Negotiations in Public
Procurement
Past, present and (near) future
Pedro Telles
ICEL Dublin
February 2013
Plan
• Past
• Traditional limitations to negotiation
• Present
• Negotiation in numbers
• Competitive dialogue and contract
performance
• (Near) future
• New procedures on draft Directive
Compromise Text and associated
risks
Present
Past
Near (future)
Negotiations have been frowned upon
in European public procurement
Negotiations have been frowned upon
in European public procurement
Why?
Reasons
• Protect competition
(internal market)
• Increase
transparency
• As an insurance
policy
Insurance
policy?
To minimise
corruption and
incentives issues
How did Member States
react?
Did the sky fall?
• Commission initiated two proceedings
against the UK in 2000...and we are still
waiting for a decision
• Kathro case (R on the Application of
Kathro v Rhondda Cynon Taff County
BC) 2001
Present
Past
Near (future)
Legal regime
at EU level
Standard procedures with
negotiations freely available
Directive 2004/18
No
Directive 2004/18
Part B Services
Yes
Directive 2004/17
Yes
Contracts not covered by
Directives (i.e. low value
or concessions)
Yes
Directive 2009/43
Yes
Percentage of public contracts advertised on OJEU
(value)
2006
2010
EU 27 18.5% 18.6%
Source: Eurostat (online data codes:
gov_oth_procur)
Open and
restricted
procedure
represent
80% of
advertised
contract
value
Source: Cost and Effectiveness in public
procurement report 2011
Only 14.88%
of total procurement value
in 2010 was awarded through
procedures without negotiation
What have we learned over
the last 8 years with
competitive dialogue?
“Negotiations” within competitive
dialogue
• Dialogue stage is actually a negotiation
• Dialogue after tender submissions
should be more limited than on
open/restricted procedure
• Dialogue with preferred bidder is pure
madness
What do you mean by “pure
madness”?
• Lack of competition
leverage
• Fosters foot dragging
by bidder
• Leads to “negotiation
creep”
How to extract value from dialogue stage?
• Focus discussions on specific topics
• Use stages for consolidation
• Set deadlines for end of dialogue/stage
• Get participants to sign document
stating they do not wish to discuss any
topic further at the end
What about negotiations during contract
performance?
• Same caveats apply as before
• Asymmetry of information and
resources, capture of regulator
• Cautionary tale:
• Plus Pressetext, Succhi di Frutta
and the recent Spain v
Commission (AVE) ECJ decisions
Present
Past
Near (future)
A well stocked negotiation toolkit for
2014?
• Competitive dialogue (revised)
• Competitive procedure with negotiation
(revised negotiated procedure with prior
publication)
• Innovation partnership (new)
Draft Directive appears
to bring wider access to
negotiations...
...Is it a good idea?
Photo by rocknroll_guitar http://flic.kr/p/5sgMAg
What are going to be the consequences of
widespread negotiations in public
procurement?
• Higher transaction costs
• Contracting authority
• Suppliers
• Higher opportunity costs
• Suppliers
• Scope for much worse outcomes
Reasons to limit
negotiations • Protect competition
(internal market)
• Increase
transparency
• As an insurance
policy against
corruption, incentive
or lack of training
Competitive procedure with negotiation
will be the new restricted procedure
20% of procurement will improve
80% of procurement will get worse results
Photo by Bartek Kuzia http://flic.kr/p/2Tw6eE
Questions
welcome.
p.telles@bangor.ac.uk