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PUBLIC PROCUREMENT BEST PRACTICE GUIDE Page 1 of 94

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Public Procurement Directorate TABLE OF CONTENTS

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TABLE OF CONTENTS

TABLE OF CONTENTS............................................................................................. 1

CHAPTER 2: PROCUREMENT STRATEGY ...................................................... 3 2.1 AN OVERVIEW................................................................................................. 3

2.1.1 How can Public Procurement be defined? .............................................. 3 2.1.2 What is the Pre Tendering Procurement Strategy?................................. 3 2.1.3 What is involved in the Pre Tender Phase? ............................................ 3

2.2 PROCUREMENT BASICS ................................................................................... 3 2.2.1 What is the mission of Public Procurement?........................................... 3 2.2.2 What are the objectives of Public Procurement? .................................... 3 2.2.3 What is meant by Value for Money? ....................................................... 3 2.2.4 What is Best Value for Money? .............................................................. 3 2.2.5 How is Value for Money Achieved? ........................................................ 3

2.3 PROCUREMENT POLICY ................................................................................... 3 2.3.1 How is a Positive Procurement Culture created?.................................... 3 2.3.2 When is the Procurement Process Outsourced? .................................... 3 2.3.3 Why Collaborate and Aggregate with other contracting authorities? ....... 3 2.3.4 What are the principles of Procurement Activity?.................................... 3 2.3.5 How can Environmental & Sustainability Issues be promoted?............... 3

2.4 MARKET ASSESSMENT .................................................................................... 3 2.4.1 What is the Role of Competition in Public Procurement?........................ 3 2.4.2 How can Contracting Authorities Engage the Market?............................ 3 2.4.3 When is Market Sounding Undertaken? ................................................. 3 2.4.4 What is Market Creation? ....................................................................... 3 2.4.5 When is there a need to Source Suppliers?............................................ 3 2.4.6 How can suppliers be retained through the Procurement Process?........ 3 2.4.7 What about monopolies and cartels?...................................................... 3

2.5 THE PROCUREMENT PROCESS ........................................................................ 3 2.5.1 Appointment of the Procurement Team .................................................. 3 2.5.2 What are the possible Procurement Procedures?................................... 3 2.5.3 What are the current EU Thresholds? .................................................... 3


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2.5.4 What are the procedures for contracts above EU Thresholds?............... 3 2.5.5 What are the procedures for contracts below EU Thresholds? ............... 3 2.5.6 What needs to be considered when advertising a tender?...................... 3 2.5.7 What is an acceptable procurement timetable? ...................................... 3

2.6 FRAMEWORK AGREEMENTS AND CALL-OFF ARRANGEMENTS .............................. 3 2.6.1 What are the stages of framework agreements? .................................... 3 2.6.2 Why use framework agreement?............................................................ 3 2.6.3 Examples of when Framework Agreements are useful ........................... 3 2.6.4 How is a Call-off arrangement used?...................................................... 3

2.7 EVALUATION STRATEGY .................................................................................. 3 2.7.1 Evaluation stages and their linkage to the tender procedure................... 3 2.7.2 Key evaluation principles........................................................................ 3 2.7.3 Determination of Technical Specifications .............................................. 3 2.7.4 What types of specifications can be used? ............................................. 3 2.7.5 What criteria should I use to select suitable economic operators?.......... 3 2.7.6 What criteria should I use to award the contract? ................................... 3 2.7.7 What about the Evaluation Panel?.......................................................... 3 2.7.8 Summary of the decisions to be taken at the level of formulation of the evaluation strategy ................................................................................. 3

2.8 CONTRACT CONSIDERATIONS .......................................................................... 3 2.8.1 What is the Contract trying to do?........................................................... 3 2.8.2 What type of contract should be issued? ................................................ 3 2.8.3 What will be the contract monitoring process?........................................ 3 2.8.4 How long should a contract run for? ....................................................... 3 2.8.5 What type of payment mechanism should be put in place? .................... 3 2.8.6 Negotiating on variations to the Contract ................................................ 3 2.8.7 What types of commercial arrangements are available?......................... 3

2.9 PARTICULARITIES IN THE PROCUREMENT OF SUPPLIES, SERVICES & WORKS......... 3 2.9.1 What are the specific features of the procurement of supplies?.............. 3 2.9.2 What are the specific features of the procurement of services?.............. 3 2.9.3 What are the specific features of the procurement of works?.................. 3 2.9.4 How does the Legislation apply to mixed contracts?............................... 3

2.10 EXEMPTIONS TO THE RULES SPECIAL CASES .................................................. 3 2.10.1 How are the Exemptions defined?.......................................................... 3 2.10.2 What strategies could be applied in the exemptions? ............................. 3 2.10.3 How can competition be maintained in the Exemptions? ........................ 3 2.10.4 Acquisition of Physical Infrastructure: Rent/Lease or Buy?..................... 3


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Public Procurement Directorate CHAPTER 2: PROCUREMENT STRATEGY

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CHAPTER 2: PROCUREMENT STRATEGY

2.1 AN OVERVIEW

Public procurement is one of a number of activities within the operations of the government of the Republic of Cyprus that requires special attention in promoting good corporate governance and better overall value for money.

The current level of public sector procurement makes a significant impact on the economy of the island in sectors such as construction and public works, transport, energy, telecommunications, and heavy industry. Local and regional authorities and public utilities in the Republic of Cyprus regularly purchase goods, for example: computers, office equipment, public transport vehicles; services, for example: catering or cleaning, management consulting or technical assistance services; and public works for example: the installation of new public transport infrastructure or the construction of new buildings.

There are approximately 760 Contracting entities, as defined by the Law, including Ministries, Departments, Independent authorities, Municipalities, Bodies governed by public law, Bodies in the Utilities sector and other local authorities. This provides a very wide and diverse group with different approaches to public sector procurement.

2.1.1 How can Public Procurement be defined?

Public procurement can be defined as the acquisition, of supplies, services and works by any public body and ranges from the purchase of routine supplies or services to formal tendering and placing contracts for large infrastructural projects by a wide and diverse range of contracting authorities. Public procurement involves the use of public money to accomplish specified public purposes, beginning with the identification of a need and ending with the completion of a contract. Examples include:

The Ministry of Commerce, Industry and Tourism plans to purchase a number of floating pontoons for new marina developments at Larnaca and Paphos;

The Cyprus Tourism Organisation plans to examine the establishment of a local partnership approach to the development of niche tourism across rural and coastal areas;

The Department of Civil Aviation of the Ministry of Communications and Works plans to expand the terminal at Larnaca airport within the next two years to upgrade the facilities and deal with the increasing demands from tourism.


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The Department of Government Purchasing and Supply procuring the supply of army shirts.

The Pharmaceuticals Services Department of the Ministry of Health procuring the supply of medicines.

It is important that all public procurement across the different contracting authorities reflects the latest and best practices in procurement as compliance with the EU

Directives and the EU Treaty principles on non-discrimination, transparency, freedom of movement between member states.

2.1.2 What is the Pre Tendering Procurement Strategy?

In Chapter 1 the focus of our considerations was on project definition. A clear and sound definition is the prerequisite for efficient procurement decisions and procurement operations. Assuming that the Contracting Authority has determined a project is feasible and that there is a robust business case and an approved Project Fiche the pre-tendering process may then begin. This chapter defines the procurement strategy, focusing on establishing a clear definition of the pre-tendering aspect of the procurement process. The Chapter incorporates the requirements laid down by the European Union (EU) and Cypriot public procurement legislation and best practice on procurement process and procedures from across Europe.

A procurement strategy provides a pattern of decisions and events associated with acquiring specific goods, services and works to support your business. Any government purchaser will be expected to produce a procurement strategy befitting the value and complexity of the procurement. The strategy is set out at the pre-tendering stage of the process and assures the Contracting Authority that the selected procurement approach is appropriate for the proposed acquisition. The procurement strategy should facilitate a collaborative approach and open communication between potential suppliers and the Contracting Authority.

2.1.3 What is involved in the Pre Tender Phase?

This phase involves the formulation of the procurement strategy by following the steps below, during which appropriately justified decisions regarding the procurement are taken:


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Figure 2-1: Steps to be followed for the formulation of Procurement Strategy

Key factors influencing the procurement strategy relate to the degree of complexity, innovation and uncertainty about the requirement, together with the time needed to achieve a successful outcome.

2.2 PROCUREMENT BASICS

Any public sector procurement process requires a mission and related objectives that should be recognised by all contracting authorities operating within the public procurement system of the Republic. The existence of mission and clearly defined targets relates to achieving

2. Consider the procurement basics

10. Consider the exemptions & special cases & adhere to when appropriate

1. Outline the Procurement Strategy

3. Consider procurement policy/

requirements

4. Undertake a market assessment

5. Develop the procurement process

6. Examine the use of Frameworks

Agreements

7. Consider the evaluation strategy

8. Examine the Contract Management

9. Consider the specifics of supplies, services& works


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value for money in public expenditure which is based around a number of key guiding principles.

Depending on the complexity of a requirement, considerable input in terms of lead time and expertise is required by contracting authorities to procure public contracts which requires a structured process that covers

Defining what is to be purchased,

the most promising sources for deliverables identified,

the appropriate and correct procurement procedure has to be determined,

the clauses and terms of the tender documents and the contract have to be drafted

competitive bidding has to be arranged,

the evaluation of bids has to be organised,

the recommendation for the award of contract taking into account all the advantages and the risks has to be prepared, and

All details need to be documented in an audit-proof way.

This section details the mission of public procurement and relates this to the practical requirement of contracting authorities to achieve best value for money. This section considers a number of key questions, including:

What is the mission of public procurement?

What are the objectives of public procurement? What is meant by Value for Money?

What is Best Value for Money?

How is Value for Money Achieved? The Whole Life Cost

2.2.1 What is the mission of Public Procurement?

The mission of public procurement is to ensure and enable contracting authorities meet their policy and business objectives in the delivery of better public services. The public procurement process spans the whole project life cycle from initial conception and definition of the needs of the public service through to the end of the useful life of an asset or the end of a contract.

2.2.2 What are the objectives of Public Procurement?

The objectives of all personnel involved in public procurement are to: Ensure an open, transparent and compliant process;


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Achieve continuous improvement on all categories of expenditure through a transparent and fair procurement process;

Achieve Value for Money in all procurement activities;

Promote equality of opportunity for all businesses and in particular SMEs and SEs;

Work in partnership with the private sector and other organisations to achieve value for money, quality and effective service delivery;

Promote innovation;

Encourage environmental and social sustainability through effective procurement policies and practices.

2.2.3 What is meant by Value for Money?

All procurement of goods, services and works must be based on Value for Money (VFM), that is, to deliver:

the right goods, services, and/or works

of the right quality

in the right quantity

at the right time

at the right price

And delivered to the right place.

Value for Money is not just about price.

Other factors that may also need to be taken into account when assessing Value for Money, include:

Availability of suppliers - For example, if there are a large number of suppliers in the market place it is likely that the cost of providing supplies, services or works will be cheaper due to the higher level of competition. In this case it is likely a contracting authority will receive better value for money.

Additional costs (i.e. transport, postage and packing, storage) These will vary according to the location of the supplier and the requirements of the contracting authority.

Possible discounts for bulk purchases (although these may be offset by interest charges and storage costs). Economies of scale can reduce costs particularly if there is an aggregation of need across different contracting authorities.

Objectives of the procurement. The objectives of the procurement need to be tangible and measurable to be able to assess value for money.


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Environmental considerations and long term environmental costs It is important that sustaining the environment is not always thought of as an increase in costs. For example recycling of waste material on a construction site may reduce clearing costs.

The cost of the procurement process itself. It is important that the cost of the procurement process is not disproportionate to the costs of the actual contract

The location of the supplier. For example in an ICT service contract , contracting authorities may get a greater number of consultant delivery days from a closer supplier than one who includes travel costs and fewer delivery days.

2.2.4 What is Best Value for Money?

The purpose of public procurement is to obtain the best VFM (BVFM) and to do this it is important to consider the optimum combination of whole life cost (i.e. acquisition cost, cost of maintenance and running costs, disposal cost) of a purchase and its fitness for purpose (i.e. quality and ability to meet the contracting authoritys requirements). This definition enables contracting authorities to compile a procurement specification which includes social, economic and environmental policy objectives (SEE criteria) within the procurement process. Whole life cost includes both quantifiable and non-quantifiable or intangible costs and benefits.

Procurement processes within contracting authorities can only result in best value for money when the following ten guiding principles governing the administration of Cypriot public procurement have been satisfied to an acceptable extent:

Table 2-1: The ten guiding Principles to achieve Best Value for money

Competition - Competition among suppliers should be encouraged in the most efficient and effective way.

Efficiency & Effectiveness- fficiency and effectiveness should be sought in the procurement process to secure value for money for the contracting authority.

Fairness/ Non Discrimination Act fairly during the whole procurement lifecycle without imposing unnecessary burdens or constraints on suppliers or potential suppliers. Avoid any favourably treatment to specific supplier or potential supplier.

Objectivity/Integrity/ Honesty Declare any conflict of interest that affects or appears to affect their judgment; Reject gifts, hospitality and benefits of any kind from supplier or a potential supplier, which might be reasonably seen to compromise their objectivity or integrity.

Transparency Ensure equal conditions and accessibility to all economic operators, by informing them in an open and transparent way.

Accountability Be accountable for the responsibilities assigned to them, as well as for the decisions made by them, keep the appropriate records.


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Confidentiality/ Accuracy of Information/ Protection of Intellectual Property Respect the confidentially of information acquired in the course of performing their duties and not disclose any such information without having proper and legitimate authority to do so.

Conformity to the Laws Serving the Public Interest/ Responsiveness Conform to the national and EU legislation, as well as to other requirements and commitments regarding public procurement. Serve the public interest and act with responsiveness in using the taxpayers money.

Professionalism Work to a high standard of professionalism by complying with the legislation in force and applying the best practices.

Green purchasing- Exploit the opportunities to incorporate environmental considerations and issues in each stage of the procurement lifecycle.

2.2.5 How is Value for Money Achieved?

Essentially, whole life costing, (WLC), incorporating the acquisition, operation, maintenance and disposal of the asset, is aimed at answering the question What is the minimum WLC of achieving these business or policy objectives ? rather than the more limited question What is the cost of buying this item? In deciding on which option to select for meeting a need or providing a service, it is essential to consider all the costs involved in each option.

Some of these costs will be incurred at the outset, when equipment is bought or initial payments are made for service contracts. However, many of the costs will only arise over the life of the option, for example, as a result of operating the equipment, such as, energy costs, equipment maintenance costs, staff training, and disposal costs, along with the environmental impact of both the old equipment and the new equipment at the end of its working life.

The cost of achieving an objective differs from the cost of buying an item in two ways. Firstly a purchase may not be necessary for the achievement of the objectives

identified. For example; there may be a number of different options available such as hire, lease, and partnership along with outright purchase. Second, the purchase price is unlikely to be the only cost incurred as a result of the procurement. For example, there may be operating costs including: fuel costs, maintenance and labour costs along with disposal costs including recycling. Determining the full cost of meeting a given requirement involves an understanding of how the eventual solution will be operated over the whole life. It is always necessary to consider what the procurement is supposed to provide, the cost options of each of the solutions along with risks and the relative WLC of meeting the business or policy requirements.

The WLC of using an item can be broadly divided into three categories: acquisition, operating and disposal costs.

Acquisition costs are incurred before the solution is ready for implementation.

Operating costs are incurred as a result of actually using it or keeping it available (maintenance costs).


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Disposal costs are incurred on disposal or when dealing with site contamination or other harmful effects.

There may also be some income that will be realised on disposal if there are assets with a resale or residual value. This and any rental income when assets are not in

use can be offset against the costs in determining the whole life cost.

The following analysis of costs needs to be considered by contracting authorities when considering the options of buy, lease, hire or find an alternative.

Table 2-2: Analysis of Costs

Type of Cost Detail of Costs Acquisition Purchasers Legal costs

Cost for Writing Specification Purchase Price/Rent/Hire Purchase Price Software Licences Fees to copyright holders One-Off Licence Fees Cost of Transportation to Site Installation Costs Preliminary Inspection Costs Sustainable Development Costs

Operating Insurance Accommodation of operators Annual Licence Fees Operatives Wages and Salaries Fuel and Electricity Cleaning Costs Periodic Inspection Costs Spare Parts and Other Maintenance Costs Sustainable Development Costs

Disposal Sellers Legal Costs Costs of Removing Installations Cost of Transportation from Site Refuse Disposal Charges Site Clean-up Costs Environmental Sustainable Development Costs

Although whole life costing deals with the total cost of an asset over its total life, it should be remembered that different solutions may have different life spans. The cost of the chosen solution should therefore be annualised to enable the costs of different solutions to be properly compared (such issues can arise either at the initial business case or at the evaluation stage provided that it has been stated in the tender documents and broken down in the bidders proposals).

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The following simple example gives an illustration of how to annualise costs for comparative purposes.

Example 2-1: How to annualise costs for comparing different solutions

Electro Mechanical Services requiring the supply and maintenance of 5 buses. A bus with automatic transmission, which has a whole life cost of 270, 000 euro and a life span of 15 years, has an annual cost of 18, 000 euro. A bus with manual transmission, which has a whole life cost of 200, 000 euro but a life span of only 10 years, has an annual cost of 20, 000 euro. The bus with the higher whole life cost has the lower annual cost. The life span of a solution will, of course, depend on the length of time the solution is needed as well as its durability. In the above example, if the bus was only needed for 10 years and the total cost of using the bus with automatic transmission for the first 10 years would be 180, 000 euro, the bus with automatic transmission would deliver better value for money.

2.3 PROCUREMENT POLICY

Establishing procurement policy means taking essential case-by-case procurement decisions within the limits that are defined by the EU Directives and the laws and regulations of the Republic. All procurement activity needs to reflect best practices in procurement, which will ensure the promotion of transparency, accessibility, value for money, equality and sustainability. This section deals with some specific questions including:

How is a positive procurement culture created?

When is the procurement process outsourced?

Why collaborate and aggregate with other contracting authorities?

What are the principles of procurement activity?

How can the environmental and sustainability issues be promoted through procurement?

2.3.1 How is a Positive Procurement Culture created?

A positive public procurement culture is one of the Public Procurement Directorates (PPD) top policy priorities for raising the standards of public services throughout the public sector and delivering a better public service. A positive procurement culture requires a top-down commitment and leadership to the process supported by bottom-up processes and procedures, including:

The development of strategic generic policies and procedures (such as this best practice guide) on a cross - departmental approach which will ensure a more standardized approach to procurement;

Ensuring there is commitment to the agreed procurement processes, at the most senior levels within the contracting authorities.

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Making Best Value for Money central to any procurement activity; Ensuring that all procurement activity is conducted in an open, transparent and non-discriminatory way, allowing all potential suppliers to compete for business on equal terms;

Promoting long-term thinking and commitment to strategic procurement issues;

Ensuring that all procurement is undertaken with appropriate qualified professional and experienced staff.

The following checklist can be used by contracting authorities to examine whether they are operating within a positive procurement culture.

Checklist 2-1: Developing a positive procurement culture

Action Y/N Do you measure and achieve continuous improvement in all categories of procurement expenditure?

Do you achieve best value for money from all procurement activities? Do you ensure accountability towards the Contracting Authority, the supplier and the beneficiaries?

Do you promote equality of opportunity for all economic operators? Do you promote integration with e-government? Do you work in partnership with economic operators to achieve sufficient capacity and competition, best value for money, quality and effective service delivery?

Do you promote innovation? Do you encourage sustainability and promote environmentally friendly procurement?

Do you develop professional procurement skills and expertise? Do you recognise the importance of programme and project management skills?

Do you aim to maximize the influence procurement has on all non-pay spend? (such as the development and/or implementation of new government policy)

Do you know what your key areas of spend are and therefore your main budgetary commitments?

Like other professionals, procurement experts should:

liaise and network with other colleagues working in procurement;

improve and update their knowledge regularly;

Follow meticulously the ethics of their profession;

Measure and manage procurement performance.

This should be undertaken through continuous professional development (such as long-life vocational training) and membership of a relevant professional body.

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2.3.2 When is the Procurement Process Outsourced?

Normally, a contracting authority will undertake the procurement process in-house; however, there may be a valid reason to outsource one or several parts of the procurement process. An example could be to reduce fixed personnel costs or engage technical and /or professional expertise.

It is important to note that even if some parts of the procurement process are outsourced, the decision-making still remains with the contracting authorities.

The following table outlines the strengths and weaknesses of the two options (in house procurement and procurement through a third party procurement agent), as

well as the actions contracting authorities can take to reduce weaknesses of both options.

Table 2-3: Strengths and Weakness of different approaches to procurement

Option Strengths Weaknesses Actions to Reduce Weaknesses

In-house procurement - Greater control on technical & commercial procurement decisions

- Greater control on priorities,

- Flexibility - Expertise developed

& maintained within the team

- Reduced lead time necessary to prepare contracts to outsource procurement

- Procurement of deliverables unspecific to the usual specialisation

- Unsteady workload for procurement staff (perhaps temporarily under-worked)

- Lack of expertise to deal with specialised aspects of procurement or the contract (particularly in small contracting authorities)

- Lack of resources to deal with demands on procurement staff

- Ensure that in-house personnel are an integral part of the procurement team

- Develop sectoral expertise within the in-house procurement team.

- Manage the expectations of contracting authorities on the time required for the procurement process

Procurement through a Third Party procurement agent

- Specialised technical know how necessary (health, science, etc.)

- Specialised commercial know how necessary (e.g. PPP/PFI arrangements)

- Flexibility on staff levels within the contracting authority.

- Possibility for reduced confidentiality on forthcoming projects.

- Additional cost - Reduced operational

control on the procurement process

- Lack of development of know-how and expertise within the contracting authority.

- Ensure strict confidentiality agreements are signed with any Third Party Organisation.

- Assign a member of the contracting authority team to lead the procurement process

- Incorporate staff training and development into the procurement process

One of the main disadvantages of contracting outside experts in the procurement process is the potential to create a situation in which the contracting authoritys key staff predominantly

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comprises outside individuals possessing the required expertise but having no experience working as a team.

It is important that all staff employed within any contracting authority are properly inducted at the start of their employment and fully adheres to all aspects of the Code

of Ethics and Best Practice Guide.

In case that a contracting authority does not have the necessary resources or expertise to carry out the procurement process, it can assign the whole process to

another public contracting authority which has the relevant capacity and capabilities.

2.3.3 Why Collaborate and Aggregate with other contracting

authorities?

It is important that different government departments collaborate on essential aspects of procurement to maximise use of resources, improve opportunities for value for money and standardise their approach. The reasons to collaborate include:

sharing market intelligence

sharing best practice, expertise and approaches to procurement

Defining annual requirements to identify opportunities for collaboration or aggregation of contracts across a number of contracting authorities.

It is important that government officials regularly and systematically pool market intelligence and share strategic information about future projects and current bids, with a view to better understanding the totality of the public sectors likely demands on industry and the nature of the market necessary to meet those demands. This is particularly important in the Republic, where there are sometimes questions regarding the volume of available industry capacity for specialized contracts.

In the majority of cases this collaboration is most easily managed on a sectoral basis such as IT requirements, finance requirements and so on.

Example 2-2: Collaboration of Contracting Authorities on a sectoral basis

The Department of Information Technology Services, which possesses expertise in Information and Communication Technology, has undertaken the responsibility to procure relative systems or services for all the Contracting Authorities. For this reason, the relative needs of the public service are aggregated and in this way the public procurement approach is formalized.

2.3.4 What are the principles of Procurement Activity?

As well as adhering to the Key Guiding Principles for procurement as outlined in section 2.2.4, it is important that all contracting authorities conduct business dealings with suppliers, consultants and contractors on the following additional principles:


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place orders and award contracts in accordance with the law, regulations, relevant internal policies rules, regulations, best value principles and the best practice guide

comply with the Code of Ethics for personnel involved in public procurement

adhere to the obligations of the government in the contract terms and conditions. It is important for contracting authorities to ensure that any terms and conditions included in a contract are realistic and achievable for the authority. For example, in relation to payment or frequency of monitoring taking into consideration the availability of resources.

ensure information given to suppliers is accurate, relative and fair

account for your actions and your part in reaching decisions

Project specifications and criteria should be as open and generic as possible to avoid favouring any one solution or any one economic operator.

Managers should remind procurement personnel in writing and on a regular basis (usually twice a year) of the risks of being targeted for fraud and corruption.

Procurement personnel should report such attempts immediately to their supervisors.

Conflicts of Interest

Personnel involved with procurement, (including members of tender boards and evaluation committees) are required to advise their contracting authority of any

interests that might reasonably be expected to influence them and their activities as an employee of the public sector. If it comes to your knowledge that a contract in which you have any pecuniary or other interest, direct or indirect, has been or is proposed to be entered into you should give written notice to your contracting authority through the nominated procurement manager.

Gifts, even those of low value, should be rejected and returned by mail or if left behind in the office should be pooled and made available to charity organisations, as

stated in Law 1/90, For the Public Service and in the recently devised comprehensive guide on procurement ethics (which has been developed in parallel with this Best Practice Guide on Public Procurement).

2.3.5 How can Environmental & Sustainability Issues be promoted?

Significant environmental and social impacts can occur throughout a supply chain and can be reduced through procurement strategies. Some projects require particular environmental standards from service providers or particular environmental credentials in goods to be used. An important aspect of the contracting authority meeting its sustainability objectives is the early identification of specific requirements and standards in the development of a procurement strategy.


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Suppliers need to be able to meet the environmental and social requirements of projects, for goods and services. In addition, good practice and the provision of information on these issues in relation to the goods and services by the suppliers will help the contracting authority meet and measure progress against its sustainability objectives and should therefore be encouraged.

When developing a procurement strategy, contracting authorities can use the following checklist to make sure measures are in place to minimise negative and

maximize positive environmental and social impacts within the procurement process:

Checklist 2-2: Minimizing negative and maximize positive environmental and social impacts

Ensure the procurement process complies with current and potential future environmental legislation such as the use of certain materials or the labeling requirements on goods.

Ensure that procurement supports the specific environmental and social objectives and targets of programmes such as the energy efficiency of new buildings and equipment.

Ensure that service providers have the capability to meet the technical environmental aspects of projects.

consider how goods are to be used and ultimately disposed of or recycled and request that suppliers aid the contracting authority in minimising the use and disposal impact

As far as is practical and reasonable, request information from suppliers on the environmental and social impacts of the products and services being supplied, and how these have been minimised. In particular look for evidence of good practice such as certification like fair trade.

Encourage suppliers to minimise the environmental impacts of their operations, products and services by asking questions and thereby demonstrating the importance that the contracting authority places on these issues. One straight forward way to do this is for a contracting authority to specify the minimum standards (e.g. ISO) and then evaluate if these can be met by the supplier. (It would be impossible to evaluate a range of different environmental standards in an EU contract that can only be awarded on the lowest price or MEAT).

Demonstrate to suppliers the contracting authoritys own commitment to environmental and social issues through its own activities and explaining its importance to its stakeholders.

When awarding contracts it is important that environmental criteria (such as exhaust emissions and noise levels when acquiring vehicles) and social criteria (such as

accessibility for people with disabilities when constructing a new building) form an integral part of the requirements as set out in the specification, (discussed in more detail in section 2.7.3).

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2.4 MARKET ASSESSMENT

Contracting authorities should continually engage with key sector groups to ensure and enable the effective implementation of its policy and deliver on its requirement to provide better public services. The most effective approach to bvfm is to maintain competition in the marketplace. It is important that contracting authorities take a strategic, long term approach to the marketplace to gain suppliers knowledge of markets and trends (market engagement) as well as gain an understanding of the capacity and capability of markets in relation to specific projects (market sounding). There are some key considerations that need to be addressed in this section, including:

What is the role of competition in public procurement?

How can contracting authorities engage the market?

When is market sounding undertaken?

What is market creation?

When is there a need to source suppliers?

How can suppliers be retained through the procurement process?

What about monopolies and cartels?

2.4.1 What is the Role of Competition in Public Procurement?

Contracting authorities will benefit from keeping competition alive. They need to make sure and build sufficient long term capacity and capabilities within the sectors they regularly procure, through regular engagements with key sectors such as construction, IT etc. along with the development of market intelligence. In a sellers market with little or no competition it is likely contracting authorities will encounter an up-hill battle in ensuring best value for money. In a buyers market with a lot of competition, there is a good chance of fulfilling their mandate. Therefore, contracting authorities should use their commercial influence to help improve the competitiveness of their suppliers and ensure that appropriate procurement policies and principles cascade down the supply chain.

The following checklist outlines simple measures contracting authorities can take to include SMEs and/or Social Enterprises in the supplier base.

Checklist 2-3: Maximizing SMEs and SEs in the supplier base

Ensuring the wide dissemination of information about procurement opportunities, through appropriate business and voluntary and community networks;

Ensuring that any consultation panels/groups that are established have adequate representation from a wide range of different suppliers to meet the differing needs of contracting authorities and include SMEs and SEs etc

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Encouraging partnerships and collaborations within the sectors or with larger organisations. This is often desirable in order to adequately meet the specific and specialist needs of the contracting authorities

Sponsoring capacity building projects for SME and Social Economy businesses with respect to procurement

Ensuring all goods and services should be acquired by competition unless there are convincing reasons to the contrary. For example, the ability for a contracting authority to maximize vfm through purchasing supplies through a receiver dealing with a bankruptcy situation.

Working with small and medium-sized and social enterprises suppliers is to be encouraged in order to strengthen long-term competition. The more SMEs and SEs bidding for work in the long term the greater the competition in the market place. However any potential supplier must meet the basic standards set by the contracting authority, such as:

pass a financial appraisal appropriate to risk (to ensure financial capacity); show they have the technical capability for the requirement;

demonstrate that they can reliably deliver goods and services within required timescales;

Provide customer support.

meet BVFM criteria

Comply with relevant legislation and policies.

An association of bidders can take either the form of a joint venture or a subcontract. Under a joint venture all members, if awarded the contract, shall individually sign and

be jointly and severally liable for the entire assignment. This is not to be encouraged as it is more difficult for the contracting authority to manage. Collaborative partnerships where the lead supplier can propose to subcontract some of the work to another supplier are much more manageable for contracting authorities. In this case the lead supplier should play the main role in the provision of supplies, services or works under the contract.

At first glance it might seem logical to give a number of contracts for a certain type of project to a particular supplier as they have the best historical record of performance.

Over time this is likely to diminish competition in the marketplace, leading to a monopoly and creating difficulties in revitalising competition in the longer term.

Suppliers must not:

be awarded contracts without the application of a competition;

be used continuously without referring to the market place from time to time to ensure BVFM is being achieved;

be used to the exclusion of other potential suppliers;

be connected to staff within the contracting authority without a Declaration of Interest having been made;


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Contracting authorities must refer to the Laws of the Republic in order to ensure that all EU and national policies and procedures related to public procurement are implemented.

2.4.2 How can Contracting Authorities Engage the Market?

It is important that contracting authorities engage in a two way communication process with the marketplace when establishing the procurement policy. Strategic engagement can take a number of forms and are detailed below.

One useful way to undertake strategic market engagement prior to the implementation of policies is through Public/Private Reference Groups (PPRGs).

These groups usually consist of public sector officials, industry groups (such as the Chambers of Commerce) and potential suppliers (usually MDs, CEOs or specific representatives groups). The group can inform the effect of implementing certain government policies or the adaptation of certain procurement processes. There is also an opportunity to secure supplier input/buy in, to particular government policy.

Contracting authorities take responsibility for setting up PPRGs which may meet only a few times/year depending on need. However they have proved invaluable in securing supplier input/buy in to particular government policies.

It is important to keep detailed written records of all meetings and make them available to all potential suppliers (for example on the website). Contracting

authorities should ensure that general engagements in respect of a project should stop as soon as a formal procurement project is initiated.

2.4.3 When is Market Sounding Undertaken?

Prior (and well in advance) of any procurement exercise, contracting authorities may wish to assess the reaction of the marketplace to a particular requirement or procurement process. Particular areas of interest might be:

the more accurately estimate the required budget for a particular contract

to refine and further clarify the requirement and/or produce the specification

to identify potential suppliers

To develop general market knowledge.

There is no specific process for market sounding and it does not follow any specific EU or national rules or procedures. It is however, appropriate for contracting authorities personnel to make contact with suppliers through attending trade fairs, exhibitions and demonstrations. Other ways of communicating include PINs, running workshops and conferences and via the internet. The outcome of the market sounding process is for contracting authorities to have a better understanding of the likelihood of generating a competitive response to a requirement.

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A key element is to gather and consider market intelligence within key sector groups and bring the suppliers perspective to the public sector procurement process. The benefits of market sounding include:

Saving time and effort by bringing a precise focus to later procurement activities;

early visibility of issues that will affect the project; Early understanding of project risks; Develop more competitive procurement strategies;

Ensure and enable capacity to meet future programmes and projects. There are four key areas where market sounding may assist:

Assessing the feasibility of a proposed project; Assessing the capability of the market place to deliver;

Assessing whether there is an established market to deliver the project and an adequate number of suppliers;

Assessing the capacity of the market to deliver.

The following checklist provides a series of questions that a contracting authority may wish to answer when undertaking a market sounding process.

Checklist 2-4 : Considerations when undertaking a market sounding process

Consideration Y/N

Is the project you are considering actually feasible? (technically, financially, operationally and within the required timeframes)

Has the project ever been undertaken before? Can the project be delivered by a single supplier? Does the project require a consortium of suppliers due to its complexity or innovation?

Is there an established market for the requirement?

Are there enough suppliers in existence for a competitive procurement?

Can the market deliver what you require within the timeframe?

Can the market deliver what you require on a large enough scale?

Market sounding may only be undertaken before the commencement of the procurement process. It is important that personnel do not compromise any subsequent procurement exercise in any way e.g. by giving any one supplier additional information on any forthcoming contracts and therefore an unfair advantage in the bidding process.

When appropriate, contracting authorities should ensure that there is appropriate consultation with members of the public who will be directly affected by the outcome

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of procurement and also with the wider community and other stakeholders.

Market sounding involves no element of supplier selection or bid evaluation and involves no commitment from either side. Market sounding is not appropriate for

every project. It is probably more beneficial for new/innovative projects particularly within ever developing sectors such as ICT, or projects involving high technical requirements such as large infrastructural projects.

Engaging the market provides an opportunity to ensure that services provided are at the forefront of those available.

2.4.4 What is Market Creation?

Contracting authorities may need to address a proactive approach to the marketplace when they believe that market interest in a particular project may be low. This may occur if a supplier believes that an existing provider is too strongly entrenched with the contracting authority or if there are simply not enough bidders to respond.

There is then a need to take a different than normal approach to stimulate an interest and generate a competitive market response. The contracting authority needs to approach the marketplace and the ways of doing this is through, for example:

Market sounding processes as outlined above

Contacts with, for example: trade unions; supplier organisations such as the Chamber of Commerce & Industry; organisations such as the Cyprus Tourism Organisation; and trade bodies such as the Hotel Association and the Employers and Industrialists Federation.

Running selling to events, for example workshops and conferences with the participation of suppliers

The contracting authority website with an interactive discussion page.

The need to create a market is more likely to occur if:

the scale of the project is too large or too small, the geographical boundaries appear unrealistic,

the project involves too many key stakeholders, suppliers have concerns about the associated risks/commercial viability,

The requirements are new or specialist.

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2.4.5 When is there a need to Source Suppliers?

When there is a need to create a market it is likely that contracting authorities will also experience the need to determine suitable potential suppliers from whom tenders may be sought. This sourcing process is particularly relevant if:

the product or service has not previously been procured;

demand for goods or services not previously purchased arises;

there are too few known suppliers;

the existing supplier is performing badly;

the market is rapidly changing;

there is a requirement to improve competition between suppliers invited to tender for a contract;

a benchmarking exercise suggests that VFM is not being delivered, i.e. it is important to assess the value of a bid against recent bids for similar projects across all of the contracting authorities.

When sourcing potential suppliers, it is good practice to consider small and medium sized firms as well as larger, well-known companies.

PINs (Prior Information Notices) can help to alert potential suppliers to the opportunity and open a dialogue with them. Potential suppliers may also be requested to complete an expression of interest at this stage. Although this is not obligatory and

not stated in the Law, contracting authorities may wish to request an Expression of Interest within the PINS in order to assess the level of interest/ potential number of suppliers that may be interested in bidding for the contract. PINs include details of the contracting authority, contact details and a brief overview of the requirement including background, type of service, timescales and so on. While they should be broad enough to allow for flexibility later, they should also be precise enough to avoid sending mixed, contradictory or misleading messages to the market. Insertion of a PIN does not commit contracting authorities to purchasing or proceeding with a project if circumstances change.

Written records must be retained on the appropriate file which show which suppliers were invited to quote/tender, why suppliers were approached and when requests for

quotes/tenders were made. If in doubt about the inclusion/exclusion of a supplier at the sourcing stage, consult with your Senior Procurement Officer/Procurement Manager (if he/she exists). It is important to note that this is permitted only in certain procurement procedures which are provided in the Law (e.g. Negotiation procedure without advertising)

Such dialogue is an act of balancing because it carries the risk of contravening the principle of equal treatment. It must be clear to project designers that early market

engagement leading to the subsequent tailoring of project requirements to a certain suppliers product is forbidden. Project requirements and specifications must be kept neutral so as to allow open competition.


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As a Member State to the WTO Agreement on Government Procurement, Cypriot contracting authorities can benefit from the access to markets in countries that have ratified this Agreement.

2.4.6 How can suppliers be retained through the Procurement

Process?

Contracting authorities need to work towards developing and enhancing a long term competitive marketplace. One important way to do this is to understand the suppliers perspective throughout the procurement process and keep as many involved as possible.

Suppliers make decisions on the continuation of the bidding process at a number of key points in the procurement process usually related to the time and cost associated with submitting the bid against the likelihood of success. Key decision making points include, for example, the issue of a PIN, OJEU advert, issue of a prospectus, pre-qualification questionnaire, issue of the terms of reference and so on.

Ensuring a competitive response means holding on to as many bidders as possible, therefore it is important that contracting authorities keep the different stages of the

process to a minimum i.e. do not issue a pre-qualification questionnaire unless it is necessary.

The following outlines ways that contracting authorities can keep processes simple and maintain a reasonable level of bidders, while also lowering the barriers to entry for

SMEs/SEs.

Table 2-4 : Lowering the barriers to entry for SMEs and SEs

Consider dividing a large project into a number of different stages (ensure you refer to aggregation issues).

Set out a clear and realistic timetable at the start of the project. Reduce bid fatigue through timing the release of contract notices across the

contracting authority

Ensure the project is commercially viable from the business case as outlined in Chapter One

Convince the marketplace that the bid is winnable and that the contracting authority is willing to displace the incumbent supplier or in-house provision. This may take a longer term approach whereby the contracting authority needs time to prove that other suppliers do win contracts due to their capability and capacity

Keep delays, uncertainties and changes of direction in the procurement process to a minimum to reduce any additional expense or lack of interest from the bidder.

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2.4.7 What about monopolies and cartels?

Through ongoing market intelligence and a cross departmental approach to assessing the marketplace, it is possible for a contracting authority to identify when suppliers may be attempting to/ or have eliminated the competition thus forming a locally based monopoly. The monopoly operates as one single seller and will work towards gaining a higher price for a product or service on the basis that they are the only supplier. An example includes when, large management consultancy companies agree collectively to continually under price smaller, lower value contracts for a prolonged period of time (up to 1 year), while gaining high profits on higher added value projects with the contracting authority. In the long term this is likely to eliminate smaller suppliers that depend on these contracts for survival thus ensuring only a few, larger, competitors remain in the marketplace.

It is important to remember that contracting authorities can inadvertently create a monopoly in the marketplace by, for example being too specific or unnecessarily

setting standards too high within the specification.

Where monopolies cannot be maintained some suppliers of a certain group of products may engage into cartels. This is an association of independent companies

formed to regulate the price and sales conditions of the products or services they offer. Cartels are illegal and any suspicion must be reported, in the first instance to the Commission for the Protection of Competition with a notification to the Accountant General. Going for a different technical solution may be an option for the contracting authority.

2.5 THE PROCUREMENT PROCESS

This section outlines a number of key decisions at the pre tendering stage and addresses a number of key questions for the contracting authority, including:

What is important when appointing the procurement team?

What are the possible procurement procedures?

What are the current EU Thresholds?

What is the correct procurement procedure above and below EU Thresholds?

What needs to be considered when advertising a tender?

What is an acceptable procurement timetable?

2.5.1 Appointment of the Procurement Team

The procurement process can often be complex with a number of different roles and responsibilities involved in the procurement chain. For every procurement exercise, a Procurement Team needs to be appointed, with an identified project owner, which is responsible for the implementation of the procurement exercise. The procurement team involves all the personnel engaged in the procurement process including the Evaluation Committees.

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The co-ordinator of the Procurement Team - referred to as the Procurement Manager - carries the overall responsibility for the procurement process. This includes completing the procurement planning as well as the implementation of the procurement exercise in relation to:

Time;

Budget; and

Quality requirements. Contracting authorities should ensure that the procurement manager appointed to a project is able to undertake the following roles and responsibilities.

Table 2-5: Tasks of the Procurement Manager

Tasks of the Procurement Manager

General Responsibilities

- Overall responsibility and accountability to deliver a success procurement process

- Planning, organising, guiding, controlling and coordinating the team members

- Accountability for cost, schedule, quality and scope of the procurement - Information flow and communication between procurement team and other

stakeholders (e.g. beneficiaries) - Compliance with all National Legislation and EU Procurement Directives,

Guidances and best practices

Specific tasks: - Composition, coordination and leadership of procurement team (job

descriptions, supervision of results, quality control, etc.); - Decision on any additional human resources needed, e.g. consultant

contracts for feasibility studies, technical specifications, etc.; - Responsible for checking resource allocation, and related risks with the

relevant units of the contracting authority; - Elaboration of a work plan and a time plan for the procurement

implementation respecting the wider project cycle in general; - Elaboration of a communication strategy (internal) and advertisement/

publication needs; - Market research and commercial enquiries; - Carrying overall responsibility for drafting of technical specifications and

terms of references; - Controlling change to the procurement scope, cost, or schedule;

Project Initiation/ The procurement manager should be assigned as early as possible in the life cycle of the project in order to establish management responsibility as well as to begin the development of the procurement requirements based on the stipulations in the project document. The Procurement Team is responsible for carrying out the different activities in the procurement process. Experts with different profiles may assist the Procurement Manager with planning and implementation the procurement exercise, and they may also assist with obtaining necessary commitments within the Contracting Authority. All stakeholders should


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interact with the Procurement Team to ensure that requirements are properly understood and implemented. The Procurement Team could consist of state employees, consultants and others contributing to the procurement exercise.

Public Procurement, as project implementation in general, is team work, with particular regard to cooperation and coordination. Thus, good experience has widely been made with the use of interdisciplinary teams that initiate, plan, execute, control, and close the various components of procurement. In general, there are organisational, financial, technical, legal issues, as well as communication/ public relation, and IT/ EDP matters, that are to be covered by the procurement team members. Usually, procurement experts do not work exclusively for one procurement exercise, but several different projects and procurement activities at the same time. In any case, the team members shall have clearly defined tasks and responsibilities, taking into account changing requirements when the project is progressing through its lifecycle.

The following definitions are used for the different procurement team members. The Director of the Contracting Authority (or their nominated project owner) is

also the Budget Holder and has responsibilities as defined by Legislation including ensuring the existence of available money for the project and the procurement process

The Evaluation Committees evaluate the submitted tenders and have their roles and responsibilities defined by legislation. In cases where the evaluation committees are responsible for the awarding of the contract (depends on the value of the contract to be awarded) the consent of the Director is required.

The Tender Boards are permanent teams at a Ministerial Level, and are responsible for the awarding of the contract in cases where the value of the contract is above EU thresholds, and also where there is a dispute between the decision of the evaluation committee and the Director of the contracting authority in contracts below the EU threshold.

The team of procurement Officers within the contracting authority is responsible for the successful completion of the procurement process (i.e. preparation of tender documents, publication, communications, etc). Some of the team members are also likely to be responsible for the implementation of the contract.

The Project Board / Steering Committees are often formed in cases where the project is large or complex1.

Public Procurement Directorate personnel provide support and advice on the procurement process to the Contracting Authorities. In cases of EU funded projects, PPD being the Competent Authority in Public Procurement, has to

1 The Regulation 201/2007, which concerns the Contracting Authorities of the Central Government,

foresees the appointment of a Management Committee by the Council of Ministers with specific authority and responsibilities, for large and complex projects.


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approve the whole procedure and perform ex-ante controls. Generally PPD is responsible for the:

preparation of Legislation fully harmonized with the EU Directives;

issuing Circulars regarding Public Procurement Matters;

providing training sessions to Contracting Authorities;

maintaining help desk facilities;

performing spot checks;

Monitoring overall performance and compliance of contracting authorities.

Contracting authorities are required to implement the procurement process involving each of the team members in the following roles and responsibilities.

Table 2-6: Roles and Responsibilities in the Procurement Process

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Note 1 : Issuance of Compliance Certificate

In general, there are organisational, financial, technical, legal issues, as well as communication/ public relation, and IT/ EDP matters, that are to be covered by the procurement officers. Usually, procurement officers do not work exclusively for one procurement exercise, but serve different projects and procurement activities at the same time. An example of the most relevant areas within the procurement process is to be found in the Responsibility Matrix below.

Table 2-7: Responsibility Matrix for Procurement Officers

Team Member Member 1 Member 2 Member 3 Member 4 Member 5

Roles & Responsibilities

Head/Board of Directors

Evaluation Committees

Tender Boards

Procurement Manager

Procurement Officers

Project Board / Steering

Committee

PPD Officers

Business Case giving approval

(project design team)

Budget Approval Establishing Procurement Strategy/Arrangements

Providing Procurement Advice & Support

Giving Procurement Approval

Drafting Briefs/ Specification

giving approval

Market Assessment

Managing Panels Managing PPD input Selecting Procurement Procedure

Approval of All Tender Documents

in cases of EU

funded projects (note 1)

Managing the tendering process

Evaluating Quotes & Tenders

(giving consent)

Awarding of the contract

Approval of Award of Contract

in cases of EU

funded projects (note 1)


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Field of Activity

Organisation, logistics, documentation

e.g. Project Secretary

Technical drawings/ specifications

e.g. Technical Engineer

Financial issues, cost calculation, funding schemes

e.g. Budget and Finance Officer

Legal issues and contractual matters

e.g. Legal Officer/ Lawyer

IT and EDP issues Project Secretary or add. Team Member

External communication, advertisements, publications

Legal Officer or Project Manager or add. Team M.

As can be seen by this table, any project has the potential for interdependencies and overlapping responsibilities. The procurement officers responsible for finance and funding, for example, will rely on the costs expected for elaborating technical specifications (Team Member 2) as well as for publications/ tender announcements (Team Member 4), and others. Teams may be formally or informally organised, and individual team members may be active or inactive. In some cases, procurement officers could also be appointed for several different tasks at one time, e.g. the Legal Officer, being responsible for the public relations as well as legal issues. This depends on the complexity and requirements of the project e. g. the scope of work and the level of expertise required. In any case, the procurement officers shall have clearly defined tasks and responsibilities, taking into account changing requirements when the project is progressing through its lifecycle.

2.5.2 What are the possible Procurement Procedures?

The EU public sector Directives permit four tendering procedures when the contract value is above EU thresholds and guidance on the appropriate approach to procedures for contracts below the EU thresholds. According to the legislation, contracting authorities shall apply the open procedure and the restricted procedure when awarding public contracts. Only under specific circumstances, defined by the law, can the negotiated procedure and the competitive dialogue be used. For low-value procurement, simplified procedures are available.

Each of these procedures is outlined in this section and further details are addressed in:

Chapter 3 for the Open, Restricted and Simplified Procedures


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Chapter 5 for the Negotiated Procedure and the Competitive Dialogue

For each concrete procurement exercise, the selection of the appropriate procedure shall be based on a careful analysis of the circumstances.

To select the procedure the contracting authority needs to evaluate three basic questions.

Is the value of the contract above or below EU thresholds?

Is the envisaged procedure permitted in the respective case? The negotiated and the competitive dialogue procedures may only be used in specific cases as clearly defined in Laws 11(I)/2006 and 12(I)/2006.

Is the envisaged procedure proper from a procurement management perspective? Especially the expected contract value, time considerations and the potential of the marketplace.

The following checklist can be used to assist in the selection of the correct procedure.

Checklist 2-5 : Choosing the correct Procurement Procedure

Consideration Yes No

Is the Value of the Contract above EU Thresholds?

Open, Restricted, Negotiated or Competitive Dialogue Procedure applies

Open, Restricted or Negotiated Procedure applies. If the value of the contract is below EURO 85.430,07, in addition to the Open, Restricted or Negotiated Procedure the Simplified Procedure may also apply.

Do you wish to limit the number of tenders received?

The Restricted Procedure may be more appropriate

The Open Procedure may be more appropriate

Are there a large number of potential suppliers?



Do you wish to save time in the evaluation of a large number of technical bids?



Does the requirement permit overall pricing?

The open or restricted procedure may be used

The negotiated procedure may be used

Is it possible to specify requirements for the service or goods with precision to allow bidders to tender?

The open or restricted procedure may be used

The negotiated procedure may be used

Is the requirement complex and needs to be clarified and developed?

The Competitive Dialogue Procedure may apply

The Open, Restricted or Negotiated Procedures may apply.

2.5.3 What are the current EU Thresholds?

The EU published up to date financial thresholds relating to Supplies, Services and Works in December 2007. These are outlined in the tables below.

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Table 2-8: EU Thresholds for Public Contracts

Supplies ()

Services ()

Works ()

All public sector contracting bodies listed in Law N12 Annex III

133,000 133,000 5,150,000

Other Public Sector Contracting Bodies 206,000 206,000 5,150,000

Indicative Notices 750,000 750,000 5,150,000

Small Lots N/A 80,000 1,000,000

Table 2-9: EU Thresholds for Utilities Contracts

Supplies ()

Services ()

Works ()

All Sectors 412,000 412,000 5,150,000

Indicative Notices 750,000 750,000 5,150,000

Small Lots N/A 80,000 1,000,000

The following points should be noted in respect of the thresholds:

the EU thresholds are mandatory;

These thresholds are reviewed by the EU every two years and are announced to the contracting authorities by PPD;

all amounts are stated exclusive of VAT;

Indicative notices relate to early warning notices of the procurement, i.e. a Prior Information Notice (PIN). In cases where a PIN has been published, the contracting authority has the right to decrease the time limits for the receipt of the tenders in accordance with article 43 (4) of the Law 12()/2006.

Small lots refer to large contracts that are divided into smaller lots, usually to encourage SMEs/SEs to bid for them. Importantly this acts as a deterrent to contracting authorities trying to circumvent the appropriate procurement procedure. As stated in Law 12 article 21(5)b it is important to note that the total amount of the specific lots does not exceed 20% of the total value of all lots.

2.5.4 What are the procedures for contracts above EU Thresholds?

Open Procedure - This is a one-stage procedure whereby all interested parties can tender for a contract. In this procedure, the contracting authority takes no steps to limit the number of tenders received or to consider the suitability of suppliers prior to the submission of tenders. The procurement of routine commodities is normally carried out through an open competition as they are simple to specify and therefore to price. Examples would include


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office stationary, computer consumable through to the purchase of energy such as liquid fuel, gas electricity etc. This procedure also covers service contracts such as consultancy, ICT and financial services. It is also appropriate for small construction projects such as the construction of a changing/shower facility at a seaside location or the supply and installation of wind turbines.

If there are minimum requirements for the contracting authority then it is important that they be made clear in the contract notice to avoid unqualified bidders incurring the

expense of preparing and submitting tenders. Restricted Procedure - This is a two-stage process where only those parties who meet minimum requirements in regard to professional or technical capability, experience and expertise and financial capacity to carry out a project are invited to tender. As a first step, the requirements of the contracting authority are set out through a contract notice in the OJEU and expressions of interest are invited from potential bidders. The contract notice may indicate the relevant historical information to be submitted or the information may be sought via a detailed questionnaire (a Pre Qualification Questionnaire, PQQ) to interested parties.

Prequalification of Bidders. The purpose of the pre-qualification is to assess historical financial, economic and technical capacity and capability of prospective

bidders. This is possible where high costs of preparing detailed bids could discourage competition, - such as custom-designed equipment, industrial plant, some complex information and technology contracts or large or complex works.

It is important to note that, as a basis for pre - qualifying candidates, only the criteria relating to personal situation, financial capacity, technical capacity, relevant

experience, expertise and competency of candidates set out in the European Directive (Articles 45 to 48 of 2004/18/EC) and also in the National Law (Articles 51 to 54 of Law 12(I)/2006) are permissible. The prequalification should be based entirely upon the capability and resources of prospective bidders to perform the particular contract satisfactorily, taking into account their

experience and past performance on similar contracts,

capabilities with respect to personnel, equipment, and construction or manufacturing facilities, and

Financial position.

The scope of the contract and a clear statement of the requirements for qualification needs to be sent (via post or electronically from the contracting authoritys head quarters) to those who respond to the contract notice. All such applicants that meet the qualitative selection criteria should then be allowed to bid. The output from this stage is a restricted list of pre-qualified economic operators.

The second step involves the issue of Invitation to Tender (ITT) documents to all those on the restricted list. The ITT includes the complete specifications, the evaluation criteria, terms and conditions of contract, pricing schedule etc.


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The Directives require that a number sufficient to ensure adequate competition is invited to submit bids and indicate a minimum of five (provided there is at least this number who meet the qualification criteria) and up to a total of 20 (is considered best

practice). In the restricted procedure the contracting authorities have the right to limit the maximum number of candidates (economic operators) they intend to invite. In order to exercise this right they should clearly state it in the Contract Notice and also to determine this maximum number. According to the National Law 12(1)2006 this number cannot be less than 5 and is recommended not to exceed 20.

Contracting authorities may opt to shortlist qualified candidates. Short listing of candidates who meet the minimum qualification criteria must be carried out by non -

discriminatory and transparent rules and criteria agreed in advance of issue and clarified to potential competitors.

The restricted procedure is most commonly used :

when a contracting authority needs to ensure that potential bidders have the capacity and capability to undertake the project, or

where there are higher levels of risk, (in high risk projects, such as large construction projects, the restricted procedure enables contracting authorities to eliminate those without the necessary capacity and capability at the first stage), or

the cost of tendering is high, (The first stage of the restricted procedure tends to be short and succinct requiring no detailed costings or methodology from potential bidders. This encourages more SMEs and SEs to bid for the first stage and receive an outcome before undertaking a detailed bidding process), or

Where there are a large number of potential suppliers.

From a contracting authoritys perspective, the restricted procedure may appear to require more input than the open procedure, due to a two-staged evaluation process. However, in the long term it is less intensive as there tend to be fewer bids to evaluate at the detailed technical evaluation process, i.e. stage two.

An example of applying the restricted procedure would relate to the provision of fleet maintenance when the contracting authority wishes to outsource this service. It will be important that potential suppliers meet all the economic, financial and technical requirements for this work, as the contracting authority fleet is an expensive asset that cannot afford excessive downtime or poor or dangerous standards of practice. Therefore, if a supplier has had any legal actions in the past due to professional negligence or legal offences the contracting authority would need to take this into consideration at Pre-Qualification Stage. If this is the case then the bidder would not be allowed to proceed to the second stage of tendering. However, in the open procedure this initial evaluation is not undertaken as a separate first stage and therefore the potential suppliers who dont meet the minimum qualification criteria have submitted a detailed technical bid that eventually wont be evaluated.

Competitive Dialogue Procedure - This is a procedure, introduced under Article 29 of the public sector Directive 2004/18/EC and Article 31 of the National Law 12(I)/2006 , designed to provide more flexibility in the tendering process for more complex contracts, for example


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public private partnerships (PPPs). Contracting authorities must advertise their requirements and enter into dialogue with interested parties, (pre qualified on the same basis as for restricted procedure described above). Through the process of dialogue with a range of candidates, a contracting authority may identify arrangements or solutions which meet its requirements. Provided its intention is indicated in the contract notice or in descriptive documents supplied to candidates, a contracting authority may provide for the procedure to take place in successive stages in order to reduce the number of solutions or proposals being discussed. The reduction must be achieved by reference to the award criteria for the contract.

In conducting the dialogue, contracting authorities must ensure equality of treatment and respect for the intellectual property rights of all candidates. When satisfied about

the best means of meeting its requirements, the contracting authority must specify them and invite at least three candidates to submit tenders. The most economically advantageous tender (MEAT) will then be selected. Aspects of tenders may be clarified or fine tuned provided that there is no distortion of competition or discrimination against any bidder.

The opportunity to use competitive dialogue has been introduced into the EU Directives and thus in the National Law. This could be used, for example, if a contracting authority wished to outsource a major core activity then it would wish to enter into dialogue with a number of suppliers. One possible example would be the requirement for systems support to a core finance system. The contracting authority would be advised to enter into structure engagements with a number of potential suppliers with the purpose of clarifying and developing a detailed requirement that would allow the market place to compete and provide a quality service.

Negotiated Procedure- There