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Can EC harmony keep in tune?

The EC updates its procurement directives in 2002. What should you watch out for?

Modernisation, simplification and clarification of public procurement law are the main aims of the European Commission's new legislative package, due come into force in 2002.

But bodies representing European consultants, contractors and architects vehemently oppose some aspects of the new directives in their current form.

The most radical changes, and as a result the most acrimonious debate, centres around three key issues: framework agreements, e-procurement and competitive dialogue (see below).

Competitive dialogue is intended to assist contracting authorities who are unable to objectively define technical requirements or assess technical or financial solutions.

Under the plans, the contracting authority can request outline proposals as part of the qualification process.

But Ulrich Paetzold of FIEC, the European Construction Industry Federation, believes the plans amount to giving the client the chance to get free advice from tenderers, from which it can then cherry pick and pass on the best bits to the others.

This view is shared by the European Federation of Engineering Consultancy Associations, which sees the plans as a 'theft of intellectual property'.

As it stands, the procedure allows for, but does not require, candidates to be compensated for their contributions.

David Green, chairman of the European Council of Civil Engineers taskforce on procurement, accepts there is a risk that the system may be abused, but believes this can be removed with an effective code of practice. This view is not shared by EFCA chairman Jan Van der Putten who sees it as 'theoretically impossible' to prevent.

EFCA is resigned to the fact that the plans will become reality and is working hard to mitigate the effects. It is keen to see a reworking so that competitive dialogue is permitted only if the client cannot define its needs 'even with external advice'.

The continent is also divided over the directive's approach to framework agreements. 'The rules prepared are hardly applicable, ' says Paetzold. The European Council of Architects meanwhile describes the plans as 'entirely unsuitable'.

Although the winner will have to be selected in accordance with detailed provisions in the directive, there are concerns that clients will abuse the system to drive prices unfairly low as bidders know they have all proved their ability and that the only difference between them will be price.

Green feels that these issues are only concerns in Europe, where 'there is an impression that in the UK we follow rules to the letter of the law, but other countries do not necessarily comply'. Green's real concern is that the legislation is only being enforced to try and ensure compliance, but that the result is an involvement of lawyers right from the outset.

Green is also dismayed by the permitted length of the framework agreements. Because of perceived anti-competitive effects, the directive is set to limit their duration to three years. According to Green this could affect local governments, where much needed investment in plant, training and research will be put off as investors will not see the benefits within the three years of their contract. To counter this, Green would like to see contracts extended to eight years, with competitiveness ensured by measures such as benchmarking.

However, moves to exploit the opportunities offered by e-commerce are at least guardedly welcomed by all. The Commission aims to let 25% of contracts by electronic means by the year 2003.

To achieve this, the directive will be changed to put electronic communication on the same basis as more traditional means, leaving the choice to the individual client. Significant time savings are expected and therefore a reduction in time limits will be imposed.

Green believes that such moves are to be applauded, but warns that the rate of change has to take account of the mobility of the industry. As Van der Putten says, 'E-procurement is the future, but we have a long way to go.'

But the basic requirements of the procurement regime - EC wide advertisement followed by open competition - remain unchanged.

In the interests of simplification, the three existing Public Sector Directives will also be consolidated into one text and the individual sections and articles have been reordered to reflect the normal flow of the procurement process.

This clarification, particularly regarding the rules on contract selection and award criteria, have been welcomed by all parties concerned, but there is still a feeling that much confusion and ambiguity remains.

Procurement overhaul

The EC started its review of public procurement in 1996, with the publication of a Green Paper and extensive consultation. By March 1998, it made clear that the necessary changes would be made. Barbara Linehan, Brussels-based partner with lawyer Masons, explains the progress New initiatives adopted by the Commission to overhaul procurement include a radical package of new legislation. This package, it hopes, will form the main vehicle to simplify and modernise the existing regime. The two main strands of this legislation are still in draft, but they are likely to become law by 2002.

However, while the legislation will be more straightforward and relevant to modern purchasing practices, changing markets and new technologies, the basic requirements will remain unchanged.

In the interests of simplification, the three public sector directives have been consolidated into one text and individual sections and articles reordered to reflect the normal flow of the procurement process. Inconsistencies have been removed, financial thresholds simplified and the rules on selection clarified.

But bringing the legislation into line with modern procurement practice is felt to be vital. Changes are proposed to allow e-procurement to be phased in as well as more flexible procurement models such as framework agreements. The Commission also agreed to broaden the circumstances in which negotiated procedures can be used by introducing a new form of negotiated procedure, known as the competitive dialogue, which would be available for all 'complex procurements'.

E-procurement The Commission set itself the target of achieving 25% of all procurement through electronic means by the year 2003. New legislation will, for the first time, put electronic communication on the same basis as traditional, leaving the choice to the individual contracting authority. Significant time savings are predicted with new technology so the Commission has proposed a reduction in procurement time limits, where electronic means are used.

Competitive dialogue The Commission appreciates that in some cases clients need the input of bidders in the procurement process. The new procedure, available for the procurement of 'particularly complex public contracts', is especially suitable when the client's needs are hard to define or price for.

The procedure permits the contracting authority to request outline proposals as part of the qualification process and to take these into account when deciding who to invite to tender. However, dialogue is restricted to the period between the submission of outline proposals and the establishment of the final specification. The procedure allows, but does not require, that candidates be compensated for their contributions.

Framework arrangements The use of more flexible purchasing techniques, including 'framework agreements' are now permitted under the Consolidated Directive. Because of the potential anti-competitive effects of framework arrangements, the directive limits their duration to three years - five in exceptional cases - and only permits their use after competition.

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