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New “basic procedure” for contracts below EU thresholds

One new procedure will replace the three most commonly used procurement procedures below the EU thresholds. The open bid will disappear, and the basic procedure without negotiations will appear. It is supposed to be easier and more flexible, but will it work?

The draft of the new Public Procurement Law dedicates an entire separate section to classic contracts below the EU thresholds. The “basic procedure” is a new procedure, appropriate in a substantial number of cases for contracts of a value lower than the EU thresholds. The rules and course of the procedure are not completely new, but to some extent are based on existing contract award procedures (e.g. open bid and negotiated procedure with notice).

The current Public Procurement Law does not provide for a separate procedure below the EU thresholds, but only introduces specific provisions aimed primarily at streamlining the procedure (e.g. a shorter period for submitting offers, the possibility to waive a bid bond, shorter binding period for offers, etc). Therefore, in most cases, the contracting authority also above the thresholds goes for open, restricted or negotiated procedures with publication of a contract notice. In order to conduct the procedure, they must look for appropriate regulations basically in the entire act. Now it is to be easier: they will turn to Chapter VI, which will guide them by hand through the procedure.

Three scenarios of the basic procedure

According to the draft of the new Public Procurement Law, the contracting authority will generally award contracts following the basic procedure. Only in justified cases specified in the act will the contracting authority be able to award a contract following the innovation partnership procedure, negotiated procedure without a notice, or single-source procurement procedure.

However, this does not mean that the contracting authority is restricted in the manner in which the procedure is to be conducted, as the drafters make it possible to carry out the basic procedure under three scenarios. Negotiations aimed at joint determination of the details of the given contract are the element differentiating these scenarios. Therefore, the choice of the appropriate procedure depends on whether, at the stage of initiating the procedure, the contracting authority is able to prepare the technical specifications, or it cannot yet describe the conditions of the contract with sufficient precision.

Option 1: procedure without negotiations

A procedure without negotiations is the first and simplest basic procedure. According to the justification of the draft, it is analogous to an open bid procedure. This option will be applied when the contracting authority precisely defines the subject and conditions of the procurement at the stage of initiating the procedure, and also will have no need to conduct negotiations on selected elements of the description of the subject of the procurement or the terms of contract performance.

Option 2: Procedure with possibility of negotiations

If at the initial stage the contracting authority is not in a position to independently define precisely all the terms of the contract, it may provide in the contract notice for the possibility of conducting negotiations. In such situation, the contracting authority must indicate the scope of possible negotiations, referring to the description of the subject of the procurement or the provisions of the contract in the contract notice.

The contracting authority may limit the number of contractors it invites to negotiate (but no fewer than three). After completion of negotiations, the contracting authority creates or, if the need arises from negotiations, amends the technical specifications and invites contractors to submit final bids.

The purpose of the negotiations is to “improve” the offers received. According to the explanatory memorandum, negotiations are optional: the contracting authority “may” but does not have to negotiate. Although the current draft does not directly indicate the possibility of waiving negotiations, it seems correct to assume that if the contracting authority receives fully satisfactory bids (i.e. not requiring any change), it may proceed to the selection without conducting negotiations. The criteria for evaluation and weighting of offers will not be subject to negotiations.

Option 3: procedure including mandatory negotiations

The contracting authority will choose the third scenario of the procedure if its needs and the specificity of the subject of the procurement make it difficult or impossible to describe precisely the terms of the contract. In such situation, instead of technical specifications, the contracting authority prepares a description of needs and requirements, in which, in particular, it defines the minimum requirements that all contractors must meet, as well as the criteria for evaluation of bids.

In this scenario, the negotiations are mandatory and cover essentially all elements of the procurement (except for the minimum requirements mentioned above). Contractors may, among other things, negotiate the weights assigned to the bid evaluation criteria. They may also actively participate in the process of creating the terms of the contract in order to ensure the effectiveness of the contract to be executed.

Equitable objectives, but will they be achieved?

The drafters’ intention is to simplify the existing two-stage procedures and encourage contracting authorities to use negotiations to a wider extent (so far, when awarding contracts below the EU thresholds, contracting authorities have been reluctant to use procedures providing for a request to participate in the procedure). Whether this objective will be achieved, time will tell. Certainly, whatever name is used, the basic procedure under the third scenario entails similar burdens for contracting authorities as the current procedures. Moreover, the use of the third scenario is possible only if it is justified by the specificity of the contract: its subject or the needs of the contracting authority. From this point of view, it is doubtful whether the new procedure will encourage contracting authorities to engage in dialogue with contractors.

The second point is that, in principle, classic contracting authorities award contracts of different values. The draft of the new Public Procurement Law imposes on them the obligation to familiarise themselves with the new procedure, where scenarios characterised by the drafters as offering flexibility may cause many practical problems. We will see how the establishment of the basic procedure contributes to the effectiveness of public procurement procedures. The new Public Procurement Law should enter into force at the beginning of next year.

Serom Kim, Infrastructure, Public Procurement & PPP practice, Wardyński & Partners