OJEU and the Brexit Impact

OJEU is an abbreviation for the Official Journal of the European Union and is used to publish tender opportunities across every EU member country. It has been in place since 2003, and the intent is for public sector contracts to be made available for bidders, not just in the resident country but across all member states. Sounds simple and effective, but in practical terms, there’s a lot of ‘red tape’ to get through with bureaucratic processes and procedures, which is counterintuitive when the concept is that all companies of all sizes are encouraged and invited to tender. Many SMEs will not have the resources available to work through all of this to bid for work directly and remain locked in lower down the supply chain.

OJEU is broken down and accessible into three sections: legislation, i.e., regulations, directives, and decisions made by the EU. The next series includes information regarding the EU and judgements made in the Court of Justice and includes expressions of interest requests for projects. The third part is the one that contains the public sector contract notices for work types across all members states. This includes utilities plus all other public sector contracts and EU institution contracts.

The sheer scale of public procurement contracts means that if all notices for every contract were required to be advertised via OJEU, the administrative burden would be huge. For example, the UK spends £290b on public procurement each year. The costs involved in bidding for small value contracts are not commercially viable considering the likely return. To address this, a threshold comes into play and is broken down as follows.

Note that even with the thresholds below, over 746,000 procurement notices are published each year and 235,000 requests for tenderers for works of approximately €545b in value.

1) Public Contracts Regulations 2015:

Central Government:

• Supplies and Service Contracts: €139k
• Works Contracts: €5.35m
• Other Specific Services: €750k

Other Public Sector Contracting Authorities:

• Supplies and Service Contracts: €214k
• Works Contracts: €5.35m
• Other Specific Services: €750k

Small Lots:

• Supplies and Service Contracts: €80k
• Works Contracts: €1m
• Other Specific Services: N/A

2) Defence and Security Public Contracts Regulations 2011

All sectors:

• Supplies, Services and Design Contracts: €80k
• Works Contracts: €5.35m

3) Utilities Contract Regulations 2016

All sectors:

• Supplies, Services and Design Contracts: €80k
• Works Contracts: €5.35m
• Other Specific Services: €750k

4) Concessions Contract Regulations 2016

All sectors:

• Supplies or Works Contracts: €5.35m
• Social and Other Specific Services: €5.35m

The tender notices are uploaded and published on TED (Tenders Electronic Daily) from a raft of different organisations that either manage or receive public funding. These are broken down as above, but there are also sub-categories to make it easier to search. However, this is mainly down to the buyer entering information to select the appropriate categories to begin with. As TED is so huge, many other companies will monitor and filter opportunities as required, but subscription fees are needed for this service.

Post-Brexit

Following the UK’s exit from the European Union in January 2020, there were calls to take the opportunity to overhaul the public procurement regime. As a proposal to do this, the government issued a Green Paper in December 2020 titled “Transforming Public Procurement“. It states a desire to take complete control of the rules that will enable procurement methods and techniques to be much quicker and more efficient.

Following Brexit, the UK moved to ‘Find-a-Tender‘, which went live in January 2021, effectively replacing OJEU. However, as the UK is still part of the World Trade Organisation (WTO) Agreement on Government Procurement, albeit now an independent member, the UK can still access the £1.3 trillion in public sector procurement opportunities.

Proposed Changes

The categorisation above regarding the breakdown of categories into subsectors and financial threshold limits is simplified, removing duplication, and providing the ability to negotiate and deliver more innovative solutions. This contrasts with the previous set up which was very transactional, i.e., issuing a tender for services and receiving a compliant bid back only, which was deemed to stifle the ability to really engage and offer alternative solutions or the ability to proceed through procurement in stages and switch strategies at each stage as the bidders list is reduced to award.

The drive to become more efficient also sees proposals for the government to remove over 350 regulations that currently govern public procurement. The Green Paper seeks to re-define government procurement policy using the following principles:

• The new regulatory framework should align with Treasury’s Managing Public Money
• Good practice – That procurement should support the delivery of national priorities such as economic, social, ethical, environmental, and public safety.
• Value for Money – It should enable the optimal whole life blend of economy, efficiency and effectiveness to achieve the outcome of the business case.
• Transparency – There should be transparency, underpinned by an openness regarding accountability for public money, anti-corruption and the effectiveness of procurements.
• Integrity – good management, prevention of misconduct to prevent fraud and corruption.
• Fair treatment – decision making should be impartial and made without conflicts of interest.
• Non-discriminatory decision making – contracting authorities should not make discriminatory decisions.

Flexible Procurement Strategies

Currently, there are seven procurement methods available for buyers to select, but the criticism has always been these are too rigid and do not reflect the stages that may be required when moving towards award i.e.

• Open procedure
• Negotiated procedure without prior publication
• Restricted procedure
• Competitive dialogue
• Competitive procedure with negotiation
• Innovation partnership procedure
• Design contests

The proposal is to replace the above with three simple procedures, which are:

• A competitive, flexible procedure giving buyers maximum freedom to negotiate and innovate to get the best from private, charity and social enterprise sectors.
• Retain the open procedure that buyers can use for simpler, ‘off the shelf’ competitions.
• Retain the negotiated procedure without prior publication but renaming it as the limited tendering procedure.

Tender Assessment Changes

Previous EU procurement rules required tenders to be assessed on a criterion based on the most economically advantageous tender (MEAT) which is in essence the lowest price, or considered to be the most cost effective, which can be a combination of price and quality, usually based on a ratio between the two e.g., 70:30, 60:40, 50:50 and so on.

However, the current regulations are prescriptive, and there is a criticism that they miss out the broader factors such as social and environmental. That is to say that the quality part of the bid can be about the project or services procured and, therefore, can the buyer also include that businesses commit to the wider requirements?

To address this, the Green Paper proposes reforms that an evaluation of bids is based on the Most Advantageous Tender (MAT). The suggestion is that by adopting this evaluation method, it will allow the buyer to take a broader view on the evaluation criteria in terms of how they can assess value for money and assess prior performance.

To context this, suppliers can be excluded if their past performance has led to termination, damages or other comparable sanctions, which are few and far between. With these changes, a supplier’s persistent deficiencies in the performance of previous contracts can be taken into account.

Challenge on Awards

If the bidder wishes to raise a legal challenge on the award of a contract, the procurement review method is via a traditional court-based system. While such a process is rigorous, thorough, and tested, those participating have said that it is too lengthy to get a decision, too expensive and too complex. For the smaller buyers, SME’s, charities, and social enterprises, this is not an option.

The overriding sentiment here is that the time, cost, and complexity challenges to reach a decision can have a detrimental effect on access to justice.

To address the current situation, the Green Paper reforms include proposals around:

• A tailored fast track system – to allow for an expedited trial process with a scalable approach that can be tailored down to meet the case in question. The scalable part enables the urgency of the case to be recognised, at what stage the procurement is and also if the challenge is on a point of law or a breach of process etc.
• Written pleadings – the premise here is that a word count is imposed on both parties to cut down on the costs of legal support, including barristers for court hearings.
• Disclosure – In the event of a challenge or dispute, both sides must prepare the history of evidence as disclosure to the court. The proposal is for clear and open transparency at every stage of the competition, allowing this time to be cut down and establish the facts much earlier on.
• Capacity – as cases are generally heard at the Technology and Construction Court (TCC), the proposal encourages parties to effect a change that encourages claimants and lawyers to make more use of the TCC’s District Registries outside of London, thereby increasing capacity.
• Timescales – To cut down on time to reach a decision, the proposal suggests that both parties initially set out their case in pleadings, which in turn could lead to faster half-day hearings if the issue in question is an interpretation on a point of law.

Changes in Awards and Outcomes

As it stands, bidders are notified by letter of the contract award and others can request debrief letters. The Green Paper proposes that introducing greater transparency throughout the process will allow the bidders to have a complete understanding of the decision, which will reduce the number of complaints.

Another benefit of the increase in transparency is that, as it currently stands, in the event of a challenge, the contract award is suspended, which in turn means that for on-going maintenance contracts and the like they are forced in to pursuing short term agreements that may not be the most value for money.

Another reform proposed in the Green Paper is a cap on the amount payable under a contract extension using an appropriate profit rate based on a government standard. The view is this would stop any perverse incentive, perceived or otherwise.

Summary

Whilst the Green Paper was published in December 2020 with consultation on the paper following the publication ending in March 2021, it’s doubtful that such reforms will be in place this year and could take longer than 12 months before they are put into place. However, reforms are required, certainly simplifying the current process for buyers and the procurement strategy they can adopt and the drive for transparency at every stage of the process, which will undoubtedly benefit the bidders.

Feature Photo by Christian Lue on Unsplash

About Dean Suttling

A member of the Royal Institution of Chartered Surveyors, Dean has twenty years of experience in commercial management and quantity surveying, undertaking roles for contractors, clients, and consultants.