European Structural and Investment Funds Masterclass How to Deliver Compliant Procurement in ESIF Projects Andy Luff LLB (Hons.) – ACL European This is the Welcome page to the Presentation.

Presentation Structure Overview of reformed public procurement rules ESIF Procurement Guidance Treaty principles in procurement Procurement Thresholds Single Tender Actions (STAs) Basic run through – Procurement Process Error rates in Structural Funds – Procurement Summary/questions This is the Welcome page to the Presentation.

Reformed Procurement Directives (2014) February 2014 EU Council and Parliament Adopted two new procurement directives Directive 2014/24/EU Public Procurement Directive 2014/25/EU Procurement by Utilities By April 2016 To transpose into National Law (except e-procurement by October 2018) UK - Public Contracts Regulations 2015

Reformed Procurement Directives (2014) - Aims Simplification Flexibility Greater inclusion: Environmental protection (full life costing) Social responsibility Innovation Allows: Innovation partnerships (for R&D and subsequent purchase) Consulting the market – preliminary market consultation with suppliers to get advice

Procurement Rules/ ESIF Guidance – National Rules Below EU Directive Level – Treaty Principles or National Rules apply (UK examples). Contracting Authority (yes): Public Contracts Regulations 2015 apply. Treaty Principles a. Equal treatment & non-discrimination b. Transparency; c. Mutual recognition; and d. Proportionality

Reformed Procurement Directives (2014) - Thresholds Central Government authorities Works contracts, subsidised works contracts € 5 225 000 All services concerning social and other specific services listed in Annex XIV € 750 000 All subsidised services € 209 000 All other service contracts and all design contests € 135 000 All supplies contracts awarded by contracting authorities not operating in the field of defence Supplies contracts awarded by contracting authorities operating in the field of defence Concerning products listed in Annex III Concerning other products Sub-central contracting authorities All other service contracts, all design contests, subsidised service contracts, all supplies contracts EU Public Procurement Directive Thresholds Central Government and sub-central contracting authorities (i.e. Local Authorities in the UK)

Low Level Procurement Thresholds Contracts within the scope of the interpretative communication are required to apply “a degree of advertising sufficient to enable the… market to be opened up to competition and the impartiality of procedures to be reviewed”. Value of Contract Minimum Procedure Advertising Required £0 - £2,499 Direct award None £2,500 - £24,999 3 written quotes or prices sought from relevant suppliers of goods, works and services £25,000 – Relevant Public Contracts Regulations threshold Formal tender process in line with the Interpretative Communication and ESIF Procurement Guidance. Advertised on Contracts Finder, and Opportunity is advertised on the ESIF grant recipient’s website for a reasonable time period

Procurement Rules – Single Tender Action (STA) STA Justification Form and Declaration When? Extreme urgency (unforeseen) Only one supplier No organisations have responded to advertisement Must have prior approval (of DCLG/DWP) Note disclaimer

Procurement – Treaty Principles Source – European Court of Auditors

Procurement – Stages of a Procurement Process Basic Stages of a Procurement Preparation and planning Invitation to bid (advertising) Submission and selection of bids (selection criteria) Evaluation of bids (award criteria) Awarding the contract (contracting phase) Contract implementation

Procurement Stage 1 Preparation and planning Procurement plan (ESIF requirement) Procurement route/contracting authority Choose process (see next slide) Apply thresholds Scoping of the specification Choose selection and award criteria Identify conflicts of interest Timescales (for procurement stages and delivery) Arrangements for a clear audit trail Type of contract envisaged (e.g. performance related)

Procurement Stage 1 Choosing a Procedure Preparation and planning (2) – Choosing procedure Open procedure Restricted procedure Competitive procedure with negotiation Competitive dialogue Innovation partnership Negotiated procedure without prior publication Also consider: Framework agreements Dynamic purchasing system

Procurement – Types of Procedure The six main types of public procurement procedure Open procedure The most often used, accounting for 51 % of all contracts awarded. Offers have to be submitted by a certain date and all admissible offers are evaluated Restricted procedure. Interested suppliers are first asked to provide their qualifications, then a shortlist is drawn up and only the shortlisted suppliers are invited to tender. Competitive dialogue Used for more complex procurements. The procedure involves a dialogue between the contracting authority and potential suppliers, with the aim of identifying and defining the best legal and/ or financial set‑up of a project to satisfy the contracting authority’s needs or objectives.

Procurement – Types of Procedure (2) The six main types of public procurement procedure Competitive procedure with negotiation After a call for tender and an initial evaluation, the contracting authority invites its chosen economic operators to submit an initial tender. It then negotiates the initial and all subsequent tenders submitted, except for the final tender, with a view to improving their content. Negotiated procedure without publication Can be used only in a small number of pre‑determined cases. The contracting authority enters into contract negotiations with one or more suppliers. Innovation partnership The contracting authority selects suppliers following an advertisement, and uses a negotiated approach to invite them to submit ideas to develop innovative works, supplies or services aimed at meeting a need for which there is no suitable existing ‘product’ on the market. The contracting authority can award such partnerships to more than one supplier.

Procurement – Stage 2 – Invitation to Bid (Advertising) Choose route to advertise Contracts above thresholds – OJEU Contracts below thresholds – National Rules apply Follow Treaty principles Clarifications – Must be made available for all potential bidders

Procurement - Stage 3 & 4 Submission and Evaluation 3. Submission and Selection of Bids Based only on information in bid criteria Minimum criteria (pass/fail) Late bids must be rejected Selection criteria applied Evaluation of Bids Bids reviewed and given scores against award criteria Keep detailed audit trial and evaluation documentation No negotiations at this stage

Procurement Stages 5 & 6 Award and Contracting 5. Award Stage Contract award notice to OJEU (within 30 days) Contact successful organisation Contact all bidders after decision (name of contractor and basis for decision) Standstill period (not less than 10 days) Appeals Contract Implementation Exchange of contracts Careful with modifications (keep as minimum) Inception, review process agreed

Procurement Selection Criteria To assess the suitability of bidders (not the bid) Must be relevant to the contract (e.g. qualifications) May set minimum criteria Examples: Business probity (ethics/conduct) Technical and professional qualifications Capability and experience Economic and financial standing (plus insurance) Capacity

Procurement Award Criteria To assess, based on the bid, which bidder is best placed to deliver and should be awarded the contract. Must be clearly defined in the specification. Examples: Price Quality Methodology Technical merit Approach to sustainability

Procurement Evaluation Criteria Matrix  0  Unacceptable Nil or inadequate response. Fails to demonstrate an ability to meet the requirement. 25 Poor Response is partially relevant and poor. The response addresses some elements of the requirement but contains insufficient/limited detail or explanation to demonstrate how the requirement will be fulfilled. 50 Acceptable Response is relevant and acceptable. The response addresses a broad understanding of the requirement but may lack details on how the requirement will be fulfilled in certain areas. 75 Good Response is relevant and good. The response is sufficiently detailed to demonstrate a good understanding and provides details on how the requirements will be fulfilled. 100 Excellent Response is completely relevant and excellent overall. The response is comprehensive, unambiguous and demonstrates a thorough understanding of the requirement and provides details of how the requirement will be met in full. Scoring Matrix (Example) May also include weighting on award criteria

Cohesion Policy Error Rates 2014

Public Procurement and EU Cohesion Expenditure Court of Auditors report 2015 Failure to comply with public procurement rules has been a perennial and significant source of error. Serious errors resulted in a lack, or complete absence, of fair competition and/or in the award of contracts to those who were not the best bidders.

Public Procurement and EU Cohesion Expenditure

Analysis of Procurement Errors in Cohesion Policy Pre-Tendering Direct award of contracts Split contracts into smaller tenders to avoid thresholds Inappropriate tendering procedure used 82% of errors at this stage found to be serious by C of A Tendering Problems with publication and transparency requirements and in tender specification (highest % of errors) Specification of unlawful, and incorrect application of, selection and award criteria Procedural weaknesses, including lack of appropriate documentation Contract Management Modifying or extending the scope of contracts without using procurement procedure

Procurement Errors and Possible Flat Rate Corrections Issue Examples Possible Correction Inadequate preparation Direct awards without sufficient justification Changing the scope of the contract during tender process Underestimating contract value Failure to set out how bids will be scored 100% 25%-10% 25% Sub-standard advertising No advertising Choosing to advertise on medium with inadequate scope Inaccurate and discriminatory advertising >100% >25% Express breaches of public procurement law Not meeting prescribed time limits Using frameworks not permitted to use Mixing up selection and award criteria Discriminatory or dissuasive criteria Accepting bids that have not met the criteria Failure to score 25>50% Not following Treaty Principles Giving additional information to certain bidders but not others Extending deadlines for some bidders Not applying consistent criteria Failure to put in place procedures to address conflicts of interest Lack of clarity in relation to interviews and inconsistency in how used in assessment Documentation Not having the documentation to show the process was followed

Summary Overview reformed public procurement rules Treaty principles in procurement Basic run through – Procurement Process Error rates in Structural Funds – Procurement Summary/questions

Contacts Cornwall Facilitation Team ACL European E: accesstotheprogramme@cornwalldevelopmentcompany.co.uk T: +44 (0) 1872 224770 Website http://www.cornwallislesofscillygrowthprogramme.org.uk/ ACL European Andy Luff E: andy.luff@europeanfunding.org.uk T: +44 (0) 1223 968878 M: + 44 (0) 7825 827210 Linked In https://www.linkedin.com/in/andyluff/ This is the Welcome page to the Presentation.