PLC Public Sector reports:
Is it being overused … or even abused? What does “particularly complex” actually mean? What if you can specify the “what” but not the “how” – does that count? Do bidders like it or loath it? These are just some of the many questions likely to be asked when an authority is deciding whether it can, or should, use the competitive dialogue procedure.
The procedure is now nearing its third birthday. Most commentators agree that, in the round, it has been a success, allowing more private sector expertise to be inputted at the competitive stage of a procurement. However, if it is to continue to prosper and avoid numerous, recession-inspired, legal challenges, PLC Public Sector argues that the Government needs to publish further practical guidance which answers some of the many questions that still surround the use of this new procedure.
In June 2008, the OGC and the Treasury published guidance on using the competitive dialogue procedure. The guidance provides a good grounding in how to use the procedure, but is a lost opportunity to address the question of when it is actually appropriate to use it. The guidance provides little greater insight than the definition of a “particularly complex contract” set out in the public contracts regulations and the, not overly helpful, explanatory note issued by the European Commission (which was used as the basis for the OGC’s original guidance on when to use the competitive dialogue procedure published in January 2006 and the procurement policy note it published in July 2006). Unfortunately, anyone looking for answers in either of these two documents is likely to conclude that they ask more questions than they answer.
The Guidance only gives one example of a suitable project for the procedure – “Contracting Authorities wanting a facility (eg a school, hospital or prison) constructed and managed for a long period”, while the introduction refers to “major computer networks, integrated transport systems, complex framework agreements, PFI and other PPPs”. Procurement officers and their legal advisors will be well aware few projects are this straightforward. Yes, examples such as these will obviously fall on the right side of the line, but almost any procurement will have its own complexities and it is in the grey areas that authorities need assistance in determining the way forward. It is true that every procurement is different, and that the question of what is the appropriate procedure must be asked on a case-by-case basis. However, this is not an excuse to only provide general, high level guidance, far more specific examples need to be provided.
This is more important than ever for two reasons, both related to the current state of the economy:
- Firstly, the downturn will mean more legal challenges. It is inevitable – the scramble from the private sector to keep heads above water will mean that public sector contracts will be hard fought for. This means we can expect challenges claiming that the wrong procurement procedure was used (especially if it was the competitive dialogue procedure where the higher bid costs will mean there is more at stake).
- Further, these higher bid costs may also have the opposite effect. It is likely that while some contracts may be strongly contested, others will not manage to attract any interest at all. The private sector will decide that the bid costs are simply not worth the risk, or even actively unaffordable. This means that authorities will not be able to procure what they need and will be failing in their general obligation to help the economy in these difficult times.
The OGC is not generally shy of issuing guidance (for example, see the recent guidance on IT procurements, better contract management, social issues, equality and being green). These publications all address important subjects, but none are as important as the fundamental operation of the OGC’s primary piece of legislation (the public contracts regulations). The OGC needs to act quickly and issue guidance that sets out many more examples of the types of contracts that, in the Government’s view, fall on the right and wrong side of the line. At the same time, a push for more soft market testing by public sector purchasers prior to letting contracts would provide a much cheaper, and no less effective, alternative to using the competitive dialogue procedure to solve the complexities of many procurements.
Readers of our previous post “slimming down the OGC Model ICT Contract” will be aware of our concerns at proposals to mandate further parts of that contract. To do so without first addressing the issue of what the appropriate procurement procedure is in more detail, could be viewed as trying to run before being able to walk. Also, in the meantime, time and money are being wasted by authorities repeatedly trying to answer questions such as those set out at the start of this post and unnecessarily using the competitive dialogue procedure.
The costs to an authority of unjustifable use of the competitive dialogue procedure are more likely to be felt in officer time and bid costs finding their way into the contract price than defending a challenge to the process, which would presumably form part of a wider claim.
In terms of soft-market testing, it is often very difficult to get providers to openly share views on a proposed tender. For example, prospective bidders do not like to criticise proposed plans or raise objections to terms for fear of damaging their reputation with the authority. Neither do they want to share any information which may provide their competitors with a competitive advantage. Therefore, in addition to the points raised above, authorities need better guidance on how to effectively involve the market in scoping their services.