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PROCUREMENT FAQS

This is the first in a series of public procurement frequently asked questions which we will publish on a bi-monthly basis. If you have any queries you would like to see addressed in future issues, please get in touch with a member of our team – counsel@acuitylegal.co.uk

1: IS IT PERMISSIBLE TO USE A STAGED EVALUATION PROCESS IN AN OPEN PROCUREMENT PROCEDURE?

When advising contracting authorities on their procurement processes, a question that we are often asked is whether it is permissible to include, as part of an open procurement procedure, a process which allows for a reduction in the number of bidders where tenders do not meet certain minimum technical (or quality) requirements.

An open procurement procedure has generally been seen as a one stage process only, where all tenders that comply with the selection criteria are fully evaluated according to the published award criteria.This is in contrast to other procurement procedures (e.g. competitive procedure with negotiation, competitive dialogue procedure and innovation partnership procedure) which often consist of multiple evaluation stages and in which a reduction in the number of tenders (often in successive stages) is common place.

There is express authority in Directive EU 2014/24/EU ("the Directive"), and also in the Public Contracts Regulations 2015 ("PCR 2015"), for a multi-stage approach to be undertaken in those other procurement procedures mentioned above. Although that express authority is not included in the provisions concerning the open procurement procedure, the approach is not excluded by either the Directive or the PCR 2015.

Although some contracting authorities have taken the view that they are able to include a staged evaluation process where those bidders who do not meet certain minimum technical requirements (for example minimum threshold scores), we have also seen a reluctance by other contracting authorities to adopt this approach.

However, in September 2018, the Court of Justice of the European Union ("CJEU") delivered a ruling in the case of Montte SL v Musikene (Case C-546/16) which clarified that when using an open procedure it is permissible to exclude tenders at an initial stage based on technical (or quality) criteria, and to only permit those who pass that stage to have their tenders assessed at a second evaluation stage.

In its judgment the CJEU ruled:

  • the Directive permits open procedures in which tenders submitted that do not reach a predetermined minimum score threshold at the end of that evaluation are excluded from the subsequent evaluation based on both technical criteria and price
  • this reduction in the number of tenders is permissible regardless of the number of bidders remaining in the process.

In making these decisions the CJEU noted, amongst other things, the following points:

  • the Directive expressly permits the setting of minimum requirements in relation to the technical evaluation
  • the Directive does not contain any rules as to how an open procurement procedure is to be conducted, with the exception of minimum time limits
  • contracting authorities are obliged to base the award of public contracts on the most economically advantageous tender, and that this to be identified on the basis of the price or cost and may include the best price-quality ratio, which is to be assessed on the basis of criteria which comprise qualitative aspects such as quality, including technical merit
  • as long as a contracting authority proceeds in accordance with the principles of transparency, non-discrimination and equal treatment, so as to guarantee an objective comparison of the relative merits of the tenders in aid of the overall aim of effective competition, contracting authorities are free to determine, according to their needs, the level of technical merit which tenders must provide (depending on the characteristics and the subject matter of the contract in question) and to establish a minimum threshold which those tenders must comply with from a technical point of view. The Directive does not preclude a contracting authority achieving this by setting a predetermined minimum score threshold as a first stage
  • the fact that the Directive provides for the possibility of certain procedures being conducted in successive stages, does not permit the conclusion that a two-step evaluation of tenders during the contract award stage would be inadmissible in the case of an open procurement procedure.

Whilst, in our experience, a number of contracting authorities have previously taken a pragmatic approach in this regard, this case does provide a helpful clarification for contracting authorities who have been unsure as to whether they can legitimately use a multiple stage evaluation process under the open procurement procedure.

Using such an approach in relation to the open procurement procedure will make it easier for contracting authorities to eliminate bidders based on the contracting authority's particular requirements, in an efficient and structured manner.

One important point to note is that this approach is not intended to limit the number of tenders subjected to further evaluation, as would be the case, for example, in a competitive dialogue procedure where a contracting authority decides to limit the number of tenders taken through to the next stage. There is always the possibility that all submitted tenders meet the minimum requirements and therefore proceed to the next stage. Rather this approach is meant to allow those who do not meet certain minimum requirements to be removed earlier in the process. In the Montte SL v Musikene case, the CJEU seemed to attach importance to the fact that the contracting authority could only eliminate bidders which failed to achieve the minimum score and it did not have the discretion to eliminate bidders which met the minimum requirements by selecting only the "best tenders" to go through to the second stage.

In light of this, it would seem sensible that any criteria set by contracting authorities for the elimination of bidders at the first stage of an open procedure are absolute criteria (i.e. the use of minimum score thresholds). However, when setting such absolute criteria, contracting authorities should always bear in mind the relevant risks and issues of adopting its preferred approach.

For example, adopting an overall minimum threshold for the quality criteria could mean that some bidders meet this overall threshold having scored very highly in one or more areas but very poorly in another area; or if using scoring hurdles for individual quality questions, where only bids which score a specified minimum score in certain requirements will be considered. A contracting authority needs to be wary of adopting this approach for all quality criteria, especially if there are some criteria that are less important to it, otherwise the risk is that an otherwise strong bid is excluded on fairly minor grounds.

Also, whilst this case confirms it is permissible for such an evaluation process to result in only one bidder remaining in the process, this outcome may not achieve a contracting authority's ultimate procurement objectives including value for money considerations. The contracting authority could find itself in a situation where it does not wish to accept the remaining tender and therefore has to restart the whole procurement process.

The CJEU certainly noted that if there is only one tender left for the contracting authority to consider, following the technical evaluation, the contracting authority is in no way required to accept that tender and that it is open to the contracting authority to terminate the procedure and start a new procurement procedure with different award criteria.

When devising any procurement process, a contracting authority should always bear in mind the general principles of equal treatment, transparency and proportionality, and also be mindful of its obligations under regulation 67 (Contract Award Criteria) of the PCR 2015, including the requirement to ensure the possibility of effective competition. Contracting authorities should also seek appropriate advice if there is any doubt as to whether a proposed procedure is compliant with the PCR 2015.

If you have any queries, please do not hesitate to contact a member of our Commercial Team.

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