Chairman - Paul Darling QC.

John Houlden

Marcus Harling

Jon Milward

John Smith

Maximising Success in EU ProcurementCreating a balance for Public and Private Sectors

Agenda

• Relevance to Property & Construction Sectors

• A basic review of the current regime

• The competitive dialogue in practice with Case Studies

• Framework agreements – how to use them effectively and legally

• Challenges – risks and opportunities

Relevance to Property & Construction

JV with public sector

Grant funded contracts

framework

Infrastructure

Development Agreements

RSL Design & Management

Construction

PPP

FM

S106 Agreements

Relevance to Property & Construction

• Waste• Housing• Regeneration• Nuclear• Sustainability• Transport• Health• Defence

• £2bn PFI credits (2007 CSR)• 45,000 new units p.a (2010)• RDA/ Local Authority led• Decommissioning/ new build• Look out for money allocated• Rail investment• Community based healthcare• Aircraft carrier / accommodation

A basic review of the current regime

• How and why did we get here?

• When does it apply?

• How does it apply?

How and why did we get here?

EC Treaty

• Art. 12 - prohibits discrimination on grounds of nationality

• Arts 28, 43 and 49 prevent restrictions on free movement of goods, freedom of establishment and freedom to provide services

Treaty

Directives

UK Implementing Legislation

TRANSPARENCY

EQUALITY OF DEALING

When does it apply?

Bodyawardingcontract

Subject matter of contract

Value of contract

Need to consider:

When does it apply?

Bodies covered (aka “contracting authorities”):

– those listed in Regulations (i.e.. Ministers, government departments, Houses of Parliament, local authorities etc)

– bodies established to meet “needs in the general interest” if:

• financed;• supervised; or • appointedby a contracting authority

When does it apply?

Central Purchasing Bodies

SupplierContracting Authority

CentralPurchasing

Body

When does it apply?

Bodyawardingcontract

Subject matter ofcontract

Value of contract

Need to consider:

When does it apply?

Subject matter:

– Is it a “public works contract”?

– Is it a “public supply contract”?

– Is it a “public services contract”?

NB Works by any means

When does it apply?

Need to consider:

Bodyawardingcontract

Subject matter ofcontract

Value of contract

When does it apply?

BODY WORKS SERVICES SUPPLIES

Central Govt £3,497,313 A= £90,319

B= £139,893

£90,319

Other Public Sector £3,497,313 £139,893 £139,893

How does it apply?

PIN CONTRACT NOTICE EVALUATION

CONTRACT AWARD

Open

Restricted

Competitive Dialogue

Negotiated

Selection/award

Debriefing

How does it apply?

Open procedure:

– all may submit tenders

– 52 days to return of tender

– suitable for contracts with simple subject matter and award criteria (i.e. stationary)

How does it apply?

Restricted procedure:

– only those invited by contracting authority may submit tenders

– 37 days for EOIs/40 days for tendering

– appropriate for more complex procurements

How does it apply?

Negotiated procedure:

– Very limited application, only in certain specified circumstances, e.g. exceptionally when nature of works/services or risk does not permit prior overall pricing

– two procedures - competitive and non-competitive

– competitive – 37 days for EOIs

How does it apply? Selection and award

Selection

Award

Selection – practical issues

• Requirement to exclude

• Minimum requirements:– financial standing– technical capacity

• Objective criteria

NB Recent ECJ case law

How does it apply? Selection and award

Selection

Award

Award

Criteria for award:

(a)

(b)

lowest price

most economically advantageous to the contracting authority

1

2

3

4

FreedomNB Weightings

Award – practical effect

Establish relative weighting of the evaluation

criteria either:

• at the start of the procurement before notice is placed; or

• before issue of contract documents

KEY PRACTICAL ISSUE!

The competitive dialogue in practice

• When is it used?

• How does it work?

• Case studies

Competitive dialogue – when is it used?

Authority:

• wishes to award a “particularly complex contract”; and

• considers that open or restricted procedures will not allow the award of the contract; and

Competitive dialogue – when is it used?

PIN CONTRACT NOTICE EVALUATION

CONTRACT AWARD

Open – one stage process (tender) with no negotiation

Restricted – two stage process (PQQ/tender) with no negotiation

What is a particularly complex contract?

Authority is not objectively able to:

• define the technical means of satisfying its needs; or

• to specify the legal or financial structure of a project

Competitive dialogue – when is it used?

Requirement known

Solution unknown

Competitive dialogue – how does it work?

PIN CONTRACT NOTICE EVALUATION

CONTRACT AWARD

Competitive Dialogue

Selection/award

Debriefing

Competitive dialogue – how does it work?

Technical dialogue

Contract notice

pqq

Competitive dialogue

Competitive dialogue – how does it work?- incremental reduction in bidders

1

2

3

Competitive dialogue – how does it work?

Final round

Evaluation

Award

Phased Dialogue – no reduction in bidders

Contract Notice PQQ DialogueFinal

TenderClarification/

Contract

PHASE 3:Concluding Issues

PHASE 2:Legal Discussion

PHASE 1:Technical Discussion

Process:

Competitive Dialogue Case Study – Finding the Development Partner

Competitive Dialogue Case Study – Finding the Development Partner• Opportunity created by

local authority looking to use surplus land to kick start redevelopment

• Requirement for local authority offices in scheme

• What to expect.• Avoiding mismatch

between expectation and delivery

Competitive Dialogue Case Study – Finding the Development Partner

• "public works contract" means a contract, in writing, for consideration (whatever the nature of the consideration)—

• (a) for the carrying out of a work or works for a contracting authority; or

(b) under which a contracting authority engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements;

• Application of Competitive Dialogue to a property development transaction

• Developers unfamiliar with regulated procurement

• Contracts conditional on planning are typical

• Developers reluctant to carry significant bid costs or to engage in a lengthy competitive stage

• No standard documentation

• Challenge is how to get to final tender

Competitive Dialogue Case Study – Finding the Development Partner

Planning the procurement

Contract Notice - Short listing

Invitation to Participate in dialogue

Dialogue

Final Tenders

Bid clarification to Contract

“particularly complex contracts.”Be clear on the timetable.

Market testing / information days.

Understand Evaluation criteria, includingrisk based to deal with solutions.Incremental reduction of bidders is usual.

Full contract mark-up or populated Heads of Terms at FT.No substantial modification of bids

afterwards.

The time for planning a strategy has passed!

JON MILWARD

Head of Development

Drivers Jonas

Maximising Success: The Agent’s View

Agenda

• Popular Perceptions of the OJEU process• The Reality• How and When to Engage (Public Sector)• The Marketing Process• How to Get Shortlisted (Private Sector)• How to Get Selected (Private Sector)• The Documentation• Commercial Negotiations – How to get the best result

Agenda

“How to Succeed Despite the Lawyers!”

Popular Perceptions

• Time-Consuming• Costly• Over-Complex• Too Many People Chasing Too Small a Prize

The Public Sector

Developers

Advisers

The Reality

• For the Public Sector – a transparent, open process. Auditable and competitive BUT can be prescriptive

• For the Private Sector – an opportunity to engage on some of the most exciting projects in the UK BUT some barriers to entry.

• For Advisers – lots of ‘recession-proof’ work BUT public sector fees are low and private sector partners may require ‘sweat equity’.

How and When to Engage

• Appropriate Preparation

• OJEU doesn’t mean the public sector can put their feet up!

• Creating Certainty – Horses for Courses

– Planning

– Legal

– Specification

RNOH Bolsover St, W1

• Royal National Orthopaedic Hospital NHS Trust

• Ridgeford / Manhattan Loft

• In-patient facility

• Funded out of Residential Development

LFEPA HQ - 8 Albert Embankment

• Fire Station Headquarters

• Mixed Use – Residential Led

• New Fire Station

• Subject to Planning Deal

Founder’s Place – Guy’s and St Thomas’ Charity

• Detailed Planning Consent granted

• Support accommodation for Guy’s and St Thomas’s

Hospital

• 400 Private and key worker units

•

The Marketing Process

• Most Developers don’t read the European Journal!

• Consider Additional Marketing – which must be consistent with the OJEU advertisement

• The Use of PINs

Poplar HARCA – Chrisp Street Market

• Estate Redevelopment

• PIN to Establish market

appetite

How to Get Shortlisted

• Know the Assessment Criteria

– Track record

– Ability to Fund

• Fill in the Forms Smartly – beware of procurement monkeys

• Expert team

• If limited/no track record, consider partnerships with others

• Sort out your Funding – particularly in today’s market

How to Get Selected

• Engage – treat it as a Partnership

• Make some effort – you are on a shortlist

• Don’t over-promise – be realistic

• Be aware that risk transfer is often as important as value

• Make sure your funders are fully committed

The Documentation

• Keep it Simple Stupid

• Provide as part of the shortlist tender pack?

Commercial Negotiations

• Consider and Agree Key Commercial Points Early – what is important to you?

• Agree Milestones and stick to them

• Understand report deadlines / Board Approval processes

• Don’t try to win every point

• Remember this is a Partnership

I Want My Cake AND I Want To Eat It

Commercial Negotiations

• Be prepared to be flexible – especially in changing market conditions

• Review commercial aspects regularly

• Prepare your parachutes!

• The Principle of “Equal Unhappiness”

JON MILWARD

Head of Development

Drivers Jonas

Maximising Success: The Agent’s View

Any questions………

Framework agreements

• What is a framework?

• How to use them effectively and legally

What is a framework agreement?

Different contractual structures:

• Commitment to purchase

• Mix of commitment to purchase and option to acquire

• No commitment to purchase but option to acquire

What is a framework agreement?

Procurement regulations:

“..an agreement or other arrangement between one or more economic operators which establishes the terms (in particular the terms as to price and, where appropriate, quantity under which the economic operator will enter into one or more contracts….”

NB No commitment but can be legally binding!

What is a framework agreement?

No commitment to purchase but option to do so:

NB: • No more than 4 years• If more than 1 supplier, no less than 3

Contract specifying:

• mechanism for future purchases

• terms of purchase (including price)

Call off 1 Call off 2 Call off 3

How to use them effectively and legally

Two key elements:

• Establishment of frameworks

• Call-offs during framework term

Call-offs during framework term

Two means:

• without competition – by applying the framework terms

• with competition – where not all terms laid down

Call-offs during framework term

With competition:

• only those suppliers who are parties; and

• only those who are capable of performing proposed contract

Call-offs during framework term

Contracting authority must:

• consult in writing

• invite submissions of tenders in writing

• set a time limit for responses

• award on basis of award criteria specified

Challenges – risks and opportunities

• What remedies are available?

• Key risk areas

• Future developments

What remedies are available?

Remedies under the regulations differ according to whether process challenged:

• before; or

• after,

the contract has been entered into

What remedies are available?

Mandatory standstill:

• Minimum 10 day standstill between:

– communicating decision to award; and– entering into a contractually binding

agreement

• Mandatory disclosure of information

What remedies are available?

• Remedies under Regulations pre-execution:

– interim measures

– set aside

– order amendment of documents

– award damages

• Only remedy under Regulations post execution is damages

• NB Timing is critical – “promptly” and within 3 months

Key risk areas

• Transparency

• Equal treatment

• Evaluation – selection/award

• Confidentiality

Future developments

New remedies directive – implementation by 20 December 2009:

• Standstill – similar but:

– potential extension to Part B and framework call offs– ineffectiveness of concluded contracts possible if breach with a

limitation period of 6 months– potential for penalties for authority if wrongful use of exemption

and unable to set aside

• Suspension of process on application

• Increased scope for Commission intervention

Conclusions

• Be aware – contractors are and challenges are on the increase!

• Early identification of issues is crucial – potential mitigation is possible

Practical Issues to Maximise Success – Bid Selection - Bid selection – evaluate client

• Track record of organisation/sector • Commitment to this project – is there real driver• High level sponsor• Are there multi-authorities • Affordability versus ambition • Engage with authority

- Bid selection – evaluate yourself• Your track record• Consider likely criteria • Consider if consortium/other expertise needed

Practical Issues to Maximise Success – During The Procurement - PQQ

- identify authority selection criteria - clarify and question- increasingly used for down selection

- Dialogue - think about tone, approach, team- respond to dynamics - aim to influence constructively - emphasis on early development of solution- make aware of bid costs – e.g. due diligence

- Post dialogue- clarifications if necessary- answer the question- respond to clarifications