can be awarded.
2. Who Is Responsible?
The nature of the devolved management within Durham University means that each department and college is a 'discrete operational unit'. This means that, generally, there is no obligation to aggregate across departments and colleges only within them.
For example, there is no legal requirement to aggregate all the computers purchased by the different departments and colleges within the University. In some cases, there is a legal requirement to aggregate commodities of the same type within each department or college.
There are exceptions to this rule as follows:-
- If a contract for a specific type of product(s) is managed by any one part of the University and used by the rest of the University, the entire University spend would need to be aggregated for that product range supplied.
- If traditionally a contract for the supply of goods has been managed by a central point this cannot be changed simply to avoid the regulations, for example, the supply of photocopiers has traditionally been managed by the Procurement Service. As such a contract for the supply of photocopiers will be arranged via the European Directives.
Each department and college should be responsible for its own aggregation policy with help and advice from the Procurement Service. The rules encourage the proactive management of supplies which means that approximately once a year the aggregation of large areas of expenditure should be undertaken.
3. Is This Really Necessary?
The Durham University must, by law, retain records of all expenditure that is above the threshold and documentation showing the reasons for any actions that are taken. Reports must be completed by the Procurement Service for HEFCE regarding the University's activities within this area.
Suppliers who think they have been disadvantaged by the University's actions in relation to the EU Procurement Directives could take action against the University,resulting in heavy financial penalties.
4. The Procedures
Having established that a procurement exceeds the threshold and the rules do apply, the following procedures should be followed. The following paragraphs are intended as a summary only as the Procurement Service will assist all departments and colleges in the implementation of the Directives.
4.1. A Call For Competition
A contract notice or 'Call for Competition' (which accurately summarises the nature of the contract) must be advertised in the Official Journal of the European Communities (OJEC). All advertisements are placed electronically by the Procurement Service.
Contracts must not be advertised in the UK, prior to an advert being sent to the OJEC. Advertisements in the UK must provide exactly the same information as that in the OJEC.
The date that the advertisement is sent to the OJEC should be noted as the Directives emphasise the importance of minimum timescales.
Prior Information Notice (PIN)
The University is required to advertise, by means of a PIN, procurements which, during the next 12 months, will exceed an aggregate estimated value of £464,024. This is to alert the market to major future demands. The PIN must be published as soon as possible after the commencement of the financial year. It is followed by a Call for Competition when the procurement process is about to begin. To encourage contracting authorities to place PIN notices, the timescales may be shortened for any tenders which have previously been advertised in the OJEC by way of a PIN.
4.2. The Procedure For Tendering
Prior to the Call for Competition being written a decision must be taken regarding the type of tendering procedure to be employed. There are essentially three types of procedure, as follows:-
All suppliers who respond to the Call for Competition in the OJEC must be invited to tender. This method should be used with caution as potentially hundreds of suppliers may respond resulting in a time consuming and costly exercise. The procedure is appropriate in the following circumstances:-
- When there are a limited number of suppliers.
- The nature of the contract ensures that bid evaluation will be simple.
The timescales for the Open Procedure are as follows:-
From the date that the Call for Competition is sent to the OJEC a period of not less than 52 days is allowed for receipt of tenders.
A deadline for receipt of suppliers requests for the invitation to tender should be specified in the advertisement.
The invitation to tender document must be sent to suppliers within four working days of their request for it, provided that they request it within the deadline.
Should a supplier request additional information relating to the invitation to tender document, this must be supplied no later than 6 working days before the deadline for receipt of tenders.
Where a site visit is necessary for a tender to be submitted, the tenderer should be provided with a minimum of 7 days from the site visit to the deadline for receipt of tenders. This may require a reasonable extension to the 52 days minimum specified for the receipt of tenders.
Once the tender return date has arrived and tenders are evaluated, HM Treasury recommend a period of 30 days for the financial and technical appraisal of tenders. This period will vary according to the complexity of the procurement and may only constitute a few days.
The Restricted Procedure enables tenders to be invited from 'selected' suppliers responding to the advert.
The timescales for the Restricted Procedure are as follows:-
From the date that the Call for Competition is sent to the OJEC, a minimum of 37 days is allowed for the receipt of requests to participate from the potential tenderers. The requests to tender should be made by letter. If made by telephone or facsimile a confirmation letter must be received.
Once the final date for receipt of requests to participate is reached no more requests from suppliers must be accepted. The requests received must undergo an in-depth evaluation in accordance with EU regulations and a tender list produced.
Written invitations to tender must then be sent simultaneously to all selected suppliers on the tender list. A period not less than 40 days should be allowed before the date for receipt of tenders.
Should a supplier request additional information relating to the tender document, this must be supplied no later than 6 working days before the date for receipt of tenders.
Where a site visit is necessary for a tender to be submitted, the tenderer should be provided with a minimum of 7 days from the site visit to the deadline for receipt of tenders. This may require a reasonable extension to the 40 days minimum specified above for the receipt of tenders.
As with the Open Procedure, departments and colleges should allocate a reasonable length of time to properly evaluate the tenders which may, in a complex procurement, constitute several weeks.
There is an Accelerated Procedure which may be used in exceptional circumstances but poor planning is not an excuse to use these procedures.
The Negotiated Procedure may only be used in specific circumstances and its use under the Supplies Directive is not encouraged by the EU Commission responsible for the Directives. The Procurement Service will provide advice on its use if unusual circumstances which preclude competition exist.
5. Further Considerations
5.1. Technical Specification
The invitation to tender should include a detailed technical specification of the type of product required. The technical specifications or standards must reference European Standards where possible. The conditions in which other standards may be used should be detailed. There must be no positive discrimination towards UK suppliers. All European suppliers should be allowed an equal opportunity.
Further guidance will be provided by the Procurement Service at the time of writing the contract documents.
5.2. Supplier Appraisal, Post Tender Negotiation And Contract Award
There are specific rules for supplier appraisal, the use of post tender negotiation, supplier debriefing and Contract Award.