1 Rome, December 13 th 2004 Working Group on Auction Design and Competitive Issues Rome, December 13 th 2004 Matteo Zanza, Consip

2 Rome, December 13 th 2004 Agenda Final Report already presented in Stockholm 31 Institutions 19 sent back the Questionnaire Some deeper information and new points: 1.Governance of Institutions 2.Analysis of Purchased Value over Total Public Procurement 3.Online Auctions 4.Abnormally Low Offers

3 Rome, December 13 th 2004 Institutions classified Governance Organisation Institutions Large Administrations ESPA (Romania) French Ministry of Economy, Finance and Industry Administration of State Material Reserves (Czech Republic) Greek Ministry of Development Central Purchasing Bodies ABA (Belgium) BBG (Austria) BESCHA (Germany) Consip (Italy) Malta Department of Contract SKI A/S (Denmark) OGC (UK) Statskontoret (Sweden) Authorities Hungarian Council for Public Procurement Irish Department of Finance Polish Public Procurement Office Slovakian Office of Commissioner for Access to Public Information Slovenian Office for Public Procurement MINHAC (Spain) Public Procurement Directorate of Cyprus Turkish Public Procurement Authority

4 Rome, December 13 th 2004 Purchased Value as percentage of Total Public Procurement To compare different Purchasing Bodies on the basis of their activity SKI A/S (Denmark) (Sweden)(Germany)(Austria)(Belgium)(Italy)(UK) Fonts: GDP: Eurostat; Total Public Procurement as % of GDP: EU Report 2004; Purchased Value: Questionnaires

5 Rome, December 13 th 2004 Online Auctions 7 institutions applied this procedure Three different formats have been applied 1. Sealed Bid auction 2. Descending auction (reverse auction) 3. Multiple round descending auction Below or above thresholds? 5 Institutions performed them both below or above the thresholds Useful tool to improve the procurement performances

6 Rome, December 13 th 2004 The contracting authority shall be obliged to invite the tenderer to explain his price quotation. Abnormally Low Tender 1/2 Article 51 of the 2004 EU Directive states that “If, for a given contract, tenders appear to be abnormally low in relation to the goods, works or services, the contracting authority shall, before it may reject those tenders, request in writing details of the constituent elements of the tender which it considers relevant”. The Directive defines then which details should be taken into account by the contracting authority. If the firm is not able to justify its offer the latter is considered abnormally low and so rejected. When a tender presents an abnormally low price compared to others tenders, market prices or institution own costs estimation.

7 Rome, December 13 th 2004 BESCHA, Consip and the Turkish Public Procurement Authority follow three different additional criteria to identify those firms that have to motivate their offer. Abnormally Low Tender 2/2 Consip If the offer presents a discount lower than 20% of the arithmetical mean of the all discounts considered valid. Turkish Public Procurement Authority (work contracts) BESCHA If the offer presents more than 20% deviation from the second best price. If the offer is below of a defined Boundary value obtained multiplying a certain value “K” by the “Estimated cost” of the contract. To have the “K” value, the contracting authority has to calculate the ratio between the arithmetical mean of the tenders (tenders 120% above or 40% below of the “estimated cost” are not taken into account) and the “Estimated cost”. To any value of this ratio between 1.2 and 0.4 there is a correspondent “K” value.

8 Rome, December 13 th 2004

9 Turkish Formula Tenders which are over 120% and under 40% of estimated cost are not taken into concentration while calculating the means of the tenders. 1. By dividing the mean by estimated cost the value “C” is obtained 2. By using the table below, “K” is obtained 3. By multiplying the “K” by estimated value, we obtain the boundary value AT = The arithmetic mean of valid tenders EC = Estimated cost calculated by the contracting entity C = AT /EC Boundary Value = K*EC C=AT/ECK 1,200,800 1,000,800 0,900,766 0,800,723 0,700,671 0,600,610 0,500,538 0,400,454

10 Rome, December 13 th 2004 Domestic GDP

11 Rome, December 13 th 2004 Total Public Procurement I.e. Purchasing of goods, services and works by governments

12 Rome, December 13 th 2004 Purchased Value