Negotiating isn’t mandatory for Contracting Authorities

• United Kingdom

• Procurement strategies - Briefings
• Health and life sciences - Healthcare e-briefings

05-03-2014

As Contracting Authorities will be aware, in circumstances where the Negotiated Procedure is used, they are able to negotiate with tenderers in order that their tenders can be adapted to meet the requirements in the contract notice, the specifications and additional documents (if any) and to seek out the best tender.

Despite guidance issued by the UK Government which confirmed that the Negotiated Procedure is not considered suitable or necessary for the majority of transactions and  the fact that the Negotiated Procedure can only be used in limited circumstances (outlined in Regulation 13 and 14 of the Public Contracts Regulations 2006 (as amended)) (“the Regulations”), due to its inclusion in the new directive as an approach available to Contracting Authorities, it still has an important role in the procurement landscape moving forward.

As is well known, the Regulations require competition to be maintained throughout the negotiation period.  Negotiating up to contract award can expose the Contracting Authority to the risk of challenge due to the fact that final solutions may have moved significantly from the evaluated position (which could undermine the awarded scores, and potentially, the ranking of the tenderers). This risk is increased in cases where only one bidder is involved in the negotiations.

A recent ruling of the ECJ has highlighted another risk which Contracting Authorities need to be alive to. In Case C-561/12 – Nordecon AS, Ramboll Eesti AS v Rahandusministeerium [2013], the Court considered the question of whether a Contracting Authority is allowed to negotiate with tenderers whose tenders do not comply with the mandatory requirements set out in the contract notice.

In answer to that question, the Court ruled that even though the Contracting Authority has the power to negotiate in the context of a negotiated procedure, due to the binding principle of transparency, it cannot negotiate with a tenderer whose tender does not comply with the mandatory requirements of the tender documentation. The fact that, following negotiation, the tender does subsequently meet those requirements does not retrospectively justify the decision to allow such negotiation to take place.

The Court considered that to allow a tender that does not comply with the mandatory requirements to be admissible with a view to addressing such issues in negotiations would effectively mean that the fixing of those mandatory conditions would be deprived of any useful effect. Once these mandatory conditions have been set, they cannot be deviated from. This would be the case even if all tenderers failed to meet the mandatory conditions.

Therefore, in summary, despite the fact that under the negotiated procedure Contracting Authorities have the power to negotiate with tenderers, they are still bound to ensure that mandatory requirements are met in order to ensure that the process is fair and transparent. In the event that the Contracting Authority does not ensure that such requirements are met, there is a real risk that an unsuccessful bidder may issue a challenge under the Regulations in respect of any subsequent contract award.