Route 3 - Develop Strategy - Procurement Route

The Treaty on the Functioning of the European Union (TFEU) fundamental principles apply to all procurement activity of cross-border interest and regardless of value. This includes the principles of transparency, equal treatment and non-discrimination, proportionality and mutual recognition which should be adopted by an organisation when running a competition.

It is the responsibility of an individual orgnisation to decide whether, and at what level, advertising is required taking account of the procurement rules.

[For Care and Support Services (C&SS) contracts, an organisation has more flexibility in deciding which procurement route, tools and techniques to use. Please see the Compliance to TFEU Fundamental Principles for C&SS document.]

The selection of the Procurement Route to be taken will be dependent on the value and nature of the requirement. You must ensure that the Procurement Route you choose is consistent with the requirements of the Procurement Reform (Scotland) Act 2014, the Public Contracts (Scotland) Regulations 2015 and the Procurement (Scotland) Regulations 2016 before you embark on your procurement. Decisions on compliance with the Regulations may require specialist knowledge. If you are in any doubt you should seek specialist professional procurement or legal advice and guidance.

[Specific rules are available for Care and Support Services contracts over €750,000.]

The first issue to be addressed is whether the total value of the requirement exceeds the threshold for advertising in the Official Journal of the European Union (OJEU). If your requirement does not exceed this threshold you must still consider whether the requirement needs to be advertised in the OJEU in order to meet a general obligation derived from Principles of Procurement.

If your requirement exceeds the threshold for advertising in OJEU you should determine whether you may be exempt from the full application of the rules.

Contract Notices should be used to advertise all Route 3 procedures. The only exception to this is that a Prior Information Notice (PIN) for sub-central organisations can be used to advertise the Restricted Procedure or Competitive Procedure with Negotiation. A sub-central Organisation is any Organisation which does not belong to Central Government or National Health Services.

The Procurement Reform (Scotland) Act 2014 requires all regulated contracts to be advertised on the Public Contracts Scotland portal. This is a website available to the Scottish public sector for advertising all contract opportunities. The portal also encompasses functionality to publish OJEU Contract Notices. Contracts must not be advertised at a national level before they are published in the OJEU.

[For Care and Support Services, an organisation is largely free to decide to use the procurement procedures, tools and techniques of its own choosing when procuring. That said, as a matter of best practice, it is likely it will want to follow a procurement procedure that is proportionate to the value of the contract and to take account of some fundamental considerations (for example Fair Work practices and other matters described in more detail in the statutory guidance which support the Act).]

Procurement Officers should ensure compliance to the TFEU fundamental principles as laid out in Compliance to TFEU document.

Organisations can choose from six main procedures:

Organisations may use Open or Restricted Procedures freely, but they need justification for the Competitive Procedure with Negotiation, Competitive Dialogue and Innovation Partnership. The Negotiated Procedure without Prior Publication can only be used in permitted circumstances (discussed later).

[For Care and Support Services ONLY: For many care and support services contracts, an organisation may use the procurement procedures, tools and techniques of its choosing. You should follow a procurement procedure, as a matter of best practice, that is proportionate to the value of the contract and to take account of some fundamental considerations (for example, the TFEU fundamental principles where relevant and Fair Work practices).

When doing so, you may choose to adapt or streamline one of the procurement procedures described in the Public Contract (Scotland) Regulations 2015. If you do so, you are not obliged to follow the detailed procedural requirements set out in those Regulations. You should therefore not refer to the Regulations in the tender documentation issued to participants, as this may create an expectation that the detailed procedural requirements will be followed. In all cases, you should ensure that the procurement process is described accurately and clearly, and then adhered to.]

[For Care and Support Services procurement, you should also consider the Care and Support Services Contract Type, Duration and Transitional Arrangements document, and the Guidance on Contract Renewal & Direct Award without Competition document.]

For all procurements, the Commodity/Service Strategy will assist in determining whether you should opt for a single contract or adopt a framework agreement approach.

You may also wish to consider the associated timescales for each of the procurement procedures. There are several approaches you may take in terms of the procurement route for your requirement. If your research has indicated that there are few bidders/tenderers that could meet your needs in the market place, you may decide that all bidders/tenderers who respond to an advertised opportunity should be sent the full Invitation to Tender without a separate selection stage. For above threshold requirements, this is known as the Open Procedure.

If there are potentially many bidders who could meet your needs, you should choose a procurement route that will minimise the cost of competition for both public bodies and bidders. Typically this would involve a selection stage, designed to reduce the number of bidders to a more manageable number (e.g. by utilising the ESPD (Scotland) to shortlist bidders). For above threshold requirements, the Restricted Procedure is the most straightforward. In the case of a Restricted Procedure, only those bidders successful in the selection round will be invited to submit a tender. Open and Restricted Procedure can be used freely in any circumstances and for any type of contracts.

For above threshold requirements where you are unable to define the technical means by which you may satisfy your objectives and/or you cannot specify the legal or financial make-up of your requirement, you may adopt the Competitive Dialogue procedure or Competitive Procedure with Negotiation. Competitive Dialogue allows tenderers to submit initial solutions after being successful at the selection stage. The Organisation may limit the number of suitable bidders to be invited to participate in the procedure.  Several stages of dialogue may then be undertaken to develop their solutions with the Organisation and allow the reduction of the number of solutions. The Organisation does not however require bidders to submit tenders before starting dialogues with them. At the end of the clarification process, tenderers are asked to submit a final tender. The Organisation can decide on the number of dialogue stages  and should make its plans clear to suppliers in the procurement documents.

Care should be taken before selecting this route. You need firstly to ensure that you legally satisfy the criteria of using Competitive Dialogue and also be aware that this process is costly and resource intensive for both Procurement Officer and bidders and is likely to result in a significant increase in procurement timescales.

Alternatively, Competitive Procedure with Negotiation allows the Organisation to clarify the tenders with the bidders after they have submitted fully formed initial tenders. Both procedures may be highly useful in situations where the needs of the Organisation cannot be met using the Open or Restricted procedures.

In special circumstances, the Organisation may choose to use Innovation Partnership. In some cases the requirement is the development of an innovative product or service which cannot immediately be purchased directly from a supplier. Innovation Partnerships offer a solution for this problem, allowing the Organisation to purchase the outcome of a competitively sourced research and development contract. Note that this procedure can only be used where there is a need for the development of an innovative product, service or works and there are no available solutions on the market.  Care must be taken to preserve supplier confidentiality and make arrangements for intellectual property.

The last procedure, the Negotiated Procedure without Prior Publication, can only be used in very limited and exceptional circumstances. You are advised to seek professional procurement or legal advice or guidance prior to adopting this process.

[Legislation does not preclude the use of an e-auction as part of the tender evaluation process for Care and Support Services. However, its use is not appropriate in the context of social care procurement. This is because of the risk that an e-auction’s focus on reducing costs will impact on the quality of care that can be delivered for the amount bid. E-auctions should not, in any circumstances, be used as part of the tender evaluation process for the procurement for Care and Support Services.]

You may wish to consider the potential for an eAuction when you are able to identify your specification in detail and where there is a heavy emphasis on price or certain values being the determining factor. If your Organisation wants to hold an electronic auction it must state that fact in the contract notice or in the invitation to confirm interest and there are legal requirements as to what the Procurement Documents must include (e.g. the features / values which will be the subject of electronic auction).  EAuctions are normally best used where there is a surplus of supply in the marketplace and the buyer holds the power in the relationship. They cannot be used for contracts where intellectual performance (e.g. design) is the subject matter since this cannot be evaluated automatically.  Before proceeding with an electronic auction, Procurement Officers must fully evaluate the tenders in line with the advertised weightings and award criteria and then all tenderers that have submitted admissible tenders will be invited simultaneously to participate in the electronic auction.  During any phase of an electronic auction your Organisation must not disclose the identities of bidders.

The invitation to participate in an electronic auction must include details of the initial evaluation outcome and clearly state the mathematical formula(e) that will be used to determine the rankings based on the most economically advantageous tender, taking into account the new prices or values inserted. 

As with all aspects of the Procurement Journey, the activities at this stage must be carried out in a carefully managed manner that supports the Principles of Procurement.  As a minimum the processes must be carried out in a transparent way that ensures there is no distortion of the market place, the outcome cannot be a procurement that unduly favours or disadvantages a particular supplier and it is the responsibility of the buying organisation to make sure that these requirements are met.

If the proper Procurement Route has not been followed and a breach of the Procurement Reform (Scotland) Act 2014, the Public Contracts (Scotland) Regulations 2015, or the Procurement (Scotland) Regulations 2016 has been identified your fraud awareness team may look to examine the procurement cycle to ascertain to what extent the proper procurement route was not observed. The rationale for action, e.g. that there is no requirement for OJEU advertisement should be examined objectively and details recorded for audit purposes.

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